B&N expects Nook losses to increase in 2013

[Kali Yuga]

Originally Posted by pl001

I did mention all the failures in that same post.

If you say so

Originally Posted by pl001

But Amazon got their start selling books and selection was limited.

Actually, they listed 1 million titles at launch in 1995, which was 5 times more than the largest physical bookstore could offer (around 200k).

Originally Posted by pl001

B&N could have used their existing clout and supply chain to offer a better selection and better prices.

Actually, they did. As a result, they got sued by a consortium of indie stores for antitrust actions in 1998.

"Borders and Barnes & Noble are using their clout and influence with publishers to get discounts and preferential treatment," Avin Mark Domnitz, executive director of the American Booksellers Association, said Wednesday. "This poses a threat to [independent bookstores'] survival and the diversity of American bookselling. They are being asked to compete with one hand tied behind their backs."

(They settled for $4.7 million.) B&N also tried to buy out the massive book distributor Ingram, which also freaked out... everyone, since B&N would have gotten a choke-hold and priority on book shipments, and sales data on all their competitors (including Amazon). The FTC shot it down.

Whether or not they could have executed that plan as well as Amazon is pure speculation and in reality quite doubtful as they had an interest to protect their B&M profits. However I will maintain the opportunity was there.

The only real chance B&N had was if Amazon was unable to keep getting funds, as happened to almost all of the other "dot coms."

And realistically, that's what should have happened. Bezos had zero industry experience, and burned up massive sums of cash for at least 6 years straight -- Amazon didn't turn a profit until 2001. It stayed afloat because Bezos was a) very sharp, b) very good at securing credit, and c) it wasn't staffed by people snorting coke under their desks while waiting for a first-day IPO pop.

Anyway.... For a year or so, B&N thought of online sales as a fad and/or cannibalization of their existing sales model. By 1997 or so, they realized they had no choice but to get into digital (while Amazon was already moving into other types of retail). My recollection is they didn't do a great job at first, but problems were certainly ironed out by 2000.

Another thing that's so often forgotten is that in the late 90s, Amazon was the underdog -- and B&N was the voracious leviathan that strangled the indie bookstores, and tried to dominate the industry by buying up competitors and merging with Ingram.

As in, if you told a bunch of book-lovers in 1995 that B&N's days were numbered, they would've cheered. The idea that B&N is now the underdog that book-lovers hope can take on the Big Bad Amazon just cracks me up.

[Kali Yuga]

Originally Posted by fjtorres

And, as a capper, a (dubious?) breakdown of Kindle economics from Morgan stanley

Does this mean you now accept assessments by equity analysts?

Originally Posted by fjtorres

I fear something really bad is coming...

It's called "Amazon dominating the industry." And it's already here.

Whether it's genuinely a Bad Thing remains to be seen.

[jgaiser]

Originally Posted by Kali Yuga

It's called "Amazon dominating the industry." And it's already here.

Whether it's genuinely a Bad Thing remains to be seen.

Holy Crap! I'm agreeing with Kali Yuga (Professional Contrarian)!

[charmian]

That yahoo/BGR article fjtorres linked is noteworthy: it is kind of odd that B&N felt the need to make multiple announcements about the revenue drop.

One factor I think also contributes is that if we're talking about the second group of people (the group of people who are mainly interested in a tablet for reading, and anything else is a nice extra but not really necessary), this group is 1) smaller probably than the group who wants a tablet for multiple purposes, 2) less willing to pay a higher price, since they want a single-purpose device, and they know that single purpose is not very demanding on the hardware, and 3) have less incentive to upgrade their devices. Thusly, it is easier to saturate this market and they are less likely to buy a new device every year: they are more like the e-ink reader market, which has been slowing down.

[fjtorres]

Originally Posted by jgaiser

Holy Crap! I'm agreeing with Kali Yuga (Professional Contrarian)!

Fear not: Kobo just announced a revenue increase of 143%.
http://www.the-digital-reader.com/20...es-up-in-2012/

And there is Apple, who have been eating up most of the market share Nook has been losing.
Amazon domination will not go unchallenged.

[fjtorres]

Originally Posted by charmian

it is kind of odd that B&N felt the need to make multiple announcements about the revenue drop.

Ominous is what it is.
Publicly-owned companies are required by law to report negative changes to their projected financials as soon as they learn of them. As the report says *something* came up in the last few days that they felt obligated to report.
Could be delayed number crunching, could be january sales...
I'm thinking that december hardware sales have in the past resulted in january content sales.
Could also be dismal news from their limited international incursion.

We'll have to wait for the shoedrop...

[kevinp]

Originally Posted by fjtorres

Quote:
... And it’s very hard to see why any new consumer who researches his or her purchase for even five minutes would now take the betamax risk of buying a Nook.

Most of the stuff on my Nook is sideloaded. I can get better deals just about everywhere else, which is the root of the problem here.

It's unfortunate that most people would agree with the above quote. The Nook HD+ hardware is superb for the low price they charge. My Nook will long be out of warranty by the time B&N crumbles.

[SeaKing]

Originally Posted by Kali Yuga

Sears, Kmart, Best Buy are still around.

Circuit City and CompUSA over-expanded, a common problem for electronics chains.
--
.

Sears and Kmart have combined and their biggest profit center is selling their old store and landing holdings. There are fewer stores and they are shells of what they used to be.

Best Buy is consolidating and trying to figure out what they are going to be. In some cases it will just be Cell Phone resellers.

Ckt City, CompUSA whatever reason, they are gone except ComUSA has a presence in FL and an online business, or maybe not. Who knows. ComUSA owes reneged on $80 worth of rebates. I won't do business with them again.

[morriss003]

They should sell themselves to Facebook.

[robko]

And it’s very hard to see why any new consumer who researches his or her purchase for even five minutes would now take the betamax risk of buying a Nook.

Unless he's trying to say that e-pub format is dead and only Kindle format is going to survive this is a little much. Even if Nook collapses it's not like the content usable on the devices isn't available from many other sources.

[Shushan]

Originally Posted by robko

Unless he's trying to say that e-pub format is dead and only Kindle format is going to survive this is a little much. Even if Nook collapses it's not like the content usable on the devices isn't available from many other sources.

This was my thinking too. Both DH and I are using basic ST Nooks. There's so many free classics on ManyBooks.Net & Gutenberg.org, for starters. The Nook still works with libraries. There are also plenty of vendors selling epubs. Still hoping B&N will change some policies and offer some really good sales for their own ereader one of these days, but even if they never do, even if B&N goes under, its still a nice little reader.

[jhempel24]

Originally Posted by Shushan

This was my thinking too. Both DH and I are using basic ST Nooks. There's so many free classics on ManyBooks.Net & Gutenberg.org, for starters. The Nook still works with libraries. There are also plenty of vendors selling epubs. Still hoping B&N will change some policies and offer some really good sales for their own ereader one of these days, but even if they never do, even if B&N goes under, its still a nice little reader.

Even as a Kindle user, I still prefer my books to be in ePub format. It's easier to edit and manipulate and converts to azw3 quite nicely

[rhadin]

Originally Posted by charmian

One factor I think also contributes is that if we're talking about the second group of people (the group of people who are mainly interested in a tablet for reading, and anything else is a nice extra but not really necessary), this group is 1) smaller probably than the group who wants a tablet for multiple purposes, 2) less willing to pay a higher price, since they want a single-purpose device, and they know that single purpose is not very demanding on the hardware, and 3) have less incentive to upgrade their devices. Thusly, it is easier to saturate this market and they are less likely to buy a new device every year: they are more like the e-ink reader market, which has been slowing down.

I think you are right that the second group is a smaller group than the first group, but I think that the second group is made up of the people who actually buy and read more than 1 book a year, whereas the first group is not. Granted I only have anecdotal evidence to support this contention, but I suspect that I am not alone in being a member of the second group and buying dozens, if not into the hundreds, of books each year. (Last year, for example, I bought 70 harcovers and 340 ebooks [not counting the free ebooks I also "bought"]).

If your primary business is selling books, as is the case with B&N, then your focus probably should be on the second group. I'm not quite sure what Amazon's primary business is other than to be a general retailer, in which case the focus probably should be on the first group.

You are also right that since I am primarily interested in reading there is little incentive for me to upgrade the device as long as it functions well for reading. B&N can keep improving the video quality on its tablet but that won't induce me to buy a new tablet.

I'm not so sure, however, about unwillingness to pay a higher price. At least in my case, I paid more for my original Sony 505 ($300) than I would have paid for either a Kindle or Nook, and then I bought the Sony 950 (again, $300) when it became available for more than either the Kindle or Nook would have cost. I was willing to pay more because the Sony devices gave me what I wanted (I have to admit I really hated the design of the original Nook and always disliked the keyboard Kindles. I bought the Sony 950 because I really liked the advanced touch screen, which none of the others had at the time, as well as the 7-inch screen). I think the issue is more what is being offered for the price than the price itself.

[fjtorres]

Originally Posted by rhadin

I think you are right that the second group is a smaller group than the first group, but I think that the second group is made up of the people who actually buy and read more than 1 book a year, whereas the first group is not.
.
.
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If your primary business is selling books, as is the case with B&N, then your focus probably should be on the second group. I'm not quite sure what Amazon's primary business is other than to be a general retailer, in which case the focus probably should be on the first group.

There is no question that the second group (let's call it reading-focused) of tablet buyers is smaller than the first (let's call it media-focused). And, lets add in that it is a known fact that book buyers have a 70/30 split between casual readers (a few books a year) and avid readers (a few books a month). And in the US only 40% of the population even reads books.

Avid readers have no problem justifying the purchase of a device solely for reading. Which device will depend on their needs for mobility, battery-life, and type of content. They can even justify, as many of us do, having multiple devices.

Now, the mainstreaming of ebooks started with eink devices and for avid readers of narrative text--which is where the bulk of consumer publishing money lies--eink is a very good match. After the 8 hour price war (that B&N started) walled-garden eink readers have been priced at near cost. Which these days means well under $100 for the entry-level readers and not much more for the premium models. This meant explosive growth in 2010-11 as avid readers jumped in, practically en-masse.

Since then growth has been slower as few avid readers remain willing to adopt ebooks that haven't. New eink sales are coming primarily from younger readers, upgraders, and replacement sales and international sales. (Hence, Amazon and Kobo doing well--Nook, not so much.)

All that applies to narrative text. Other areas of consumer publishing, though, haven't been through the ebook mainstreaming process yet. Magazines, cookbooks, travel guides, art books, coffee table books, comics... All those segments are a poor fit for current eink tech. And since narrative text ebook adoption is now fairly mature in the US, growing the market for ebooks in the US means targetting those un-tapped markets *and* casual narrative text buyers.

Which brings up tablets, which can be well-suited to that content. And, because they are multifunction media consumption devices, can be justified purchases on reasons other than their ebook reading functions. Note I said *can* be well-suited to reading. Because, while they can be used that way, as multifunction devices, they aren't optimized for reading the way eink devices are. Size, weight, battery-life, aspect ratio, ergonomic design, are all areas where tablets can be suboptimal for reading.

Which brings us back to the types of readers and the reason they pick one product over another.

Avid readers looking for tablets will seek the best set of features for their reading needs but casual readers looking for tablets will be more interested in the device's suitability for other uses since they won't be using it primarily for reading.

Oh, and then there's a third class of tablet buyer; those who aren't at all interested in how good they might be for reading. And that last group is way bigger than the other two.

To the last group, tablets are really just another kind of computer and they prize flexibility and computing power over all else. Suitability for reading is incidental.

Casual readers will appreciate suitability to reading but, again, won't be too willing to trade off much computing flexibility against reading suitability. Their choice will be used as a media pad or computer most of the time and as a reader occasionally.

Avid readers looking at tablets will be looking at a usage pattern where long reading sessions and access to many sources of content of different types is critical. And, so far, it seems like trading off the full computing power and app stores of the generics is a tolerable price of admission as long as the desired features and content are available at a tolerable price. Avid readers will make trade-off the casual readers won't, so suitability for avid readers does not mean suitability for casual reader buyers.

Basically, B&N *correctly* identified the need to go beyond avid readers of narrative fiction and start targetting casual readers but failed to provide enough non-reading value to take the color Nooks into the casual reader space. The Nook Color didn't and reportedly sold 340K units in the full year they were unchallenged. The Nook Tablets didn't either and were totally lapped by the Fire in weeks; it wasn't until the Nook HD/HD+ that they even *started* getting serious about non-reading content. And mostly it's just video. That may be... too little, too late...

Whatever the reason, the entire Nook line's appeal (eink and color) remains limited to avid readers and loyal B&N customers. Casual readers seem more likely to buy into Amazon's trade-offs or Apple's pricing than they are Nook's value proposition. At least so far.

The big problem is that there are a whole lot more casual readers out there than there are avid readers. And a clear majority of avid readers in the US are by now either commited Nook customers or they are Kindle customers. Any installed base growth needs to come from international markets (where B&N brand loyalty is meaningless) or from casual readers. And in the latter range there is a 900lb gorilla named Apple.

Consider this: there are, what?, something like 200 million *active* iPxxx devices out there. Say Apple gets them to each buy just one ebook a year on average, that is 200 million ebooks. We just saw the size of the global market estimated at 900 million ebooks in 2012 so 200 million ebooks would be 22% global share. Versus Amazon's 45% global share.

Now, Apple is clearly not averaging one ebook per customer yet. They probably won't for a while. If ever. But there is real money and real market power in those onesy-twosy casual reader sales. (Just ask Costco.)

So I don't think any serious ebook retailer can afford to focus solely on the likes of us, the avid reader; they need to go after casual readers too. iOS, Windows, and android reading apps are a good start. But a solid line of multifunction devices is probably a necessity, too.

And it may be time to stop thinking of the ebook retail world as Amazon vs Nook, with Kobo trying to elbow in. The reality is looking more like a global Amazon versus Apple vs Google race with Kobo trying to outrun them all.

And I'm not sure I see much of a role for a B&N-hobbled Nook in that race.
I still think Nook needs new owners.

[charmian]

I agree that the tablet sphere can't really focus on the avid readers. It is interesting to consider what a tablet designed for readers of magazines, cookbooks, and other forms that don't translate well to e-ink readers would look like. I think it would be larger than the current tablets (in screen size) and also have a longer battery life. Although this might not be possible with the current tech. BN's tablets don't have conspicuously better battery life than the competition, nor do they really offer anything too different from the others otherwise.

The Nook HD+, as someone mentioned upthread, is a good deal at $269, but it seems people don't find the price difference significant enough.