Quote:
Originally Posted by fjtorres
What I don't quite get is how, at 29% of the ebook market and $1.5 billion a year in sales, Nook could *not* be standalone profitable. At that scale, development and customer support costs should be practically noise and while hardware margins are clearly thin the content margins are plenty healthy. So, where the losses?
The only three ways I can see Nook as a money-losing proposition at this point is if:
- Their Nook hardware costs are way higher than Amazon's
- Their customers are getting their ebooks from places *other* than their ebookstore
- Their back-end/overhead is eating them up alive
Considering their aggressive hardware pricing over the last 18 months it would be the height of folly to be *forcing* a race to the bottom on hardware prices if either of those three were true, no?
|
Nook owners are purchasing content elsewhere plus the discerning shopper looks for "cheap reads." B&N has public domain and other free offerings, Friday's free book promo, and Overdrive library lending. All at no cost. Plus, all the non-Agency discounting. And the thousands of 99 cent books. The fewer people purchasing the $9.99+ titles the less money earned.
When you think about it $3 profit on a $10 ebook isn't much unless you're selling millions of them. And I am talking several hundred million books a year. We know they aren't doing those kinds of numbers. They may be doing better on newspaper and mag subscriptions as these are recurring purchases. A $20/month NYT sub probably nets them more than an ebook.
Hardware costs are eating them alive. They had to discount the NST from $139 to $99 to $79 (limited time) to $75 (limited time). Perhaps, earning $40 more a Nook would have made a big difference. And we don't know R&D, manufacturing costs, shipping, retailer markup, returns, etc.
The same is true with Amazon. Their 3rd quarter results very disappointing. Yes, they eeked out a small profit but warned they may
lose money during the 4th quarter ... as much as $200 million. How costly was releasing 3 devices and the rest of their digital division? Enough to possibly wipe out all profit from the rest of the company during the busiest time of the year. Fortunately, Amazon has $450 million earned so far this year and can stand the temporary loss.