Does Barnes and Noble have a (viable) Digital Strategy?

[Fbone]

Apple, Google, MS, Sony ... none seem a good fit for all of B&N. In pieces there may be some interest. Even Walmart may buy a store or two.

I was never good at foreseeing corporate mergers and acquisitions.

I was stunned when Dish Network bought Blockbuster.

[fjtorres]

Originally Posted by SensualPoet

The thing B&N could do would be to prove they can run the bricks and mortar business in an attractive, long-term profitable manner so they can sell off the Nook digital business at a premium and reward the long-suffering B&N shareholders.

Would Sony be interested?

(shrug)

If Sony were a well-run company, they would *have* to be interested; the fit is a natural!

Sony's reader value-proposition is hardware only and they get near-nil ebook revenue.
Nook would not only get them an instant ten-fold(?) NorthAm marketshare boost and economies of scale to compete worldwide on *value*, not brand loyalty, but it would also bring in some folks that seem to understand the content business better than anybody at Sony this side of Columbia pictures, *and* it would give them a walled-garden ecosystem to replace the one they foolishly abandoned just as it was about to pay off.

If Sony wants to get back in the game *fast*, buying Nook is about as good an investment as they could make, provided they focus on the ereader DRM and backburner Adept compatibility as I expect Kobo to do shortly.

(But Sony is not a well run company, is it, what with the tier-2 managers ignoring or making war on the CEO...)

[SensualPoet]

I completely agree about the value Nook carved out of B&N brings to Sony ... and provided Sony actually leveraged their strengths instead of squandering them.

OTOH, if Sony were thinking of divesting itself of its ereader business, perhaps Rakuten has a few more pennies in the corporate coffers, folding the Sony ebookstore into Kobo and using Sony connections to broaden the Kobo retail base. Or perhaps Sony simply sells of its store and keeps the premium hardware business and goes agnostic with an Android only eink and Android only tablet ereader that would run multiple ereader apps in the same way Dell computers run multiple web browsers.

That development would neither help or harm B&N, which brings us full circle to the original OP: is B&N better off or worse off splitting Nook from the store operation? And can it afford to keep them whole, in any case?

[fjtorres]

Originally Posted by SensualPoet

I completely agree about the value Nook carved out of B&N brings to Sony ... and provided Sony actually leveraged their strengths instead of squandering them.

OTOH, if Sony were thinking of divesting itself of its ereader business, perhaps Rakuten has a few more pennies in the corporate coffers, folding the Sony ebookstore into Kobo and using Sony connections to broaden the Kobo retail base. Or perhaps Sony simply sells of its store and keeps the premium hardware business and goes agnostic with an Android only eink and Android only tablet ereader that would run multiple ereader apps in the same way Dell computers run multiple web browsers.

That development would neither help or harm B&N, which brings us full circle to the original OP: is B&N better off or worse off splitting Nook from the store operation? And can it afford to keep them whole, in any case?

I do think Sony needs to get serious about ebook content and get back in the walled garden business; that is where the money is. If they're not, they *should* get out. But, I don't think they're likely to get out of the ereader business until things get much worse; look at how long they've stayed with Walkman, constantly trying to make it relevant. I suppose it would be seen as a loss of face if Sony dropped out of ebook readers.

Now, B&N...

At this point the questions and red flags outnumber the positives, no?

We know for a fact that they put the company for sale as a unit and nobody bit, even though their biggest B&M competitor had just imploded and left a 17% hole in the market. Essentially nobody had the appetite to take it on as a package. And that was *before* the 4th quarter numbers bubbled up with more questions than before.

In pieces? Well...
- Sterling is reportedly a money loser, but it *is* a content acquistion channel.

- Nook, judging by the Kobo sale price should be worth a cool billion to *somebody* unless they're sitting on an inventory time bomb.

- The College Bookstores are solid beachheads in the academic market that should appeal to anybody looking to the future digital textbook business. But they're running in the red, right?

- The B&M storefronts, I really don't know what their intrinsic value might be. If their leases are anything like Borders' 20 year side deals, though, I doubt anybody would touch it with a tractor beam. B&N minus the college stores and Nook looks a whole lot like... Borders...

I'm not sure any management team *could* make those storefronts, as they are now, a viable concern for the long term. A Nook sale, total or partial, might simply generate good money to throw after the bad...

Might the proper answer be to simply spin Nook off, give current Stockholders the Nook stock, and liquidate the rest of B&N altogether?

[GA Russell]

Originally Posted by fjtorres

Might the proper answer be to simply spin Nook off, give current Stockholders the Nook stock, and liquidate the rest of B&N altogether?

Wouldn't the creditors such as bond holders be able to go after the independent Nook company if the remaining B&N's assets do not meet the debt?

[fjtorres]

Originally Posted by GA Russell

Wouldn't the creditors such as bond holders be able to go after the independent Nook company if the remaining B&N's assets do not meet the debt?

Probably.
But there is no guarantee Nook itself would have any money itself.
What the spinoff would achieve is allow Nook to draw investors for itself, free of the drag of the stores. Nook itself might start its independent life with a pile of debt but at least a roadmap to solvency.

Some reports say the stores aren't *big* money losers by themselves; they're just not contributing much if anything to the bottom line. Lots of churn but no progress. And big negative potential.

Meanwhile, Nook's opportunities for expansion need money...

The B&N quandary is they're low on cash and low on prospects, except for Nook.
Which is where the original article was questioning their strategic planning. Part of it is that as a traditional B&M retailer, their management is new to the realities of the Tech business and didn't do their homework, judging by their aggrieved response to the Android patent suit. They seem to have some competent middle managers in the Nook division but the higher-level guys? Not much evidence pro, some con...

[geertm]

Originally Posted by fjtorres

Probably.
But there is no guarantee Nook itself would have any money itself.
What the spinoff would achieve is allow Nook to draw investors for itself, free of the drag of the stores. Nook itself might start its independent life with a pile of debt but at least a roadmap to solvency.

Some reports say the stores aren't *big* money losers by themselves; they're just not contributing much if anything to the bottom line. Lots of churn but no progress. And big negative potential.

Meanwhile, Nook's opportunities for expansion need money...

The B&N quandary is they're low on cash and low on prospects, except for Nook.
Which is where the original article was questioning their strategic planning. Part of it is that as a traditional B&M retailer, their management is new to the realities of the Tech business and didn't do their homework, judging by their aggrieved response to the Android patent suit. They seem to have some competent middle managers in the Nook division but the higher-level guys? Not much evidence pro, some con...

Actually B&N's bookstores are the only part of the company that is still making a nice profit. The reason that the company as a whole makes a loss is that they are investing so much money in their digital Nook business.

[tomsem]

Perhaps Rakuten (who purchased Kobo) could buy the Nook business as well. That would improve their US presence, and complement Kobo's more international reach.

[Lancelot]

Originally Posted by geertm

Actually B&N's bookstores are the only part of the company that is still making a nice profit. The reason that the company as a whole makes a loss is that they are investing so much money in their digital Nook business.

Ain't this the truth? Instead B&N keeps talking about how successful Nook unit is. Not once did they open up the books and show how much they invested in Nook in the first place.

B&N's continuing lost in "total" revenue is their own fault...just the classic, poor, corporate decision-making. B&N's digital strategy is to double-down or nothing. They still havent realized they can't compete against Apple nor Amazon on their tuff