Rudderless Barnes & Noble may have missed its window of opportunity

B&N had its earnings call this week and, perhaps not surprisingly, things are getting worse for the struggling book retailer. Laura has the details over at Gigaom.

The high (or low) lights:

  • Device sales are off $100 million for the quarter, off 58% from a year ago.
  • Digital content sales are off as well, down 26.5% to $57 million
  • Revenues as a whole were down by 10% to $2 billion, with retail down 6.3% to $1.4 billion and college off by 6% to $486 million

Not a ¬†pretty picture. Their mature business lines, retail and college, continue to decline (which is kind of expected), but boy, just look at digital. That’s their “growth” business, but instead of growing it’s in free fall, with both devices and content dropping at an alarming rate. This is not a good sign since digital is clearly where the market for books are going.

And that future is probably why the company can’t shake its e-reader aspirations. Today they indicated they still plan on releasing a new Nook device, despite previous pronouncements about getting out of hardware. Can’t blame them, since what else would they do but bet on something that at least resembles what people will use in the future.

But realistically, when people choose to read digital in coming years, the chances it’ll be on a B&N digital device are pretty slim at this point. ¬†Amazon and Apple have really locked up the e-reader and tablet market and have, by extension, won the e-book storefront war.

So what are B&N’s options at this point? While it’s unlikely at this point one of the cash-rich big tech companies would buy them, I still think it would be the best exit for the bookseller. B&N has a premium real estate footprint, something I think a Google or Microsoft would still benefit from.

Another option would to be to try and hold on but with a downsized footprint and sales staff, but the problem with this option is it won’t save their digital business.

I think the most likely route is to sell the business, but the question is to who? Some speculated last year that Microsoft, which is a minority investor in the company, might buy them, but I think such a deal is probably unlikely under Nadella. The software company’s new CEO is much more focused on the business and cloud market than consumer, so a B&N likely wouldn’t be in the cards as his first or second acquisition.

In the end, it might be private equity that swoops in and saves the company if big tech passes.

Whatever the company does, they better decide soon if they want their digital business to be of any attraction at all, because they way its going, there might not be much left a year from now.

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Michael Wolf

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