Barnes & Noble's Nook business is struggling. Photographer: David Paul Morris/Bloomberg
Real Loser in Apple E-Book Verdict Is Barnes & Noble
The Apple e-book verdict is in: guilty. A federal judge ruled today that the world's biggest technology company violated antitrust laws by scheming with publishers to fix the prices of electronic books.
Apple Inc., which plans to appeal, will probably face damages. The real loser in the ongoing e-book battle, however, continues to be the only company that exists solely to provide consumers with books: Barnes & Noble Inc.
Barnes & Noble, which came to Apple's defense in the trial, had employed the same so-called agency model Apple used to compete with market-leader Amazon.com Inc. Apple let publishers set prices for the e-books it sold, then collected 30 percent of the revenue. Under the deal, publishers couldn't sell more cheaply to Amazon, which undercut Amazon's discount strategy.
The agency model enabled Apple and Barnes & Noble to gain market share, but it collapsed last year when, in a settlement with the Justice Department, five major publishers agreed to drop the practice.
Given that the changes in the way e-books are sold have already taken place, it's unlikely that, even with today's verdict, Apple will lose much of its share of the e-book market. In any case, e-books are only an ancillary source of revenue for the company, and a fine would merely be a slap on the wrist.
Barnes & Noble has more at stake. The company lost $475 million on its Nook tablet business in the last fiscal year. It has discontinued its color tablets, and Chief Executive Officer William Lynch, who made the Nook a key part of the company's strategy, resigned Monday.
Still, there's hope for Barnes & Noble. Even as the Nook business deteriorated, its retail unit became more profitable last fiscal year, generating $374.2 million in earnings, a 16 percent increase from the year before.
As Matt Townsend writes in Bloomberg News, printed books still have value. The rise of e-books, which make up just 20 percent of the book market, is slowing. Publishers use Barnes & Noble to sell their older titles, since the e-book market is primarily a place for new releases. There's also the academic market: Barnes & Noble manages some 700 university bookstores, Lydia DePillis writes in the Washington Post. And where else would writers go on book tours?
The Apple verdict is another wakeup call in a string of many for Barnes & Noble, which needs to turn away from the e-book battle and toward the challenges of being a bookstore.
(Kirsten Salyer is the social media editor for Bloomberg View. Follow her on Twitter.)