Barnes & Noble Is Suffering a 'Hunger Games' Hangoverby
Barnes & Noble continues to spin downward, and it wants everyone to know who is to blame. The Nook? Nope. It’s Suzanne Collins, who hasn’t written a single installation of The Hunger Games this year, and E.L. James, who has stopped writing Fifty Shades of Grey books without any concern for the impact it would have on the bookseller.
On Tuesday the company announced it had lost $87 million in the most recent quarter. Retail revenue, which makes up about 75 percent of its total revenue, dropped 9.9 percent. The company also said Leonard Riggio, its chairman and largest shareholder, was dropping his effort to buy that part of the business. Barnes & Noble’s attempt to grow a Silicon Valley startup—which Riggio did not include in his buyout effort—continues to be a drain on its traditional retail business. Revenue in the Nook portion of the business was down 20.2 percent, with the money it brought in by selling Nook devices falling 23 percent.
Many analysts, and this magazine, figured that Barnes & Noble would bring the effort to an end. Instead, the company says it plans to further integrate its Nook and retail businesses. It thinks that its digital efforts still have potential to bolster its retail business, even if they are burning through cash for now. Barnes & Noble now claims 22 percent of the U.S. e-book market, and says it has sold 10 million Nook devices. “If we want to be in the device business, we have to be in the content business no matter how they’re produced. We think our people can produce better devices than anyone else,” Michael Huseby, company president, told investors in a conference call on Tuesday morning.
Even today, Barnes & Noble should have a natural advantage in the bookselling business, because most readers seem to want a mix of digital and print, says Michael Shatzkin, chief executive of Idea Logical, a consultant for publishers. “Only Barnes & Noble has e-books, print books, online and offline. The challenge for them is to keep the customers as customers change their patterns of consumption,” he says. “It’s very hard to discern, because Amazon buries its numbers so much, but it’s my impression that the gap between Amazon.com and BN.com is growing.”
The company said more than half of the drop in retail sales was basically a hangover following the 2012 binge on The Hunger Games and Fifty Shades of Grey trilogies. And while digital content sales dropped 15.8 percent in the quarter, Barnes & Noble said that, excluding the impact of those titles, they only fell 6.9 percent. Digital content isn’t selling very well because Nooks aren’t selling very well.
It’s not just Barnes & Noble. According to the Association of American Publishers, net sales of trade books in the first quarter of 2013 were down 4.7 percent from a year earlier, with almost all of the losses concentrated in the young adult category. It should go without saying that Fifty Shades of Grey, which wasn’t published in the U.S. until April 2012, is not included in those young adult numbers.
Barnes & Noble said it also expects to see sales lag this quarter, when compared to 2012′s hit-fueled performance. It looks on the horizon and sees John Grisham and Stephen King riding to the rescue with new novels coming later this year. It just has to hope that everyone doesn’t just put them on their Kindles.