Posts tagged Noble
Barnes & Noble remains a big player in a growing industry, and until Google changed everything this week, it made fantastic hardware for the money. But as with Nokia, a changing market and financial problems are driving a proud Number Two into a subordinate role that threatens to choke it out of existence.
Barnes & Noble was the king of the book superstore. In the early 1990s, the company revolutionized the book industry by going big, wiping out the little guys with economies of scale. At the end of the decade, as Amazon lured users with its online logistics edge, Barnes & Noble clawed back to a strong second spot with streamlined operations and an online push.
And when e-readers hit the market, Barnes & Noble had the foresight to launch its own device, the Nook, while its closest competitor, Borders, sold third-party devices. The decision worked for Barnes & Noble, which built the Nook into a nearly $2 billion business, while Borders has stumbled into bankruptcy.
In April 2012, Barnes & Noble and Microsoft entered into an agreement to create “Newco,” a Nook-centric company that would combine educational and digital business lines, and create new, complementary products. Microsoft reportedly paid more than $300 million up front for a 17.6% stake, pledging an additional $300 million over time.
Barnes & Noble is a one-trick pony in an industry full of device, platform and content convergence. For the most part, Barnes & Noble has remained a bookseller, and that narrow focus has relegated the former goliath to a bit player.
Microsoft’s infusion of cash into “NewCo” after yet another quarterly loss has helped the company deal with amped-up competition from the Kindle Fire and other e-readers. Still, like another prominent Number Two player, Barnes & Noble’s financial woes have forced the company into an unbalanced relationship with its Seattle benefactor. Microsoft gets a physical presence and access to the growing educational market – a traditional Apple stronghold. Barnes & Noble almost certainly gets pressured to build a low-margin Windows-based Nook, so Microsoft has something to compete with the Kindle Fire and the new Google Nexus 7 tablets.
Physical bookstores are dying, and content sales are becoming more device-dependent. Google and Amazon have deep enough pockets to aggressively market loss-leading tablets. Barnes & Noble doesn’t. Microsoft does, but who knows if it will cut its losses and run if the going gets rough – or if it decides to focus on Windows tablets like the Surface. For Microsoft, the education market is just a nice-to-have. Barnes & Noble doesn’t have that luxury.
Barnes & Noble CEO William Lynch gets digital retail. He’s run e-commerce for Palm, Gifts.com and HSN.com, and unlike the Riggio brothers (Founder and Chairman Leonard and Vice Chair and former CEO Steve), Lynch isn’t hamstrung by an emotional attachment to paper books. He also understands the opportunities of Barnes & Noble’s physical stores, like linking book reviews into Nooks via NFC chips. He has a rough road ahead, but Lynch may be Barnes & Noble’s greatest asset.
The Nook, as an entertainment and collaboration device, is not on par with competitive tablets. That may be fine for consumers who just want to read e-books, but over time it’s likely to lose out to inexpensive yet full-fledged tablets. With Newco, Barnes & Noble and Microsoft might have a shot at capturing a solid chunk of the nascent educational e-book market, but they’ll have to demonstrate success relatively quickly or Microsoft could decide the push isn’t worth the effort. Barnes & Noble may not fold anytime soon, but it’s on a path toward increasing irrelevance.
Can This Company Be Saved?
Absolutely, but it’s going to take a lot of work and a bunch of luck. Google’s new tablet will hurt Nook’s direct sales, and Barnes & Noble will need to find new ways to get users into its ecosystem – for example, aggressive bundling of devices with textbooks. The company’s future may boil down to how much help Microsoft chooses to give. If the Surface and other products promote the Nook store, and if Microsoft cuts a licensing deal for low-cost Nook devices with the power to challenge Google, Barnes & Noble has a decent shot at long-term survival. If the competition gets ugly and Microsoft cuts and runs, as it has before, Barnes & Noble will likely fade away. Even if Lynch plays all his cards right, he might still lose the game.
DeathWatch Victims So Far
Research In Motion: Things are hurtling downhill even faster than expected. Massive losses – more than 11 times worse than expected – and new delays in its Hail Mary BlackBerry 10 operating system update have made the company’s dire situation even harder to ignore.
HP: No change in status
Nokia: No change in status
38 Studios: No change in status
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In what has long been a nightmare scenario for booksellers, the physical bookstore is becoming a showroom for the online shopper. After casually browsing the tomes in comfort, people will use their smartphone or tablet to buy their choices online at a much lower price. While most booksellers can do little more than fume, Barnes & Noble is not just meeting the threat head on, it’s embracing the change.
William Lynch, chief executive of the New York-based company, told Fortune magazine Tuesday that he planned to have near-field communication installed in Nook e-readers as early as this year. The technology would make it possible for browsers to touch books in the store with Nooks to get more information, such as reviews, and then purchase titles in whatever format they want.
The company declined to discuss its strategy Wednesday. “We haven’t announced anything further,” a spokeswoman said in an email.
The success of Lynch’s idea depends on convincing publishers that it’s in their best interest to embed into their books information-storing chips that the Nook could read. If they agree, then Lynch would move a step closer to merging the physical and virtual words.
Barnes & Noble is in a unique position in having physical stores, an online store and an e-reader. “[The stores] remain a very important advantage for the company – the only retail player in the category with integrated three-channel distribution under one brand,” said Peter Hildick-Smith, president of the Codex Group, a book market research and consulting company.
Even Amazon, which has about 60% of the U.S. e-book market to Barnes & Noble’s 30%, understands the importance of having physical stores. The online retailer has been selling its Kindle e-reader through retailers since at least 2010 and is currently in chains such as Target, Best Buy and Staples (although Target announced Wednesday that it plans to stop selling Kindles).
Balancing Physical, Online Sales is Key to Success
Getting the right combination of the physical and online sales channel is key to survival. For example, Borders sold e-readers from Sony and Rakuten, maker of the Kobo, and had Amazon run its online store. With no connection to the online customer, Borders didn’t have enough to survive. The bookseller went out of business last year.
Barnes & Noble has not made the same mistakes as its one-time rival, and its current strategy actually plays into the habits of book readers. Codex has found that people who own e-readers also buy physical books. “They’re not just pure-play e-readers; they are living in the print world, as well,” Hildick-Smith said.
In a February survey, Codex found that only 2% of book buyers bought only digital books. In general, people read nonfiction on e-readers and fiction in physical books, Hildick-Smith said.
Of course, Barnes & Noble still faces a number of hurdles in its online business. Nearly all Nook sales originate from the company’s 691 stores, which are only in the U.S. The company needs to reach the international markets, which is why Barnes & Noble partnered last month with Microsoft. The software maker agreed to invest $300 million in a new subsidiary comprising Barnes & Noble’s Nook and college bookstore businesses.
Under the deal, Microsoft will develop a Nook application for Windows 8, which is expected to ship this year, Lynch told the financial news agency Bloomberg. The app will take Barnes & Noble’s digital books to consumers in Europe, Asia and Latin America, according to Lynch. Along with selling e-books, Barnes & Noble will also have to sell Nooks, which it hopes to place on the shelves of retailers in other countries.
If successful, Barnes & Noble could become a stronger competitor to Amazon, which has a tremendous head start. The online retailer sells its Kindle e-reader in stores in the U.K., Germany, France, Canada and Australia, and through its website in 175 countries. Amazon also sells books in seven languages.
Despite being the underdog, Barnes & Noble seems committed to putting up a fight by proving that the physical and virtual can coexist and prosper.
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Today, Barnes & Noble has been revealed to be the first-ever location where you can unlock the free Mighty Eagle character in Angry Birds Magic, the new game from franchise creators Rovio. The idea behind Angry Birds Magic is to use technology, like GPS and NFC (near field communication), to connect gamers with their surroundings in order to augment gameplay and unlock special location-based rewards.
How to Unlock the Mighty Eagle at Barnes & Noble
With GPS, when gamers play Angry Birds Magic in certain locations, “magic happens,” explained Ramine Darabiha, Product Manger for the game at ReadWriteWeb’s 2WAY Summit earlier this month. But not every location will be magic, he said, only those that “make sense” for the brand.
That’s why B&N is the first location to be transformed into a “Magic Place,” as these special locations are called. It can promote Angry Birds both on its Nook Color e-reader and within its store, through merchandise displays.
In order to unlock the free Mighty Eagle character, gamers have to play Angry Birds Magic on the Barnes & Noble Nook Color while visiting one of the company’s 700 bookstores across the U.S. The Nook version of the game is available for $2.99 in the Nook’s app store and can be played over B&N’s free in-store Wi-Fi.
In addition, B&N will capitalize on their new partnership by offering Angry Birds-themed games, toys and other merchandise for sale and will offer free stickers and temporary tattoos to Angry Birds fans who visit the store.
More to Come, via NFC
This is just the first of many partnerships for Rovio. Other rewards will be enabled through the use of NFC, a short-range wireless frequency that enables data transfers over short distances. With NFC, you just tap or wave your phone over a sticker, tag, poster, object in order to enable a connection.
For NFC work, it has to either be built into the phone itself, or added on afterwards, via a case or microSD card. However, for its use with Angry Birds, it’s possible that you could simply place an NFC sticker on your phone to let the “magic” to happen.
Rovio previously said that the NFC features would be limited at first to Nokia’s devices, but would roll out to all other NFC-enabled phones soon. Currently, this is a short list, including Google’s Nexus S, some variants of the Samsung Galaxy S II and the upcoming BlackBerry Bold phones (9900/9930), among others.
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The publishing and bookseller world as a whole has seen substantial shake-up over the last few years: the rise of the e-book, the collapse of Borders, for example. And the world’s largest bookseller Barnes & Noble has received its own fair share of mixed reviews lately as well. On one hand, the company announced last summer that it was putting itself up for sale in order to boost what it felt were undervalued shares. On the other hand, Barnes & Noble has had a string of wins in the digital realm, most recently when Consumer Reports ranked its e-reader the Nook over competitor Amazon’s Kindle.
It’s good news, no surprise, for digital sales, as the company reported a 50% sales increase from BN.com. Those sales involved both traditional, print books, of course, but as Barnes & Noble showcased in today’s report, it’s the Nook and its associated digital content that’s the real star. The company reported that Nook sales were $250 million in the fourth quarter and that during the same period, it opened over 1 million new Nook accounts. For the full year, sales of the e-reader rose to $858.1 million, up from $572.8 million last year.
“We now sell three times as many digital books as all formats of physical books combined on BN.com,” CEO William Lynch said in a conference call. Much like Amazon’s recent announcement about e-books versus print sales, Barnes & Noble gave no exact sales figures here.
Nonetheless the growing e-book business helped push total sales for the year at Barnes & Noble up 20% to a record $7 billion. By comparison, in-store sales for the year were just $4.4 billion, and during the fourth quarter, those sales fell by almost 3%. The company chalked this up to the “fire sales” held as its once-competitor Borders closed over 200 retail stores. Whatever the cause, the result: a total loss for Barnes & Noble for the quarter of $59 million, more than had been anticipated.
While the sales of the Nook and e-books have been strong, Bloomberg points out that Barnes & Noble has had to increase its marketing and product development expenditures in order to keep pace with Amazon, which still has a strong lead in market share for e-readers.
Bloomberg cites Standard & Poor analysist Michael Souers calling The Nook is the company’s “only driver of long-term growth.” So in answer to the question “Can e-books save Barnes & Noble,” the response perhaps is “indeed, it’s the only thing that can.”
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