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Nook’s Goose Cooked?

According to a recent report in The Digital Reader, the VP and general manager for global e-Books at Nook Media, Jim Hilt, is leaving the beleaguered e-Bookseller in February.

Hilt is the fourth Barnes & Noble (NYSE:BKS) executive in recent weeks involved in a management reshuffling. Michael Huseby, formerly head of Nook Media, is expected “to manage the orderly liquidation of what’s left of the company” as the new CEO of B&N, according to the report cited above.

Barnes & Noble also made major cuts to its Nook engineering staff on February 10, 2014 as reported by Reuters. Is this a death knell?

B&N announced dwindling Nook revenue every quarter last year. Worse, for the all-important holiday season of 2013, Nook revenue was down dramatically compared to the previous year.

A holiday shortfall is especially punishing in the e-Book world, because consumers who get e-Book devices as gifts typically go on a downloading binge thereafter, filling up their shiny new toys with reading material. For this reason, a holiday downturn hurts the bookseller on two fronts: both hardware and software.

One reason that the Nook has faltered is that it’s more specialized than the latest Kindle devices from Amazon (NASDAQ:AMNZ) or iPads from Apple (NASDAQ:AAPL). Nook enthusiasts argue that the Nook is beautifully designed for its primary purpose: reading e-Books. But critics counter that its other functions are too limited by comparison.

Pricing and non-exclusivity policies also hurt the Nook. Its rivals at Amazon and Apple have long been criticized for their dogged efforts to lure authors and publishers into disadvantageous exclusive deals, while (to its credit) Nook maintained a more open policy toward e-Books.

Apple’s iBookstore reportedly rejects e-Books that contain live hypertext links to books sold by its competitors, a questionable practice that some believe is a violation of the 1st Amendment of the U.S. Constitution. Amazon’s “Kindle Owners Lending Library,” a program that pays authors and publishers a small royalty when their books are borrowed for free by Amazon Prime members, is available only for e-Books sold exclusively by Amazon.

As cynics say, “No good deed goes unpunished.” By taking a higher road in its treatment of authors and publishers, the Nook has been left with a smaller catalog of available reading material for consumers, as Amazon and Apple have lured away thousands of content creators.

In terms of pricing, Amazon is (in)famous for selling e-Books at a loss, in order to gain market share. To the chagrin of authors and publishers, in most cases Amazon cuts royalties for e-Books priced above $9.99 in half. Many popular books are priced substantially lower as Kindle editions than their Nook counterparts.

In a recent interview with The Wall Street Journal, Huseby insisted that B&N remains committed to the Nook. “Your best chance of success for selling digital content is on your own dedicated devices which have your brand or a co-brand on them,” he stated. “If we can leverage an outside partnership to help us with devices, we will do that.”

But the future of the Nook has never before looked as questionable as it does now. Stay tuned to IR for further developments…

 

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