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…


4 replies
  1. avatar
    Katherine says:

    Just an FYI – Nook has nearly the same royalty payment structure as Kindle – a little worse for the bulk of the books (65% vs. 70%) and a little better on those above $10 (40% vs. 35%).

    From their T&C’s):
    For NOOK Books with a List Price at or between $2.99/£1.50 and $9.99/£7.99
    65% of the List Price
    For NOOK Books with a List Price at or below $2.98 /£1.49, or at or greater than $10.00/£8.00 (but not more than $199.99/£120.00 and not less than $0.99/£0.75)
    40% of the List Price

  2. avatar
    Rich Meyer says:

    I think it’s time for the Nook, and maybe even B&N, to just mosey off into the sunset. It’s never a good sign when someone won’t buy your company IF you include the division with the fancy e-reader.

    They’ve been a major embarrassment to themselves with their petty policies toward their providers (Marvel Comics and DC Comics come immediately to mind), and their archaic, non-service customer service policies.

    Much like Borders/Walden, they shot themselves in the foot a long time ago and have just let it bleed out.

  3. avatar
    Guest says:

    Nook brand has done so much to contribute to the literacy scene and benefited
    so many and sadly competition will means that there will be those tablets that
    the consumer will support and those who have a good product but not be able to
    sustain sales against such a on-going changing market. Hopefully after a downsizes B&N/Nook will
    continue to maintain a sustainable level that will enable them to continue.

    generally need to co-exist with changing markets and the embryo of eBooks which
    is exponentially increasing in sales since 2009-10. The traditional way of
    customers having to enter a bookstore to find what they want and have to stand
    there to peruse potential selection does not make for a relaxing environment.

    Combining a bookstores’ with a warm welcoming and relaxing environment where
    readers can feel comfortable looking at books where seating is available to go
    through a series of books and then perhaps stay for a while to contemplate
    which book(s) they will chose to buy makes the whole customer experience more
    conducive to encouraging increased sales.

    Comments on social media alone reinforces the latter with comments around
    eBooks and how readers feel more relaxed and comfortable whilst browsing eBooks
    selection which is a small but important part of a customers journey in buying
    the eBooks and likely means that over a time they will buy more. This principal
    needs to be better understood and applied in bookstores to balance sales of
    handbook printed editions along side eBook formats.

    Books are no more threatened by eBooks then stairs by elevators!


  4. avatar
    Mike Scantlebury says:

    The Nook’s here? It’s not here? As an author who puts out books through Smashwords, part of the attraction of that deal is that SW can get my ebooks onto the Nook. If it can’t – cos the Nook has failed – there’s still the others, all of which are connected to SW. If Nook is going, it’s a sad story, but mainly for readers and the company itself. Authors can continue.


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