Barnes & Noble Should Kill the Nook

Barnes & Noble (NYSE: BKS  ) may have done it all for the Nookie, but it's clear that the struggling bookseller's plan to matter in a digital tomorrow just isn't going to happen.

Barnes & Noble posted sloppy quarterly results this morning, but the real dagger is how its Nook line is fading in popularity. Nook revenue declined 32% to $108.7 million in the period relative to last year's comparable quarter. 

No one should be shocked by a decline. Amazon.com's (NASDAQ: AMZN  ) Kindle and Kindle Fire have won this fight, and Barnes & Noble should've known that it was doomed the moment it entered into a battle against the one company that doesn't care about near-term profitability when it wants to penetrate the market. Barnes & Noble has scaled back its Nook initiatives, and the actual 41% decline in device and accessories isn't the jaw-dropping figure here. The real head-shaking metric is the 21% decline in digital content.

Think about that for a bit. Even if Barnes & Noble is selling fewer Nooks, it would still mean a broader base of gadgets in the wild. This is incremental. However, now we're seeing that it's not merely the book superstore chain's inability to compete with Amazon on e-readers or Apple (NASDAQ: AAPL  ) on tablets: Nook buyers just aren't buying content anymore.

It's hard to blame Barnes & Noble. After all, it survived Borders and most of the friendly neighborhood beacons of lit. The Nook could've made it, too, if it wasn't for Amazon's ferocious ways. 

If it had been Apple to enter the e-reader war with Barnes & Noble, the Nook would've had a shot. Apple sells its gadgetry at generous markups, allowing Nook to compete on price without sacrificing margins. Amazon, on the other hand, is ruthless. Teardowns show that it sells many Kindle products near or even below cost. Amazon feels that it can do that, making that back in digital media. Barnes & Noble was never going to be able to match Amazon's reach, especially once we moved beyond digital books to other digital media that Amazon's been selling for years.

Splitting up Barnes & Noble into pieces or selling off subsidiaries has been the relentless chatter for two years, but it's all simply a matter of waiting until the ticking stops. Barnes & Noble's bookstores will eventually be gone. The lingering office-pool bet is exactly how many years it outlasts Blockbuster. However, there's little point in continuing the Nook charade. That game's over. Amazon won. Barnes & Noble lost.

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  • Report this Comment On November 26, 2013, at 6:14 PM, melegross wrote:

    It would be a shame for them to stop selling digital content. I have all three stores on my iPad, and have since they first came out. I buy books from all three. That's a lot of books!

    I hate to think that Amazon out someone else out of business using their underhanded tactics.

    But Bezos is as ruthless as Bill gates is.

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