Is the Nook Spin-Off a Hint of Underlying Problems for E-Readers and

Image by Flickr user Eric Grossnickle

The Nook may be heading for the cutting room floor sooner than expected. Barnes & Noble  (NYSE: BKS  ) has announced that it will spin off its e-reader as a separate public company, probably in early 2015 . Barnes & Noble shares responded with a 7% leap  following the news, a bonus following the total 40% gain seen since 2014 began.

Investors responded positively to the news because the Nook has been looking like a failure for some time, with quarterly revenue decreasing more than 22% year over year and total fiscal revenue falling by 35.2% in 2013. While the Nook will be a public company, investor interest is unlikely; Nook has a slim chance of surviving as its own business as it faces declining demand and fierce competition in most areas except textbook sales.

Ultimately, this spinoff is a symptom of the problems that all e-readers are facing in the changing market, problems that could force even  (NASDAQ: AMZN  ) and others to alter their approach.

Dominant e-readers face challenges
If e-readers have a future, it is probably through the most successful products like Amazon's Kindle line. Apple  (NASDAQ: AAPL  ) is staying away from a dedicated reader device thus far. Kindle devices themselves brought Amazon about $3.9 billion revenue in 2013 .

However, even the Kindle's lifespan may be limited. The rise of the iPad, Kindle Fire, and other tablet computers has made the e-reader a little irrelevant. Apps for the Nook, Kindle, and many other e-reader are available on these tablets, and these apps are getting even easier to use. Why take two screens on vacation when you only need one? Some remain fans of the readability that e-ink offers in sunlight, but buying a separate device for that solo benefit is a tough sell. The latest Forrester  research predicts that e-reader sales will fall from 25 million sold in 2012 to 7 million sold in 2017 because trends like this.

Numbers also point to waning interest in e-books in general. Sales revenue has been flat, around $3 billion , for the past couple of years. Sony  has already given up on selling e-books in North America and has dropped its Reader line in favor of tablets. Amazon  is dropping prices on devices like the Kindle DX. Apple is keeping quiet  on its numbers, but has recently reached a settlement for its e-book lawsuit  and appears intent on providing Amazon with more app-based competition.

The rise of Netflix-like services
Another problem with e-books is the challenge provided by alternative services like Oyster and Scribd. Both of these companies offer a Netflix-like arrangement where you pay a monthly fee and get app-based access to a digital library -- 400,000 titles in the case of Scribd and 500,000 for Oyster. Consumers can also pay a little more and get services like Entitle , which offers new releases from major publishers like HarperCollins and allows people to permanently keep the books they choose.

All of these services are working on developing more contracts with big publishers, and their recent success may offer a reason why direct e-book sales are falling. Oyster started 2014 with a $14 million  funding round, and that was back when it only offered 100,000 titles, while Scribd appears on the path to an IPO. All companies in this group are sapping e-book revenue from big sellers.

In other words, placing big bets on the future of e-readers could be dangerous, and e-book revenue may not be as dependable as publishers or companies like Amazon wish. The market is more diverse than it was and could offer a second chance for floundering companies. If the Nook wants to survive the coming years, its solution might lie in one of these e-book alternatives.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3017991, ~/Articles/ArticleHandler.aspx, 9/1/2015 6:43:20 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Tyler Lacoma

Tyler Lacoma is a business writer and editor with experience in international economics, marketing, and tech news.

Today's Market

updated Moments ago Sponsored by:
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASD 4,636.11 -140.40 -2.94%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/1/2015 4:00 PM
AAPL $107.72 Down -5.04 -4.47%
Apple CAPS Rating: ****
AMZN $496.54 Down -16.35 -3.19% CAPS Rating: ***
BKS $15.25 Down -0.36 -2.31%
Barnes & Noble CAPS Rating: *