Barnes & Noble (BKS +0.00%) couldn't quite make its tablet business work. The market proved too competitive, too expensive, and too risky. In the end, the retailer failed to sell enough Nooks to get to profitable scale, and to power those all-important content sales.
The Nook's digital business fell by 8.9%, thanks to lower device sales and a tough comparison with last year, when customers were snapping up popular titles like The Hunger Games.
Thanks, Kindle
A lot of those Nook tablet struggles came at the hands of Amazon.com (AMZN 2.61%), and the success it managed with its Kindle devices. The online retailer's tablet and e-reader lineup dominated its own sales lists, snatching the top four spots of its best-selling products worldwide last year. In fact, every one of Amazon's top 10 best-selling items last quarter were either digital or Kindle-related. That's what a strong ecosystem looks like.
Still, Amazon might soon be feeling the same content pinch that its bookselling rival has this year. In other words, Barnes & Noble's shrinking digital content revenue could be a sign of weaker sales growth ahead for Amazon.
It's true that the retailer is having no trouble moving its tablets and e-readers. But it is still seeing stalling growth from its media business, which includes e-books and other downloads. Last quarter -- when digital content sales should have been jolted by a rush of new device owners filling their tablets with digital stuff -- Amazon's media business chipped in just 12% of its total revenue growth. A year ago, that figure was a much stronger 22%.
Source: Amazon.com financial filings and author's calculations.
Most of that slowdown came from Amazon's international media business, which grew by just 1% last quarter. Media sales in the United States rose by a more respectable 14%, but that was still slower than the 17% growth Amazon booked in the year-ago quarter.
If consumers, particularly in the U.S, are scaling back on their digital content purchasing, then that poor sales growth trend will continue. Investors will find out if Amazon bucked the trend later this month when it reports its earnings results.
