August 12, 2020

Chief Leaves Barnes & Noble After Losses on E-Readers

William Lynch Jr., the chief executive of Barnes Noble, resigned on Monday, two weeks after a devastating earnings report that accentuated the bookseller’s losing battle against powerful rivals like Amazon.

Mr. Lynch’s departure was part of a series of sweeping changes the company announced as it tries to regain its footing after a failed initiative to build up its Nook division and compete in the increasingly crowded market for e-readers. When it revealed its fourth-quarter earnings late last month, Barnes Noble said it would cease making its own color tablets, an acknowledgment that they were lagging popular brands like Amazon’s Kindle Fire and Apple’s iPad.

Instead, the company said it would form partnerships with third parties to make the color devices, while it continued to make and sell its own black-and-white versions of the Nook.

In a statement late Monday, the company said that Michael P. Huseby had been appointed chief executive of the Nook division and president of Barnes Noble. Mr. Huseby has served as chief financial officer since joining Barnes Noble in March 2012; previously he held that position at Cablevision Systems, a media company.

Max J. Roberts, the chief executive of the college division, will report to Mr. Huseby, while Mr. Huseby and Mitchell S. Klipper, the chief executive for the retail stores, will report to Leonard Riggio, the company’s chairman.

The moves on Monday appeared to be a step toward separating the digital and retail divisions, as the company has indicated it might do. Barnes Noble has been in talks over a potential sale of its digital assets, as well as its 675 bookstores.

Microsoft is one potential buyer of the Nook business; last year it invested hundreds of millions of dollars to acquire 17.6 percent of the division.

Mr. Riggio has expressed interest in taking back ownership of the physical stores that make Barnes Noble the largest bookstore chain in the country. Mary Ellen Keating, a spokeswoman for Barnes Noble, declined to provide an update on that offer.

There was no indication that a new chief executive would be named.

“Because the company is in a transition period, we have no immediate plans to name a C.E.O.,” Ms. Keating said.  

 “We thank William Lynch for helping transform Barnes Noble into a leading digital content provider and for leading in the development of our award-winning line of Nook products,” Mr. Riggio said in a statement issued Monday. “As the bookselling industry continues to undergo significant transformation, we believe that Michael, Mitchell and Max are the right executives to lead us into the future.”

The financial results for the fiscal fourth quarter underscored the urgency of the need to take action. The Nook unit showed a $177 million loss in earnings before interest, taxes, depreciation and amortization, or Ebitda, more than doubling the loss from the period a year earlier. Sales fell 34 percent, to $108 million.

The signs have been ominous for the company since the beginning of the year, when it announced that sales for the nine-week holiday period in late 2012 had declined at both its bookstores and in the Nook unit.

Mr. Lynch joined Barnes Noble in February 2009, with no previous experience in bookselling. He was executive vice president for marketing at and also worked for

At the time, his arrival was hailed as a forward-thinking move, since Mr. Lynch, a Texas native, was only 39 years old and fluent in e-commerce and technology. Within months, Barnes Noble introduced its first Nook e-reader.

To publishers, Mr. Lynch had performed a temporary miracle, helping create a product that provided a welcome competitor to Amazon’s Kindle, which dominated the market and offered e-books at a relatively inexpensive price.

The Nook was initially successful, drawing critical praise and capturing consumers who were uneasy about buying an e-reader — at the time a brand-new device — online, without testing it out in person. Barnes Noble’s hundreds of retail stores allowed potential customers to see and touch what they were buying.

But even though Barnes Noble quickly gained a sizable piece of the e-book market, it was not enough to ward off Amazon. And as black-and-white e-readers gave way to multifunctional color tablets, Barnes Noble found itself competing unsuccessfully against companies many times its size, like Amazon and Apple, that have had technology in their DNA from the start.

As chief executive, Mr. Lynch worked from the company’s Ninth Avenue office in Manhattan, across town from the Fifth Avenue building where Mr. Riggio keeps his office. Mr. Lynch threw his energies into the digital side of the business, taking far less of an interest in the retail stores, and frequently flew to Palo Alto to build up Barnes Noble’s presence in Silicon Valley, where their e-readers are designed.

Mike Shatzkin, the founder and chief executive of the Idea Logical Company, a publishing consultant, said a split of the business could help stave off the company’s decline.

“The Nook business clearly is going to need some global investment to have any kind of chance at all, and it certainly looks possible that they will be better off separate than together,” Mr. Shatzkin said. “There’s a glide path to oblivion, and you can affect the speed of the decline. Nobody’s going to bring back a robust brick-and-mortar book business.”

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Barnes & Noble Posts a Profit, but Sales of Digital Content Slows

The company, the largest conventional bookseller, has invested heavily in its Nook e-business as consumers increasingly shop online and read e-books. Barnes Noble said revenue from its Nook business grew, but revenue from devices fell because of lower average selling prices. Digital content revenue grew 38 percent, but that was down from a 46 percent increase in the fiscal first quarter.

Investors were hoping for higher growth, and shares of Barnes Noble fell $1.79, or 11 percent, to $14.26.

Barnes Noble reported net income of $2.2 million for the three months that ended Oct. 27. That translates to a loss of 4 cents a share, however, after the impact of preferred stock dividends. That matched analysts’ expectations, according to FactSet. The results compare with a loss in the same quarter last year of $6.6 million, or 17 cents a share.

Revenue was nearly flat at $1.88 billion. Analysts expected revenue of $1.91 billion.

Revenue from the company’s Nook division rose 6 percent to $160 million. Barnes Noble introduced two new Nook e-readers, a 7-inch Nook HD and 9-inch Nook HD Plus, during the quarter, and began shipping them just after the quarter closed.

In a call with analysts, William Lynch, the chief executive of Barnes Noble, said the company expected digital content buying to pick up after the holiday season, when Nooks are expected to be popular gifts.

The company said Nook unit sales doubled over the busy four-day shopping weekend around Thanksgiving as the company increased markdowns at retailers like Target and Wal-Mart Stores.

But the Nook faces tough competition from other new devices this holiday season, including Apple’s iPad Mini, new Amazon Kindles and Google’s Nexus tablet.

“They’re maintaining their market share by way of promoting and discounting,” said Peter Wahlstrom, an analyst at Morningstar. “But it’s a more competitive marketplace.”

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Media Decoder Blog: Barnes & Noble to Introduce New Video Service for Nook Devices

Barnes Noble said on Tuesday it would introduce a new video store for its Nook products this fall, the latest expansion of the bookseller’s digital content.

The service will allow customers to stream and download movies and television shows for a fee onto TV’s and mobile devices, while storing the content in the Nook cloud. The video catalog includes HBO shows, like “Game of Thrones” and “True Blood,” and movies including “The Artist” and “Toy Story 3.”

Barnes Noble has focused heavily on its digital offerings to compete with retailers like Amazon and Apple. In April, it received a boost when Microsoft said it would invest hundreds of millions of dollars in the bookseller’s digital division.

Barnes Noble’s Nook enters a crowded market of digital rental services that let viewers download movies and television shows to mobile devices. The video streaming service would be similar to Apple’s iTunes in that viewers could rent single episodes, movies or whole TV seasons. Wal-Mart entered the streaming business in 2010 with its $100 million acquisition of Vudu, which allows viewers to rent high-definition movies on Internet-enabled televisions. Many new television sets now come with the Vudu and Netfix apps built in. Verizon and Redbox recently partnered to introduce their own streaming service.

Major studies have taken a blow in home video revenue in recent years as DVD sales and traditional rentals decline. Deals like the one with Barnes Noble help bring in additional rental revenue and offer viewers another outlet on which to find content. That’s in combination with home-grown streaming services like HBO Go, which requires users to authenticate that they pay for Time Warner’s HBO before accessing hundreds of episodes of past and current shows on tablets and mobile devices.

William J. Lynch, the chief executive of Barnes Noble, said in a statement, “As one of the world’s largest retailers of physical video discs and digital copyrighted content, our new Nook Video service will give our customers another way to be entertained with a vast and growing digital video collection, as part of our expansive Nook store.”

Barnes Noble currently has about 25 percent of the e-book market. In August, the company reported a loss of $41 million, or 78 cents a share, in the quarter ending July 28. Nook sales were flat over the previous year, at $192 million.

On Tuesday, Barnes Noble also signaled its intentions to build a bigger presence in Britain. It said the company Dixons Retail, which owns the electronics retailers PC World and Currys, would sell Nook products in 600 stores. Barnes Noble also named Patrick Nourvillois as a managing director responsible for building the Nook brand “outside the U.S. across the globe.”

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Bookstores Drop Comics After Amazon Deal With DC

Amazon, seeking to make its coming Kindle Fire tablet as appealing as possible, negotiated a deal with DC Comics for the exclusive digital rights to a hundred popular graphic novels. Among the series: Superman, Batman, Green Lantern, the Sandman and Watchmen.

Barnes Noble, with a tablet of its own to nurture, did not like this one bit. Two weeks ago it removed all the copies of the physical volumes from its 1,300 stores, saying it would not carry any book if it were denied the right to sell the digital version.

Books-a-Million, the third-largest bookseller with 231 stores, followed suit last week, making the same argument.

Booksellers of all sorts used to pride themselves on never removing any book from their shelves, but that tradition — born in battles over censorship — is fading as competitive struggles increase. Last year, in a sort of foretaste of the present conflict, Amazon temporarily removed the “buy” buttons for the publisher Macmillan as part of a struggle over e-book pricing.

This time, the stakes are once again high. The two chains are desperate to avoid becoming showrooms for Amazon’s digital warehouse, which would quickly send them to the bookstore graveyard like their former colleague Borders. DC Comics must stay relevant in a world where many of its young male fans read everything on mobile devices — not the most congenial medium for comics. And Amazon must preserve and extend its dominance.

In comics and other online forums where the issue is being debated, everyone is unhappy with someone. Amazon is being accused by some of throwing its considerable weight around to the detriment of readers and the larger culture. DC Comics is being criticized by others of placing greed over its fans. Barnes Noble is alternatively being accused of throwing its own weight around and of cutting off its nose to spite its face. Even the comics’ writers are getting some heat.

As Amazon seeks over the next few years to expand its tablet line, these collisions over content are likely to become routine. “It looks like content providers and online purveyors have a few more rounds to go before the Wild West is tamed,” said Lorraine Shanley, a publishing consultant.

DC Comics, a division of Warner Brothers, says it is being misunderstood. But on its own Web site, it said the books would be available “exclusively to Amazon’s newly announced Kindle Fire,” with no qualification. Even the possibility that fans could have access to the books on their iPad through the Kindle app seemed disallowed.

DC now says the books will be available on other e-readers through the Kindle app. “Just because we’re starting with Amazon, this is not the be-all and end-all of our digital strategy and distribution,” said Jim Lee, co-publisher of DC Entertainment, the parent company of DC Comics. He added, however, “We are not at liberty to discuss exactly when” the comics would be available on other e-readers, citing the company’s nondisclosure agreement with Amazon.

Amazon declined to comment about the deal.

DC executives seem surprised at the speed with which they had alienated some of their devout fans. Some threatened piracy, like NinjaZilla, a poster on a comics forum who wrote, “What will me and my poor iPad do? I’m so sorry DC! Because it is not like I can download all those comics for free, oh wait yes I can, and now I guess I will and maybe I will download every comic DC produces while I am at it!”

Mr. Lee said, “We say to our fans, have a little patience.”

A lot of patience might be required. DC says it took two years of work with Amazon to complete the process of converting the comics into something that could be read and appreciated on the Kindle Fire.

Independent bookstores, which are rarely offered exclusives by publishers, argue that they are bad for consumers.

“A competitive retail market where products are available from lots of different places creates greater choice and a competitive pricing environment,” said Oren Teicher, chief executive of the American Booksellers Association. “Choice is better than no choice.”

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