In one aisle, a father and daughter were having a spirited generational discussion over the side-by-side covers of “The Great Gatsby,” one of which bore an image of Leonardo DiCaprio. For reasons I wasn’t quite clear about but nonetheless found charming, an older couple used a book on vegetarian cooking to cover up a copy of “The Art of Seduction” on the shelf. Nearby, two apparent siblings, one sporting pink hair and the other purple, traded loud opinions over the True Crime display.
Watching the readers lounge in chairs with a view of Route 3, it was hard to reconcile the pageantry of retailing with the brutal recent headlines about the book business.
At the beginning of the July, the Big Six publishers became the Big Five with the blending of Penguin and Random House. At the beginning of last week, the chief executive of Barnes Noble left the company after a grim earnings report that highlighted a failed strategy to have the company’s Nook device compete in the crowded tablet space.
Then on Thursday, Judge Denise L. Cote of United States District Court in Manhattan issued a withering decision against Apple, writing that the company had conspired with the major publishers to fix the price of e-books in an effort to thwart Amazon’s momentum.
So far, what has been bad for the industry has not yet hit consumers directly. If they are among the many millions of people enthralled by CBS’s “Under the Dome,” and decide to read the giant Stephen King novel that inspired it, they can hop on Amazon and buy it with a click for $13.99. Or they could avoid its door-stopping heft and spend just $7.99 for the Kindle version.
No wonder that last year e-book sales boomed, including a 42 percent rise in sales of fiction. Net revenue for publishers also climbed more than $1 billion in 2012, to $15 billion, according to BookStats, an annual survey of the book business.
But while publishers revel in the robust margins provided by e-books — no manufacturing, no shipping and no remaindering — the growth of Amazon leaves them as secondary characters in a business they used to control.
Apple may be the one that was found guilty of setting prices, but Amazon has the kind of market power that allows it to set prices unilaterally. The company is already pulling back on discounts on scholarly and small-press books.
Barnes Noble tried to keep up with the technological shift, but the company’s earnings were perforated by a $177 million loss from its Nook division, and that news took out William Lynch Jr., the chief executive, and threw a deep scare into publishers.
In my view, Barnes Noble is a company that did the right thing, and got clobbered anyway. When most media companies get into the device business, what pops out is clunky and useless, but the Nook is an excellent reading device that drew critical praise and, initially, buyers. At a time when legacy media companies are derided for letting the future overtake them, Barnes Noble aggressively innovated.
Amazon, however, not only had the Kindle, but consumer relationships, inventory and technical know-how that could not be overcome. And as consumers moved from e-readers to tablets to take advantage of multiple functions like video, the Nook ended up in a corner. During last Christmas season, Nook sales were down 12.6 percent compared with the period a year earlier.
But the current spate of bad news may mask underlying strengths. As Bloomberg News pointed out on Thursday, Leonard Riggio, the 72-year-old architect of Barnes Noble’s national buildup, is still considering buying the physical stores and taking them private, in part because the fundamentals of that business are still solid, if not spectacular. In the fiscal year that ended in April, the retail stores and Web site generated earnings of $374.2 million before interest, taxes, depreciation and amortization, a 16 percent increase, even as sales declined almost 6 percent.
One of the parties that might want to root for Barnes Noble is Amazon. Sales of e-books fell immediately after Borders went under, leading some to suggest that reduced opportunity to browse the physical artifact resulted in less online buying.
Having a bookstore in your neighborhood, as opposed to one that is bookmarked on your browser, is an invitation. Not long ago, I was walking by an airport bookstore and thought, “What if this was the only place to buy books?” Similar to Hollywood, only the blockbusters would get shelf space.
After Borders called it quits two years ago this week, Barnes Noble became the last big chain where publishers could get the exposure for their books that allows readers to discover them, and to sell all manner of books big and small that are still part of the foundation of the industry.
Morgan Entrekin, publisher at Grove/Atlantic, says everyone has skin in the retail game.
“We need to have a diversity of distribution channels to be healthy, and Amazon may want it all, but they are smart enough to know that,” he said. “People can’t live online all the time.”
Bookstores offer discoverability, not just the latest Dan Brown or Carl Hiaasen book on the front table, but sometimes treasures deep in the stacks, a long tail of midlist authors and specialty books. Even as the book business consolidates, the physical object displayed in an actual place will continue to be an important part of the ecosystem.
Let’s hope it survives. From the balcony of the Barnes Noble, what looked like the buzz of literary commerce was less impressive on closer inspection. The checkout line was busy because there were only two people working the registers. And the coffee shop was not so much an amenity for consumers-on-the-go than a spot where people camped out and pawed over magazines they had not bought and probably never would.
On the way out of the store, I saw the father and daughter who were arguing over the “Gatsby” cover. They had bought neither, but they probably settled on which one they were going to buy on Amazon.
Article source: http://www.nytimes.com/2013/07/15/business/media/why-barnes-noble-is-good-for-amazon.html?partner=rss&emc=rss
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