Business
3:21 am
Tue February 26, 2013

Has The Nook Saved Barnes & Noble From Going The Way Of Borders?

Originally published on Tue February 26, 2013 7:44 am

Transcript

LINDA WERTHEIMER, HOST:

Barnes & Noble Chairman and chief stockholder, Leonard Riggio, is looking into the possibility of buying the company's retail book business, but not the Nook, the e-book, the company had staked it future on.

STEVE INSKEEP, HOST:

That news comes as the company is set to release its third quarter earnings on Thursday. Barnes & Noble has already signaled the report will be disappointing, especially with the e-reader.

NPR's Lynn Neary reports on the future of the bookstore chain.

LYNN NEARY, BYLINE: Alexandra Petri is Barnes & Noble's dream customer.

ALEXANDRIA PETRI: My confession here is that I actually picked my apartment based on its proximity to Barnes & Noble.

NEARY: But she is also its worst nightmare.

PETRI: If you were going to buy a Nook you would already have a Kindle, is basically the way I feel about it.

NEARY: Petri is a columnist and blogger for the Washington Post. When she read recently that Barnes & Noble has plans to close more of its stores, she wrote that she wanted to stage an intervention. The company, she said, needs to understand that its most devoted customers love books, not digital devices like the Nook.

PETRI: Barnes & Noble has been trying, really hard, to push it over on you. If you sit in the store long enough you're bound to hear an announcement come over on the speaker system saying hey, book lovers, have you tried the Nook yet? Because if not, you really should.

NEARY: If Barnes & Noble seems to be trying a little too hard to sell the Nook, that's because they have a lot at stake in the device. Not too long ago, company officials and industry observers alike, were predicting that the Nook would save Barnes & Noble from meeting the same fate as its biggest rival, Borders, which is now out of business. The Nook gave Barnes & Noble a seat at the digital table.

JAMES MCQUIVEY: The Nook is really one of the better devices in the early days of tablets.

NEARY: James McQuivey of Forrester Research is among those who thought the Nook would lead Barnes & Noble into the digital publishing future. But things move fast in the digital world, and McQuivey says the Nook is getting left behind.

MCQUIVEY: The Nook is basically a reading device, maybe a media device. The tablet market has gone far past just reading or even consuming media. It's about email, it's about productivity. These are all things the Nook can try to do but just doesn't keep up with the paces set by someone like Apple or Google or other people who are working on these tablets.

NEARY: The problem is, Barnes & Noble spent a lot of money developing the Nook and improving it. Peter Wahlstrom, a senior analyst with Morningstar says it's become a losing proposition.

PETER WAHLSTROM: Because if I walk through my scenarios of Nook media as it stands today, where sales are going, where profitability is going, and based on how much money the company, Barnes & Noble has already sunk into Nook, they're putting good money after bad.

NEARY: So Wahlstrom welcomed the news that Riggio is thinking of buying the retail side of Barnes & Noble. That would effectively spin off the Nook into a separate business.

Wahlstrom says both Microsoft and the media conglomerate Pearson already have a big stake in the Nook. They have deeper pockets and the expertise needed to develop both the hardware and software that could make the Nook more competitive. He says Barnes & Noble could go back to doing what it does best, being a great book store.

WAHLSTROM: The last national book seller, which is modestly profitable, would generate a fair amount of cash flow, limited capital expenditure needs and exist in a mature/declining environment in the U.S.

NEARY: James McQuivey agrees that the Nook business should be separated from the retail side of Barnes & Noble.

MCQUIVEY: I would expect that the Nook brand stays as a separate unit that gets operated as a device maker and a software provider. The Barnes & Noble brand, of course, and the Barnes & Noble.com website stays with the bookseller, but, of course, as a strategic partnership between the two. Nook becomes the, perhaps exclusive for time, e-reader and tablet that you can buy at Barnes & Noble. So it frees them up to operate in their own interest, but it doesn't stop them from working together as partners as well.

NEARY: If all this pans out, McQuivey says one really big challenge remains, the retail book business is not in good shape.

MCQUIVEY: What does Riggio think he can do with the book side of the business? You're looking at a business that's about to go over the cliff, meaning the book selling business, generally; and yet you're saying, I want to buy that. Either he believes that this business is a special business that he wants to cherish and nurture, or he thinks he's going to do something other than sell books with it. And my money would be on the latter if you are going to put money on it at all.

NEARY: But if it is the former, and Leonard Riggio really does envision Barnes & Noble as the last national book seller, well then, maybe no one needs to stage an intervention after all.

Lynn Neary, NPR News, Washington. Transcript provided by NPR, Copyright NPR.