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B&N may spin off Nook business, confirms overseas drive

06.01.12 | Charlotte Williams

US bookseller Barnes & Noble has said that it is considering separating its Nook business from its traditional book retailing operations in order to "unlock value" from that business not represented in its share price. It has also confirmed the news, first reported in The Bookseller in November, that it is looking to take the Nook overseas and is in discussions with "strategic partners including publishers, retailers, and technology companies".

The statements came as the company reported sales of its Nook e-reading devices increased 70% year-on-year over the nine-week festive period ending 31st December 2011, with sales of digital content increasing by 113% over the same period. However, while B&N said sales of NOOK Tablet exceeded expectations, sales of its e-ink device the NOOK Simple Touch "lagged expectations", indicating a stronger customer preference for color devices. The company said it had "over-anticipated the growth in consumer demand for single purpose black-and-white reading devices this holiday" and as a result reduced its sales and profits guidance to investors for the full-year.

Chief executive officer William Lynch told The Bookseller in November that it planned to take the Nook platform overseas, and it now says that it is in discussions with "strategic partners including publishers, retailers, and technology companies in international markets that may lead to expansion of the Nook business abroad". The announcement suggests that a deal with Waterstone's is now close.

The company also reported that it is pursuing "strategic exploratory work to separate the Nook business". Chief executive officer William Lynch said: "We see substantial value in what we've built with our Nook business in only two years, and we believe it's the right time to investigate our options to unlock that value."

Barnes & Noble's shares are priced at $11, valuing the business at about $650m. Late last year the Japanese company Rakuten put a $315m value on Kobo, which is significantly smaller than either B&N or its Nook division, and which has never made a profit. B&N's share price actually fell on the news, and the company admitted that there was "no assurance that the review of a potential separation of the NOOK digital business will result in a separation" and that there was no "timetable for the review". 

Lynch said the Nook business should represent $1.5bn in comparable sales this financial year. "Between continued projected growth in the U.S., and the opportunity for NOOK internationally in the next 12 months, we expect the business to continue to scale rapidly for the foreseeable future.”

The consolidated Nook business, including sales of digital content, devices and accessories, increased 43% during the period to $448m, on a comparable sales basis. Sales in its physical stores increased 2.5% over the same period last year, to $1.2bn, with physical book sales growing year-on-year for the first time in five years, increasing by 4%.

B&N said that it expects digital content sales to be approximately $450m for the 2012 financial year, with BA.com sales increasing 43% year-on-year to $327m over the most recent nine-week holiday period, "driven by continued growth of the Nook business, offset by a decline in online physical product sales".

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By David Gaughran

Does anyone know what Barnes & Noble are doing? First they announce they are looking for a buyer for their publishing arm (Sterling), and now they are seeking to spin off the Nook. At the same time they are reducing the number of books they are carrying in the physical stores to make room for non-book items (keychains, scented candles etc.).

The digital side of the business is the only area showing any growth. Sales are flat on the physical side, and if you separate out the growth in non-book items, the book side is actually down. They quietly closed another tranche of stores in the last quarter of 2012 - just let the leases expire and made no announcement.

There is a clear lack of strategy here. They don't even know for sure if they are going to sell the digital side or not. They don't know if they whole business is on sale or not. Meanwhile the physical stores are taking out bookracks to expand Nook display areas, even though that side of the business might be separated. What happens if it is? Do those display areas disappear? Do Barnes & Noble start stocking other devices too? I don't think they really have a clue what they are doing. And this all smacks of desperate investors seeking to cash in on the only part of the business with any value before it all goes belly up.

Sadly, once the digital side is sold, it's curtains for America's largest bookselling chain.

Fri, 06/01/2012 - 14:09
By Philip Athans

B&N is not the first, nor will it be the last business to be negatively impacted by sudden bursts of technological adoption. They were at least smart enough to get in on the e-book when they did, and even though they continue to lag behind Amazon, at least they're in the race.

As someone who LOVES books--who lives in a house full of books, who has made a living for his entire adult life in the publishing and music businesses--I've had my share of struggles with emerging technologies, and was an early skeptic of the e-book.

But now, the economics of the e-book are simply undeniable. The format benefits literally everyone but the traditional brick-and-mortar bookseller. It's good for authors, who are seeing their back catalogs refreshed in new e-book editions, who at least have the option of exploring self-publishing options, and who are here to fuel a new hunger for content (and authors are, at heart, CONTENT PROVIDERS, and should always be format-agnostic).

Publishers will not only survive the e-book "revolution" but will thrive because of it, enjoying that rarest of bird's in this all but impossible business: profit. (Though nowhere near the imaginary income levels buzzing through the agent/author communities.) Authors will do just fine, though they'll make their money over time rather than in unsustainable lump sum advances, and consumers will enjoy convenience, ease of use, and lower MSRPs. If there's any way to do all that and still protect the bookseller--I'm all ears.

Tue, 24/01/2012 - 16:55
By David Gaughran

Does anyone know what Barnes & Noble are doing? First they announce they are looking for a buyer for their publishing arm (Sterling), and now they are seeking to spin off the Nook. At the same time they are reducing the number of books they are carrying in the physical stores to make room for non-book items (keychains, scented candles etc.).

The digital side of the business is the only area showing any growth. Sales are flat on the physical side, and if you separate out the growth in non-book items, the book side is actually down. They quietly closed another tranche of stores in the last quarter of 2012 - just let the leases expire and made no announcement.

There is a clear lack of strategy here. They don't even know for sure if they are going to sell the digital side or not. They don't know if they whole business is on sale or not. Meanwhile the physical stores are taking out bookracks to expand Nook display areas, even though that side of the business might be separated. What happens if it is? Do those display areas disappear? Do Barnes & Noble start stocking other devices too? I don't think they really have a clue what they are doing. And this all smacks of desperate investors seeking to cash in on the only part of the business with any value before it all goes belly up.

Sadly, once the digital side is sold, it's curtains for America's largest bookselling chain.

Fri, 06/01/2012 - 14:09
By Philip Athans

B&N is not the first, nor will it be the last business to be negatively impacted by sudden bursts of technological adoption. They were at least smart enough to get in on the e-book when they did, and even though they continue to lag behind Amazon, at least they're in the race.

As someone who LOVES books--who lives in a house full of books, who has made a living for his entire adult life in the publishing and music businesses--I've had my share of struggles with emerging technologies, and was an early skeptic of the e-book.

But now, the economics of the e-book are simply undeniable. The format benefits literally everyone but the traditional brick-and-mortar bookseller. It's good for authors, who are seeing their back catalogs refreshed in new e-book editions, who at least have the option of exploring self-publishing options, and who are here to fuel a new hunger for content (and authors are, at heart, CONTENT PROVIDERS, and should always be format-agnostic).

Publishers will not only survive the e-book "revolution" but will thrive because of it, enjoying that rarest of bird's in this all but impossible business: profit. (Though nowhere near the imaginary income levels buzzing through the agent/author communities.) Authors will do just fine, though they'll make their money over time rather than in unsustainable lump sum advances, and consumers will enjoy convenience, ease of use, and lower MSRPs. If there's any way to do all that and still protect the bookseller--I'm all ears.

Tue, 24/01/2012 - 16:55

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