Barnes & Noble's Nook business falls more than 32%
Barnes & Noble's Nook business continues to struggle in its competition with Amazon, with revenues in the segment declining more than 32 percent in the company's most recent quarter, according to numbers released this morning.
Context & Ripple Effects
The decline extends a slide that began years earlier: Barnes & Noble had already been phasing out the Nook 3G back in 2011, and by mid-2012 its own earnings showed the Nook Simple Touch dragging hardware revenues down even as digital content sales rose. A GeekWire-covered study in December 2012 projected dedicated e-reader shipments would fall 36% that year as tablets took over, framing exactly the squeeze this quarter confirms.
What makes this quarter notable is the breadth of pickup — the New York Times, Fox Business, ABC News, ZDNet and VentureBeat all carried the same numbers on or about November 26, 2013 — and the competitive timing: Amazon spent the prior week shipping confirmed Kindle Paperwhite software updates while rumors circulated of a higher-resolution Paperwhite refresh for early next year.
First-order effects
- Barnes & Noble's segment loses scale precisely when Amazon is investing hardest in its Kindle lineup, widening the gap between the two reading ecosystems.
- The shortfall pressures the rest of Barnes & Noble's P&L, since Nook hardware and content sales were pitched to investors as the growth offset to declining physical bookstore traffic.
Second-order effects
- Publishers and content partners face further concentration of digital book distribution around Amazon's store, reducing their leverage on pricing and terms.
- Any remaining Nook hardware roadmap competes against both multi-function tablets and Amazon's subsidized devices, forcing Barnes & Noble to choose between deeper price cuts it can't fund or a retreat from hardware.
Third-order effects
- If the tablet-driven contraction holds, the dedicated e-reader becomes a niche accessory rather than a category, leaving one dominant device-and-store platform where several competed.
- A bookstore chain whose digital arm shrinks this far points toward structural separation: retail stores and digital content businesses valued, and possibly run, as different companies.
The trend: Dedicated e-readers are ceding the market to tablets and Amazon's integrated Kindle ecosystem, pushing rivals like Barnes & Noble toward retrenchment or exit from hardware.