Barnes & Noble's bad holiday: Nook, store and BN.com sales down
As it had warned investors last week, Barnes & Noble announced disappointing holiday sales Thursday. For the nine-week period ending December 29, 2012, Nook device sales, in-store sales and BN.com sales were all down from the same period last year.
Context & Ripple Effects
Barnes & Noble entered the holiday period with a split Nook picture: the Nook Simple Touch had weighed on revenue in 2012, even as digital-content sales rose. The holiday figures matter because weakness is no longer confined to a single device line; stores and BN.com also declined.
First-order effects
- Barnes & Noble loses holiday sales across Nook hardware, stores and BN.com, putting pressure on the retail and device businesses at the same time.
- Nook’s device-sales decline limits the near-term expansion of the customer base that buys Barnes & Noble digital content.
Second-order effects
- Digital-content growth has less capacity to offset the hardware drag identified in Barnes & Noble’s earlier earnings report, increasing the importance of revenue from existing Nook users.
- Barnes & Noble must manage a holiday shortfall across its physical and online channels rather than using one channel’s strength to compensate for another’s weakness.
Third-order effects
- The results point toward a tougher version of the retailer-plus-device model: a dedicated reading device must support recurring content sales while its owner also carries store and web operations.
- If device demand stays weak, digital-book economics will depend more on monetizing active Nook users than on adding hardware buyers.
The trend: Dedicated-device businesses are becoming more dependent on recurring digital-content revenue as hardware sales lose momentum.