B&N Reports Digital Sales Down 50%, But It’s Okay Because They Have a New Tablet in the Works

Barnes & Noblebarnes noble logo released their latest quarterly financial report today, and the news is as bad as one could imagine. Sales were down slightly in the retail stores and in the college bookstores, which is bad enough, but sales in the Nook Store dropped through the floor.

B&N reported their third quarter earnings (for the quarter that ended January 25, 2014). Overall revenue fell 10% to $2.0 billion, and EBITDA increased to $173 million from $74 million a year ago.

According to the press release, the B&N the retail unit, including the bookstores and BN.com, had revenues of $1.4 billion for the quarter, decreasing 6.3% over the prior year. B&N College, the 600 odd college bookstores which are operated under contract, had revenues of $486 million, decreasing 6.0% as compared to a year ago.

And that brings us to the Nook division. You might want to sit down for this.

According to the B&N press release, revenues for the Nook segment dropped by half as compared to the same quarter last year.

The NOOK segment (including digital content, devices and accessories) had revenues of $157 million for the quarter, decreasing 50.4% from a year ago.  Device and accessories sales were $100 million for the quarter, a decrease of 58.2% from a year ago, due to lower unit selling volume and lower average selling prices.  Digital content sales were $57 million for the quarter, a decline of 26.5% compared to a year ago, due primarily to lower device unit sales.

In spite of the terrible news, it’s not all bad; B&N also reported that they took a smaller loss on the Nook last quarter; their money pit only cost them $60 million EBITA, and not the $190 million loss in the same quarter last year.

One could argue that this is actually good news in that B&N isn’t losing quite so much money, but the losses are going to have to eventually be covered by revenues. What with Nook revenues continuing to decline for the 5th straight quarter, there’s a good chance that revenues will cancel out the losses at about the point that both reach zero.

color_nookBut never mind that; B&N has also shared today that they are planning to release another tablet this year. “The Company is actively engaged in discussions with several world-class hardware partners related to device development as well as content packaging and distribution.” said Michael P. Huseby, Chief Executive Officer of Barnes & Noble, Inc. said in a released statement. “As a result, we plan to launch a new NOOK color device in early fiscal 2015.”

Rumors of said tablet have been circulating since at least last August; at last report it had a model number of BNTV800 and was running Android on an Nvidia Tegra 4 CPU. These details were revealed in a leaked benchmark test in November, and have yet to be confirmed by B&N or by other leaks.

At this point I would think this is another mistake on the part of B&N; as has been pointed out at MobileRead B&N has already lost nearly 1.4 billion dollars investing in hardware. This is not their strength, and since they cannot afford to keep throwing money away I think it would be better for B&N to focus on apps and content.

IMO tablets were B&N’s single greatest error. If they had stuck with Nook ebook readers, and never released the first Nook Color,  B&N could have saved themselves the money invested in the Nook Tablet and Nook HD/HD+, 3 devices no one wanted to buy – not even after the latter two were cheap and shipped with Google Play.

20 thoughts on “B&N Reports Digital Sales Down 50%, But It’s Okay Because They Have a New Tablet in the Works

  1. Their biggest problem with the ebooks is that the price of the books from the big publishers: its between $1-3 more expensive on Nook than it is Amazon or Apple (although generally very similar to the price Kobo offers).

    This might also explain the self publishing figures that you had up yesterday. i.e. the reason why self published books make a big part of the platform is because they are cheaper than the books offered by the publishers on Nook’s system, and the readers are price sensitive (which is what the publishers were worried about in the first place).

    This actually annoyed me as there were a bunch of books I wanted to buy recently on the Nook yet if I did so, it would cost me $20 more than on Amazon or Apple. Hence I finally did what I’ve been meaning to do for months and went out and bought an iPad. (I still like my Nook HD but the useful parts that the iPad has, such as a smart cover than turns the device off, is way more handy than the Nook).

      1. I do have the Kindle app on the Nook HD but I’ve been trying to avoid buying from Amazon on principle (and I actually like reading on the Nook Glowlight but I haven’t figured out how to hack books onto it yet). Not because I think they are ruthless competitors (although they are) but because they don’t pay sales tax. Its in my interest to make sure that the schools and other services my community depends on get money, hence I try and purchase goods in my area that pay sales tax (like Barnes and Noble do). That’s why I’m disappointed that they weren’t price competitive, I don’t mind paying an extra 6% sales tax but this 30% than the cost at Amazon and Apple (hence I went with Apple in the end).

        1. Uh, you do know that retailers don’t *pay* sales tax?
          It is *consumers* who pay sales tax.
          What Amazon objects to is acting as a tax collector when the law doesn’t require them to.
          If you’re going to make hollow gestures, at least make them in a cause you understand.

          1. Well if you’re going to be snarky about it, how many consumers do you know pay sales taxes that they owe at the end of the year? Its probably zero. So I stand by my statement that the easiest and most effective way for the sales tax to be collected and send to the states is via the business, like it is with any store based in the state.

          2. Here.
            Ohio has a use tax.
            And Amazon lets you easily tally all your orders to calculate the tax.
            It never bothered me to comply with the local laws. $50-60 a year.
            I still got a couple hundred back in refund.

        2. Hmmm, Amazon collects sales tax on quite a few of my eBook purchases (where required to do so) and I’d have to assume they’re reporting and passing that tax on to the state. Are you saying Apple does something differently and that’s why you “went with them”?

  2. nook tablets would have been great if they had allowed access to google play from the beginning, or at least BEFORE the holiday season of 2012, instead of immediately after.

    1. Agreed. it would have been a decent value in Fall 2011, a time when it was competing with the original Kindle Fire. Google Play on a polished budget tablet vs the clunky KF? It’s obvious which would have been the better value.

  3. Excluding NOOK, retail same store sales were essentially flat, which is a good sign given the drastic increase in online shopping YOY (increase of 15%-20%).

    Moreover, margins were up a whopping 25% (24-30%), which means BN stores are retaining customers *and* making more money off of said customers.

    So aside from the floundering NOOK division, BN is in about as good shape as can be expected for a big box retailer in the current economic environment.

    The timing of the new color tablet is interesting. BN’s fiscal year begins in May, which seems to point towards that educational focused tablet idea. Get it out in the early summer and get it plastered across campuses right when the back to school season hits.

  4. Also, the NOOK Tablet was the third best selling tablet of 2011/2012 holiday, behind the KF and iPad. The company didn’t really fall off the cliff until the HD’s.

    1. And then the following Spring B&N had multiple B1G1 sales, a price cut, and sales on refurbs. They also released a Nook Tablet with only 8GB of storage in the hopes that it would be able to compete better against the Kindle Fire.

      You might say that the Nook HD is where everything went wrong, but the real problem is that B&N ordered way too much hardware they couldn’t sell. And that problem existed ever since the original Nook Color.

      1. BN didn’t cut the price of the NT until the HD’s came out. There were never B1G1 sales on the NT. That was (again) the HD’s. There was the (subsidized) NYT promotion, and a few “get a gift card with the purchase of the device”, but nothing as drastic as you’re painting. More to the point, Amazon did plenty of sales on KF’s during that year as well, as did Samsung, et all. If your criteria for “successful” is “never goes on sale” the only successful tablet is the iPad, which is a silly stance to take.

        The NT period was one of large growth in content sales, device sales, and increasing marketshare for BN, at least until the N7 and KFHD hit in August/September of 2012. That’s when the shit hit the fan.

  5. It will be foolish to try and expand Nook brand…they still don’t get it, they are not attracting new customers beyond existing B&N shoppers. They can outsource all they want to cut cost but Nook is too late in the tablet game to expand. There are plenty of cheap and fully functional Android tablets in the market now. Producing new Nooks just to keep their existing ebook readers from jumping to another platform is just as silly.

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