Barnes & Noble has lost over a billion dollars on their digital investment in the past 4 years but they’re not going to let that continue. B&N’s most recent quarterly SEC filing has revealed that they’ve cut funding for Nook Media significantly.
B&N reported that during their third fiscal quarter, which ended on 25 January 2014, the capital expenditures for the Nook were $7.4 million. This represents a decline of 74% from the amount spent on the group in the same period in the previous fiscal year, and over the past 9 months B&N has cut Nook capital expenditures by an average of 55%.
B&N reported a $61 million loss on the Nook that quarter on $157 million in revenue from Nook content and hardware sales.
Part of the reduced expenditures comes from the layoffs which we’ve been reading about for the past several months. B&N confirmed on their conference call with analysts last month that 190 positions had been eliminated as B&N shifts focus from the consumer ebook market to the educational market. They have also been hiring new staff with that goal in mind.
The SEC filing also notes that Barnes & Noble has yet to fully comply with their international obligations to Microsoft, and that B&N is still working towards selling a sufficiency of ebooks in 10 markets. While they did launch the Nook store in 32 countries in 2014, B&N has acknowledged that effort has not reached the “content thresholds” called for by the Microsoft contract. B&N was supposed to hit that milestone by June 2013, and then by the end of the 2013 calendar year, but they believe they will still make their latest deadline of April 2014, when the current fiscal year ends.
Until Barnes & Noble achieves the necessary level, the delay “may entitle Microsoft to defer a portion of advance payments until the target expansion requirement is met.” As part of their investment in Nook Media in 2012, Microsoft is paying B&N $25 million annually for five years to help with the international expansion.