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B&N Reports Revenues Down, With Nook Revenues Down 32%

Barnes & Noblebarnes noble logo shared more bad news today in the form of a new quarterly report. In the 3 months ending 26 October, B&N grossed a total revenue of $1.73 billion, or about 8% less than the same period last year.

On the plus side, B&N reported that EBITA (operating profit) increased from $66.5 million to $75.7 million. They also reported net earnings of $13.2 million, or 15 cents a share, up from $501,000 a year ago. On a per-share basis, the company posted a loss of seven cents a year earlier.

But in spite of the 2 bright spots revenues were still down. Retail revenue fell nearly 8%, to $921 million. College bookstore revenue fell 4.6% to $737.5 million, and that was during the back to school period when B&N should have shown an increase.

And to top things off,  Nook revenue dropped 32%, to $108.7 million. Device and accessory sales reached $51 million for the quarter, a decrease of 41.3% from the same period last year. Even though B&N was selling their hardware at drop dead prices they still couldn’t equal last year’s sales.

Digital content sales also dropped for the quarter. They totaled $57 million, a decline of 21.2% compared to a year ago.

Just to put that in perspective, the AAP reported last week that August 2013 digital revenues (ebook plus audiobook) totaled $144 million.  That’s one of the 3 months included in B&N’s latest quarterly report and does not include the entire market, but it does offer an indication that B&N has lost ebook market share.

At one point B&N claimed to have 27% of the ebook market, and now it is clear that their market share has shrunk. I’m sure this comes as no surprise to anyone.

Barnes & Noble is going into the holiday season in a reasonably strong albeit minimally profitable position. Their current financial report shows hints of a turnaround in terms of profitability, and if B&N can keep that trend going while still boosting sales during the most important sales quarter of the year then they should come out even stronger than before.

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flyingtoastr November 26, 2013 um 11:31 am

"Even though B&N was selling their hardware at drop dead prices they still couldn’t equal last year’s sales."

The drop dead prices are the problem. In Q2 ’13 the NOOK device prices were $99 (Simple Touch), $139 (NGL), $199 (NOOK Color), and $249 (NOOK Tablet). Q2 ’14 prices were, respectively $79 (NST, -20%), $119 (NSTGL, -15%), $129 (NOOK HD, -35%), and $149 (NOOK HD+, -40%) from their comparable devices last year. So BN would have had to move a whole lot more units to equal last year’s revenue.

A 40% drop in revenue probably means they sold fewer units than in FY’13, but not a whole lot fewer. The lower average selling price is what’s really causing the drop.

Content sales, though. Youch. Fifty Shades was definitely part of it (BN sold some fifteen million copies of it last year, which is nuts if you understand that a book can get onto the NYT bestseller list with only a few thousand weekly sales), but that’s a pretty precipitous decline.

Paul November 26, 2013 um 11:34 am

Fingers crossed they survive.

Alexander Inglis November 26, 2013 um 11:52 am

I find it hard to believe that Amazon and Kobo are experiencing "sharp declines" in digital content sales. Let’s hope they finally get around to selling Nook Books outside of US and UK beyond using a Microsoft Account with Windows 8.

yuzutea November 26, 2013 um 1:50 pm

What is behind the digital sales decline? To some extent, of course, the 50 Shades phenomenon and the Hunger Games, but this seems in excess of that in comparison to general ebook sales.

I suspect (warning: pure speculation) it’s that B&N is not selling as many e-ink readers, which as B&N has noted, sell more digital content than the tablets. Perhaps the device sales are more concentrated on the tablets. B&N seems to be also claiming that it’s lower prices as well.

Regardless, even if Nook division continues to decline, it seem the physical stores are okay. (However, I wonder if the amount of shelf space for books has declined since last year?

Nate Hoffelder November 26, 2013 um 2:34 pm

Users are abandoning the platform in part because B&N has done their best to convince us they won’t be here next year.

I doubt that the Nook will ever be killed off, but it is rapidly losing its status as a chimp to Amazon’s gorilla. At some point it will shrink to the status of a monkey, just like Sony, Google, and other ebookstores.

And yes, it looks like the bookstores will survive.

flyingtoastr November 26, 2013 um 2:44 pm

They’re still solidly in second place for the US ebook market (high estimates put Apple at only 10% of the market, so unless BN lost more than half of their peak they’re not that low).

As for Amazon’s gorilla – if they’re not careful they’re going to get hit with antitrust soon. They’re really starting to look like Microsoft did in the 90’s – all it takes is an AG who doesn’t buy into the mantra that "cheaper is always better" and they’ll be in trouble.

Nate Hoffelder November 26, 2013 um 2:53 pm

Solidly? I don’t think you can use that word when the trend is pointing in a downward direction.

And I would be willing to bet cold hard cash that Apple has already supplanted B&N for second place. Unfortunately we don’t know who leads.

flyingtoastr November 26, 2013 um 3:11 pm

At it’s peak BN was reported as having roughly 27% of the US ebook market. The largest Apple has ever been reported as having is 10%. You’re talking about BN losing nearly two-thirds of their customers to fall below that threshold. Remember that in the last year (when BN started to see declines) the ebook market has not grown particularly quickly either, so it’s a shifting of customers, not them failing to bring on new customers (because there aren’t as many customers). We also have to take into account how whacky last year’s book market was with THG and Fifty Shades giving everyone inflated numbers that by necessity would cause this year to look smaller.

Worldwide I’m sure you’re correct (thouhg I’m willing to bet Kobo and Sony are far larger than you give them credit for internationally, especially in Eastern Europe where Amazon is particularly weak). US, though, I doubt it.

Nate Hoffelder November 26, 2013 um 4:01 pm


One, that 27% estimate is old and is is like any other market share figure. It’s a WAG, and cannot be cited as a fact.

And two, that 10% Apple guess is equally outdated. In the 2 years since that guess was made iBooks (hardware sales, iBooks 2.0, iBooks 3.0, iBooks Author and textbooks) has gone up while Nook has gone down. Combine the 2 trends and it is entirely possible that iBooks and Nook have swapped places in terms of market share.

fjtorres November 26, 2013 um 4:43 pm

I’d say it’s *likely* they have swapped places.
A simple back-of-envelope calculation:

Nook digital revenue ran $51M for three months, of which 25% has been reported as indie sales. That means that about $37M was trad-Pub revenue of the kind recorded by AAP. Rounding up, that means about $13M a month, out of $144M. Which is less than 10%. Even if the full $17M per month were trad-Pub revenue, that would leave them with around 13% market share. Which, oddly enough, fits in with the reported 51% drop in year-to-year revenues.

And, alas, since AAP year to year numbers didn’t drop 50% with the loss of 50Shades ebook sales, Nook' s drop is specific to them.

I’m thinking we’re looking at "reverse network effects"; the shakier their ebook prospects, the less likely consumers will be to invest in the platform. And since Nook hardware is ADEPT compatible, the likely beneficiaries of defections are going to be Kobo, Google, and (to a lesser extent) Sony.

Who knows, maybe Google will be relevant by next spring…

flyingtoastr November 26, 2013 um 5:46 pm

You’re comparing two numbers that aren’t the same thing.

AAP numbers are sales for the first half of the year, BN’s quarterly results only intersect for part of one month. You can not draw any statistically relevant comparisons between the two, and to do so is FUD of the worst degree.

RE: Nate – BN’s 27% marketshare is from FY Q1’13, only ~15 months ago. It isn’t that long ago. But please, if you want to give some more concrete marketshare numbers I’m all ears. Until then, don’t whine when people have to extrapolate from old data.

Nate Hoffelder November 26, 2013 um 6:03 pm

"BN’s 27% marketshare is from FY Q1’13" [citation needed]

And the AAP figures which I cited and which Felix used were from August alone. The AAP provided them.

fjtorres November 26, 2013 um 6:13 pm

It’s FUD to point out that a massive year to year revenue drop when everybody else is seeing at worst minimal growth is not a good thing?
Whatever their installed base–whether 20 or 27 percent–their revenue stream is looking closer to 10 percent of industry sales. The message in those numbers is that Nook owners are either not buying books or getting them from somebody else. (Which is why I’m wondering about defections to Kobo or Google. )
Pick yer poison.

Ravi December 2, 2013 um 5:12 am

They could also be defections to Amazon (at least on the tablet side). For all of the Nook tablets, the Kindle app is now just a Play Store away…

Fbone November 26, 2013 um 4:02 pm

The drop in digital content sales to $57 million could be due to customers purchasing lower priced titles.
A look at their current bestseller list shows 30 of the top 50 are priced lower than $5.00

Also, Kobo has had some very good promo codes the past 3 months starting with 50% off all Agency published titles. Then there were 50%, 75%, 80%, 90% and 95% off on non-Agency ones.

fjtorres November 26, 2013 um 4:51 pm

But the AAP didn’t report a 50% year to year drop.
Average book prices have also been reported to have dropped more like 20-25%, post conspiracy, not 50%.
They may be looking at a perfect storm of declining trad-Pub pricing, increased indie sales, and an exodus of sales to ADEPT vendors. Individually, each could be weathered, but combined…
They *need* a really good holiday sales season to counter the growing appearance of a Nook death-spiral.

willem November 26, 2013 um 6:04 pm

The Nook business is pretty dead already, the only question is whether B&N will find someone willing to dispose of the carcass. Unfortunately those sniffing around are likely to adopt a wait-and-see position so as to snap it up when it is really rotten, when B&N can no longer stand the stench of failure and sells it for next to nothing.

fjtorres November 26, 2013 um 6:18 pm

To think that 15-18 months ago they might’ve cleared a cool billion (and retained control) with an IPO.

willem November 26, 2013 um 9:58 pm

Well that ship has sailed and no weather is ever going to bring her back.

Nate Hoffelder November 26, 2013 um 7:31 pm

Dead? No, not really. It’s probably still bigger than Sony’s ebook revenues, or Samsung (which doesn’t have an ebookstore in the US). Nook isn’t dead; it’s just no longer one of the majors any more.

willem November 26, 2013 um 10:18 pm

Declaring them to be bigger than Sony or Samsung (!) is just damning with faint praise. Given the rate of sales decline they won’t be bigger for much longer anyway.

This patient is on life support and unless there is a miracle – or a sale – you can expect Riggio to pull the plug himself next year. Enough money has already been wasted as it is, and he has to fear that the Nook fiasco will embolden an activist investor to do what Ron Burkle attempted.

Nate Hoffelder November 26, 2013 um 10:27 pm

Good point.

Sony is going to keep their ebook division even if it loses money because it is supported by hardware sales. B&N is much more likely to cut the Nook Store lose if it doesn’t at least break even, and if no one wants to buy it Rggio might simply smother it.

fjtorres November 27, 2013 um 6:08 am

I’m sure there is no shortage of players still willing to buy Nook. The problem is Riggio and co are still over-valueing the thing. They might, in fact, prefer to kill it rather than sell for its true market value. After all, the new owner might turn it around and make them look incompetent.

Nate Hoffelder November 27, 2013 um 6:52 am


Chris November 26, 2013 um 6:33 pm

I agree that B&N is definitely not in second place for US ebook market share. They lost that some time ago. I have read in several places that it is estimated that Amazon controls very close to 80% of the US ebook market which I believe. B&N is probably closer to third or fourth place. The Nook is dead and the only question is who will buy it. I have a feeling B&N will have to sell it for a HUGE loss just to unload it.

steve November 26, 2013 um 7:19 pm

I should point out that Wall Street expected a loss of four cents a share. They made 15 cents a share. In other words, they destroyed the expectations.

fjtorres November 27, 2013 um 6:16 am

By cost-cutting.
They’re down to 620 stores or so, almost a hundred stores from their peak, and still planning further closures.
Shrinking into profitability isn’t a path to prosperity, just to survival.
And, if their TV ads are to be believed, their survival hinges on transforming into gift shops.
It’s better than dying, of course…

Bill Smith November 28, 2013 um 3:40 pm

I think the bigger question is "What can B&N do to survive and prosper, especially in digital?"

Honestly, B&N has done everything they can to make it difficult to be one of their ebook customers — DRM that cuts you off when your credit card expires, terrible technical support, a craptastic website, and in general a "we don’t want your money" attitude.

Amazon is here to stay and why would the average reader take a chance on a Nook when the platform may not be around in a year or two (or so B&N kept on warning us).

1) How about start selling DRM-free .mobi direct downloads off the Nook website — the pitch, "Now, you can read Nook ebooks on your Kindle!"

2) Offer direct downloads regardless of platform, like Smashwords and so many other smaller indie ebook vendors.

Sure, lots of the big publishers will not participate, so they’d need to easily flag the "open" vs. "DRM-nook-only" books, but this could give B&N a chance to sell to Kindle and Fire owners — since they are a HUGE part of the ebook landscape, these are the customers they really NEED to cultivate. Plus, it will help readers look beyond the "Amazon Walled Garden" which is what B&N MUST do.

Nate Hoffelder December 2, 2013 um 7:03 pm

I think there is a strong consensus that digital is a bust for B&N. Right now they need to just focus on their stores and retail operations. B&N needs to see what tricks they can learn from the thriving indie booksellers.

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