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B&N Still Plans to Launch eBookstores in 10 Countries, Owes $55 Million to Manufacturers

barnes_noblelogoBarnes & Noble filed their annual report with the SEC today, and it revealed a few hints about their future plans. This report covered the 12 month period ending 27 April 2013, and it includes specific details on how much B&N still owes to manufacturers on the Nook hardware contracts, who owns Nook Media (B&N still controls 78%), as well as some hints about B&N’s future plans.

Barnes & Noble had previously announced plans to launch the Nook Store in 10 countries by June 2013. There was evidence to suggest that B&N was looking at Germany, Russia, and the Netherlands as possible next steps, but unfortunately June came and went without any showy launches.

B&N may have missed their goal by a whopping 90%, but that doesn’t mean that they’ve given up. The filing today mentions that B&N is still planning to expand their ebookstore into 10 countries by the end of the year:

The Company sells digital content in the U.K. directly through its NOOK devices and its website. The Company plans to continue to expand into additional international markets and believes that its partnership with Microsoft will help foster that expansion. Under its partnership agreements with Microsoft, the Company previously disclosed that it expected to be in 10 international markets by June 30, 2013. While substantial progress has been made towards meeting the target expansion requirement, the Company now expects expansion into these 10 markets to be accomplished by the end of 2013.

It’s not clear to me whether these new ebookstores will be branded Nook or whether they will carry some Microsoft brand. It’s also not impossible that these new ebookstores will be part of the Windows Store.

BTW, did you notice how it’s taken B&N 4 years to take the Nook Store international when Amazon managed the same with the Kindle Store in just 2 years (and Kobo managed to do it the day they launched)? Of course, if B&N had kept Fictionwise open instead of closing it earlier this year B&N would still be selling ebooks in a couple hundred countries, not just the US and UK. But I digress.

In other news, B&N reported that they still have commitments to buy millions of dollars worth of Nook hardware. B&N expects that it will cost the company $14 million to

The Company has arrangements with third-party manufacturers to produce its NOOK ® products. These manufacturers procure and assemble unfinished parts and components from third-party suppliers based on forecasts provided by the Company. Given production lead times, commitments are generally made far in advance of finished product delivery. The holiday sales shortfall resulted in higher than anticipated levels of unfinished goods. As a result, the Company is in negotiations with certain vendors for purchase commitments totaling approximately $55.0 million. Based on current negotiations and product development plans, the Company has recorded a provision of $13.8 million for commitments which it estimates as the most likely outcome. Future charges may be required based on the final result of these negotiations as well as changes in forecasted sales. The adjustment in NOOK’s hardware strategy is expected to result in the rationalization of its cost structure. The Company expects to incur restructuring charges as a result of this adjustment. These amounts are currently not estimable.

But in spite of the generally poor performance of the past year, B&N is still planning to sell new hardware, and they are still planning to design and release new Nook ereaders.

While the Company experienced disappointing NOOK ® device sales over the most recent holiday selling season, the Company’s digital strategy is to offer customers any digital book or magazine, any time, on any device. The Company remains committed to continuing to have a premier digital bookstore. In terms of its device strategy, the Company intends to reduce its existing cost structure. Further, the Company’s business plans are being adjusted to reduce its investment in sourcing, assembling and manufacturing the Company’s own NOOK ® tablets and to explore outsourcing or co-sourcing such functions. This revised strategy is intended to capitalize on the Company’s design capabilities in partnering with third parties to source co-branded tablets with NOOK ® content. This new partnership model may reduce the Company’s risk associated with designing and manufacturing its own tablets in the competitive tablet market, while allowing the Company to offer its vast digital catalog, and high-quality digital bookstore service. NOOK expects to continue to innovate and design best-in-class dedicated eReaders.  

TBH, it wasn’t clear whether B&N was going to have new Nooks. Sure, their past press release could be read that way but it still wasn’t clear. But the details in this filing could mean that the Nook HD that B&N passed on earlier this year could indeed be released.

B&N originally launched the Nook Store 4 years and 9 days ago. After seeing a couple years of decent growth, B&N’s turned sour in late 2011 / early 2012 with a marginal performance in the holiday quarter. That unsatisfactory performance led to a reorganization in April 2012 which split off Nook Media and drew in investment from Microsoft.

That reorganization did little to improve B&N, which went on to report a dismal holiday quarter in 2012 and poor Nook revenue in FY 2012. B&N’s response was to reduce expenses by abandoning plans to develop any more tablets and instead rebrand someone else’s hardware.

There’s no solid info yet on when or if any new Nook branded hardware will be released, but the intentions stated in the SEC filing tell us that it could happen.

Barnes & Noble

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Paul July 29, 2013 um 1:50 pm

I think you mean the Nook HD ereader. The way the sentence is written it makes it sound like you’re referring to the Nook HD tablet.

Nate Hoffelder July 29, 2013 um 1:57 pm

Yes I did and there was supposed to be a link. I wonder where that went.

flyingtoastr July 29, 2013 um 2:09 pm

BN does sell ebooks worldwide – so long as you have a US billing address. Which, incidentally, is the same thing Fictionwise did.

Nate Hoffelder July 29, 2013 um 2:12 pm

Nope. Try telling that to the Canadian and other international customers who lost everything they had bought at Fictiownise when it closed.

Alexander Inglis July 29, 2013 um 2:48 pm

Yes, Nate is correct: Fictionwise was fully usable from Canada with Canadian billing. Of course, after the fiasco of the Big Five collusion with Apple, almost everything worth buying was dropped from the Canadian catalog … it was left with indie publishers. B&N Nook is still not interested in the Canadian market, apparently, leaving the 34 million customers to Kobo, Amazon and Sony.

And, FWIW, Kobo launched internationally. It didn’t take 4 years or even 2 years. Given that Kobo started with, by far, the tiniest amount of funding, the strategy has clearly been a successful one. B&N, as usual, is leaving money on the table, as capitalists like to put it.

Nate Hoffelder July 29, 2013 um 3:19 pm

That’s a good point about Kobo. I edited the post.

Paul July 29, 2013 um 3:23 pm

You need a "like" button for the comments 🙂

flyingtoastr July 29, 2013 um 5:23 pm

Canada is a special case because there are laws on the books making it very difficult for American book companies to establish a presence there.

Nate Hoffelder July 29, 2013 um 7:54 pm

And yet Amazon somehow managed to sell ebooks to Canadians since 2009.

Doug August 1, 2013 um 11:48 am

Amazon isn’t a bricks-and-mortar bookseller. The Canadian Bookseller Association has been rather adamant that B&N (and, formerly, Borders) be barred from doing business in Canada. In 1996, Canada told Borders to stay away from Canada, and there was an implication that the demand applied to Barnes & Noble as well:

It might also be noted that for a decade, was simply a marketing arm for Canada Post. In 2010, Amazon finally convinced Canada to let Amazon do its own business in Canada in return for a $20 million "investment" in Canadian cultural activities and for vague promises about carrying more Canadian content.

Syn July 29, 2013 um 3:27 pm

I used to be one of those customer service agents. Worse customer policies ever.. Like I said before, half thier business is pity sales from people wanting to keep them alive. If they did more for the customer I wouldn’t have have a problem with it. The most we really do is apologize a hundred times per call, even if its not our fault.

Fbone July 29, 2013 um 8:34 pm

Going international wouldn’t make sense for them at this time.

Marie July 30, 2013 um 11:16 am

Nate, one of the parts you quoted says:
"the Company’s digital strategy is to offer customers any digital book or magazine, any time, on any device."

Do you suppose this should specify "Nook device" and/or "any device with a Nook app"? Because without any qualifiers, it sounds like a customer could read B&N’s digital content on a Sony or Kobo, and my understanding is that, right now, you need to strip the DRM to read Nook books on other e-ink devices. Any chance that could change?

Nate Hoffelder July 30, 2013 um 11:34 am

TBH B&N is incapable of following through on the narrower wording of that commitment anyway. They have content which cannot be read on all of their devices and apps, so I don’t see the lack of support of other devices to be an important issue.

Marie July 31, 2013 um 9:02 pm

Thanks for that info, Nate. I don’t have a Nook, and have used the Nook app on our tablet only a couple times, so I didn’t realize they had that issue with some of their content.

Felicity Heaton July 31, 2013 um 4:45 am

Barnes and Noble Nook would get more support if it went international in more than one way. At the moment, an indie author outside of the USA cannot work directly with Barnes and Noble on their Nook / Pubit platform. They’ve been telling us international authors (I’m in the UK, and do my biggest business with Amazon, Apple and Kobo, earning around £190,000 a year from my ebook sales from those three companies alone) from the moment they launched Pubit that they would allow us to use their book selling platform soon, and it’s been years since Pubit launched. Now they sell books in my country, and they still won’t let me work with the directly. I know many international authors don’t promote B&N because of this, and because it isn’t international for readers either. It isn’t working for us (and has a terrible reputation for slowness, missing sales and royalty payments among US authors).

I think this just goes to show how slow they will be to take the company fully international and that they aren’t going to be embracing the best methods of saving their business until it’s too late for them and the other three companies rule the ebook world (let’s forget Sony, because they’re pretty much dead already). Barnes and Noble will keep putting things off and shooting themselves in the foot by always failing to do what they say they’re going to do.

As for Fictionwise, I used to sell my books there and use it, and you didn’t need to be a US citizen living in America, not as you do with Barnes and Noble.

Doug August 1, 2013 um 11:35 am

I don’t think we read the section on hardware commitments the same way. What I read was, "We currently have commitments to buy about $55.0 million in new hardware, but we expect to be able to reduce those commitments to only $13.8 million in new hardware, and that’s the number we’ve reported. We expect restructuring and other charges, but we can’t offer any guesses as to how much those would be."

Doug August 1, 2013 um 12:03 pm

If one wishes to be accurate, one should differentiate between "B&N" and "NOOK Media" for events from October 2, 2012 onward. Although B&N does still report NOOK Media in the B&N consolidated financial reports, B&N’s only direct financial connection to NOOK Media is that it owns most of the NOOK Media stock. No money is moving between B&N’s bookstore/website operations and NOOK Media.

There are indirect financial connections in that the B&N bookstores are the major retailers for NOOK devices, and is the major retailer for e-books for NOOK. And, of course, there are non-financial connections in that B&N can control what NOOK Media does.

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