B&N Still Plans to Launch eBookstores in 10 Countries, Owes $55 Million to Manufacturers
Barnes & 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 nook.co.uk 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.
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