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B&N to Spin Off Nook Media

Galaxy-Tab-4-NOOK_25[1]America’s largest bookstore chain released their annual financial report today, and some pundits are going to be in for a shock.

Barnes & Noble has announced that they plan to spin off Nook Media into its own publicly traded company – just like I suggested back in April.

With the objective of optimizing shareholder value, the Company’s Board of Directors has authorized management of the Company to take steps to separate the Barnes & Noble Retail and NOOK Media businesses into two separate public companies.  The Company’s objective is to take the steps necessary to complete the separation by the end of the first quarter of next calendar year.

Nook Media currently consists of both the Nook unit and B&N College, the chain of college bookstores which B&N operates under contracts.

It’s not clear why both parts are being included in the spun off Nook Media rather than combining the financial viable B&N college with the retail stores, but when CEO Michael Huseby was asked about this on the conference call he hinted at the possibility of just such a reorganization, saying vaguely, "we’ll see what happens with the final separation." He went on to explain that "the reason it was done originally was that the college business was headed towards the digital transition and there was strong interest in that business from Microsoft and Pearson."

There’s no information yet on how this will affect B&N’s plans to launch a Nook-branded Samsung tablet, but I don’t expect that to be canceled. Both that deal and the decision to spin off Nook Media took months of preparation, so there’s a near certainty that Samsung new about the spin off and partnered with B&N anyway.

Given B&N’s current financial report, today’s news should really come as no surprise. The retailer reported that revenues were up slightly for the quarter (3.5%) but down for the year (6.7%). The Nook division continues to hemorrhage money,  but on the plus side the EBITDA for the retail division, college bookstores, and for the company as a whole were all net positive.

In short, B&N turned a slight profit last year.

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4th Quarter




But it’s not all good news; the Nook division saw slipping sales last quarter, which was to be expected:

The NOOK segment (including digital content, devices and accessories) had revenues of $87 million for the quarter and $506 million for the full year, decreasing 22.3% for the quarter and 35.2% for the year.  The inclusion of the 53rd week contributed $9 million in additional sales in fiscal 2014, including $1 million in additional device and accessories sales and $8 million of additional content sales.

Device and accessories sales were $25 million for the quarter and $260 million for the full year, declining 30.1% and 44.8%, respectively, due to lower selling volume and lower average selling prices.  Digital content sales were $62 million for the quarter and $246 million for the full year, declining 18.7% and 20.6%, respectively, due primarily to lower device unit sales.

To be honest, the spinoff is a move that many thought would happen as much as two years ago. B&N spun off their ebook division and college bookstores in April 2012, creating the company now known as Nook Media. After taking on Microsoft as an investor, B&N sold a share to Pearson in December 2012.

There were also rumors that this split would happen in 2013 as well. Shortly after B&N’s disastrous 2012 holiday season, rumors circulated that Len Riggio wanted to split B&N and take the retail stores as a separate company. The split did not happen at that time, but the rumor did turn out to be true. Riggio wanted to get rid of Nook Media and rescue the retail stores, but later cancelled his plans after Bill Lynch left his position as CEO and Riggio took control of B&N in his position as chairman of the board.

And now it is finally going to happen. This might not be good news for Nook Media (they need a sugar daddy) but for B&N it’s great news. They are finally getting the albatross off their neck.

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fjtorres June 25, 2014 um 10:33 am

It’s going to happen but not until March of 2015.

Lots of bleeding still to come.

Paul June 25, 2014 um 11:38 am

I wonder if it includes the web site? If so, Kobo should buy it cheap simply for the tech.

flyingtoastr June 25, 2014 um 12:15 pm is a wholy owned subsidiary of the BN retail division, so it would go with the stores in the split.

Doug June 25, 2014 um 2:27 pm

Sort-of. Retail owns, but NOOK Media owns, which currently redirects to Digital content sales on are ascribed to NOOK Media.

I’m sure that’ll make for an interesting divorce.

Fbone June 25, 2014 um 2:06 pm

Breaking down the Nook numbers. B&N still selling 100,000 ebooks a day ($632k) and approx 1500 devices a day. Hopefully, someone else can make those numbers work in a profitable company.

Alexander Inglis June 25, 2014 um 6:51 pm

These are definitely better results than recent quarters. The Nook experience has been a terrible bath, however, for B&N shareholders. What isn’t clear, is what might have been left of B&N had it NOT run with a Nook platform for a while: would Amazon have rendered more destruction on the bookstores if they weren’t allied with an ebook platform?

Still, as noted above, same store sales are down significantly year-over-year and, in a financial note I’ve never seen before, the commentary stated that "excluding February", results were much better. Good thing that’s not a regular sanctioned way to report street numbers!

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