Riggio Has 99 Problems, But Saving B&N Ain’t One
Remember last Friday when I described B&N’s road map as "throw ideas up against the wall and see what sticks"?
Apparently my snark struck home. The NYTimes published a piece on B&N on Sunday. It was rather thin on details concerning B&N’s future plans, but it did say that Riggio had 5,00 ideas on what to do next:
Some publishing executives privately express hope that Barnes & Noble will be sold, perhaps to Indigo. Mr. Riggio didn’t rule out the idea of a sale, although he said he didn’t think “this is the time to sell the company.”
“We’ll be responsive to our shareholders,” he said. “We always have to entertain offers that come along.”
Mr. Riggio said he still hopes to retire someday. In the meantime, he has about “5,000” ideas for how to lure customers back to Barnes & Noble.
“I want more people to buy and read books,” he said.
It is looking more and more like Riggio’s real plan is to maximize his profits while running B&N into the ground (exactly what a reader suggested on Saturday).
If you think no one would be that callous or self-destructive to kill a company by degrees, then you haven’t been paying attention to the murder of local newspapers.
The malign genius of the private equity business model, of which more in a moment, is that it allows the absentee owner to drive a paper into the ground, but extract exorbitant profits along the way from management fees, dividends, and tax breaks. By the time the paper is a hollow shell, the private equity company can exit and move on, having more than made back its investment. Whether private equity is contained and driven from ownership of newspapers could well determine whether local newspapers as priceless civic resources survive to make it across the digital divide.
The Bastrop Daily Enterprise, in the northeast corner of Louisiana, was founded in 1904, part of a small family-owned chain. The newspaper did a thriving business, with 30 employees and $1.5 million in annual revenues. “We served our communities, won awards for our reporting, and made good money for the owner,” says a former staffer who asked that we not use her name. Then the Enterprise was bought by GateHouse Media, the newsroom was gutted, and all operations were centralized by the new corporate owners.
“Now they’ve got maybe eight people,” says this former employee. “They’re lucky if they’re doing $600,000 gross. I remember what these papers used to be. It’s unrecognizable.” Few citizens of Bastrop, however, know the reasons behind the wasting of the Enterprise because no one has reported on it.
All signs point to Riggio following the same plan. This would explain B&N paying dividends despite falling revenue each quarter, and the wholesale firing of the receiving managers this spring. Both measures are designed to boost short term profits at the expense of long term growth.
Could B&N survive if it were given a chance? I don’t know. Some retailers, including even bookstore chains, have survived the rise of internet retailing.
Then again, they didn’t have Riggio at the helm.