No, The Sony Kobo Deal is Not a Model for Barnes & Noble’s Nook
I’m sure you’ve read the news today about Sony and Kobo. The former is bailing on the US ebook market, and as one last kindness to their customers they’ve convinced Kobo to take them in, while the latter is going to gain a few thousand more customers.
This deal is generating a lot of debate and punditry, including a new article over on Forbes. Jeremy Greenfield thinks it would be a good idea for B&N to follow in Sony’s footsteps and simply walk away. While at first I thought it sounded like a horrible idea, it’s actually not all that implausible:
Sony and Kobo are both thought to be very minor players in the U.S. ebook market. I doubt the move will add too many readers to Kobo’s rolls. The company wouldn’t tell me how many accounts are being transferred but in its press release announcing the move, it claimed the same 18 million worldwide users as it has claimed in other recent announcements.
This could be a good model for Nook, which many in the publishing industry expect to be shuttered or sold before the end of 2014. Nook is Barnes & Noble’s device and ebook business and it has been faltering badly for nearly two years. While it still brings in over $100 million in revenue every quarter, it loses much more than that and revenues have been shrinking rather than growing.
That’s a terrible idea and it is also wildly improbable, but as much as I might hate it I am afraid it might actually happen.
And just to be clear, I’m not referring to the possibility that B&N might sell out (I wish); I want to examine the Forbes proposal that B&N might simply walk away.
The thing is, Sony didn’t sell out; they threw in the towel. They bailed on the US ebook market because the revenue probably didn’t meet their expectations, and on their way out the door they asked Kobo take in the soon to be orphan customers (Sony’s last friendly act of customer service).
The US Sony Reader Store isn’t going to be transferred to new ownership; it’s going to be dismantled. I’m sure no one thinks that would be a good solution for B&N’s problems with the Nook, but they could still do it.
All it would take would be for B&N to perform a cold cost benefit analysis and decide that the ongoing hemorrhage of money outweighed the negative publicity. I would have reached that conclusion months ago, so it’s not impossible for B&N to reach the same conclusion in the near future.
And here’s how the result of that analysis might play out.
B&N’s first step would be to fire nearly everyone working at Nook Media. Not counting the people who have left over the past 6 months, that’s somewhere around 600 people, most of whom work in either Palo Alto or NYC. This would take the development teams that B&N spent years and a ton of money putting together and cast them to the wind, completely throwing away all that work, but if B&N is walking away from ebooks I don’t think they would care.
Next, B&N would have to find another company to take over the customer accounts. (Actually, this would come first, but I wanted to be melodramatic about the firings.) This could be Kobo, but Apple and Amazon are out. The latter would never get regulatory approval, while the former wouldn’t deign to support customers that didn’t own Apple hardware. And I doubt Kobo would be able to take over the accounts; I think Amazon would do their best to block regulatory approval for a B&N-Kobo deal.
As a result, that leaves just one company as the most likely candidate to take over the charred remains of the Nook Store: Microsoft. Remember, MS already owns a chuck of Nook Media, and the international Nook Store appears to operate under Microsoft’s auspices (it’s Windows 8 only). And that makes MS the best candidate to keep the Nook customer accounts from going in the shredder.
Update: A reader has pointed out that MS can be multi-platform when it suits them; they already have iOS and Android apps for Xbox Music and other apps. Thanks, Commons!
MS would probably abandon the Android apps, the iPad and iPhone apps, the OSX app, and maybe even the Windows apps, but they would at least keep the Windows 8 app going. And MS would keep many readers from suffering the same fate as Fictionwise’s international customers (left in the cold when B&N shut Fictionwise down).
Sure, almost no one would be able to read their ebooks because they didn’t run Windows 8, but at least their investment wouldn’t be completely gone.
But I’m not sure that would matter much on the larger scheme of things, because if B&N simply abandoned their Nook customers to MS I think most of those customers would flee for a safer harbor.
They would go running to Amazon.
Sure, they would keep reading their existing ebooks (assuming they still had access), but future purchases would be made in the Kindle Store – where it’s safe to assume that the ebooks will not vanish in the night. After all, many people might hate Amazon but who would you trust more, Amazon or MS?
In short, if B&N followed in Sony’s footsteps Amazon would come out a huge winner. And for that reason alone we should all be hoping that B&N doesn’t simply throw in the towel.
What do you think?