In 1998, Rocket ebook, the first commercial e-reader was launched. Even though it wasn´t a success, it opened the door for subsequent products to disrupt the multi-billion dollar publishing industry. Leading the way in this digital disruption was the first version (2007) of the Amazon Kindle. Then came even worse news for book sellers, when Apple released the Ipad (2010). Sales for these two products grew at an astounding rate, threatening to over throw traditional book stores as the source of America´s home libraries. In 2014, the New York Times went as far as to predict that by 2018 more than 50% of all books read in the US would no longer be the classic hard cover books we all grew up with.
Bearing the brunt of this frontal attack was, and still is, Barnes and Noble. Founded in 1873, the book selling giant grew from a small book business in Wheaton, Illinois, to over 640 retail stores in the United States. It is currently the undisputed leader in the market for book selling, and has engaged in several attempts to defend itself from the digital invasion of the publishing industry.
Even though Barnes and Noble released their first online books in the 1990’s and began to sell books directly to consumers via their website in 1997, they noticed that e-readers represented a different enemy than regular online sales. In many people´s minds, including company management, the Kindle had the potential to be to Barnes and Nobles what Netflix had been to Blockbuster. The centennial company wasn´t going to wait to find out if that was true, and thought that their best strategy was to fight fire with fire.
Launching the Nook
In 2009 Barnes and Noble released the NOOK, their very own e-reader. The company wanted to leverage its unique assets, iconic brand, and reach to compete directly in the distribution of digital content. They were off to what seemed to be an auspicious start, as the company declared that the NOOK was the “best selling item in Barnes and Noble history”. However, as the years progressed financial results on the NOOK have been far from stellar. Even though the device was praised as high quality and some estimated that it had 27% market share, the effort that was being put into the NOOK wasn´t paying off. Barnes and Noble quadrupled their advertising expenditures to give the NOOK a much needed boost, but was finding it hard to make a profit.
It has been almost 7 years since the NOOK was launched, and the situation hasn´t been reversed. Looking at Barnes and Nobles 2016 year-end financial results, we see a grim picture for the NOOK´s future. Full year comparable stores sales were flat, while NOOK sales (including digital content, devices, and accessories) where down 27.4%, reaching an operating loss of 98.6 MMUSD. Unlike what most people would have guessed in 2007, e-reader sales have stalled (including Amazon Kindle), while hard cover book sales have remained stable. This makes us ask ourselves: Was the medicine worse than the disease? Did we act prematurely in declaring the demise of books as we know them?
Blockbuster´s recent failure to compete against online streaming is fresh on everyone´s mind, leading us to believe that all things digital will prevail. While there are strong indications that most industries will face extreme transformations, let´s not forget other examples from the past of traditional industries that have survived disruption. When television was first introduced into people´s homes, everyone believed that movie theaters were doomed to fail. One short walk in most neighborhoods would prove that hypothesis to be incorrect.
While it may be early to tell if Barnes and Nobles is the new Blockbuster or the old movie theater industry, there are some things that the company should do to regain its profitability. Number one, is accepting that they should not compete against the technology giants Amazon and Apple. They should maintain a strong online presence, but competing in hardware is a whole other story. The NOOK must be buried. Secondly, similar to movie theaters, it is important for them to frame book purchasing as an experience that can´t be substituted by clicks. If they wish to continue doing what they do best, it is important to sell not only a product, but an experience. (731 words)