Wednesday, May 25, 2011

Opinion — E-Books, Catch Me If You Can

The question of the day is why someone would want to pay a billion dollars for Barnes & Noble, a struggling big box anachronism fighting an uphill battle to stay alive in an increasingly digital marketplace.

In various reports, by the Financial Times, Bloomberg News and others, the secret is said to be the Nook, the Barnes & Noble e-reader, which has just been updated with touch-screen technology. The Nook is the main competitor of the Amazon’s Kindle, which has 67 percent of the market. Is that what the buyer wants for a billion dollars? Does that make sense? Maybe. There is also the thought that B&N will benefit at least temporarily from Border’s incredibly shrinking presence. But more likely, it’s not the retail store business at all, or the e-reader, but the whole enchilada — the online book business.

Hardware aside, Amazon has 58 percent of e-book downloads. B&N has 27 percent (not all that shabby when you think about it). Apple has 9 percent. Look at it this way: a new B&N owner will close down the bricks and mortar, sell the real estate (or reduce and eventually eliminate lease and labor costs), and focus on the reading habits of the future.

A smart analyst might say, “it’s now or never” because Amazon shows no signs of slowing down. As veteran writer Ed Gorman mentions in his blog, Amazon has been busy hiring traditional book-publishing executives who are jumping their own sinking ships to create an Amazon publishing empire. The on-line book company pioneer appears to be expanding beyond it’s own successful businesses which, in addition to selling books (and everything else including toilet paper), has also provided publishing services to small publishers and self-publishing authors.

It is now poised to become a major publisher and threatens such legendary publishers as St. Martin’s Press, Knopf, Houghton-Mifflin and Random House. Amazon will seek out and sign big-name authors for big book deals and in the process not only become publisher but also distributor and book store. The new buyers of B&N might just have the same business model. The sad irony here is that as on-line publishers become THE publishers, those bookstores that are left (independent and genre bookstores) will have to carry books published by companies determined to put them out of business.

Being a major publisher will also provide entry into the movie business, including licensing rights to ancillary products. In other words, Amazon would get a piece of all the action. B&N may be number two at the moment; but they are in the best position to challenge Amazon’s increasing dominance.

Liberty Media, the company currently knocking on B&N’s door, may be trying to get in the game before Amazon owns all of it.

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