The world’s largest bookstore chain could be re-thinking its approach to digital books.
Barnes and Noble has warned investors when it reports fiscal 2013 third-quarter results on Thursday, losses in its Nook Media division — which includes sales of e-books and devices — will be greater than the year before and that the unit’s revenue for all of fiscal 2013 would be far below projections it gave of $3 billion.
The reported earnings will include the holiday season and lead many to believe that the chain’s investment in the e-reader has run its course. The New York Times quotes a person familiar with the company saying that the chain is considering moving away from its program to engineer and build its own devices and focus more on licensing its content to other device makers.
“They are not completely getting out of the hardware business, but they are going to lean a lot more on the comprehensive digital catalog of content,” said this person, who asked not to be identified discussing corporate strategy.
On Thursday, the person said, the company will emphasize its commitment to intensify partnerships with other tablet producers like Microsoft and Samsung to make deals for content that it controls.
The move could be a reversal for the company, who has attempted to stay the course on building its own e-reader to compete with the Amazon Kindle and smart tablets.
“In many ways it is a great product,” Sarah Rotman Epps, a senior analyst at Forrester, said of the Nook tablet. “It was a failure of brand, not product.
“The Barnes & Noble brand is just very small,” she added. “It has done a great job at engaging its existing customers but failed to expand their footprint beyond that.”
Others pointed out that even if the Nook itself was a nice device, its offerings were not as rich as that of its rivals. Shaw Wu, a senior analyst at Sterne Agee, a midsize investment bank in San Francisco, said, “It is a very tough space. It is highly competitive, and extras like the depth of apps are very important. But it requires funding and a lot of attention, and Barnes & Noble is competing against companies like Apple and Google, which literally have unlimited resources.”
Horace Dediu, an independent analyst based in Finland who focuses on the mobile industry, said that the difference in quality among the products was so small as to be increasingly irrelevant.
“We’ve moved beyond a game of specs,” he said. “Now it is about your business model, about distribution and economics of scale.”