Tag Archives: publishing industry insights

Is B&N Divestiture the Pathway to Samsung?

With the recent news of Samsung taking over development of Barnes & Noble Nook Media tablets, followed by the news this week of the coming divestiture of B&N Retail from B&N Nook Media, might this all be leading to a solution to problems for both Samsung and Barnes & Noble?

Let’s start with B&N Retail, who once free of the Nook Media relationship can surely find better ways to maximize profitability from that current floor space and drive increased store traffic. Possibly they will want to sell a more diverse selection of tablets and smartphones. Possibly high-level corporate pressure will temper the difficult negotiations likely to occur so a sensible B&N overall brand strategy is followed.

But NOOK Media will not want to overpay for that prime retail space given their current difficulties and so a significant reset of that valuable floor space seems likely, especially given it is front and center in many locations, prime real estate. How many more print books might they actually be selling in that space right now if it were available?

What NOOK Media needs most is available via Samsung, whose tablet and smartphone lineup gains them access to Best Buy, Staples, AT&T, Verizon, and more, amounting to several thousand more storefronts located in the places people already shop for tech.

Samsung, on the other hand, made a weak attempt to establish their own branded ebook storefront but are too late to that game, a game in which even Apple is struggling competing against Amazon. So the B&N NOOK Media group would potentially offer Samsung the second largest database of ebook buyers after Amazon. Chances are many of these customers have zero (or worse) brand affinity toward Amazon, so they are not likely to leave if given better hardware than what they have gotten from B&N in the past. And many prefer their Nook models dedicated to reading over multi-purpose “distraction-easy” tablets.

That better hardware will start soon as the strategic partnership rolls out. Assuming it is going well, which I believe will be the case, then the divestiture to follow opens the door for Samsung to outright buy Nook Media, leaving B&N Retail Founder Leonard Riggio free to resume running the retail business he loves so dearly. As well as gain from the Nook Media sale. Which from a brand standpoint is a great reason why B&N came up with the NOOK name, because it is an excellent ebook product brand name and can be carried forward under any other larger brand umbrella.

I do not own shares in any of these companies and am just an interested industry observer speculating off in the wings. I appreciate your comments.

Buttons, Zippers and Books

 
I very much enjoyed my time at the Publishing Business Conference and Expo, where as always I learned a great deal from some very bright and thoughtful people.

 

As someone who has now attended three decades of conferences in the book, photo, and consumer electronics industries, I have noticed one constant across them all: denial of the speed and depth of the coming changes.

 

This conference had many feel-good moments of “print is not dead” and “print will always be here” and one excellent speaker used an analogy I had not heard before: “Just look down at your shirt buttons, which have been around since the earliest times. The same will be true for the printed book.” 

 

I dutifully looked down at my shirt and did indeed notice many buttons (all buttoned thank goodness!) but then continued downwards to my pants where I encountered a zipper and metal clasp. Hmm…I thought…plus geez I hope no one is looking at that strange balding dude up front. 

 

The point of these changes is not about “going away forever” but how the companies making the buttons of their time adapt to weird things like Velcro, metal clasps, and zippers, which reduce the number of buttons they sell.

 

So I did a little button research and came upon this fascinating excerpt about the dawn of the zipper:

“In 1913, Sundback revised and introduced a new model, which had interlocking oval scoops (instead of the previously used hooks) that could be joined together tightly by a slider in one movement or swoop. This final model is recognized as the modern zipper, which took many months to find success in the industrial market. Retailers, who were prone to sticking with traditional materials and design methods, were slow to purchase the product.” (Source: Wikipedia, whatever that is!)

 

And then I started thinking about the great wooden boat builders here in my state of Maine and how they “totally missed the boat” when the rest of the world moved on into the age of metal. And indeed you can find some of the best wooden boat builders in the world still operating in Maine, but most ship builders who did not move forward are gone.

 

A direct mail guru once told me the reason people open sealed envelopes at a higher rate than wafer-sealed self-mailers is because this sacrosanct item dates back to the time of Charlemagne and is therefore deeply encoded in our DNA in signifying something important is inside. (He also had some important “ins” with a 6 x9 envelope vendor needing to dump excess inventory. Would I like to purchase 1.5 million today?) 


The only thing that comes sealed in my mail is a treasured invitation to go see the newest Volvo S60. The important messages I receive are happening in email, text messaging, or on Facebook. And my missing a wedding invitation could be the best thing to happen to that lucky couple getting married.

 

The old photo industry denials were truly tough to fathom. “People love their prints, they will never give them up!” “You cannot match the quality of a printed photo with digital!” “Yes, things are shifting but we will be fine for the next 10-15 years and then I can retire.” (As in screw the younger people.) Well 15 years later the number of prints produced has dropped to a whole new scale and stalwarts like Kodak, Sony, and Polaroid are forever changed. And the number of photos being captured and shared has never been higher.

 

And what about those old paper mapping atlas denials? “People will always want a printed atlas,” the Rand McNally man is so certain, it guarantees he must be wrong. Funny but a woman sitting next to me at the Book Conference commented that her teenage son could not figure out how to use a paper atlas recently, where you have to go from page 14 to page 37 to connect to the north but page 17 to connect to the east and so on. Plus you cannot even see where you are on the page. “Jeez, Mom, I can figure that all out in a few seconds using my phone.” (Guess who never figured out how to penetrate the GPS market…yup, Rand McNally.)

 

Older people will lament the loss of map-reading skills and a few teenagers will probably die in the woods unnecessarily. But how many more will show up on time for their college interview? Will get into North Dakota State because they actually showed up in the correct town? 

 

I think Sony had it right even though they have lost so much over the years. “Disrupt yourself before someone unexpected does it to you.” Many of the changes come with comforting but deceptive downward plateaus, where you get to catch your breath. But you are still in a stepping-down trend that becomes more and more problematic as key volume thresholds are passed. Retailers need to sell “x” amount. When it falls to the “g” amount, they need to ask you to leave the shelves. And depending on how smart they are in staying current (Staples does an excellent job with this) the stores themselves close. CompUSA, Borders, and Circuit City were not so smart apparently.

 

The hardest part is managing the profitability slides from print to digital with all those fixed overheads (e.g., human beings with kids to feed), but this control is not actually in the manufacturer’s hands. New competition comes along and baits you into eroding what you have. You follow you lose. You don’t you lose. But change was going to erode and alter everything anyway so why not figure it out yourself while you still can? Continuous innovation. Kodak did not. Palm did not. The list is very long.

 

And I imagine many button manufacturers who continued to supply the risk-averse retailers who confidently dictated what products they should make (do NOT go there) failed to survive as clasps and zippers and Velcro reduced their volumes. I will zip it now. Or button it?

 

— Caleb

 

 

 

 

The Barnes & Noble House of Cards is in Motion

I recently made myself a promise to remain silent unless I had something positive to say. Anyone who knows me knows this is not a personal strength but I want you to understand I am working on it.  I walked around the recent Book Expo (Print Book?) Show feeling like Rip Van Winkle passing through an industry that continues to operate in the same ways as 125 years ago, and just smiled and winked at the many ghosts passing down the aisles.

But this news today from Barnes & Noble brings me back to my chief concern for the future of print book publishing, and especially the authors to be impacted, which is their announced ongoing poor retail store performance.

As reported by Reuters: “The picture was also bleak in its retail business, consisting of its 675 bookstores and accounting for two-thirds of sales. Sales at stores open at least 15 months fell 8.8 percent last quarter. Barnes & Noble expects retail sales to be down by a high single digit percentage in its new fiscal year.”

You see it is all a house of cards and I lived through this during the decline of print photography and see so many parallels I would feel remiss for not sharing them even if they fall upon denying ears. The parallels are these:

1) The core print retail business erodes much faster than the internal denial plans for, with too-rosy financial assumptions (the people driving the bus understandably want to stay employed) proving to have been far too optimistic when viewed in hindsight. That escalating erosion plays hand in hand with:

2) You cannot continue to invest in new competitive digital areas like the Nook without a funding base, so both the new and the old are failing in tandem.  I witnessed this working for Konica in the 1990s and also watched it happen at Poloroid, Kodak, and others. What these giants had in common were huge investments with mega-retailers to push through huge volumes, via expensive multi-year contracts. And also huge investments in R&D digital image capture, edit, and share product ideas (e.g., cameras/phones, photo software, and send/storage).

3) This major retail erosion is truly bad news for the publishing Big Six in my view, who have built publishing models scaled on these superstore retail volumes. Increased royalty advances, larger print runs…all made possible by widespread retail presence through B&N and Borders (gone). The current consolidation is similar to what happened in the photo industry, when Konica merged with Minolta (and eventually wisely got out of consumer photo altogether). Sony also exited as did others. The new growth came from new players. The industry survivors rapidly downsized themselves to new smaller niche market segments (e.g., Nikon). And one of the world’s longest-standing, most-prized brands — Kodak — was brought to their knees. Impossible people thought.

So if you are a major publisher, with all those newly combined overheads and impending staff reductions, how do you make it work as your core retail business dries up? I do not pretend to have answers but based on what I saw in other industries forever altered by the digital revolution, would suggest that they need to take their best and brightest and put them to work with the West Coast best and brightest in launching new brands using new business models. Or buy new brands while they still have cash. The good news is the food will still be served, but it will be on a new plate, as Douglas Adams famously said over a decade ago.

And if I were B&N? I would be working hard and fast on a new store-within-store branded retail concept to go into supermarkets and mass merchants while the brand still has value. A combination of bestsellers and print-on-demand from a new wave of cheaper faster machines. This is what Fuji did in the photo business to stay afloat. Today, their self-service photo stations are everywhere from Walmart to Walgreens to Kroger. Kodak once had that space locked up but Fuji out-innovated them.

The good news in all this? The sooner we get through the painful transition, the faster the new jobs can be created. But sadly they will not be the same people, many of whom look like they are over sixty based on what I saw at Book Expo. The twenty-somethings will continue driving major new changes in the decades to come. I doubt there are many former Kodak people working at Facebook or Apple in the new world of consumer photo we all enjoy so much today. What happens to all the good “old” people is truly the saddest part of these disruptive changes and I sincerely hope they can manage a soft landing.

I promise…my next post will be extra bubbly to make up for this Debbie-Downer one.

— Caleb Mason