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And the Saga Continues

nookkindle I must have been living under a rock. Until the advent of agency pricing, I didn’t realize the contentiousness and longevity of the thirty years’ book wars. Oh, I do remember talking with one of my favorite book sellers – a retired teacher that opened a book store in Memphis. She shared that she was having a difficult time competing with Waldenbooks. And I remember her talking in dismay about the proposed purchase of Ingram Book Group Inc. by Barnes and Noble. And sure I watched the 1998 comedy, “You’ve Got Mail” with Tom Hanks’s Fox & Sons Books putting out of business Meg Ryan’s Shop Around the Corner. However I moved away to a smaller town, and became cocooned against the bookstore closings. Then in the spring of 2010, agency pricing got my attention in a big way. Since then I’ve tried to keep up with the current changes.

While Amazon is considered a disruptor company for many of the changes today – hated by independent book store owners and publishers, especially after they promoted their price-check app over the Christmas holidays, in the 80’s and 90’s Barnes and Noble was considered the “brutal capitalist” of booksellers. And its history is extremely interesting, considering what has been happening in the book world of late. Barnes and Noble was the first major bookseller to discount books, by selling The New York Times best-selling titles at 40% off the publishers’ list price. In the eighties they bought up chain book stores like B. Dalton, Doubleday Book Shops, and Bookstop. In 1998 they tried to purchase Ingram Book Group Inc., the largest book wholesaler in the United States but were unable to do so because of antitrust concerns. Supposedly one reason Waldenbooks and Borders opened so many stores was to keep up with Barnes and Noble’s superstores.

In 1996 B&N expanded into Canada with a 20 percent stake in Chapters Inc., the largest book retailer there, but sold it three years later. And then it tried to expand into the digital world, but the timing was a little off. As noted in this Wall Stree Journal article, “In 1998, they [B&N] invested in NuvoMedia Inc., maker of the Rocket eBook reader, and the bookseller actively supported digital-book sales. But in 2003, it exited the still-nascent business, saying there wasn’t any profit in it.” In 1998 Barnes & Noble got sued by the American Booksellers Association and 26 independent bookstores who claimed that Barnes & Noble and Borders had violated antitrust laws by using their buying power to demand from publishers “illegal and secret” discounts and then in 2003 Barnes and Noble was the first bookseller to publish its own line after acquiring Sterling Publishing Co., the nation’s largest publisher of how-to books, competing side by side with Modern Library and Penguin Classics.

But now it is the underdog to Amazon. If you have followed the news recently then you know that Barnes and Noble announced after posting earnings per share loss of $1.31 in 2011, they expect this year’s loss to be twice as large as previously expected, between $1.10 and $1.40. It has also put Sterling Publishing Company up for sale. It is not that stores aren’t successful, and the Nook has even gotten solid recommendations, as well as making inroads into Amazon share of the eBook market. However Digital Book World states “the operating loss in its online division (including online sales and “development and support”of the Nook) hit $66 million in its most recent quarter, up 17% from a year earlier, on a 26% increase in sales.” Barnes and Noble had toyed with the idea of spinning off their Nook division after disappointing Christmas sales of their basic touch screen. In order to promote the Nook they have entered into a partnership with The New York Times, in which the Times will subsidize the Nook for readers in exchange for a full year’s digital subscription to their paper.

The article, The Bookstore’s Last Stand, talks about how Macmillan, Penguin, and others all feel a “ sense of unease about the long-term fate of Barnes & Noble, the last major bookstore chain standing.” Of course these are the same publishing companies that are defendants in class action law suit brought by Hagens Bermans, the law firm representing eBook purchasers. In January this complain was updated to include new information and allegations including quotes by Macmillan CEO John Sargent, David Young Chairman and CEO of Hatchett Book Group USA, and information from Steve Job’s biography. You can read more about it here and even possibly become a plaintiff.

Rumors are spreading like wildfire on the web that Amazon is planning on opening a retail store in Seattle selling “Kindle e-readers, the Kindle Fire tablet, and related accessories, as well as the company’s growing collection of Amazon Exclusives book titles.” One reason is that Barnes and Noble and Book- A- Million and many independent booksellers refuse to stock books published by Amazon. While some view this as a smart move, Michael Souers an analyst at S&P’s Capital IQ, in this article from Time views the move as a way for B&N to firmly side with traditional publishers. “It’s kind of a symbolic gesture, one meant to ingratiate themselves with publishers,” Souers says. “And publishers are upset with Amazon for trying to cut them out of the process.”

Magellan Media Partners’ analyst Brian O’Leary feels that it’s foolish for Barnes & Noble to attempt to punish Amazon by dropping titles where Amazon has a special deal with the publisher. “In general” he said, “it’s a mistake for any author or publisher to create scarcity in the channel. It sends the wrong message to readers.” So if you looking for Connie Brockway’s book The Other Guy’s Bride, you won’t find it in Barnes & Noble stores. In a similar move back in October 2011 both Barnes and Noble and Book-A-Million pulled DC comics off their shelves after Amazon announced an exclusive four month deal to sell the comics on their Kindle Fire.

If that is not enough, Penguin, which only offered backlist eBook titles for library lending, announced that it is terminating its contract with OverDrive, the library digital vendor, and starting February 10 will cease to offer any of its eBooks or Audiobooks to libraries. From what I understand they are threatened by OverDrive’s partnership with Amazon, which allows wireless downloads to their Kindles. Simon & Schuster, Macmillan and the Hachette Book Group are among the major publishers that already limit eBook availability to libraries. And of course last year HarperCollins limited the number of time a library could check out an e-book before having to purchase it again.

Honestly, these turf wars are getting old. I like Amazon but that doesn’t mean I want Barnes and Noble or other bookstores to go out of business. Competition is good for readers, and I’d also like to be able to get my books from more than one source. And then there’s the issue of certain stores not selling books from another store’s publisher. After all, if I read on a Kindle, what happens if a favorite author signs a deal to publish on the Nook with Barnes and Noble, and I am unable to read the book? Publishers continue to hang on to the old way of doing business, refusing to move forward, and for the most part we, the people who only want to read great books are caught in the middle. So, what do you think about the latest changes?

– Leigh Davis

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