The Kindle and the Nook are the saviors. Without them Amazon and B&N’s book businesses might be struggling. Perhaps not as bad as Borders is, but struggling nonetheless.
Let’s start by looking at what’s happening with Borders (thanks to Paul Story for the update).
A World Without Borders
Salon writes about Borders filing for Chapter 11 bankruptcy protection -
- Borders plans to close 200 superstores, out of its 642 total stores, over the next few weeks.
- It plans to operate normally. Yeah, right.
- It will receive $505 million in debtor-in-possession financing from GE Capital and others to help it reorganize.
- It supposedly has $1.28 billion in assets and $1.29 billion in debts.
- It owes $41.1 million to Penguin Putnam, $36.9 million to Hachette Book Group, and so forth.
It’s interesting to hear the Borders President’s take on why Borders had to file for bankruptcy protection -
Borders Group Inc. President Mike Edwards said in a written statement that cautious consumer spending, negotiations with publishers and other vendors and a lack of liquidity made it clear Borders “does not have the capital resources it needs to be a viable competitor.”
Even more interesting is Salon’s take on why Borders is in so much trouble -
big-box bookstores have struggled as competition has become increasingly tough as books become available in more locations, from Costco to Walmart, online sales grow and electronic books gain in popularity.
Borders also suffered from a series of errors: failing to catch onto the growing importance of the Web and electronic books, not reacting quickly enough to declining music and DVD sales, and hiring four CEOs in 5 years without book-selling experience.
It points out that at the peak of its success Borders had 1,249 stores under the Borders and Waldenbooks names.
It’s going to be down to 442 in a few weeks. Plus there’s no guarantee Borders is going to get through Chapter 11 bankruptcy and re-emerge as a viable company.
Mike Cane points out Apple’s next move
As people are busy pretending that Apple does not intend to extend its 30% tax to apps like Kindle for iPhone and Hulu, a few things are worth keeping in mind -
- There are already unverified comments claiming that an Apple PR spokeswoman has confirmed that the 30% cut applies to Kindle for iPhone.
- Why wouldn’t Apple do this?
- Do you think Steve Jobs likes the fact that his beautiful iBooks is getting destroyed by both Kindle for iPhone and Nook for iPhone?
Of course, the real moves are yet to come.
People who think a 30% cut sounds terrible should read Mike Cane’s prediction on what Apple’s next move will be. It’s one of those ‘painfully obvious once you read it’ things -
The iPhone was the seed that unleashed everyone’s creativity. Goddamn it, he’s owed — no, entitled to — more than 30% for showing them all The Way.
Why should all of those other inferior tablets cash in?
Why should they have the same apps?
Why can’t Apple’s iOS devices be the only one to have to those apps?
And that’s when it all comes together in Steve Jobs’ greedy mind: Exclusivity.
Do read the entire post. It’s beautiful. It’s also exactly what’s going to happen in a year or two if Apple keeps picking up momentum.
The Third Alternative for Kindle for iPhone
While people pretend that the ‘allow in-app purchasing and give us a 30% cut’ rule will never apply to Kindle for iPhone let’s consider Amazon’s options if that happens -
- Option 1: Leave the iPad. Not a good option.
- Option 2: Allow in-app purchases and give Apple 30%. Please note that there are claims that apps won’t be allowed to mark-up in-app prices and that they must be the same as prices outside. So fantasies of listing ’30% higher due to Apple’ within apps will remain just that.
- Option 3: Don’t allow purchasing via the iPhone.
The third option is, in my mind, the best option. Let people buy elsewhere and read on the iPhone. It’s a big loss but it’s a LOT better than giving Apple 30% or leaving the iPhone and iPad.
Goldman Sachs upgrades B&N’s stock rating because of Nook Color
Goldman Sachs has upgraded B&N from ‘Sell’ to ‘Neutral’ and put a price target of $19 on the stock. This follows Credit Suisse’s January upgrade of B&N stock to ‘neutral’ . That upgrade was motivated by Borders’ troubles -
At that time, analyst Gary Balter calculated that Barnes & Noble could add $1 billion in sales following a liquidation of Borders’ nearly 700 stores.
Goldman Sachs feels BN.com and Nook have gained significant market share and will become more profitable businesses as costs come down. It thinks Nook is far more significant than the possible death of Borders -
According to Mr. Fassler, more important than brick and mortar gains is the strength of Barnes & Noble’s e-business. He calculates that BN.com now has a 27% share of the e-book market, to Amazon’s 58% and Apple’s 9%.
The Nook has 22% of the e-reader market, compared with the Kindle’s 67%. According to the report, the Nook color e-reader, introduced in October, generated 64% of the company’s hardware sales in the most recent quarter.
Mr. Fassler also predicts 2.4 million Nook sales this year, and 3 million Nook sales in 2012.
He’s way wrong – The Nook Color is going to sell at least 5 million units in 2011, and perhaps as many as 10 million. People have already gotten Android 3.0 (Honeycomb) running on Nook Color and B&N has a Nook App Store planned that will provide apps for people not adventurous enough to hack their Nook Colors and run stock Android on them.
The very interesting angle here is that B&N might be able to strike a balance between digital and physical and survive as the last remaining retail book chain. Perhaps, just perhaps, there will be enough demand for actual bookstores to keep B&N’s stores alive and kicking.
Is this supposed to be impressive?
Nieman Journalism Lab talks about how well one of the Kindle Singles releases is doing -
And if you’re wondering what being a top-10 Kindle Single gets you in terms of actual sales: In the first two weeks of its availability in the Singles Store, the piece sold more than 1,900 copies, Tofel says.
Neiman Journalism Lab claims a 70% cut. My understanding is that there’s only a 35% cut for items priced under $3. Let’s consider both possibilities.
At a time when Kindle Singles got the most publicity they ever would, in the first 2 weeks of its release, a top-10 Kindle Single (top 10 amongst Kindle Singles) earned either a 35% or a 70% cut of the 99 cents sale price on each of 1,900 sales.
That’s either $665 or $1,330.
The Singles publisher points out the lack of viability -
“The money will be nice, but even if you multiply the eventual sales of this by ten — and multiply that by 20 — it still doesn’t turn into enough money to float our boat,” Tofel notes.
Except the ‘multiply by 10 and then multiply by 20′ part is all make-believe. Amazon is promoting Singles heavily and launch time is when a release usually does best.
That $1 Single is competing against Alone by Lisa Gardner at $1, indie books at $1, Stieg Larsson at $5, and lots of other heavyweights. It’s just not going to be able to compete.
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