That wasn’t fun while it lasted
Following some revenue gains in fiscal 2012, Nook sales have declined and EBITDA losses widened dramatically to $475 million in fiscal 2013.
The company has run a number of promotions to help spur sales this year, including extending a Father’s Day Promotion. The most prominent sign that Nook was foundering was the official adoption of Google (NASDAQ:GOOG) Play last month. By fully embracing Google Inc (NASDAQ:GOOG)‘s sanctioned ecosystem, Barnes & Noble, Inc. (NYSE:BKS) was admitting that its own efforts to sell content and offer services weren’t going so well. After all, low-end devices typically sell at or near cost with the hopes of profiting on content sales later, and B&N gets no benefit from Google Inc (NASDAQ:GOOG) Play sales. Selling a product at cost and sending customers to another company’s content store is not a winning formula.
This surrender has been a long time coming, as competition in the tablet market has intensified dramatically, particularly in the small-sized segment. Barnes & Noble, Inc. (NYSE:BKS) was actually among the first companies to fork Google Inc (NASDAQ:GOOG)Android for its own purposes with the Nook Color in 2010. Amazon.com, Inc. (NASDAQ:AMZN) would implement the same strategy with the Kindle Fire a year later, albeit far more successfully since Amazon.com, Inc. (NASDAQ:AMZN) has a much wider content ecosystem in categories beyond e-books.
The gray area
B&N is sticking with its e-reader devices, and only giving up with color tablets. The company said it would implement a “partnership model” with color tablets and sell co-branded devices made by third-party manufacturers.
This is rather peculiar. Instead of simply giving up entirely, B&N still wants to maintain some type of branded presence in tablets. Investors can now imagine an OEM like Acer or Lenovo selling a Nook tablet that runs a forked version of Android yet still taps into Google Play — a confusing value proposition.
