Barnes & Noble is the last national book store chain left in America because it jumped on the eBook revolution early with its line of Nook eReaders. It also introduced new tablets in the form of the Nook HD and HD+ to take on Amazon and its wildly successful Kindle Fire. Unfortunately, the holidays weren't too kind to the retailer.
Barnes & Noble reports that Nook revenues declined more than 12 percent in the lead up to the holiday season. In essence, what should have been a great quarter for the company turned out to be a bust. What's even more shocking is that the BGR says Nook hardware and digital content sales combined are shrinking faster than the already shrinking traditional hardcover and paperback market.
So, what went wrong? It's really hard to say. Barnes & Noble priced its Nook tablets competitively for the holiday season. Its Nook HD+ and Glowlight Nook, competing against the Kindle Fire HD 8.9 inch and Kindle Paperwhite respectively, were priced the same or lower than the competition. Even then, the devices couldn't achieve sales on par with Amazon's Kindle devices.
For now, Barnes & Noble says that its Nook business has brought in $3 billion in revenue over the fiscal year with losses "at a comparable level to fiscal year 2012." It's not a death spiral, but it's not good either when all the other tablet and eReader manufacturers are posting profits. In fact, Amazon said that its Kindle business had its best weekend ever on Black Friday and Cyber monday. In comparison, Barnes & Noble said that Nook sales "got off to a good start over the Black Friday period, but then fell short of expectations for the balance of the holiday."
Barnes & Noble can now go one of two ways - it can either continue in the tablet business or sell off said business to another interested party. It already spun off Nook into its own subsidiary and has received substantial funding from both Microsoft and Pearson. Microsoft could step up and purchase the Nook business to increase its relevance in the tablet market, but its own botched handling of the Surface may not make the Redmond-based company a good fit.
At this moment in time, it would be smart for Barnes & Noble to hold onto its Nook business. The losses weren't staggering during the holidays, and the company still has some time to reevaluate how its going to compete in a market that's already saturated with inexpensive tablets. It's only problem is that it lacks the retail muscle of Amazon and deep pockets of Google. Nook is an underdog, for sure, but it might just be worth rooting for in the new year.