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Can E-Books Save Barnes & Noble?


Digital downloads doomed brick-and-mortar music retailers like Tower Records and Virgin MegaStore. Now, booksellers are trying to stave off a similar fate by getting in the budding business of e-books.

On Monday, Barnes & Noble launched an online bookstore and a new e-book reading application for PCs and mobile devices. The company?? eBookstore is launching with a collection of hundreds of thousands of bestsellers and classics comparable to Amazon?? offering on the Kindle, many marked with the price tag Amazon charges for its new e-books, $9.99.

But rather than edge in on Amazon?? turf, analysts expect Barnes & Noble to generate wider interest in the e-book format among mainstream consumers. ??f anything it helps build demand for e-book reading more generally,?says Forrester analyst Sarah Rottman Epps. According to the Association of American Publishers, sales of e-books grew to $113 million in 2008, up 69% from the previous year.

But unlike vibrant technology players Amazon and Google — the search giant announced a foray into e-book sales last month— Barnes & Noble is looking for a lifeline in a quickly sinking industry. The number of physical stores operated by the company, along with those of Borders and Books-a-Million, shrank by 19% between 2002 and 2008. Barnes & Noble’s stock is worth less than half what it was in March 2006, before a recession stifled the book-buying public.

“E-books are not enough to save any publisher or retailer,” says Michael Norris, analyst with media researcher Simba Information. Even though it costs virtually nothing to sell digital copies of books, the small number of shoppers to online bookstores won’t make up for the huge losses associated with brick-and-mortar stores for a long time to come, he adds.

The company did put into play a big X factor Monday, when it also announced a deal to be the exclusive online bookstore for Plastic Logic's e-book reading device, due in early 2010. Previewed at the recent D:All Things Digital conference, the superthin, touch screen operated Plastic Logic reader "has the potential to blow the Kindle out of the water," says Norris. "It’s Barnes & Noble's way of hedging their bets and being able to attach their name to a cool electronic device."

But the device could also be a liability. Doubts have been raised about Plastic Logic's ability to deliver a product competitive to the Kindle in its set time frame. "It’s going to look bad for Barnes & Noble that device doesn’t make it to market," says Forrester's Epps.

Even so, the company's electronic bookstore is somewhat platform-agnostic: its books can already be purchased and read on iPhone and iPod Touch devices, Blackberries, and on Mac and Windows computers.


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