[Decon]

Hot on the heels of a Russian Billionaire agreeing a conditional purchase of Waterstones in the UK, It would seem America have their own Billionaire, bidding to take over Barnes and Noble. With their share price escalating, is there something I am missing in what is happening.

My articles just can't keep up fast enough with the rapid changes afoot .John Malone's, Liberty Media have bid $1.02 billion for Barnes and Noble amid the companies declining paper book sales. I am really beginning to think there is life in the paper book chains yet, that the money men can see. There is clearly more chance of value in Barnes and Noble, as opposed to Waterstone's in the UK, with their success in introducing Nook which is driving the focus of the company forward.

Here's what I had to say on the history of Waterstones leading to details of todays news.

http://declanconner.com/2011/05/20/waterstones-book-storesthe-beginning-of-the-end-or-a-new-dawn/

 

[philvan]

Interesting developments, indeed. They see something we don't, or have a new business model in mind; combining upscale coffee shops with a book retailer? Nah, been done.
Perhaps loading displays with colourful covers and blurbs, which allow buyers to download an ebook by use of a unique code sold in the 'cover card' - this would save storage space and give shoppers the live physical browsing experience while also getting into the ebook market.

 

[John H. Carroll]

Perhaps they're looking to enter the publishing world as well like Amazon is trying to do.  It would make sense for B&N to publish and distribute in every form possible.  At the moment, everyone is jockeying for position.

 

[BrianKittrell]

If B&N were to start publishing, it would be going against its own fundamental business model. That, in my opinion, can only be a good thing considering the traditional bookstore business model (buy at 55% discount, return everything by day 89).

B&N, regardless of the fact it's been losing money hand over foot, still has value. That's why it's getting bids: the company is worth something. If someone buys it, they'd better understand the changes in the industry and be ready to make some hard decisions for the future of the company.

Of course, there's always the possibility that they're buying it because they own stock in Amazon, too, and plan on liquidating it for a double cash-in.

 

[Lefty]

Retail real estate is expensive. One way to reduce G&A is to lower real estate costs by closing stores or restructuring leases (another way is to fire people). Bookstores have to sell a lot of books to break even on just their retail rent. My thought was that the national stores would restructure their leases, give back a portion of the premises and add length to the lease length. I didn't read the article, but if QVC is looking to buy them, maybe QVC peddles some of their wares out of B&N, which already has an established footprint.

To my theory that nationals will have smaller stores: two of five books make money, two lose money, one breaks even (that's what I hear). Publishers drop the writers that write the 40% that lose money, bookstores carry less inventory and have less space leased because they are not needing shelves for the 40% that don't sell.

A theory in its infancy.....

 

[Rin]

Interesting developments, indeed. They see something we don't, or have a new business model in mind; combining upscale coffee shops with a book retailer? Nah, been done.
Perhaps loading displays with colourful covers and blurbs, which allow buyers to download an ebook by use of a unique code sold in the 'cover card' - this would save storage space and give shoppers the live physical browsing experience while also getting into the ebook market.

I could see this working a couple of ways - one would be to have QR codes for direct buying (for those people buying with phones/tablets that have cameras, so could be a lot of impulse sales.

They could also have those barcode scanners (sort of like the wedding registry ones) where people scan books, then check out when they're done, and have them sent to their device/account.

 

[Decon]

I suppose it's a daft idea to think that maybe they would think of installing those machines that can print any book held in a digital file similar to POD. That would reduce shelf space hence no need for such large premises. The money men must have some vision.

 

[Decon]

Perhaps they're looking to enter the publishing world as well like Amazon is trying to do. It would make sense for B&N to publish and distribute in every form possible. At the moment, everyone is jockeying for position.

They have been doing that for some time now. They started publishing out of print book editions eg The Gentle Art of Verbal Self-Defense by Suzette Haden Elgin sold over 250,000 copies and The Columbia History of the World by John Garrity, sold more than 1m copies.

 

[scl]

To my theory that nationals will have smaller stores: two of five books make money, two lose money, one breaks even (that's what I hear). Publishers drop the writers that write the 40% that lose money, bookstores carry less inventory and have less space leased because they are not needing shelves for the 40% that don't sell.

This is the start of a Death Spiral. After you make the cuts you's still have the losers, so you cut them
and first thing you know there isn't anything left. I don't know what the answer is, but the landscape
is changing rapidly.

 

[sbaum4853]

NY Times did a Why Liberty Media Might Want Barnes & Noble piece:

http://dealbook.nytimes.com/2011/05/20/why-liberty-media-might-want-barnes-noble/

Their theories:
1) eReaders have bigger potential than most people realize and the Nook has decent market share at 25%
2) Borders went down, leaving more market space for B&N.
3) Investors haven't paid enough attention to #1 & #2, so B&N was a good buy at their $17/share offer.

of course, yesterday, B&N stock skyrocketed, so maybe investors agree that B&N is a healthy business, but it took a billionaire buyout bid for them to take notice.

 

[philvan]

Combining several theories then, they could reduce floorspace & lease the rest out, install Book Esspresso machines to print on demand right there while you wait, stock displays with cover images and blurbs only so customers can browse as normal, then choose either hard copy printout or a download to a reading device, phone or memory stick. Sell coffee, Nook readers, chocolate and comfort foods.
No returns, much less storage and shelving needed, no transport costs + cash from tenants.

 

[Terrence OBrien]

Philvan,

Interesting model. I note the large chain has no inherent competitive advantage, so that model might see a return of independent bookstores.

 

[philvan]

I'm lazy, so feel free to open your own Book Emporium with a coffee machine, a Book Espresso machine, a selection of nicely decorated memory sticks, a good internet connection and a couple of shelves of colourful 'book covers' complete with blurbs. Couple of hundred thou for the Espresso Mc, but the rest should be more getting publishers to co-operate and arranging everyone's slice of the pie.

 

[Will Write for Gruel]

Philvan,

Interesting model. I note the large chain has no inherent competitive advantage, so that model might see a return of independent bookstores.

I believe the book espresso machines are expensive. One I read about requires an annual $25,000 license fee. You gotta sell a lot of books just to pay the annual fee.

 

[philvan]

Asher, I know zero about the economics of bookselling, but $25,000 a year wouldn't pay rent on a comfortably sized mall store (would it??). Places like Borders & B&N have to sell quite a few books to keep their heads above water as things are at present.

 

[Tom Junior]

I believe the book espresso machines are expensive. One I read about requires an annual $25,000 license fee. You gotta sell a lot of books just to pay the annual fee.

That's a fraction of the cost of completing stocking a bookstore with thousands of books..and paying for a huge retail space. Not to mention employees, utilities, theft protection, etc...

If I had the investment money I'd do it. You'd could fit an entire boostore/cafe in much smaller spot.

 

[Decon]

That's a fraction of the cost of completing stocking a bookstore with thousands of books..and paying for a huge retail space. Not to mention employees, utilities, theft protection, etc...

If I had the investment money I'd do it. You'd could fit an entire boostore/cafe in much smaller spot.

I have to agree with you that there is a payback, but only if you are paying to stock a book shop. With most publishers supplying on a SOR basis, I'm not sure it would work. It all depends how much of your stock you have bought and paid for and the financing costs for doing that, to include floor space.

B&N are in a lot better than Waterstones in the UK. It's not just their Nook eBook division that gives them hope for survival. They were founded by the owner when he set up in competition to his university library, who went on to buy out the name to give his company credibility. This division alone has two hundred outlets. Then there is the mail order division and not forgetting the publishing division. It just seems to be the dinosaur book shops and their deep discounting that seems to be the problem.