Blunt Advice for Barnes & Noble
Feb 14th 2012 6:07PM
Updated Feb 14th 2012 6:08PM
A long time ago, in a retail environment far, far away, Barnes & Noble (NYS: BKS) -- at the time the undisputed ruler of the bookselling galaxy -- decided to start its own publishing arm and announced that it would sell the titles in its stores. Competitors and publishers cried "Foul!" and "Unfair!" But Barnes & Noble went ahead with its plans.
How times change. Now, Barnes & Noble is crying foul and taking action at what it sees as Amazon.com's (NAS: AMZN) unfair move at its publishing arm. Here's why Barnes & Noble should stop complaining and instead start taking some positive action of its own.
Amazon wants digital exclusivity from its authors, so only Amazon can sell said authors' e-books. In response, Barnes & Noble just announced that it won't sell any books from Amazon's publishing arm, Amazon Publishing.
It's obvious why this has Barnes & Noble in such an uproar. If Amazon becomes enough of a force in publishing and the company can sign big-name authors to exclusive deals, Barnes & Noble might find itself in the strange position of not being able to sell a published work of a popular author.
Goliath and a couple of Davids
It's no secret Barnes & Noble is struggling, trying to find its way forward in a retailing world upended by Amazon. But Barnes & Noble is still big enough that it has some weight to throw around, which it's trying its best to do here.
Barnes & Noble has some help in its fight. Canada's Indigo Books & Music has joined in the protest, as has Indie-commerce. Operated by the American Booksellers Association, Indie-commerce is an e-commerce website that has removed some 300 Amazon e-books from its inventory.
One good competition-crushing move deserves another
Years ago, when Barnes & Noble established its own imprint and caused its own fuss, the situation was different in detail but similar on a larger scale. Barnes & Noble's publishing arm mainly reprinted non-copyrighted titles that, with some editing and repackaging, would sit side by side on the shelves next to the same titles from different publishers. It was a cheap way (read: no pesky authors to pay) to make some money selling books that were in the public domain.
Back then, Barnes & Noble had the power to make an unprecedented move and press forward regardless of criticism, and now Amazon is doing the same thing. Unfortunately for Barnes & Noble, it can try to raise a stink, but it will all probably come to naught.
Who's going to stop authors who want to sign exclusive deals with Amazon? Authors can do whatever they like with their work. And as Amazon gets bigger and bigger, these kinds of exclusive deals will only get easier to make, as Amazon can promise an author plenty of national and international exposure with probably a better deal than he or she can cut with a traditional publishing house.
Gutting out the middleman
Speaking of traditional publishing houses, if authors decide to take their content directly to the consumer by way of a small stopover at Amazon.com, what becomes of them? Companies such as Pearson (NYS: PSO) , with its consumer-driven Penguin imprint and vast educational publishing business, or McGraw-Hill (NYS: MHP) , another heavy hitter in educational publishing?
And let's not forget about Apple (NAS: AAPL) , which just went live with iBooks2 -- a service that gives authors the power to not only write their own e-textbooks but also offers them a prominent place to sell them, right on Apple's website.
Adapt, or spin off the moneymaker
Companies such as Pearson and McGraw-Hill have positioned themselves well. Both were instrumental in the launch of iBooks2, and Pearson in particular has been very progressive in turning its business smartly in the direction of digital.
To its credit, Barnes & Noble is pressing as hard as possible with its Nook business, right now the most successful part of the company. There's even been talk about spinning Nook off from Barnes & Noble completely. So even management must see the legacy business as slowly dying. This Fool's blunt advice to Barnes & Noble? Keep pushing the Nook and go sign some exclusive author deals yourself. You still have influence out there in the publishing world. Use it. It's healthier than just sitting around complaining about something you can't change anyway.
Companies like Barnes & Noble must adapt or go the way of the buggy whip. Amazon is the classic disruptor company, one that's turned the status quo upside down and changed the way the world does business. Read about another company, a disruptor in the field of data mining and business intelligence, set to change the face of business in its own way in this free Motley Fool special report: "The Only Stock You Need To Profit From the NEW Technology Revolution." Get your copy while the stock is hot.
At the time this article was published Speaking of buggy whips, Fool contributor John Grgurich has been on the search for one (they're terribly hard to find these days), but he owns no shares of any of the companies mentioned in this column. The Motley Fool, however, owns shares of Amazon.com and Apple. Motley Fool newsletter services have recommended buying shares of Amazon.com and Apple and creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a scintillating disclosure policy.
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