Barnes and Noble has just released their 3rd quarter financial results and things are not looking good. The company has seen a decline of 41.3% in Nook e-Reader, Tablet and Accessory sales and the entire division only brought in $51 million dollars. eBook sales were also down 21.2% due to the lower average selling prices of books and total sales were $57 million.
Part of the reason Barnes and Noble is seeing huge declines with their hardware is because of the price slashing. If you look at their portfolio of tablets last year they were making 20% to 30% more on each device sale. In Q2 ’13 the NOOK device prices were $99 for the Nook Simple Touch, $139 Nook Simple Touch with Glowlight, $199 for the NOOK Color, and $249 for the NOOK Tablet. Those were some very solid profit margins, but if you look at the prices this year you can get a Nook Simple Touch for $79, which is a 20% loss. Or you can purchase a Nook Simple Touch with Glowlight for $119 at a 15% loss, or a Nook HD $129 -35% loss or finally the Nook HD+ for $149, -40% loss.
As you can see, Barnes and Noble is trying to remain competitive in the hardware sector but it is no surprise that their sales are significantly down. They are trying to still make a go out of selling Nook devices in the hope that digital book sales will make up for the diminishing returns.
If you look at the recent decline in eBook sales, this is partly attributed to the abolishment of the Agency price model of selling books. For the longest time book retailers could charge what they wanted for eBooks and then Apple and the six major publishers came together to even the landscape and charge a unified pricing model for books. Needless to say after about a year in court this pricing model was axed and all contracts had to be renegotiated. This is a win for customers, but B&N is now making a few dollars less for each digital book sold.
eBook prices are one thing, but we have not seen any runaway success stories this year that have been getting people out in droves to buy it. 50 Shades of Grey and the Hunger Games have been critical success stories and those 2 trilogies comprise of the highest grossing eBooks of all time. The lack of 2013 bestseller to capture everyone’s imagination is also a big part of the decline.