TL;DR: Retail down, college down, Nook way down.
The bloodletting in Nook Media is devastating:
The NOOK segment, which consists of the company’s digital business (including devices, digital content and accessories), had revenues of $316 million for the quarter. This represents a decline of 26% as compared to the same period a year ago, primarily as a result of lower device unit volume. In addition, the company recorded $21 million of incremental channel partner returns given the holiday sales shortfall, as well as $15 million of promotional allowances to optimize future sales opportunities. Digital content sales increased 6.8% for the third quarter over the prior year.
NOOK EBITDA losses were $190 million for the third quarter, as compared to $83 million a year ago, primarily resulting from the previously noted sales shortfall, inventory charges, and higher operating expenses. The company recorded $59 million of additional inventory charges during the third quarter, as the holiday sales shortfall resulted in higher than anticipated levels of finished and unfinished goods. Operating expenses increased over the prior year on higher advertising costs.
In response to the device sales shortfall over the holiday season, NOOK is calibrating its business model and has implemented a cost reduction program that the company projects will significantly reduce NOOK’s expenses.
“In terms of the NOOK Media business, we’ve taken significant actions to begin to right size our cost structure in the NOOK segment, while also taking a large markdown on NOOK devices in order to enhance our ability to achieve our estimated sales plans in subsequent quarters,” said William Lynch, Chief Executive Officer of Barnes & Noble. “NOOK Media has been financing itself since October of 2012 due to the strong investment partners we’ve been able to attract in Microsoft and Pearson. Coming off the holiday shortfall, we’re in the process of making some adjustments to our strategy as we continue to pursue the exciting growth opportunities ahead for us in the consumer and digital education content markets.” Mr. Lynch also said that going forward NOOK Media still remains committed to its Tablet and e-Reader business. And, he reiterated that NOOK and Barnes & Noble bookstores will continue to have a close relationship. “Without question, our bookstores have made a significant contribution to NOOK’s success over the past three years. And, in turn, our award-winning line of NOOK products have proven to be a strong driver of traffic to our stores.”
Yeah, and this isn’t going to help:
Stop building it. Discontinue it. It’s not going anywhere now.
It’s been getting killed by both the Nexus 7 and the Kindle Fire. And then the iPad Mini came along.
And its death is imminent from another contender: Archos. Surprisingly, their US$169 Archos 80 Titanium has gotten good reviews twice. One from an Archos site and one not from an Archos site — PC Advisor. Why would anyone pay more for a Nook HD+ and have to wrestle with rooting it when for US$100 less they can get something that Just Works? Even making it a fully open Android tablet wouldn’t help now. Just kill it and stop the bleeding.