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Industry News: More bad B&N news; good news for Penguin and Random House; MacMillan settles

February 16, 2013

More bad news for Barnes & Noble

The bad news continued to roll in last week for Barnes & Noble. On the heels of an announcement that it would close more than 200 stores over the next ten years, it announced that its Nook business unit lost $262 million in 2012, with the expectation that revenue from the unit would fail to top $3 billion. Last year, B&N spun off the Nook unit as Nook media, a partnership with Microsoft. For the 2012 holiday season, the unit’s sales for content, hardware, and accessories fell by 12% over the 2011 holiday season. In-store sales fell by 8.2% this holiday season, for an overall drop in revenue of a little more than 10% year-over-year.

What this means to you: Tampa Bay Times columnist Bill Maxwell wrote a column last week lamenting the slow death of physical book stores. In the months leading up to Borders demise, it became obvious that the store near me wouldn’t make it. The carpets were worn in the high-traffic areas, and what was once a place that provided hours of rich, bookish enjoyment seemed more like a big flea market. It’s now being converted into an orthopedic office. The staff at my local Barnes and Noble seem knowledgeable and customer-service focused. Several of them have worked there for years. It’s not a place where the staff tends to work between other retail stops. As the bad news piles up, one has to wonder whether the best workers will continue to stay–and risk possible unemployment–or find an employer with a more reliable future.

DOJ approves Random House-Penguin merger

The Department of Justice has removed a significant hurdle for the merger of Random House and Penguin by approving the deal without conditions. Random House is owned by German media conglomerate Bertelsmann. Penguin is owned by the British conglomerate Pearson. And Europe still poses a large hurdle for the deal. According to a New York Times article, the European commission has been known to impose stricter conditions on mergers involving cultural entities, such as the conditions imposed on Universal Music Group in its purchase of EMI. To close that deal, Universal had to sell off 60% of EMI’s businesses in Europe.

What this means to you: It means the merger is more likely to happen, which means odds are good there will be one fewer New York publisher, which means fewer options for authors. It might also mean that these mergers are helping the existing publishers stand up to the newbies, primarily Amazon. Once the merger happens, it also means that back office workers for both publishers are nervous. The plan is to save money by combining back office operations, while leaving editorial operations the same.

MacMillan settles with DOJ; last publisher to do so

MacMillan announced terms to settle with the Department of Justice this week in the collusion suit against it, Apple, and four of the other big New York publishers. MacMillan had been holding out against the suit, but decided the risk of treble damages if it lost were too great to risk going forward. According to MacMillan CEO John Sargent, the possible damages exceeded the value of the company. The terms of the deal require MacMillan to return to the wholesale business model, moving away from the agency model, where it sets the price and the retailers gets a cut. The publishers adopted the agency model to keep Amazon from selling ebooks at a loss to increase market share for its Kindle e-readers.

What this means to you: It depends on how you view Amazon. The author of the article pulled no punches, saying: “It was a sad day for many in the industry, who continue to find it puzzling that the Justice Department has been so eager to go after publishers and Apple over possible collusion while ignoring monopolistic, anti-competitive behavior by Amazon.” Amazon has been known to throw its elbows around in pursuing its goals, with its market share allowing it leverage to dictate terms.

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