B&N nukes the NOOK with a 15 March deadline for customers to save content

While we remain committed to providing a great digital reading experience to our customers, we are exploring all opportunities to reduce costs.

That’s the sound of Barnes and Noble CEO Ron Boire sounding the retreat from the firm’s ill-advised venture into competing with Amazon’s Kindle with its own NOOK e-reader.

While his comments are simply reflective of an ongoing shift away by the firm from its digital disappointment, what is interesting is how many actions are now being taken to achieve this. Boire states bluntly:

Our first priority is to significantly improve NOOK performance. During the third quarter, we reduced NOOK expenses by $25 million and recently took additional action to exit NOOK's app and video businesses that will result in additional cost savings…we are actively engaged in exploring a number of alternatives to materially reduce NOOK's expense structure.

It’s easy to see why this is the case. While the third quarter saw B&N turn in increased profits of $80.3 million, up from $72.2 million year-on-year, total sales fell 1.8% to $1.41 billion, attributable in large part to poor online sales offsetting decent offline activity in-store. Breaking down the numbers:

• NOOK sales decreased 33% year-on-year to $52 million for the quarter.
• Digital content sales decreased23%, to $31 million.
• Device and accessory sales decreased 44% to $21 million on lower unit sales and lower average selling prices.
• Online sales overall declined 12.5%.

So action is required - and it’s starting to kick in soon. B&N customers need to get used to some big changes coming up next week - 15 March to be precise. That’s when the firm will no longer offer third party applications from the Nook Store. That’s a decision fuelled by the success of Google’s Play Store which runs on B&N devices and has been inevitably far more successful.

This decision impacts every tablet B&N has ever made, but the company insists that all existing Apps previously downloaded from the NOOK Store will remain in customers Nook Library and will continue to be accessible on compatible Nook devices.

From 15 March, customers will also not be able to rent or purchase video content from the NOOK video store, which will be closed down completely on 30 April. If customers want to keep the content they’ve already purchased, the need to transfer content to other providers.

If you’ve bought Disney, Pixar, Marvel or Star Wars content, you need to open an account with Disney Movies Anywhere, while all other content will now require the opening of a CinemaNow account.  If you haven’t done so by 30 April, you lose the content you’ve purchased.

Meanwhile in the UK, e-books will no longer be supported by B&N. Instead, customers need to open an account with supermarket chain Sainsbury’s. In a less than encouraging proviso, B&N adds that if a book can’t be transferred to the Sainsbury’s platform, a Sainsbury’s Entertainment voucher will be issued as compensation.

Still online

For all this, Boire insists that online remains a core part of the company’s ongoing strategy:

BN.com,represents a big opportunity for us and is a very important component of our omni-channel offering. While we are encouraged the site's improved performance during the third quarter, we still have work to do to improve sales.

We have undertaken major projects to improve the user experience, including a re-design of the front-end, improving SEO by re-engineering certain elements of the site, and improving BN.com's search tool so that it's more relevant and intuitive to the customer's query.

Mobile is also to play a continuing role:

Beyond the desktop experience, we're also making investments to improve our mobile and tablet experience. Today, over half of our site traffic is driven by mobile. We will improve our mobile experience to provide a great experience, whether it'd be on a phone or a tablet. We are also in the process of consolidating multiple B&N apps into a single customer experience.

The firm will also be looking to exploit the data accumulated by its growing customer membership loyalty program. Boire says:

We have over 5 million members and growing. Our membership presents us with great insights into our customers and provides us with rich data on their shopping behavior. It's also a great loyalty program that rewards our best customers through the discounts that they receive and other perks. Our focus is to continue to expand the program based on what we know about our shopping patterns of our best customers so that we provide an even better, highly-customized shopping experience.

But it’s also clear that B&N is gambling on the idea that the offline bookstore isn’t dead and there will be a lot of marketing around that. Boire says:

Leading into the holiday season, our stores held a number of large-scale nationwide events, including the All-American Art Unwind, Vinyl Day and the return of our Signed Editions, which created excitement and drove traffic into our stores leading into the holiday season. We also introduced our You Never Know Who You'll Meet at Barnes & Noble holiday television campaign, featuring Tony Bennett and Lady Gaga, which generated great buzz and unprecedented social media reaction for the company with millions of social media impressions.

My take

Well, they’re taking the tough decisions at any rate. I feel sorry for anyone who bought a NOOK. If you’re in the UK, you’re going to end up potentially with 3 accounts to handle, not just the one. B&N’s future meanwhile remains far from assured, but it has perhaps turned a page, if not moved on to a new chapter.