Nook MediaWe’ve known the numbers were coming, and Barnes & Noble released its third quarter earnings today.

A few items of interest:

Third quarter consolidated revenues were $2.2 billion, a decrease of 8.8% as compared to the prior year. Third quarter consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) were $55 million, as compared to $150 million a year ago. Third quarter consolidated net losses were $6.1 million, as compared to net earnings of $52 million a year ago.

Those are some pretty impressive numbers. Losses of $6.1 million compared to net earnings of $52 million a year earlier. B&N did attribute much of their poor performance to the less than stellar Nook holiday sales. Nate over at The Digital Reader followed the saga of Nook holiday sales (and the number of times they put the Nook on sale), so this shouldn’t come as a shock to anyone who’s been paying attention.

How much did B&N allot to promotional allowance over the holidays? Fifteen million dollars, according to the press release. That’s a lot of money to prop up holiday sales.

What does it mean for Barnes & Noble? Should you sell your Nook, strip the DRM from all your books and go buy a Kindle or a Kobo reader? Well, that depends on how much you believe in the following statement, also from the press release:

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.”

That statement was interesting because it led into a “clarification” of the proposed sale of the retail business to Mr. Leonard Riggio, founder of the company.

There can be no assurance that the review of Mr. Riggio’s proposal or the consideration of any transaction will result in a sale of the retail business or in any other transaction. There is no timetable for the Strategic Committee’s review. The Company does not intend to comment further regarding the evaluation of Mr. Riggio’s proposal, unless and until definitive agreements for a transaction are entered into or the Strategic Committee determines to conclude the process.

Hmm. Interesting. Don’t know about you, but I read that as “Mr. Riggio will not be completing that purchase anytime soon because we don’t think it’s in the best interest of the company as a whole.”

Anyone else read it differently? I wrote earlier this week that I didn’t think the split was a good idea. Several of you disagreed with me (and had good reasons for doing so).

If I had to guess, I’d say the Nook line will continue, at least for a while. There are enough companies out there who have sufficient reasons to want a competitor to Amazon who I think will prop up B&N, at least for a while. And as I said in my earlier post, I think competition is a good thing. I hope B&N will take some of the advice we bloggers have given them and make changes to keep the Nook a going concern.

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  1. On a side note, I got a letter from one of my publishers who said that ebook sales are way down, and according to other authors with small publishers, the news is the same. We’re talking only holding on to financial solvency by a bare minimum. That’s worse then even in the early days of ebooks when no one even knew what an ebook was.

    He blamed the massive influx of backlist and new titles in the market.

    I wonder if it is also about the incredible emphasis placed on self-published titles. All the sites, review lists, and magazines I read are screaming about successful self-pubs and the big name authors, but no one is talking about the rest of us.

    And, whether there’s a correlation or not, the pirate sites are having no problem collecting small publisher titles and downloading them by the tens of thousands so there’s obviously some interest in these books.

  2. The Nook mbers $316M revenue leading to *net* losses of $190M are downright scary. At the grossest level, it costs Nook $1.50 to earn $1.00.
    Depending on how bad their hardware inventory issues are or aren’t, they could conceivable be losing $2 for each $1 of ebook revenue.

    Something is very wrong over there.

    By the way: the storefronts declined by 10% but if Nook expenses are excluded their decline is only 2%. (I still think a split benefits the storefronts.) 😉

  3. Felix, excellent point. I suppose I could be convinced the split is good. I just think there has to be an advantage in being able to walk into a store and buy a device made/serviced by that store. When I still owned a Nook Color, I took advantage of the knowledgeable Nook folks in my local B&N. They saved me lots of time and money over calling Customer Service. Amazon has great customer service, but being face to face with a person is an advantage. Too bad B&N isn’t able to leverage that.

  4. In theory, B&M availability *should* be a plus.
    But the evidence appears to be that it isn’t.
    B&N just reported $21M in returned hardware losses. That is 200,000 Nook STRs worth.
    Or consider WalMart: their in-store sales featured Sony and Kobo but they dropped them for slow sales to feature Kindle and then dropped Kindle (allegedly because Amazon is a competitor–but they were a competitor when they brought Kindle in).
    Target? Sony, iRiver, Kindle… All have been featured at one time or another. If sales were great they would still be carrying them.
    It may be as simple as that people shop for readers where they shop for gadgets, not where they shop for books or clothes or groceries. 🙂

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