Barnes and Noble – Seriously, Print isn’t Dying!

I’m not the first person to write an article talking about the recent fiscal 2013 year-end earnings report from Barnes and Noble. But people who decry B&N’s loss as another nail in the coffin of bookstores everywhere are missing the lead.

Don’t get me wrong, Showcasing is kind of awful and it doesn’t help bookstores at all. But it’s not showcasing or Amazon killing B&N. It’s the Nook.

Don’t believe me? Look at the numbers:

Sales
Retail $ 947,677 1,052,533 $ 4,568,243 4,852,913
College 252,295 227,891 1,763,248 1,743,662
NOOK 107,950 163,617 776,237 933,471
Elimination (30,901 ) (64,331 ) (268,723 ) (400,847 )
Total $ 1,277,021 1,379,710 $ 6,839,005 7,129,199

Gross Profit
Retail $ 259,304 329,353 $ 1,397,859 1,452,804
College 76,131 69,781 405,076 395,311
NOOK (107,000 ) 999 (122,293 ) 68,065
Total $ 228,435 400,133 $ 1,680,642 1,916,180

Selling and Administrative Expenses
Retail $ 208,244 262,244 $ 1,023,633 1,130,311
College 72,341 69,600 293,618 279,364
NOOK 69,895 77,988 353,125 329,777
Total $ 350,480 409,832 $ 1,670,376 1,739,452

EBITDA
Retail $ 51,060 67,109 $ 374,226 322,493
College 3,790 181 111,458 115,947
NOOK (176,895 ) (76,989 ) (475,418 ) (261,712 )
Total $ (122,045 ) (9,699 ) $ 10,266 176,728

Net Loss
EBITDA $ (122,045 ) (9,699 ) $ 10,266 176,728
Depreciation and Amortization (55,725 ) (58,968 ) (227,134 ) (232,667 )
Interest Expense, net (9,510 ) (8,629 ) (35,345 ) (35,304 )
Income Taxes 68,639 20,381 97,407 25,600
Total $ (118,641 ) (56,915 ) $ (154,806 ) (65,643 )

As you can see from the above, Retail and College are actually doing alright. The problem is that B&N is taking such a bath on NOOK that it’s dragging down the rest of its business.

Why is Nook failing?

In short it’s because Barnes and Noble is trying to be a better Amazon than Amazon is and they’re not going to succeed at that. Amazon is just too far ahead in that space.

Nook was not ever going to be sufficient to let B&N compete in Amazon’s space with Amazon. As a result the retail and college segments have to carry the losses posted by the (expense heavy) hardware and the not-particularly profitable ecosystem of the Nook.

What should B&N be doing instead?

Barnes and Noble is doing one thing right by cutting back on the Nook tablet business, contracting out development of co-branded tablets to a third party. I’d go a step further and also do the same with the black and white e-readers but they’re a dying technology to begin with.

What B&N should be doing is concentrating on ways to increase foot traffic into stores and ways to get those walk-ins to buy.

And I’m going to suggest something crazy – B&N should be looking to the model of smaller, local shops for a way forward.

Establishing smaller stores in high traffic urban areas, populating those stores with educated and engaged sales staff (and putting some of that staff on the floor) and then giving local stores control over at least 50% of inventory so that the stores have diverse content could help with this.

If people are going to showcase anyway give them the opportunity to do so more easily – but then put a friendly and well-read salesperson right there to try and convert that cover search into a book buy on the spot.

You know, add value.

J.K. Rowling, Success and Benchmarks

Q: How do you get a 507,000% increase in book sales overnight.

A: Be outed as J.K. Rowling.

The truth is that the whole situation with Rowling being revealed as the author behind the pseudonym Robert Galbraith has been blowing my mind the whole week. And I’m not alone. Sylvia Moreno Garcia (who is an awesome author, you should go out and buy her books) recently wrote a really interesting little piece about success in the writing profession.

And she’s totally right – when everybody thought that the book had been written by some random veteran, despite highly favorable reviews and despite being in a popular genre, she sold somewhere beween 500 and 1,500 copies.

In the UK, the second largest English language book market in the world.

Of course, once it was revealed that this, by all accounts good, mystery novel was written by one of the most famous authors in the world it sold a lot more copies.

Now one thing I’d like to do is, as a marketer, salute Rowling’s marketing prowess somewhat. Because what really hurt her first post-potter novel, the Casual Vacancy, was mostly that it wasn’t Harry Potter.

It got reviews, by people hoping for and expecting Potter saying that it presented “a numbing understanding of the difficulty of turning a dozen or so people’s tales into a story with genuine emotional resonance.”

Ouch.

These sorts of reviews probably hurt her sales. So she avoided that problem this time around by not letting anybody know, when reviewing, that the book was hers at all!

Then, after the reviews are in and favourable, Rowling is able to confirm she is in fact Galbraith and get the sort of sales an author with her profile can expect. It was a very clever marketing strategy, albeit one that depended upon being J.K. Rowling to begin with.

Most people won’t ever achieve her level of fame.

I joke about the day that my “young-adult kung-fu rebellion in dystopian Canada” novel makes me Bill Gates rich but, let’s be honest, I’m not in this game for the money. In fact authors who have careers in writing and who are just in it for the money are rare to the point of essential nonexistence.

You’re probably less likely striking it rich as a writer than you are as a musician. So if your benchmark for basic success is to strike it rich you’re probably never going to get there.

In order to be successful in a career it’s important to set performance goals. If you wanted to, for instance, be a web designer, you might set goals like:

  1. Learn basic HTML this year
  2. Design a website over the course of a month
  3. Produce blog content each day for a year
  4. Learn best practices in website design by taking a month-long online course
  5. Get a job where working with the website is part of your duties within three months
  6. Demonstrate facility working with the website over the course of employment
  7. Use that experience to push toward a job where that was the primary responsibility over the course of a year
  8. and so on…

Notice that these goals are specific, measurable, achievable, realistic and time-targeted. Whereas the goal of “becoming a millionaire author like J.K. Rowling” is neither particularly realistic or time-targeted, and probably isn’t achievable either.

So we set the goals we can meet.

These goals might look like this:

  1. Write and sell some magazine articles because it seems like fun.
  2. Write 50,000 words in that November thing.
  3. Write a complete novel draft in a quarter.
  4. Write another novel that somebody might actually want to read over a year.
  5. Revise that novel and do rewrites over the course of a year.
  6. Take trilogy that came out of rewrites, shove it under a bed, and start again by writing short stories for a quarter to sharpen skills.
  7. Get feedback on short stories and improve writing accordingly, practicing daily for another quarter.
  8. Start yet another novel and finish a draft within two months.
  9. Edit novel over two more months to produce workable second draft.
  10. Form a workshopping group and workshop novel for a year.
  11. Start submitting workshopped novel and secure a first novel contract within a year.
  12. Sign first publishing contract.
  13. Get book to print and actually make money, any money, from fiction!!!
  14. Start from 8 and repeat until you have enough royalties coming in to make writing your own full-time job.

(Items 1-12 are actually the benchmarks I set for myself and subsequently passed. 13 and 14 are my current objectives.)

Notice that’s a hell of a lot of work for very little money. That’s because, as I said before, I’m not really in it for the money. I’ve had enough various day jobs (website designer, marketer, sales person, English teacher) that I know I can do some sort of work-work to make paying-bills money.

If, sometime in the future, I can abandon the day job and be a full-time author that’s the ultimate picture of success for me. And then I’ll worry about setting sales targets and such to make myself into a big name author or about getting the movie deal or whatever.

But that’s just what success looks like for me. With something as personal as art, any type of art, there are as many ways to succeed as there are people creating. What does success look like for you?

Why I’m not joining SFWA

I’ll be honest – there’s a certain prestige to author organizations like SFWA. In the end, the decision not to pursue a membership was a difficult one largely for this reason. There are all kinds of awesome people involved with SFWA and, as somebody just starting out in his publishing career, there is a part of me that might like the feeling of metaphorically leveling up by joining a professional organization.

That there are a lot of amazing people in this organization was another reason I might have wanted to join. These are people who I like, respect and feel honoured to know. And I’ve no problem with them being in SFWA. That’s not what this blog is about; this is not a call for them to leave. This is not a boycott.

That being said, I’m not going to do it. And I have some good reasons, only a few of which are related to the issue you probably all suspect is weighing on me.

So why won’t I do it?

Well there are a few things.

I don’t exactly write sci-fi

I looked at SFWA’s member lists and I saw a lot of people who are SCIENCE fiction writers. Even Scalzi is pretty hard sci-fi most of the time. My debut novel may be set in the future but it’s about as conventionally sci-fi as an episode of Adventure Time.

So I don’t know what SFWA would make of it. Would a science fiction organization be able to effectively market a fantasy story set on a version of future Earth? Maybe, maybe not. What I do know is that I feel capable of marketing my story. I have a grasp of its idiosyncrasies and I trust my editor to have the same.

I’m not sure that adding another cook to the marketing and promotions broth would actually help matters, especially not when clarity and consistency of message are such important elements of marketing.

I can already talk to the awesome people in SFWA

Pretty much every author these days has a blog, a facebook page, a twitter account or some combination of all three. And authors all know each other. As a fan with a decent understanding and comfort with social media I was able to connect with many of the people who are becoming my peers. I’m socially comfortable enough to approach Names at conventions and this gave me the opportunity to get to know some of these people personally.

So having access to SFWA private fora doesn’t really feel like that much of a perk. I can understand, back before social media, that the professional networking aspect of professional organizations mattered.

But between that technological change and the extent to which fandom and the writing community blend into each other I just don’t see the value add in this anymore.

I live in Canada

So perks like the emergency medical fund don’t apply to me – although the Canadian designed health insurance scheme of the Writer’s Union of Canada is a substantial value add and I’ve not discounted applying to join THAT group.

And, of course, there is that big controversy

This is, honestly, not the biggest issue for me. Especially since much of the dissent against the blatant sexism from certain SFWA members has come from other members. However the truth is that, as it currently stands, I’d not want the SFWA bulletin. I would be concerned at the risk that my member dues were providing some sort of benefit to people like Theodore Beale.

So, although the controversy that has engulfed SFWA this summer is not the core factor in my decision not to join the organization, it certainly played a role in my thinking.

There is certainly room in the world for an organized writer’s union advocating for improved quality of markets, providing collective services to authors. However when most of your value add is as a social networking organization you’ve got to compete with sites that allow for a much greater customization of experience.

I’d love to see SFWA evolve to be more about advocacy and collective organizing. I’d love to see SFWA clear away some of the Old Boy’s Club nonsense, which I suspect is at the heart of the sexist diatribes and accusations of Stalinist Thought Police behaviour. But if the value of SFWA is the membership I already can access the more awesome members of the organization through other channels without having to ever encounter the less awesome ones.

Heck, I can follow the “PC Fascists of SFWA” on twitter and then block the person who compiled the list in the first place so that I never have to see a single one of his tweets.

Apple E-Book Antitrust Ruling

The big publishing news from today is the ruling against Apple, who were have found to have violated antitrust rules by colluding with the big five to raise e-book prices.

In short form, and as un-judgementally as possible, Apple made a deal to transition from a store-set pricing model to an agency pricing model, which means that the publisher would set the price of the e-books. They also included a “most favoured nation” clause in their contracts with Apple guaranteeing that Apple would be able to sell books for the same price the books were available in any store. The publishers then approached Amazon and threatened to withdraw their books from the Amazon store if Amazon didn’t also raise e-book prices.

You can read a more complete analysis of the ruling here.

I am of two minds on this.On one hand, it’s all too easy to vilify Apple. Steve Jobs was not a nice person and quotes like:

I can live with this, as long as they move Amazon to the agent model (meaning the publishers, and not retailers such as Amazon, could set prices) too for new releases for the first year. If they don’t, I’m not sure we can be competitive.

certainly point toward a level of collusion between Apple and the big five. Setting up a price consortium consisting of a favoured retailer and the five companies responsible for producing the vast majority of the content within an industry is a pretty clear example of anti-trust.

On the other hand, much ink has been spilled regarding Amazon’s possibly predatory pricing and the impact it has had on the industry.

So really, who are the good guys here? The people driving the price of e-books up or the people driving the perceived value of books down? It’s a difficult issue. On one hand, as a reader I like to buy cheap books. I like to have a large selection of books. I like buying books to be convenient. At two books a week, even a small mark-up in book prices will have a negative impact on my pocket book. 

However as a writer I understand the amount of time and effort that goes into producing a book. <hyperbole>I put two years of my life into something, I’d like to think it’s worth more than $0.99. </hyperbole> Agency pricing models prevent Amazon from using loss-leaders to drive business out of competitors funnels and into their own. These could ultimately end up being anti-monopolistic practises.

As I said before, I’m undecided. I am not entirely comfortable with Amazon or with Apple. I’m not entirely certain that either company has the best interests of readers or of authors in their hearts. Instead I think we see two companies known for aggressive and monopolistic practises using the courts to try and get one up on each other.

And Amazon appears to have won this round.

Since I honestly don’t know what to think about all this I’d be interested to hear your opinion. Leave a comment and let me know whether the ruling against Apple ultimately help or harms readers, writers and publishing.