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Publishing News: B&N is at a “fork in the road”

B&N's dismal earnings call, fine-tuning paywalls, and German booksellers launch an ereader.

B&N, analysts respond to Nook losses

Nook_DigitalShopHeadline news this week was the dismal Nook news from Barnes & Noble’s earnings call on Thursday. The news wasn’t unexpected — Leslie Kaufman reported at the New York Times on Sunday that B&N warned it expected “losses in its Nook Media division” and she quoted a source “familiar with Barnes & Noble’s strategy” as saying, “They are not completely getting out of the hardware business, but they are going to lean a lot more on the comprehensive digital catalog of content.” A B&N spokesperson assured John Cook at GeekWire, “To be clear, we have no plans to discontinue our award-winning line of Nook products.”

Cyrus Farivar reported at ArsTechnica that, on Monday, Leonard Riggio, B&N’s largest shareholder, offered to buy the company — minus the Nook and college bookstore divisions — and take it private, causing B&N’s stock price to rise 11% that day.

Laura Hazard Owen reported at PaidContent that the investor call on Thursday was “contentious.” She noted that one analyst “accused B&N of ‘selling its working business to the chairman while keeping its shareholders beholden to the business that isn’t working’” and followed up by asking “why B&N is ‘considering selling the business that is doing better to Riggio’ while leaving shareholders with Nook Media, which has ‘no business model.’”

Leslie Kaufman reported in a post at the New York Times on Thursday that during the call, Barnes & Noble CEO William Lynch called the Nook’s holiday sales an “obvious disappointment” and said “the company was taking ‘significant actions to right size investments’ in its digital hardware division through steep cuts in advertising and the manufacturing of devices.” Kaufman also noted that Lynch said B&N would remain “committed to the tablet and e-reader market” but that they wouldn’t “continue doing what we’re doing.”

Forrester analyst James McQuivey told Kaufman: “Barnes & Noble stands at a fork in the road and rather than choose one path, it will likely need to split into two companies and let the retail business go down one path while freeing the Nook division to go down another.”

The art of fine-tuning the paywall approach

Experiments in paywalls continued to evolve this week. Mathew Ingram at PaidContent reported that Marco Arment has decided to “soften” the paywall on his digital publication The Magazine, converting it to a metered approach. Ingram quoted from Arment’s blog post, explaining the problem with the closed paywall was that his magazine’s articles weren’t getting enough eyes and were “cut off from the social web.” Arment wrote on his blog:

“On January 3, we published And Read All Over, a bold piece by Jamelle Bouie about racial access barriers in the tech press. We got a good number of comments from our readers, but nothing out of the ordinary.

“To attract the best writers, including people who already have their own sites with strong readerships, we allow authors to republish their articles on their own sites (or anywhere else) just 30 days after we publish them. Bouie did exactly that, as many of our authors have. Only then did his article explode into the huge discussion I suspected may result from it — and The Magazine wasn’t a part of it.”

Arment explained the changes to the paywall, subject to further tweaking: anyone can read one full article for free per month (about 11 articles total are published per month) — and that one article can then be accessed an unlimited number of times or even saved to Instapaper; no registration is required; and when a reader attempts to access a second article, they will see a teaser for the article and be asked to subscribe.

The metered approach comes with it’s own nuanced problems, as Andrew Sullivan can attest to. Three weeks after launching his blog The Dish behind a metered paywall, Sullivan is finding the pace of subscriptions is slowing, Laura Hazard Owen reported at PaidContent.

Readers of The Dish are allowed to access seven free stories per month before being asked to subscribe, but 91% of non-subscribers hadn’t hit that limit, Owen reported. Owen quoted from Sullivan’s blog post on the paywall situation asking regular readers to pony up. Sullivan wrote: “If you’re reading the Dish, and are part of that 20,000 group who’ve clicked on more than four ‘read-ons’ in three weeks, you’re a real, solid reader of the Dish. You’ve proven it. … help us keep you from seeing these pop-up blocks ever again — and subscribe.”

At the more extreme end of the paywall spectrum, Jay Penske, new owner of Variety magazine, is pulling down the magazine’s $250 per year paywall all together.

German booksellers take on Amazon, Apple with Tolino ereading platform

Three German booksellers — Thalia’s Michael Busch, Weltbild’s Carel Halff and Hugendubel’s Nina Hugendubel — have teamed up with Club Bertelsmann Program Director Anita Offel-Grohmann and Deutsche Telekom CIO Thomas Kiessling to launch a new ereader called Tolino Shine. Laura Hazard Owen reported at GigaOm that the device is intended to compete against the Kindle and Kobo in Germany. She noted that the Tolino Shine will connect to a bookstore with an inventory of about 300,000 German-language titles, which eclipses the German Kindle store’s inventory of approximately 150,000 German-language ebooks.

Publishing Perspectives editor-in-chief Edward Nawotka noted in post at Publishing Perspectives that the partnership “brings together Germany’s top physical booksellers, its largest media company and largest telecoms company in direct competition with Amazon and Apple, as well as other indigenous services” and that “[m]ore devices are expected to roll out in the coming months.”

Owen noted that an estimated 800,000 ereaders were sold in Germany in 2012 and that that number is expected “to rise to 1.4 million units in 2013,” according to German tech company BITKOM.

The Tolino Shine will go on sale March 7 and will sell for about $128.

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