Report: Barnes & Noble scaling back Nook efforts, shifting to content licensing

Barnes & Noble plans to move away from engineering and building Nook e-readers and tablets in favor of licensing its digital content to other device manufacturers, The New York Times reports.

Earlier this month, Barnes & Noble warned Wall Street that its Nook Media business will perform worse for the fiscal year ending April 27 than previously forecast. The bookseller cautioned that the Nook unit--including tablets, e-readers and e-books--faces EBIDTA losses greater than its fiscal 2012 losses of about $262 million. Barnes & Noble adds that Nook Media revenues for 2013 will total less than $3 billion; it previously anticipated revenues around the $3 billion mark.

Citing a source familiar with Barnes & Noble's strategy, the NYT report states that mounting Nook losses and poor holiday device sales have convinced executives the company must change course. "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," the source said, adding Barnes & Noble will announce expanded content agreements with Microsoft (NASDAQ:MSFT) and Samsung Electronics later this week.

The Wall Street Journal additionally reports that Barnes & Noble chairman and largest shareholder Leonard Riggio has expressed interest in buying out its consumer bookstore chain. Such a deal would split the consumer bookstore division from Barnes & Noble's Nook and college bookstore units. The bookseller has declined to comment on the reports.

Barnes & Noble kicked off its Nook e-reader line in 2009, and in late 2011 introduced the Android-based Nook Tablet, touting a wealth of e-books, mobile applications and HD video content in its bid to rival Amazon's (NASDAQ:AMZN) Kindle Fire as well as Apple's (NASDAQ:AAPL) market-leading iPad. In May 2012, Microsoft invested $300 million into Nook Media, and late last year, British textbook publisher Pearson acquired a 5 percent stake in the unit for nearly $90 million.

But despite exploding consumer interest in tablet devices, Nook sales have suffered. "Even though the Nook compares well with many of its competitors' tablets, Barnes & Noble's distribution channel and marketing of its products is nowhere near like those of [Apple, Google (NASDAQ:GOOG) and Amazon]," Yankee Group Senior Analyst Boris Metodiev said earlier this month. "One problem for Barnes & Noble is that most people think of the company only as a book retailer--having good e-readers seems reasonable; manufacturing good tablets seems a bit of a stretch. And the e-reader market will continue to be suffocated by the plethora of 7-inch cheap tablets. Another thing that doesn't help the popularity of the Nook is that it runs on Android's Gingerbread OS (version 2.3) which makes it quite outdated and unattractive for the consumer, compared to most other popular Android tablets running on Ice Cream Sandwich (version 4.0) or Jelly Bean (version 4.2)."

For more:
- read this New York Times article
- read this Wall Street Journal article

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