Our digital and social media producer Rachel Rohr is back from a month-long trip cross-country, talking with young Americans.
Barnes & Noble CEO William Lynch Jr. has resigned. The company has faced poor earnings reports and recently announced that it would stop manufacturing its own e-reader, the Nook.
What do these changes mean for Barnes & Noble, and booksellers?
JEREMY HOBSON, HOST:
Now, for some business news. Is Barnes & Noble going the way of Borders? Barnes & Noble CEO William Lynch stepped down yesterday after the company reported losses of nearly $120 million fueled by a nine percent drop in e-book sales revenue for the Nook. That's Barnes & Noble's e-reader. Jason Bellini of The Wall Street Journal joins us from New York. And, Jason, first of all, how did Barnes & Noble get into this kind of trouble in the first place?
JASON BELLINI: Hi, Jeremy. Well, here's the thing. Lynch has been focusing on the emerging digital book business. He's a former Palm executive, and he was the driver behind the dedicated Nook digital devices that includes the color tablets, and they've been pretty much a flop with consumers. They've been flocking to devices from Amazon, Google, Samsung and, of course, Apples' iPad, and the hemorrhaging from the Nook just became unsustainable.
And as Lynch recently told analysts, the losses had been much higher than their own expectations. You know, in the last fiscal year, they lost over $475 million. They've had to keep cutting prices on the tablets. So the company recently announced it's going to stop making its own color tablets. It's seeking manufacturing partners for them.
HOBSON: Well, if - when we say is Barnes & Noble going the way of Borders, I mean, is that really something people are talking about? Is it possible that Barnes & Noble would go away? And what would that do to the publishing industry?
BELLINI: Well, it's hard to say. I mean, right now, the business is continuing. The brick-and-mortar bookstore is continuing. They're still the largest bookseller. Its chief competitor, Borders, of course, they closed shop. But now the brick-and-mortar shops are under a lot more pressure. The expectations are there are going to be declining sales in the stores. That's because people are going in, they're browsing. They're not buying. They're going out in their tablets and not from their stores itself and buying from other sources like Amazon.
But it's still one of the last volume retailers. And analysts knew that they're not going to carry in-store as many titles as they used to. They're selling games. They're selling other types of things besides books. But for publishers, this is making the business even harder because it's making it harder to contract with authors. They don't know how many books are going to be sold when you don't have these big retailers who are placing orders in advance for books.
HOBSON: Well, tell us about the man who is taking over for William Lynch, and what are his chances of saving this whole situation?
BELLINI: Well, the nation's largest bookseller didn't immediately name a successor, but instead, it's appointing their chief financial officer, a guy named Michael Huseby, who's been the chief executive of Nook Media. Well, now he's going to be the chief executive of Nook Media and the president of Barnes & Noble. He came to Barnes & Noble after working at Cablevision.
And some analysts expect that he's going to try to exploit Barnes & Noble's growing dominance in textbooks, and that could put the squeeze on college students because the strategy could be to keep the price high on textbooks both in digital and print where they are so strong. That's source of potential long-term revenue and growth.
HOBSON: And quickly, Jason, I mean is the Nook dead, or is it going to be able to compete with the Kindle?
BELLINI: Well, that's a tough question to answer, but they're not doing away with it completely. They're going to instead market a co-branded tablet. I mean, there's going to be a Nook tablet, but it won't be a Barnes & Noble tablet per se.
So this is essentially a soft discontinuation of the product. And this doesn't affect any of the company's e-readers. It's going to continue to produce those in-house. But outsourcing the production, that's going to let the company capture some value from the work that they've already been putting into building this brand, this Nook brand...
BELLINI: ...and also stem the bleeding from it.
HOBSON: Jason Bellini of The Wall Street Journal, thanks so much.
BELLINI: Thanks, Jeremy. Transcript provided by NPR, Copyright NPR.