By any standard, the past 15 months have been eventful for Barnes & Noble. In September 2009, the company completed its purchase of Barnes & Noble College Booksellers and two months later introduced the Nook, its entry into the e-reader wars. This spring, B&N appointed William Lynch as CEO and announced a $140 million investment to upgrade its digital capabilities. In late summer, the retailer emerged victorious in a proxy battle (while announcing that it was exploring the possible sale of the company), and in the fall surprised the industry with the launch of Nookcolor. The man behind all these events, who is leading the nation's largest bookseller through an unprecedented transformation, is Len Riggio, PW's Person of the Year.
While acknowledging that "a lot happened this year," B&N's chairman says the year's developments have been long in the making. "We've been working hard on this for the past three years. The digital transformation didn't start in 2010," Riggio says. B&N had hoped to get into the device market as early as 2008, Riggio reveals in an interview in B&N's New York offices, but the company was unable to get the technology in place.
Although B&N may have been a little late to enter the e-reader field, Riggio is very encouraged by the reception the Nook and Nookcolor have received from customers and publishers. He is especially proud of the Nookcolor, which, Riggio says, "is the first time in the history of the company we made a technology leap over our competitors. From that perspective, it's very gratifying." B&N is manufacturing Nookcolors at a rate of 18,000 per day and is loading up a 747 every four to five days to bring devices to the U.S. from China, Riggio says. "We'll be up against it to produce enough for the [holiday] season," he says. Riggio expects demand for all e-reading devices to accelerate in 2011 due to positive word-of-mouth from customers, before tapering off in 2012. By that time, Riggio anticipates that new, upgraded and cheaper devices (including Nookcolor) will be on the market. "It's the history of technology. Function improves and prices decrease. It's inevitable."
As disruptive as the digital revolution has been and will be to book publishing and bookselling, Riggio says a bigger shift occurred more than a decade ago with the arrival of the Internet. The rise of the Web "disintermediated entire book categories," Riggio explains, as free online information led to declines in interest in a host of what had been strong backlist segments, like cooking, travel, reference, and how-to. Now, Riggio says, digital books are putting pressure on what had been the strongest sellers for bookstores, frontlist titles, especially for books that receive lots of media attention, while a number of genres have been affected by e-books as well. But that doesn't mean B&N can't profit from that shift. Taking the romance segment as an example, Riggio estimates that B&N has 2% of the romance physical book market but 26% of the digital business. And the sale of Nooks has helped to offset declining sales of physical books at the retailer's trade bookstores. With price points for the device well above that of print books, the average ticket purchase made by a Nook buyer is around $300 compared to the average $17 to $18 by book buyers, Riggio notes.
Selling Nooks as well as other nonbook products such as educational games and toys is part of B&N's strategy to attract more upscale customers to its stores in an effort to spur sales of books as well as provide new revenue streams to keep bookstores open. The tactic has increased sales of nonbook items and, while not stemming the steady drop in customer traffic, has slowed the decline, Riggio says. He also believes that just as bookstores devote less space to books, other outlets that sell books as a sideline will reduce the number of titles they carry, a move that will benefit all booksellers.
Riggio hears the experts talk about the demise of bookstores, but insists B&N remains committed to operating physical stores. "We intend to have a lot to say about the future of bookstores," Riggio promises. "We're in it to stay." Still, the challenge remains to make bookstores relevant in a rapidly changing media environment. Superstores were originally designed to be piazzas of culture, public spaces that offer both information and entertainment in book formats, Riggio says, and bookstores can still serve as community hubs. "The need to touch and feel things won't go away," he says, be that flipping through a book or learning how to use a Nook. There will remain a substantial number of people who prefer books in printed form as well as books that work best between covers, he predicts. Riggio's efforts to blend the sale of physical books with e-books is appreciated by publishers. "Len is the only person looking to integrate print and digital," says Simon & Schuster CEO Carolyn Reidy. For publishers to succeed, Reidy adds, "we need robust print and digital markets. What Len is doing is unique."