Rocket Bomber - business

Both Amazon and Apple reported quarterly earnings this past week. Could someone remind them there’s a recession on?

AAPL:

CUPERTINO, California—April 20, 2010—Apple® today announced financial results for its fiscal 2010 second quarter ended March 27, 2010. The Company posted revenue of $13.50 billion and net quarterly profit of $3.07 billion, or $3.33 per diluted share. These results compare to revenue of $9.08 billion and net quarterly profit of $1.62 billion, or $1.79 per diluted share, in the year-ago quarter. Gross margin was 41.7 percent, up from 39.9 percent in the year-ago quarter. International sales accounted for 58 percent of the quarter’s revenue.

Apple sold 2.94 million Macintosh® computers during the quarter, representing a 33 percent unit increase over the year-ago quarter. The Company sold 8.75 million iPhones in the quarter, representing 131 percent unit growth over the year-ago quarter. Apple sold 10.89 million iPods during the quarter, representing a one percent unit decline from the year-ago quarter.

AMZN:

SEATTLE, Apr 22, 2010 (BUSINESS WIRE) —Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its first quarter ended March 31, 2010.

Operating cash flow was $2.78 billion for the trailing twelve months, compared with $1.76 billion for the trailing twelve months ended March 31, 2009. Free cash flow increased 62% to $2.32 billion for the trailing twelve months, compared with $1.43 billion for the trailing twelve months ended March 31, 2009.

…

Net sales increased 46% to $7.13 billion in the first quarter, compared with $4.89 billion in first quarter 2009. Excluding the $185 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales would have grown 42% compared with first quarter 2009.

…

Worldwide Media sales grew 26% to $3.43 billion. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 22%. Worldwide Electronics & Other General Merchandise sales grew 72% to $3.51 billion. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 68%.

…

The U.S. Kindle Store now has more than 500,000 books, including 100 of 111 New York Times Bestsellers, more than 9,000 blogs, and more than 175 top U.S. and International newspapers and magazines, including: The New York Times, Le Monde, USA Today, The Times (U.K.), The Economist, Fortune, Newsweek, and Time.

Independent estimates (some of it based on availability of parts) put the Kindle ecosystem at 7 Million units. Compare to 24 Million Xboxes, 42 Million iPhones, 140 Million Nintendo DS systems, or 1 Billion PCs.

[Honestly, business folks, y’all are supposed to be smart: the iPad is nifty and all but there are One Billion Screens out there already — why do we have to wait for an Amazon proprietary e-book or Apple app to get legitimate digital comics? One tenth of one percent of a billion is a million freakin’ customers. Is .001 too high of a target to aim for?]

My other take on it is: Amazon has a 7 Million unit head start in the coming device war, but Apple will sell 7 Million units by Christmas. I’m not sure which horse to back in this race. Apple just wants to become the new ‘cable company’, siphoning money off the top while providing content produced by others, while Amazon—not content with merely killing off bookstores—would also like to kill off traditional publishing.

[Geek Biz Editorial]

And the long aside:
One might think there is value in the death of ‘publishing’, as the author gets a bigger chunk of the profits and the time to get a ‘book’ to the reader is compressed as vast chunks of the process are either unnecessary or skipped anyway: I write a book, I sign with Amazon, they format it for Kindle and it goes on sale next week. Neat, right?

Well… only if you ignore the role of editor in the production of books. Without an editor — and fact-checker, and proof-reader, and publicist — there is no book: Unedited writing is already out there, in vast quantities and most of it free: you’re reading some of it right now.

The Book As Object, Artefact, and Work is not the sole output of the writer alone, it is the end product of a process, a collaboration between writer, editor, publisher (the fine people for whom ‘Publisher’ is a job title, not the companies) and quite a few others on staff who contribute smaller chunks, from the folks who write jacket copy, & compile indices, to those who design covers and introduce each season’s new slate of releases to booksellers (Occasionally in person: here’s a shout out to Toni, my RH field rep, who does excellent work that benefits both RH and those of us in stores). Much of the usefulness of a ‘book’ comes from these add-ons, and much of our enjoyment of a work is the result of this polish and finess that is added after the manuscript is submitted.

And while some large media conglomerates also seem to be slowly abandoning the traditional (and highly effective) editorial process in favour of… well, I’m not really sure what they’re in favour of, other than money — their lax habits and slacking-off should not be taken as an opening for a greedy internet retailer to implement an even worse new system.

Dear Amazon: There is already a platform for authors to publish direct to readers, without an editor, or proper marketing, or the input of a team of professionals whose profession and calling is the production of books —

It’s called the internet. And if e-books, in their intrinsic quality and worth, are little more than the collected archives of a blog, why in the hell would I pay you $10 for it? There are some geniuses out there, obviously. And the publishing industry is far from perfect — but the process works and every bestseller on both your website and your precious e-reader is the result of that process, and all your filthy profits on e-books are just parasitic bloodsucking on the art and craft of real book production, contributing nothing in and of itself, and until you recognise that salient fact, you are doomed to fail.

Oh, you might be able to kill off dead-tree-books, but you won’t be able to replace them with your current business model. You may sell billions of them, and think you know the business, but Amazon, you have much to learn about what a book is.
[/Editorial]

Speaking of e-readers:
Via Shelf Awareness – a review of the TV marketing for the top 4 contending devices: Nook, Kindle, Sony and Apple: go take a look

Also of note:

• Kindle to sell at Target; B&N’s Nook to sell at Best Buy. [multiple links; visit a store or Google it if you’d like details]
• Manga anthology Yen Plus goes digital
• SCOTUS reaffirms First Amendment Rights — yes, even for stuff that lacks taste, merit, or “serious religious, political, scientific, educational, journalistic, historical or artistic value.” You know: crap; some of it really offensive crap. Now, we’re waiting to see the case where this ruling encounters the Miller Test. Folks, your right to say anything, buy anything, or even see anything means putting up with the icky. And you don’t have to look if you don’t want to. Just, a little forbearance and forgiveness, and the return of some damn privacy for what is done behind closed doors and we can all get along in peace.
• Any advances made on one front are almost immediately countered: Pirate Manga Apps for your iPhone. Dudes: not cool. If you want to steal, take up mugging. At least mugging is more ‘honest’ than this crap, in that you have to physically interact with your victim, not just charge money to look at stolen stuff second-hand. Oh, and Apple needs to clean up this crap, right quick; we put up with your walled garden and draconian rule because it’s supposed to prevent this kind of raw, unapoligetic grift. Way to drop the ball, Apple.

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Aggregate prices on the Rocket Bomber Geek Stock Index rose 41.42 points this past week (up 4.09%) bouyed by larger gains at Netflix and Apple, and general gains across all stocks tracked. It’s interesting to note, however, that AMZN dropped 6.46 points after posting their Q1 numbers on Thursday (I guess as good as they were, some investors were betting on more) — despite that AMZN was still up $1.46 week-to-week.

Rolling 10-week RBGSX Aggregate Price

Value at close of markets Friday 23 April 2010: $1054.56

& the 25 stocks: CBS Corporation (NYSE:CBS), The Walt Disney Company (NYSE:DIS), News Corporation (NASDAQ:NWSA), Sony Corporation (NYSE:SNE), Time Warner Inc. (NYSE:TWX), Viacom, Inc. (NYSE:VIA), Wiley John & Sons Inc. (NYSE:JW.A), The McGraw-Hill Companies, Inc. (NYSE:MHP), Lagardere SCA (EPA:MMB), Pearson PLC (NYSE:PSO), Scholastic Corporation (NASDAQ:SCHL), Amazon.com, Inc. (NASDAQ:AMZN), Books-A-Million, Inc. (NASDAQ:BAMM), Borders Group, Inc. (NYSE:BGP), Barnes & Noble, Inc. (NYSE:BKS), Hastings Entertainment, Inc (NASDAQ:HAST), Indigo Books & Music Inc. (TSE:IDG), Best Buy Co., Inc. (NYSE:BBY), Netflix, Inc. (NASDAQ:NFLX), Navarre Corporation (NASDAQ:NAVR), Activision Blizzard, Inc. (NASDAQ:ATVI), Electronic Arts Inc. (NASDAQ:ERTS), GameStop Corp. (NYSE:GME), Nintendo Co., Ltd (OTC:NTDOY), and Apple Inc. (NASDAQ:AAPL)

Please note: nothing here is investment advice. full disclaimer

So, after work today I looked up the first 15 weeks of past stock prices (the Friday closing price) for my 25 stocks, chunked ‘em into a spreadsheet, ran the mess through a pivot table, and came up with a (sort of) fancy chart:

Rocket Bomber Geek Stock Index Performance, 2010

This chart is just the Σ stock prices, not the weighted index I came up with in the introductory post — I actually kind of like the way this works, so I might leave it at that.

The growth in the geek sector is largely due to gains at Apple (+36.67) and Netflix (+30.22) over these three months, though all but one stock (Scholastic) gained value over the quarter.

And of course some stocks would be a much better return on [short-term] investment, like Borders: it more than doubled in price, going from 1.18 on 31 Dec to 2.74 on this past Friday. —not bad, but it was trading above $20 three years ago (back in June of ’07) so a lot depends on when you got in, and when you got out, and a lot of folks lost money on this horse.

Stock prices have precious little to do with company performance, but it’s available information so I’m guessing this will be worth tracking for at least a few months; we’ll see if it’s something both of us [blogger & reader] can get some value out of.

For the curious:

12/31/09 $877.28
01/08/10 $883.48
01/15/10 $864.98
01/22/10 $843.70
01/29/10 $850.41
02/05/10 $840.91
02/12/10 $852.83
02/19/10 $867.27
02/26/10 $863.52
03/05/10 $914.94
03/12/10 $931.32
03/19/10 $935.45
03/26/10 $966.38
04/01/10 $971.61
04/09/10 $1,003.39
04/16/10 $1,013.14

& the 25 stocks: CBS Corporation (NYSE:CBS), The Walt Disney Company (NYSE:DIS), News Corporation (NASDAQ:NWSA), Sony Corporation (NYSE:SNE), Time Warner Inc. (NYSE:TWX), Viacom, Inc. (NYSE:VIA), Wiley John & Sons Inc. (NYSE:JW.A), The McGraw-Hill Companies, Inc. (NYSE:MHP), Lagardere SCA (EPA:MMB), Pearson PLC (NYSE:PSO), Scholastic Corporation (NASDAQ:SCHL), Amazon.com, Inc. (NASDAQ:AMZN), Books-A-Million, Inc. (NASDAQ:BAMM), Borders Group, Inc. (NYSE:BGP), Barnes & Noble, Inc. (NYSE:BKS), Hastings Entertainment, Inc (NASDAQ:HAST), Indigo Books & Music Inc. (TSE:IDG), Best Buy Co., Inc. (NYSE:BBY), Netflix, Inc. (NASDAQ:NFLX), Navarre Corporation (NASDAQ:NAVR), Activision Blizzard, Inc. (NASDAQ:ATVI), Electronic Arts Inc. (NASDAQ:ERTS), GameStop Corp. (NYSE:GME), Nintendo Co., Ltd (OTC:NTDOY), and Apple Inc. (NASDAQ:AAPL)

Please note: nothing here is investment advice. full disclaimer

This is the as-yet-un-branded new feature of my blog, as it seems my readership (such as it is) just can’t get enough of warmed over google-searches, drunken commentary, and links to wikipedia on business topics.

That’s fine. I can work with this.

##

If the date on my email is to be believed, just this weekend Amazon [NASDAQ:AMZN] débuted not just a Kindle reader program for Apple’s iPad, they’ve also rolled out similar e-reader programs for iPhone, BlackBerry, Windows PC, and Mac platforms.

[link]

Speaking of Kindle: while no official statement has been made by Amazon as to the actual unit sales of their pioneer e-Reader, at least two blogs cited figures released by DisplaySearch.com that point to a very good estimate — 3.3 million — based on the shipments of hardware parts, noteably the key e-Ink displays.

Here’s the actual article,

and here’s the math:

Amazon bought 2/3 of all “electronic paper displays” manufactured in 2009 — and there were 5 Million EPD’s shipped last year: this points to 3.3 million Kindles sold (and 1.7 other e-readers besides, though who knows how that falls out with Sony, Nook, et. al) and 2009 was only the second full year of sales on the Kindle: I’ll remind you the Kindle only launched 30 months ago, in November ’07.

So what’s the new best guess on the Kindle ecosystem? I’d say 5 to 6 million units, or along the lines of the total population of the Boston, Atlanta, or Washington DC metro areas.

If selling comics on the iPad/iPhone ecosystem is like only selling comics to New York, then selling comics on Kindle is like only selling comics in Boston. Not even one person in 15, more like one person in 60.

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Quick Hits:

• Marvel leaves Diamond for Hachette.
• C2E2 seems to be going swimmingly.
• Aniplex launches U.S. DVD division with partner Bandai: an interesting new wrinkle in the anime DVD (& Blu-Ray) localization market.
• Bone Challenged. Honestly, if Jeff Smith’s books (published—well, reprinted in color—by Scholastic) don’t get a pass, then I don’t know what’s acceptable anymore. If kids can’t read Bone then there’s no way in hell we should let them near the Bible (murder, war, genital mutilation, adultery, incest, and 15 different kinds of bloody gruesome Death) (good family reading there, holmes. know it.)

The Rocket Bomber Geek Stock Index, also known as the RB Geek Stock Index or further abbreviated RBGSX, is a way to use all that evil-financial-market-associated crap-and-data for a little bit of fun — and it’s a formalization of information I’ve been tracking for at least a year, so I might as well pretty it up and get a few blog posts out of it.

On Saturday, 17 April 2010, I set up a portfolio of stocks to track the overall performance of the comic book market. Since, for all intents and purposes that’s only two stocks [TWX and DIS] and two stocks are hardly a ‘portfolio’, I’ve added some [other] big media conglomerates, major retailers of books, publishers, a couple of multi-nationals that also happen to own some publishing, major players in the DVD/Blu-Ray market, and just to round things out: Apple, Nintendo, Sony, and the other three cos. that constitute the majority of the video game market (EA, Activision, and Game Stop)

It breaks down like this:

Media Conglomerates

• CBS Corporation (NYSE:CBS)
• The Walt Disney Company (NYSE:DIS)
• News Corporation (NASDAQ:NWSA)
• Sony Corporation (NYSE:SNE)
• Time Warner Inc. (NYSE:TWX)
• Viacom, Inc. (NYSE:VIA)

Publishers

• Wiley John & Sons Inc. (NYSE:JW.A)
• The McGraw-Hill Companies, Inc. (NYSE:MHP)
• Lagardere SCA (EPA:MMB)
• Pearson PLC (NYSE:PSO)
• Scholastic Corporation (NASDAQ:SCHL)

Retailers of Books

• Amazon.com, Inc. (NASDAQ:AMZN)
• Books-A-Million, Inc. (NASDAQ:BAMM)
• Borders Group, Inc. (NYSE:BGP)
• Barnes & Noble, Inc. (NYSE:BKS)
• Hastings Entertainment, Inc (NASDAQ:HAST)
• Indigo Books & Music Inc. (TSE:IDG)

DVDs

• Best Buy Co., Inc. (NYSE:BBY)
• Netflix, Inc. (NASDAQ:NFLX)
• Navarre Corporation (NASDAQ:NAVR)
• Amazon, B&N, Hastings, Sony, Disney, Time Warner, et al. op. cit.

Video Games

• Activision Blizzard, Inc. (NASDAQ:ATVI)
• Electronic Arts Inc. (NASDAQ:ERTS)
• GameStop Corp. (NYSE:GME)
• Nintendo Co., Ltd (OTC:NTDOY)
• Sony op. cit.

Manufactures & Retailers of Hardware

• Amazon op. cit.
• Best Buy op. cit.
• Nintendo op. cit.
• Sony op. cit.

Also just a hardware manufacturer, but also Just Because

• Apple Inc. (NASDAQ:AAPL)

These 25 companies make up the Rocket Bomber Geek Stock Index. (I figure if that guy Jones can do one, so can I) (and these are the 25 companies that interest me; if you disagree go do your own math) ( * and finally, a number of firms that would be of keen interest for inclusion in this type of exercise are in fact wholly privately owned and do not trade on any market, as such do not have a stock price, and seldom bother to report any other financial info elsewise: I know and feel the lack, but it’s not my fault that they can not be included)

I contemplated for a couple of minutes on how to weight each stock, and then figured I’d let the market take care of that for me: The RB Geek Stock Index consists of 100 shares each, priced as found on Saturday, 17 April 2010 (after the Friday markets closed) and taken together represent an overall portfolio value at the outset of $101,294.73.

[note: It’s all imaginary money, as if I had $100K I’d likely not be heard from at all for at least three years, past con appearances and drunken blog posts.] [And I could do the math just as easily with 1 share each but then we get into some gnarley decimals: 100per works out quite well]

The total dollar value of the RB Geek Stock Index is multiplied by our reporting constant (at time of launch: .0098722) to set both the initial value and baseline at an even 1000. [and since we’re either still in a recession or just on the very cusp of a recovery, in the long term it can only go up from here]

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Disclaimer: The RB Geek Stock Index is not meant to constitute, or even masquerade as, legitimate investment advice (see “drunken blog posts”, above). The RBGSX is calculated and tracked for entertainment and edification purposes only, and if that doesn’t cover my ass I invite you to claim whatever you like and I’ll be happy to show up in court drunk as a sailor on leave, for as many days in a row as it takes, to make a mockery of you, and your case, and the proceedings in general such that no judge or jury could even imagine that I’d be a credible source for my own name and birthday, let alone investment ‘guidance’. If pressed, I might even be able to produce receipts and character witnesses to prove I’ve been drunk more-or-less continuously since 1996. You do not want to call me on this — or take the RBGSX as anything but what it is: straight, sober reporting of the financial markets in this one niche market, with no returns on investment implied, imagined, impuned, impounded, implanted, implicated, impressed, impregned, imbibed, immanentized, immortalized or imbroglio-ed.

Any additions or subtractions to the companies tracked by RBGSX will be fully disclosed, and will likely also result in a recalculation of the reporting constant such that the numbers, for at least one week, would remain the same. [just like the Dow Jones, in fact]

[Short of a bankruptcy or merger, I think we’re good for a year or two]

So. Let’s have some fun with this.

The new drool-worthy gadget and media darling (The Tablet from the Mount, delivered to Jobs direct from a burning bush) is the iPad.

Woot. iPad.

so.

yeah.

##

let me insert here that I feel a loss whenever I have to blog about business (last post included) and I’d really much rather talk about mecha and panty shots, but apparently that’s not the hand I, as a blogger, have been dealt. If someone else with the requisite knowledge would care to tackle these topics in my stead, I’d be eternally grateful. anyway:

##

The iPad does everything my computer does (almost) but it does it Apple-style, so it’s slick and pretty. And touchy, in that it’s a big touch screen. And that’s about it.

I don’t need another computer (I’ve bought both a new netbook and laptop in the past year; and while I really, really want a new computer what I want is a 17” monster laptop with full keyboard—incl. numeric keypad—and enough raw power to leave even the largest L-Ion battery packs gasping after a scant 2 hours away from a power socket — this also means I’m really not the iPad’s target market).

The iPad is pretty. And it’s Apple, so I’m sure it works. But everything the iPad (or iPhone, for that matter) does, outside of GPS, I can do from any one of the three laptops I currently own— OK, so one of those isn’t a laptop, it’s a netbook, and the oldest will soon be passed on to my Mom, who has a fine desktop but wants a computer to use on the porch, when the weather is nice (or to use when Dad is hogging the desktop, which is often). But right now, when Apple is launching the iPad? I’ve so many portable computers I’m giving at least one of them away. I’m not Apple’s market — and there are a whole lot of people like me.

So this isn’t really a question of hardware, or a revolutionary new computing world:
it’s 60s style Mad Men product positioning. It’s a matter of marketing, unit sales, market share, and perception.

##

Let’s go back a bit, and weigh the perception and actual unit sales of a number of other handhelds, some considered successes, others (which still sold in the millions) considered failures.

and by hand-held, that’s exactly what I mean: the Nintendo DS plays games—lots of games—and does it exceptionally well, but doesn’t make phone calls. The iPhone plays games and makes phone calls, and a whole lot else, but I didn’t see a port for Chrono Trigger come out on the iPhone so obviously there are some trade-offs, features for performance. The PSP plays games and movies (in the close-to-useless UMD format) and can even make phone calls via Skype — or so I’ve been led to believe, but you don’t hear about the PSP owner who threw away his cell phone.

The iPad is a skosh bigger, but in function and application, it’s just another handheld.

Obviously, if one wanted to really judge a new handheld device, one can look at a whole menu of what’s possible: cellular phone service, wifi or 3G or WiMax connectivity, graphics performance, processing power, flash memory storage or SD card slots or micro hard drives or any combination of the three, real stereo speakers or a headphone jack or both, AM/FM Radio (or Satellite Radio for that matter if they don’t go out of business), digital TV Tuner (though not Satelite TV as I’ve never seen a dish smaller than a pizza box), GPS, accelerometers, cameras, microphones, keyboards or no, touchscreens or no, USB ports (or FireWire or eSata or USB 3.0 for that matter), Bluetooth, inductive charging, or even crap like speech recognition, the ability to scan a document to text just by taking a picture of it, or a handheld with either a flux-capacitor enabled time travel circuit or a hyperspace uplink to the main Hitchhiker’s Guide to the Galaxy servers…

I’ve a $60 “MP3 Player” (list price was more than $60 but that’s all I paid for it) with 8 GB of storage, a mic for live audio recording, an FM tuner—and the ability to record those FM broadcasts for later playback, and a USB port so I can charge it from my laptop, or even in a pinch use it as an auxillary USB thumb drive.

& I’ve a digital camera… that’s a camera.

And both of these devices have a lot of functionality that the new iPad doesn’t. Both plug into my netbook — Adding up the cost of netbook, Sansa Clip, and Panasonic Lumix I’ve still spent less than an iPad (with $50 to spare, even for the cheapest iPad) *and* I can go into a convention (and assuming I can find a wifi signal, somewhere) I can not only record audio interviews, take cosplay photos, and write articles for my website on an actual keyboard, I can post all that crap to the internet and look like a Blog-Star doing it. (with $50 left over for at least one bar tab)

If all I want to do is browse the web I need less. If I want to play games I can get a refurbed DS for a lot less — and I can play Chrono Trigger.

Even if I want to make a phone call: I can get a phone, a 1 year (pre-paid) service contract and the first 600 minutes (at least) for $99 bucks from at least three vendors.

So far, all the Apple has going for it is a big horking touch screen and not much else.

##

Yes, I’m being hard on Apple. The iPad is pretty, and it’s a fine piece of engineering besides, but it’s still a toy.

Play games, watch movies, browse the web: sure, fine, it’s perfect.

Get work done? Photoshop, video editing, writing anything longer than a tweet? Nope.

OK, so not many of us work online, what about casual computer use? Say you want to rip a CD to MP3 (or your codec of choice) — nope, not an option. Say you want to watch a DVD, not just online streaming (lagging, fragmented) video — nope, not an option. Say you want to email photos of the grandkids’ latest exploits to Grandma: not an option via USB *or* SD card slot.

I’m not talking about heavy lifting here, this is Saturday afternoon, common computer stuff.

No optical drive, no USB, no card readers makes the iPad a lot less than a netbook.

##

Say you want to read books in bed. Fine. Get a book. …or get an e-reader — or — get an iPad… hey, have we found the killer app? Reading books in bed, you don’t even need a booklight ‘cause the screen is backlit! woot!

Yeah, fine. Of course, I watch videos in bed, browse the web, even write blog posts — dragging a ‘whole, heavy laptop’ into bed isn’t the chore it can be made out to be. (even without a lapdesk… though a $30 lap desk is one of best investments I’ve ever made)

[imagine me in this otaku nest rather than me just taking a picture of it — OK, so that was harsh; imagine Brad Pitt using a laptop in bed]

What’s wrong with a hinge, and a keyboard, and a screen that stays up at an optimum viewing angle, hands free, by itself?

##

All my arguments (if they can be upgraded to that level; call them observations) will do little to change anyone’s mind on the iPad.

There are those who will buy (or who have already bought) this thing in the first week of release: They are the True Believers, and when Apple is declared the new state religion they will be the geniuses, templars, and inquisitors that make up the rank and file of the new ruling theocratic class.

There are those who had $500-$900 just knocking around and they’ll spend it this month on an iPad, rather than shopping the Sharper Image catalogue.

There are some who will be tricked, and who will like the new device but who would have been just as happy with a netbook or laptop. (…at these prices, we’re really talking laptop)

There are the gadget nerds and tech geeks who buy new stuff just because. They bought the Apple Newton, and can’t wait to get an iPad.

Quite a few folks will buy one; but will the iPad change the world?

##

Before the Tablet from the Mount, there was the Jesus Phone:

The Best estimate I’ve seen (from Wikinvest: see AAPL, iPhone, iPhone unit sales) is that Apple has somewhere in the neighborhood of 21 Million active iPhones, and has sold 60 Million iPhone Apps.

I’d like to note that the iPhone is still only one-sixth of the “smart” phone market — and that 16-18% of the market obviously isn’t a bad place to be as apple continues to make money hand over fist (2009Q4 profits of $1.7 Billion dollars)

(and it seems at least half—possibly more—of the country has a much better phone than mine)

See: Information Week, Mac Observer, Apple Insider

Business analysis from random websites is really more of a miss-than-hit proposition though [heh.] so we really should go to first sources to sort this out:

Sales, per Apple Prime:

Q1 2010
3.36 million Macintosh® computers
21 million iPods during the quarter,
8.7 million iPhones™

Q4 2009
3.05 million Macintosh® computers
10.2 million iPods
7.4 million iPhones™

Q3 2009
2.6 million Macintosh® computers
10.2 million iPods
5.2 million iPhones™

Q2 2009
2.22 million Macintosh® computers
11.01 million iPods
3.79 million iPhones™

Q1 2009
2,524,000 Macintosh® computers
22,727,000 iPods
4,363,000 iPhones™

Q4 2008
2,611,000 Macintosh® computers
11,052,000 iPods
6,892,000 iPhones™

Q3 2008
2,496,000 Macintosh® computers
11,011,000 iPods
717,000 iPhones™

Q2 2008
2,289,000 Macintosh® computers
10,644,000 iPods
1,703,000 iPhones™

Q1 2008
2,319,000 Macintosh® computers
22,121,000 iPods
2,315,000 iPhones™

Q4 2007
2,164,000 Macintosh® computers
10,200,000 iPods
Quarterly iPhone™ sales were 1,119,000 iPhones™ in the quarter, cumulative fiscal 2007 sales at 1,389,000.

[™ and ® Apple Computers, as they seem to insist on it.]

##

Yeah, I know you can’t be bothered to do the math, but I hope your eyes didn’t glaze over; here are the totals for the 10 quarters (2½ years) since the launch of the iPhone:

42.5 Million iPhones. That’s going to be a world-wide number (though the initial iPhone launch wasn’t world-wide, it is now) and that’s total sales; doesn’t include folks who upgraded over that 2 year period.

at the same time: Apple sold 25.6 Million Macs and 140 Million iPods. (while I think the doubling of iPod sales in Q1 2010 has a lot to do with the availability of the iPod Touch, there’s a lot to be said for $99 iPods too)

The US population is at 309MM at the moment (and always rising) but we’ll use the 309 number for the mathy-bits that follow:

If each iPhone purchase represents a unique & active subscriber then 1 person in 7 in the U.S. owns an iPhone. Actually, it’s about half that (per links cited above) so overall iPhone holders represent only 1 in 15 U.S. citizens. Which is about the same ratio overall as the Greater New York Metropolitan Area compared to the rest of the United States.

That’s the overall iPhone market; and we’ll come back to that later.

Compare to the Nintendo DS, which has shipped 40 million units in the same 2½ years and which has to date, apparently, sold 125 million units world-wide — though only 45 million total to the US. That is to say, there are at least as many DS units out there as iPhones (and up to 6 times as many), but no one geeks out about how DS is a paradigm shift — and I’d also like to note that a Nintendo DS is much more likely to be passed on to a younger sibling or relative (or sold, via Game Stop or eBay) while a used and obsolete iPhone, well, isn’t.

Also the Sony PSP, considered by many to be both a failure (in comparison to the DS) and something of an only-sony-PS-completist-or-hobby-gamer gadget, but which has in fact sold 17 Million units in the US. (and benefits in the same way as the DS from the secondary market)

SO: 17 million units is a ‘failure’ if the platform also fails to capture the popular imagination, while 22 million units (just 30% more) is a success if it is ‘popular’, even if it underperfoms and does less — while a system half as capable that just plays games will sell more than twice as much as either – if the games are good.

##

Let me change gears from electronics, where the best I can do is look up stuff on google and wikipedia, to publishing where I suffer the same limitations but can speak with more authority:

A lot of hay has been made in the past year with Kindle comics and iPhone Comics. [we’ll set to one side that neither Amazon or B&N has been willing to part with actual unit sales numbers for their e-readers, which means it’s a lot less than 20 Million—a lot less—if you ask me, but without responsible corporate reporting, here we are]

Let’s look at the numbers discovered above: iPhone ownership (between 22-42 million, depending), overall population (a pretty solid 309MM at this point, no arguments), the DS ownership (40MM), the PSP base (17MM), the unknown Kindle base (5 Million, 10? —I’ll be charitable and call it 10) and who knows what else for the rest: a half million nooks? That’d be 100,000 units sold each month since it was announced. A half million Sony Readers? More? Less?

While B&N is a sleeping giant, with a lot of potential (said the B&N employee, so get your block of halite) even if nook is making headlines, it’s nothing compared to the rest of the handheld market. Kindle is actually changing behaviors in some (small) publishers, and is a new factor to reckon with for all of the majors — their response differs, though the big news this past quarter is that they are now willing to engage. The DS is a non-issue, even with the new DS XL and an announced package of (public domain) ebooks coming out. If anyone besides me ever mentioned the PSP in the same sentence with “electronic books” this would be the first time I’d heard of it.

But even before the iPad launched it’s been ‘e-book’ and ‘new media’ and ‘death knell’ while simultaneously being a ‘renaissance’ and ‘new publishing model’ and all that crap you can get away with, blogging about rumours and wishes when your purported ‘topic’ isn’t even an extant device yet.

Cory Doctorow (at Boing Boing) has had the best post [so far] on why you shouldn’t buy an iPad, with a sideline in why it won’t work as advertised for publishers.

I’ll back off of the gloom and doom [though, disclaimer: I don’t use iTunes and have never felt the lack] and we’ll instead consider Apple and iPad’s victory over the mainstream media, tech blogs, and public opinion as a fait accompli: The iPad/iPod Touch/iPhone are now our new default platform, and we’d better abandon our antiquated 19th century models and welcome our new 21st century overlords.

Sure, fine, whatevs. That United Apple Platform is, at best, only 44 Million (one person in seven, in the U.S.) and while it will grow, how do you get your product out to the other six?

In practical terms, and until Apple sells a buncha more iPads, you’re limited to the operational iPhone base (21-22MM) which means your market at launch is just half — and if your media is graphics intensive or otherwise relies on the larger format and interface of the iPad, your market today is effectively nil, no matter how many people just bought iPads, as you need to clear your app past Apple gatekeepers first and then you need to sell it.

I’m sure some Apple nerd will chime in on the comments, “But you’re forgetting about factor X or constituency Y! Your numbers are off!”

Of course my numbers are off: only a fraction of the Apple user base, no matter how we define it, is interested in books, and of that a fraction of a fraction wants digital comics, and of that it’s a fraction of a fraction of a fraction interested in digitized manga. (There’s still money to be made here, even on the fringes: ask Yamilla – but a niche of a niche of a niche isn’t the best way to replace a moribund, five-century-old publishing model. 44 Million Apple-gadget-loving-Apostates aren’t going to change the publishing industry either.) iBooks as an iTunes-analog only takes us so far as well: iTunes is fine, but a lot of us would prefer to shop a website as opposed to download an application and the walled-garden approach failed at the beginning of the web revolution (after some initial success); I predict it will fail again (though Apple stands to make a lot of money in the interim)(and Apple will likely survive, where Prodigy and AOL failed).

There are trends bigger than Apple, the iPad, and e-books — and bigger than publishing and printing technologies, too:

Ideas will out. Art is more basic than speech.

Print is under attack for the first time in 569 years. …but the whole of human knowledge and culture is more than just print. The foundations are shifting; but it’s happened before and likely will happen again and it took centuries the last time and if we manage to find a new ‘normal’ mode in less than a century we’ll be doing quite well. And I only bring this “paradigm shift” up as a topic of conversation to immediately shoot it down: the cultural tide began to shift when the web launched, the fall of media (or their transformation) also began decades ago: the iPad is neither revolutionary or a ‘game-changer’ in this much longer shift; the dialog began long ago and Steve Job’s iPad is just chiming in at the last minute with a eager adolescent’s admonition, “Hey you guys, you guys, what if we tried this?” and if it does in fact work, kudos to Jobs/Apple, but you’re showing up in the fourth quarter with just 2 minutes left on the clock: we’ve been playing this game for years and the outcome has seemingly been foretold since the first 5 minutes of play.

The Internet is the game changer; in as much as the iPad facilitates access to the internet, it’s part of that revolution. Anything that takes us back to 1992, in terms of access or content, is just a speedbump, soon to be overcome and just as easily forgotten.

I see more potential in the Google Chrome OS (software, applicable to any number of devices) than in yet another Apple hardware handset, no matter how spiffy, as the iPad is just an iPad, and can’t scale past the number of iPads sold.

##

Here’s numbers:

If you want to sell crap on the iPhone/iPad (rather than just generically sell stuff ‘on-line’) you are in fact limiting your potential customer base; rather than 309 Million U.S. inhabitants, or the estimated 800 Million English speakers world wide, or an even greater number who’d be interested in your work and willing to translate it, the Apple User base is just 22 or so million; 1 person in 15 [in the U.S.]. That’s like just selling to folks in New York. If we’re being generous, it’s like selling to just the folks in New York and L.A. — sure, it works, and you’ll make a little money and the critics will notice you: but do you really want to restrict access to just 40 million potential customers — or restrict access to just those customers who have already spent $500 of their discretionary income just to get through the door?

If your answer is ‘yes’, well, good luck and Gods bless. It’s one business model, certainly. But there is bound to be another model that engages the other five-sixths of the U.S. Market (and even merely in English) another half-billion customers besides.

Update 9:00AM 1 Apr: Borders secures $700MM credit line, $90MM cash up front

##

Incredibly, I’ve been following the Borders story for more than two years — and almost as incredibly, the post I first wrote about Borders back in March of 2008 is still current, and valid:

The only way B&N will buy Borders is if Borders goes bankrupt first — if the price is cheap enough then I think it’s obvious that someone will buy it, even with the headaches.
…

Borders has $500 million in debt. In contrast, Barnes & Noble has a cash reserve that they’ve been using to buy back their own stock.
…

Again, my opinion: but damn, William Ackman seems like a grade-A prick. I’d hate to deal with him professionally.

Ackman’s past experience consists of (i.e. he used someone else’s dollars to buy) positions in McDonald’s and Wendy’s, so yeah sure maybe he knows something of the “consumer market” — If one thinks fast food equates to booksales — it’s all retail, right? [if you didn’t catch my sarcasm: no. no it’s not]

Pershing-slash-Ackman have also bought a goodly chunk of Barnes & Noble, somewhere in the neighborhood of 6 million shares — and they’ve owned that many since at least the end of ‘06. If talk comes to a buyout by B&N (unlikely, as noted above) then Ackman is hardly an uninterested party to the discussion.

Ackman and “Wall Street” (whoever they are) want B&N to buy Borders, and that’s why you’ll hear about it in the news in the upcoming weeks, and months, and IMO years, but…

It’s about as stupid a combination as I can think of. If B&N wants more stores, they’ll just use their cash reserves and open more brand new stores

Since I wrote that in ’08, Ackman has divested himself of his B&N stake, presumably to difuse criticism exactly like my snarky comments quoted above, but I’m not buying it. As recently as February Ackman is still, still clinging to the hope that B&N will come riding up on a white horse and justify his pissing money down a hole with an instant winning-lottery-ticket-like redemption.

This is my sixth Borders post; Here, have some links:

• Borders doesn’t care if you buy books online from them or not, apparently.
• Borders: the Crystal Ball Report
• Borders Redux.
• More Borders, and Matt’s personal pipe dream.
• The Other Shoe: Borders partners with Indigo’s Shortcovers for E-Books

Two years on, and Borders is still up to their ears in debt (some of it — a key $42 Million loan, of note — owed to Ackman’s Pershing Square Capital Management group) while B&N still has cash reserves and a pre-negotiated billion dollar line-of-credit — yes, that’s billion with a ‘B’

And B&N isn’t going to buy Borders — not unless Borders goes through bankruptcy first, such that B&N (or any other potential buyer) can cherry-pick the assets & locations left after the whole deal goes south: in a competitive environment where both business have multiple locations in the same markets no one is going to buy out their competitor unless they get to discard out of hand those locations that overlap with other, currently ongoing (profitable) stores.

And on top of that B&N has, in the past year, already concluded the purchase of another bookstore chain:

Sure, you didn’t hear about it; or if you heard about it you didn’t do more than skim the PR, because it was in fact, B&N buying out B&N:

New York, NY (August 10, 2009)—Barnes & Noble, Inc. (“BKS”) (NYSE: BKS), the world’s largest bookseller, today announced a definitive agreement to acquire privately held Barnes & Noble College Booksellers, Inc. (“College”), a leading contract operator of college bookstores in the United States, in a transaction valued at $596 million, or approximately $460 million net of College’s cash on hand on the expected closing date.

The company also announced that concurrent with the signing of the definitive agreement to acquire College, BKS has received commitment letters on a new $1 billion, four-year revolving credit facility, which will replace each of BKS’ and College’s existing credit facilities. BKS will finance the transaction through $250 million of seller financing, with the remainder coming from the new credit facility and cash on hand.

College operates 624 college bookstores through multi-year management services contracts, serving nearly 4 million students and over 250,000 faculty members at colleges and universities across the United States. Founded in 1965, College has a diversified, predictable and growing revenue stream derived from the sale of textbooks and course-related materials, emblematic apparel and gifts, trade books, school and dorm supplies, and convenience and café items.

The College business is different; almost always, the campus owns the bookstore, and B&N (formally B&N College Booksellers) merely held a contract to supply books, run the bookstore, and skip away at the end of the year, laughing, with the profits. How a contract to run a college bookstore differs from a traditional lease is a business exercise I leave to the reader; let’s just say that it’s profitable enough that when Len Riggio decided to take B&N public in Sept. of 1993 he kept the college bookstore business for himself — and ran Barnes & Noble College Booksellers as a privately-held company (which, incidentally, held full title and all rights to the Barnes & Noble name exclusively — you know, despite the multi-billion dollar publicly traded corporation down the street which was the public face of Barnes & Noble but only got to use the name because of the charity of B&N-College-slash-Len-Riggio)

So on 10 Aug 2009, when B&N announced it was purchasing B&N College Booksellers, it was more a matter of the chairman of a publicly traded corporation announcing that the firm in which he (and his family) own a majority stake would purchase, for hundreds of millions of dollars, a privately held company of which he (and his family and close friends) were sole owners, for Hundreds of Millions of Dollars — and one of the reasons cited was a 17-year-old dick move on the part of said chairman when he set up an IPO for a publicly traded company whose very name and trademarks were to be wholly owned by his pocket company, which was not to be part of the IPO, and which just happened to be in the same business.

Here I should insert this disclaimer: Hi, my name is Matt Blind and I am one of the managers who run a Barnes & Noble branch [store #1907] in Buckhead, Atlanta, 30305. I am an employee of B&N, and a ‘stake holder’ and at least potentially: privy to knowledge not known to the general public. Actually, past the fact that I wasn’t given a pay raise this past year, all other information in this post is not only publicly available, but is also part of the B&N ‘investor relations’ site: that is to say, my employer wants this information to be out there. [though, perhaps without my spin on it.]

And I should say, I am in fact in favor of B&N’s purchase of B&N College; though it strikes me that if the economy hadn’t nose-dived, Mr. Riggio would have been quite happy to run his two Barnes & Nobles independently, indefinitely. (I’m thinking it was only a cash crunch that forced Len into selling out to himself.)

What pisses me off more, though is the 25¢ per quarter dividend that has been paid to B&N shareholders—without fail—for the past two years even as the economy faltered & overall sales declined; a 25¢ per quarter, per share dividend – times 57 Million outstanding shares – that’s an additional drain on the company to the tune of $14 Million dollars every three months.

Dude. You asked me to forego a pay raise this past year, and we’re paying out $57MM in dividends?

If I were to attempt a thought experiment (no accusation or actual correspondence to reality cited or implied) why, $57 Million, spread across 800 stores with, say, 7 key-holding managers in each store… why, that’d be an extra $10,000 per manager, per store, across the entire chain.

Even after taking on 600-700 College Bookstores, the same math yeilds a pay raise of $5000 for every member of field management — you know, the folks who are actually working to sell the damn books — especially in an environment when you ask managers and other full-time booksellers to take on even more as you, as corporate officers, insist that individual bookstores cut overall payroll and do more with less.

I love my job.

I not bitter,

much.

But asking folks to forego what amounts to a cost-of-living adjustment while one not only banks a $1-per-share-a-year paycheck but also enacts an insider deal that pays off Millions: dude. No, really, Dude. Are you running a retailer, or are you just cashing in at this point?

Not that cashing in on an investment is a bad thing, necessarily. Or a bad business move, for all that. It’s an excellent move in business terms and corporate board members and CEOs and other top management are not in the business of being nice guys: they’re in the business of business, and making money for shareholders, or themselves (though often the two are the same thing). But: for a number of us who work at your “investment” — a little warning would be a common courtesy; and If You Are In Fact Cashing Out: you need to let not only your employees know, but also the SEC- else your going to see some really bad repercussions down the line.

##

Anyway: your takeaway as a customer (or publisher, or competing retailer, or interested observer of the market) is that B&N as a company quietly doubled in size, though in fact it’s just a semantic deal and on a street level it’s not like they immediately changed the signs on 624 college campus bookstores: these were already branded “Barnes & Noble” — so the number of publicly visible storefronts remains the same, but now we all know there weren’t a mere 800 B&N superstores, as has been plugged in annual reports and other PR for years: the actual number is over 1400.

Borders seems that much smaller in comparison, now. (Not that small is bad; on a individual-consumer-and-community scale you really only need one bookstore, and it doesn’t have to be part of a chain)

##

Borders hasn’t been standing still.

(well, in point of fact is seems like they’ve been sliding backwards, but:)

They’ve refocused on books, eliminating CD and DVD sales in all but a handful of locations, and using the newly liberated floor-space to sell more genre fiction: more mystery, more sci-fi — & more graphic novels: the company rolled out Borders Ink Teen Shops, “special boutique-like sections within most Borders superstores that feature Young Adult as well as Graphic Novel and Manga titles along with a number of other trendy products that complement the book offerings. Items include Twilight bookmarks, lunch boxes, bag clips, trading cards as well trendy products from tokidoki, NARUTO by VIZ Media and Domo among other lifestyle brands. Borders is also dialoging with teens about books and other topics via its Borders Ink Facebook® page, which complements the Borders Ink Teen Shops.”

You might have missed the Borders Ink store-within-a-store concept, because even in the press release that announced it, the new teen offerings were buried in an avalanche of educational toys, games, plush and other offerings for readers from 3 to 12. Borders obviously placed a bet, that el-hi, teen fiction, and yes, manga would continue to offer steady sales and the best potential for growth, even in a down market.

##

The important news is that Borders dodged an important deadline: they secured alternate financing and will be able to pay off the $42.5MM loan floated by Pershing Square that helped the company survive last year, when credit was tight and few had faith in retail generally or Borders specifically; that’s the link that led the post.

additional reading and references:

21 July 2009, The Wall Street Journal on the Borders Ink initiative. See also, 22 July 2009 ICv2 and Publishers Weekly on the same topic, or look into the ‘teen’ section of the Borders website for yourself.

12 Sep. 2009, The Detroit News on Borders updates and efforts going into the holidays…

27 Jan. 2010, and The Detroit News again on the departure of CEO Ron Marshall after Border’s ’09 4th quarter sales, in business terms, sucked. Marshal was replaced by executive VP and chief merchandising officer Michael Edwards. [editorial: a good move, as they promoted not an accountant, or another outsider, but rather the guy selling books]

31 Jan. 2010, AnnArbor.com on the costs of rent, and more trouble looming on the horizon. (the far horizon, as the article quotes hypothetical costs out to 2041… but some of the other points are well taken if not entirely valid)

3 Feb. 2010, ICv2 and Publishers Weekly both quoting Ackman on the ‘unlikely’ Borders bankruptcy — and his delusions about industry consolidation in book retail.

And of course, a couple of links from earlier this week: Forbes and Business Week both reporting that Borders was close to a deal to refinance their debt, which was in fact announced this morning

##

Borders has a new, March 2014 deadline on all that new credit, and bought quite a bit of breathing room, for both the economy to improve and their merchandising bets to pay off. Ackman still owns a large chunk of the company but he no longer holds the knife; and actually, his bet on Borders will likely pay off too, with a fine margin — if he can hold on for 10 or 15 years. (Most fund managers don’t think that far ahead.)

[B&N also has a new CEO, well, close to 2 new CEOs as they promoted William Lynch from .com to overall oversight, while also bumping Mitch Klipper from COO to CEO of the Retail Division. (Retail is still a bigger chunk by a factor of 9-to-1; though digital sales are growing by double digits annually, so that’s where B&N will focus their business even if it doesn’t make sense as a bookseller. Business and corporate first, afterall.) In related news, B&N also has a new EVP for Operations and Customer Service, Dan Gilbert, whose job in part is to make sure books get delivered. So it’s not all bad.]

And maybe I’ll revisit the subject of Borders again, in 6 or 8 months.

##

Update 2 April 2010: B&N has their own activist investor to worry about.

Reuters article from 13 Nov 09, Burkle ups Barnes & Noble stake, cites concerns. Burkle, or rather his investment company Yucaipa currently owns 18.7% of B&N, and desperately wants more.

31 March 10, Burkle seeks independent Barnes & Noble directors — there’s going to be a showdown of some sort at the next shareholders meeting.

Also from 31 March, the Economist opines The sickliest part of the books business is the shops that sell them

Oddly, the one thing a significant fraction (if not a majority) of customers remembers and likes about their favorite bookstore has absolutely nothing to do with the stocking of books. —what sticks in their mind (and sticks in my craw) are the number of available tables, and chairs.

##

Rethinking the Box is a collection of ruminations on retail & bookselling, with an eye towards comics (as one goal of the exercise is to gauge the viability of a graphic novel superstore).

Previously:
Study your History. Recognise your Motives. Location, Location, Location. Know your Customer Base, and your Staff. Find your Niche. Consider your Product Lines, Stock Your Shelves, Consider alternative display strategies, take a second look at What the Customers Want and Why Even Annoying Customers are Important. Stare again in dismay at the Profit Margins. Try calculating your upper-limit affordable rent and the revenue from inventory (with a side of coffee) and compare your numbers to average industry per-storefront sales.

##

So. Let’s build a bookstore.

Remember this?

The 3” wide, five shelf, hypothetical bookcase, stocked and stacked and moved around on paper in a number of configurations, one of which was

96 bookcases on ~1000 sq.ft. of retail sales floor, complete with ADA compliant aisles between the stacks and enough room for 17,000+ hardcover books. (my math says 20,000+ manga volumes or similar trade paperback books, or 50,000+ “graphic novels” of the type DC, Marvel, and Image, Dark Horse, IDW, et al. release

— On just 1000 sq.ft.

A store doesn’t have to be big to be impressive.

But let’s move on to the next step: 16 of these 96-bookcase-blocks set up (with appropriate aisles) in a 25,000 sq.ft. big box retail space. If it literally is a box, 160ft. square, then I can easily throw up another 96 bookcases on two exterior walls, and we’ll shove the lot towards one corner to leave room for all the bookstore-stuff-that-isn’t-bookcases and voilà

[it’s only a model…]

Obviously, I’m not an architect (I’m about 90 credit hours and two degrees short) but the point isn’t to provide a set of building plans, instead we’re looking for a mathematical model so we can consider stock, and a mental image so we can talk about “the big box bookstore”.

Speaking of math, and still using that 3’ wide ‘umble bookcase, I’ve got 1632 of ‘em in the diagram above; 24,480 linear feet of shelving that will hold somewhere in the neighbourhood of 300,000 books (or 415,000 manga, or 880,000+ comic “trade paperbacks” at ¼ to ⅓ of an inch per.)

If one didn’t care about niceties like comfy chairs or a café, or shelves customers can shop without a ladder, you’d easily be able to stock a million GNs — excuse me [dr.evil] – One Million Comics! – [/dr.evil] — in the same space occupied by your typical Best Buy or Wal-Mart.

Note the model above also includes 7,000 sq.ft. of space [whitespace, to right & bottom] for things like offices, a café, stock room, receiving dock, registers, and the All Important Restrooms (I get so very tired of that question…) but like I said: this isn’t a floorplan, so you’ll just have to imagine how the different extra bits might be incorporated if this were an actual bookstore.

To give you a sense of scale: if all the bookcases are 3’ wide, then main aisles are 16 feet wide and that grey box at the intersection of the two is 14’ x 14’ — that’s bigger than my bedroom, and in terms of square feet is also bigger than my living room.

25,000 sq.ft. is half of a football field. It’s a big damn store.

##

I’m sure most (if not all) of you have been to a branch of Big Box Books (whatever the local flavour is) and can easily picture in your mind what faces the consumer as soon as you walk in the door: big tables with stacks of books set up in the entryway, in the main aisle, on the cross aisle, in the front of the kids’ department and the music department, and even in front of the restrooms. In fact, you can’t shop (or even walk) the store without encountering at least a half dozen said tables on the way from the front door to the sci-fi section, or any other {point a} to {point b} you’d care to name.

Of course, this is intentional, and it’s retail. We expect special displays, and for bookstores that means tables.

Take a step back, and consider what each table costs:

Someone at the corporate office had to theme and set the display; figuring out which titles to feature and ordering the books in sufficient quantity. Said books had to be ordered, shipped, received, and staged prior to the display being set, and then some poor schmuck (at my store, his name is “Matt”) has to clear the old display, reshelve or return those books, track down the new titles, and then set the new display in an attractive and appealing manner.

All in all, say it takes one person a couple of hours. Tack on the corporate, warehouse, and in-store processing for another two payroll hours.

And multiply this by the dozen or so tables in the store, and the hundreds of stores of Big Box Books… whole years of human endeavor (as gauged by payroll) are spent in just one reset of a chain’s displays — even considering a single store (and the fact that we can only work our employees 8 hours a day, 40 hrs. a week) then if one person, we’ll call him Matt, is responsible for these displays in a given store, he’s going to spend about 15 weeks of each working year—3 and a half months—just setting tables and doing little else.

Is this the best way to employ your most experienced, most knowledgable booksellers?

If you’re paying this poor sap minimum wage (and only minimum wage, no benefits) then each table changeover costs you $350. times 12 (minimum) tables per store, times a new set each month, times hundreds of stores…

OK, back it off — Single store, no corporate involvement: It takes one employee 2 hours to reset a table. If you change displays once a month, you’re spending 24 payroll hours on each table — $175 (min.) a year. If you want to compete on the same level as Big Box Books — same number of displays, same frequency of updates, you’re looking at spending $2000-$3000 a year just in payroll costs, to say nothing of ordering books in quantity to stock these displays, or the cost to process the returns of unsold stock (or the more onerous cost of absorbing loses on non-returnable stock).

There are ways around this, but I’m going to make it as ugly as I can before we talk about mitigating factors:

A 3×6 table can hold at least 40 hardcovers or 50 trade paperback titles, and at just three copies of each that’s an investment (msrp) of $2000-$3000 for a single month’s worth of books, for a single table. (at these rates your payroll seems like a minimal expense)

[for the Super Comic Shop model, this same table will likely only hold 24 Graphic Novels — which are larger—in two dimensions, and the important two—than most bookstore trade hardcovers. Not that it matters, but I thought I’d add in what might be a relevant detail.]

Before one can look at the performance of display tables, just consider the annual costs: a single table, with monthly changeover, at the end of the year will have cost you $25,000 and up.

For one table.

This is one of the realities of retail.

Of course, these costs must be offset by sales, and while I’ve overstated the cost of books—since they are always bought at a discount (40%, in most cases)—if a table doesn’t generate $25,000 in sales per year, then you’re putting the wrong titles on it, and maybe you’ve got it in the wrong place to begin with.

##

$2000 a month. To set up each display table, you’re looking at $2000, and you better hope the sales it generates will pay you back.

Each endcap or in-the-stacks display (5 to 15 titles) will cost you $300 to $700 each month, depending on how many titles you’d like to feature, and completely discounting the payroll costs of setting it up and taking it down.

Every display has a cost; tables hold the most books, so they’re the most expensive. The question you should ask yourself, is first) is it worth it? and second) would I have sold the books anyway, even if they weren’t featured?

##

If one considers even just my odd bookstore model, as posted above; there are two main, wide aisles above that are going to be—in a standard store—jam-packed with tables, racks, towers, & corrugated displays; at the end of each stack of bookcases, you’ll have another display; everywhere a corporate drone can think to put in a display, there’s going to be a display.

For one segment of the customer base, let’s call them grazers, this is ideal: they love the effort put into displays because they can seldom be bothered to think about what to buy, and they love being spoon-fed selections via the many display tables and other promotions.

The problem I have with tables, as noted above, is their costs — in terms of both stock and payroll — for limited return …oh, don’t doubt it: the books sell well. But often, this is because the books are new and in demand; they would have sold anyway.

The Grazers are just window-shopping; if we didn’t have tables and other displays, they’d take their lattes into the stacks and they’d be just as happy grazing the shelves; they only shop the tables because that’s what’s presented foremost (you’d trip over the displays if you weren’t looking) and it’s easiest.

##

And now, stop and consider what the bookstore would look like if we took out the (display) tables: instead of hawking dumps full of books on the main aisle, and endcap displays at the end of each stack, what would it look like if the aisle was clear and a comfy chair sat where each endcap used to be?

Dude, imagine: a 16’ wide concourse through a beautiful bookstore, otherwise clear except for a La-Z-Boy every three feet on either side of the main aisle.

Part of what makes the modern bookstore work is that we encourage customers to “just hang out”.

Can we make that function of the bookstore even more appealing?

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Why waste payroll on displays if we can instead expend it on keeping the stacks current, organized, and shoppable? Why waste floor space on displays if the same books can be presented equally well in a logical, systematic set of bookshelves — the same bookshelves you have to set up and maintain anyway, even if you do have a full slate of periodic displays?

What is the bookstore?

Is it the New Release Table? Is it the Bestseller List?

Or is it a collection of bookcases (and books), matched with comfy chairs (a fine place to read or take a nap), a place to plug in your laptop and geek out for 6 or 7 hours at a time, alongside a coffee shop that sells a decent menu of sandwiches and sweets?

— I need more outlets, free wifi, expensive coffee drinks — and a damn fine selection of sandwiches, acutally — more than I need “up to date” “competitive” book displays.

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unless the tables are of use to Internet Hobos, study groups, or even [shudder] the type of shopper who just pulls dozens of titles off the shelf to browse without buying anything […I hate you] I say: ditch the tables for clear sight lines, more comfy chairs, and easier navigation of the bookstore.

A table is a revenue generator, but is also a cost. And I’ve a suspicion the same revenue can be garnered, from the same customer base, even if the table isn’t there.

[never ask advice from a blogger, as we tend to blog about it]

I don’t get these very often, but the occasional email is certainly worth it:

Sir,

My name is [redacted] and I am the president of [redacted], Ltd., a small [redacted]-based visual and audio entertainment company. I read through the three ways to contact you on your site and opted to take the easiest for all of us. I am seeking information about new comic book sales and noted in one of your posts that you track them. I was hoping you could give me some insight regarding a project we’re considering. Please forgive this inquiry if it is inappropriate but it seemed to touch your stated expertise.

We are planning a series of audio dramas and would like to concurrently release a series of 24 high-quality comic books, (36-42 pages each, average of 2 panels covering 1/6th the page (standard) and one covering 1/3rd (widescreen)). Our intent is to produce some good comics with lasting value to the owners while concurrently widening awareness of our audio series. We are also using both the comic and audio efforts to demonstrate the viability of film proposals based on the same theme. To this end, we aren’t looking to make money on the comics but we also don’t want to loose them either.

I’ve contacted a few of the comic producers and some have offered to create the artwork for the comic panels (digital versions) for an average rate of $500 per page.

Rightly or wrongly, we’ve been led to believe that a fair run for a new comic is 3000-5000 copies at an average price of $3.99 each. By our math, that means that even if we managed to get the distribution and printing services free, we’d at best just break even or would be losing about $8000 per comic released. Naturally, printers and distributors want their pay and cuts and I presume, if comics are like independent films, we’d expect to hand over at least half of the returns to the distributor for his time/advertising expenses. That changes our math to losing up to $16,000 per issue of what would be titled a “successful” comic book.

My gutt feeling is also that these companies see us as something of a money pool from which they can fund or compensate for their other stressed efforts. I can’t prove this but its the impression I get from talking with their editors.

Associates we have in the music industry have told us to go direct to the distributors but since we don’t have any established connections with them, and don’t know the ground rules of the comic business, we aren’t sure if such a thing is feasible or common or even whom to go about contacting other than blind e-mails to the companies.

We can afford to finance the artwork and printing independently if such an option seems more viable. We don’t want to get stuck with an unsellable product due to the hidden conditions of the comic book world.

We’d appreciate any insight you could offer us as we’re sure our understanding must be skewed or we wouldn’t be getting some of the answers we’re getting. Of course, we’d apprecite tips to any connections you may know whom would be interested in such a venture for its own merits rather than merely as an influx of money. Mostly, we’d like to get your opinions and insights to our situation.

Thank you in advance for your time and consideration.
[ID info redacted]

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Oh, where to start…

Dear querent,

I’m not an expert, or a sir, but I can try to help you out anyway.

First: What I track through my site are online sales, like those through Amazon and others, but since I’m not privy to actual sales (I get the data I need by looking at what is publicly posted each day on Amazon et al.) I’m not sure how much I can help on this one.

That said, it seems you are in need of at least one correction, re: comics as cross-promotional vehicles:

Unless the comics are already made, you’re chasing diminishing returns: Sure, you might think comics are just an afterthought, or an add-on, or good exposure, but in fact comics are their own thing — and when done correctly, they require professional writers, artists, and full time editorial support. And you can’t make comics by looking at rates per page, or costs for a print run of 5000 copies (or 10000 copies) as the industry doesn’t work like that.

Comics are still books, stand-alone products with their own writers and artists and audience. If you want to tap that audience, instead of making your own books, you’d be much better served by buying advertising space in existing titles. This will be cheaper, too.

If you want to make comics, that’s great. But I don’t feel you can make ‘comics’ as an appendix to some other project, and I think the math you’ve already done will prove that to you.

Comics are not ads. They’re not marketing. If you’d like to publish a book, comics or otherwise, you’ll be entering a field with which you have no experience. A decade ago, marketing was all about Push — getting the message out on as many platforms as possible. And this was a fine model for the last century, when the only models were broadcast models — a top down approach where your customers are all passive members of an audience. The internet (and even current advertising) has shown that push-marketing doesn’t always work, and that if you’re serious about doing a comic of your property, you need to consider “pull” and “buy-in” on social media platforms.

Unfortunately, “pull” and “buy-in” are not something you can just throw money at — not even if you’re willing to subsidise your own comic book in an attempt to reach this market. People have to like — and want — what you’re selling, and this is a much harder proposition.

I wish you luck. But merely considering a ‘comic’ version of your project and emailing some random blogger isn’t going to get you there.

I spend a lot more time cruising booksellers’ websites than, um, just about anyone. (it nominally only takes up an hour or so each week — past the time I also spend to shop for stuff for myself — which doesn’t sound like much in and of itself, but because of the odd hobby even after loading up web sites I look at a lot, and I mean a lot of book listings each week.)

So, anyway… ranking at #701 in the graphic novel category at bn.com this past Sunday (…I did mention I look at a lot of these, didn’t I) was this gem:

If it weren’t for some serious miscategorization I’d never have seen it; of course, mis-filings like these are so common I hardly notice, like speed bumps. This one sticks, though:

MP3. Audio. Download.

from a bookseller. for an audio book.

Shit, son, this is news.

Heck, we could have been selling these for 6 months already. I have no way of knowing, and only a coincidence (the Dark Hunger manga bringing unrelated Feehan titles into my graphic novel search results) brought this to my attention. [by “we”, I mean B&N is the large corporation that signs my paychecks, not that I have anything to do with bn.com]

Unlike the nook, or the e-book software for your PC, Mac, Blackberry, and iPhone, no major press releases heralded the entrance into the market of MP3 downloadable books. (something may hit next week, I’m thinking)

The page at bn.com looks a lot like this and it looks like B&N mean business. To be fair, Amazon also has some listings, though they’re, um, different. I’m thinking either Amazon doesn’t quite have their act together yet, or they’re feeling a bit of a burn from publishers over the Kindle’s text-to-speech function.

Downloadable audio books are nothing new; Audible (now a wholly owned subsidiary of Amazon, in fact) has been doing this for years. The major twist is Downloadable MP3s. Legal ones. Audible uses a proprietary format which I’m sure is fine, and all, so long as one remains an Audible customer (and is Amazon’s ownership of Audible also a factor here?) but as has been proven over and over again in the past decade in the world of music by Napster and it’s spiritual descendants, the public prefers open formats and portability (and free, natch, but piracy was another essay) over being tied into a single store and company

Hell, that’s the reason I buy MP3s from Amazon over iTunes — even though iTunes has gotten better, from what I’ve heard, but screw ‘em. DRM sucks, and I don’t want even a hint of it if I can help it.

This is one more front of the e-book wars, and B&N just parked alongside Amazon and fired another salvo.

Edit 7:35pm 2 Jan — Same thing at Borders.com, though there doesn’t seem to be much there yet:

As noted above, Amazon has Audible; even the links on Amazon’s regular site for audio book downloads (when you can find them) kick you out to the audible.com site.