Rocket Bomber - retail

I love comments on the blog — but I love personal, directed email more. Obviously the blog is a tax upon my time and mental effort; conversation with readers is my only recompense.

Hi Matt,

I love your blog. And reading it the other day, it occurred to me that you might be the person to ask about something that has been troubling me about book sales numbers. (I’m a bookseller, too, as well as an author — www.cassandrachan.com.) Month by month, the sales of MMs go down by a lot. August was 21%. And yet, that’s not what I’m seeing in my store. There, hardcover sales of bestsellers are solid, but otherwise I’m selling nothing but MMs and trade paperbacks. The number of customers who ask me if a hardcover book comes in paperback and then, when the answer is no, don’t buy the hardcover has risen astronomically since the economic downturn. And yet trade paper sales are usually down a bit, too, though not as much as MM.

So what’s up? I’ve thought up a couple of possible explanations, but none that satisfy me. First is that my store is an anomaly. Second is that the majority of sales are taking place online and people don’t buy MMs online because of shipping fees. In which case, I would love to see the numbers broken down into sales from physical stores and sales from online (is there such a breakdown available?)

Maybe you don’t know any of this, and maybe this email has just made your eyes cross with boredom, and if so I apologize. But if you felt like giving me some pointers, I’d appreciate it.

Thanks,
Cassandra

##

When it comes to mass market paperbacks, there are five things to remember.

Three about how (& why) they are published:

1. The very name, mass market refers to the past history of this format being sold through non-traditional outlets: newsstands, supermarkets, drug stores.
2. The format, since it was much cheaper, was used extensively by small genre publishers to reprint material that had previously been serialized in magazines: the so-called pulp paperback. As time marched on and the anthology magazine as a category began to wither and die, Mass Markets were also used (primarily by romance publishers but also by sci-fi and mystery imprints) to publish mass-market original novels — cheap editions of material from first time authors or others who might have some appeal within their genre but which weren’t expected to sell well.
3. Sales of just about anyone’s backlist, but particularly prolific NYT-Bestselling-Author types, is primarily in the mass market format. I’m sure there are some outliers in the group, and as a readership gets older they pop for more expensive trade paperbacks [easier on the eyes] but for the most part, perennial backlist titles are also mass market paperbacks.

& two additional points about the market:

4. Buyers of Mass Market paperbacks are cheapskates. Perhaps not scroogian, legendary cheapskates, but price point is their primary motivator…
5. And they read a lot – Addiction levels. Harlequin (and perhaps others?) even had subscription programs. These heavy readers tend to specialize, but they are still our most loyal customer: maybe they just jones for one author, but buy Everything that author touches, or they love cat mysteries [still don’t understand the cat mystery people], or they read epic fantasy or hard sci-fi or police procedurals or supernatural romance or spy novels or epic hard sci-fi police procedurals with a hefty dose of romance and at least the trappings of common supernatural tropes…

[he’s not a vampire, he’s from an alien species that acts exactly like vampires for whatever reason, and he’s come to Alpha Hemoragic 5 as a diplomat for the Nosphatarians – but he’s really a spy – and he’s just been framed for murder! and only brave Earth Special Agent Mary Sue knows the truth, both about the strange death of Senator McGuffin and the hot passion that burns behind and beneath the pale blue eyes and pallid skin of Mandark, Prince of The Ashenfallus Mountain — plant tongue firmly in cheek and have some fun with the proper nouns & adjectives and these things write themselves]

…and I kind of wish I were kidding about the genre-bending that is going on. Some days I can’t tell our romance & sci-fi/fantasy sections apart.

##

Mass markets have a different returns process — you might have read the admonishment on the copyright page at some point: “If purchased without a cover etc” — as retailers have only to return the cover for proper credit, and then trash the rest of the book.

I’ll give you greens & other recyclers a moment, as we need to pause anyway for the librarians and other book lovers to also shudder in horror at the process:

Yes, mass market “pulps” are so cheap, and so little valued after their sales cycle is over, that it is literally too much trouble to ship the books back. They aren’t worth the return freight charges. Mass market paperbacks are ‘destroyed’, the stripped cover returned as proof. These cheaply printed books, made of the most common newsprint-grades of paper, are doomed to an early death anyway; their pages grow yellow and brittle in as little as two decades time.

A cheap, disposable form of a book; one that will hold up to some repeated reading, and that might even be handed down from one generation to the next, but will not make it to the grandchildren. There are technical limitations built into the medium that can only be overcome with periodic and continual re-publication of the work.

Yes, indeed: the first e-books were introduced in the 1930s — except back then we called ‘em paperbacks, and it wasn’t online sales but rather sales through newsstands that was the “new media” market place.

I don’t have historical numbers, but I’d be willing to bet paperbacks saw triple digit growth through their first years as well, eventually claiming up to 9% or 10% of the market in as little as five years from their first major introduction — and here’s the modern reiteration of the hype — Anyone at Penguin [now owned by Pearson] or Pocket [now owned by Simon & Schuster] care to comment on the first decade of their sales?

Books are books are books, and we (as a literate species) have invented progressively faster and cheaper ways to produce them — and the latest twist is e-books. But from where I sit, e-books aren’t that different from the mass market paperbacks printed in the 30s, or the 60s, or 5 years ago. There has been a steady progression of books into all sorts of markets, and inflation-adjusted prices remain steady (or get just a bit cheaper) year by year.

There is a permanance to a leather-bound folio of vellum or parchment, though — or in a carefully bound modern book printed on acid free paper — when stored in a proper library, and cared for over generations. Sure, we can get a “book” today—in scant seconds with ebook downloads—for the price of a burger

[historically, paperbacks and mass market editions: also priced equal to your lunch, most places, most decades]

but past a single read: will you keep these “books”? Will you treasure them? If you treasure them enough, will you eventually want an archival copy, up to and including a leatherbound omnibus?

##

One can buy a used clunker for $500 or a Tesla Roadster for $128,000 — and both get you from point A to point B. A rolling heap and a range-limited electric model both have their trade-offs, their limitations, their advantages. Drivers instinctively know this, or quickly pick it up [given the opportunity to experience one or the other or both]

Books are a good bit cheaper than fully-electric sports cars and it could be argued that most of us have much more experience with books. In some of the arguments about e-books, though, I have to stop and think that I’m being sold an electric racer for the clunker’s price — and being pitched that this new ‘e-book’ has the best features of each, while also (quietly, secretly) being burdened with the limitations of both.

Cheap also means disposable – and replaceable only with a new cheap version. Electronic means I’m dependent on expensive hardware, and on an outlet, and on near constant hardware & software upgrades — which at some point may stop being backward-compatible.

Open standards and honest, open archival efforts offset these concerns, partly. We’re still entrusting the whole accumulated corpus of human knowledge to a format that may not survive even a generation, and reliant on a physical base [infrastructure, hardware, software, file formats, encryption & DRM & copyrights] that might cripple the whole thing even if we still know (or could figure out) how the other 99% of the New Model Library works.

##

So far my ranting is far afield of what Cassandra originally asked — Mass Market Paperbacks: apparently, still selling in bookstores; so what’s up with the trend?

First up, month-to-month and year-to-year trends are subject to outside forces [Dan Brown, Oprah, movie adaptations of Dan Brown novels followed by Tom Hanks interviews on Oprah] that have nothing to do with books-per-se and publishing is a gambler’s game to start with, and hard to build a living off of in the long term. Oh, sure, back in Epstein’s Day publishers sought out talent, and good books, and hoped that one pick out of twenty — or a hundred — ended up as a bestseller so they could earn back enough to do the same thing next year – but it hasn’t been the 1920s for ninety years now and all the publishing houses have been bought up by Media Conglomerates and all the capital-E Editors are gone — or are now Vice Presidents in charge of this or that and “Publishers” and editors-in-chief of progressively larger-in-scale but smaller-in-scope imprints — often imprints that, at least in name, used to be publishing houses in their own right before consolidation.

Good books are still coming out – but I have to wonder how much of that is in spite of the new corporate structures, not because of them.

Wow. Even trying to get back on topic, I can still manage a rant.

Anyway:

This is the oft posted presentation of numbers from publishers.org, the Association of American Publishers, who release monthly press releases with sales figures compiled from their seventy-odd members.

We all love and treasure these numbers, which is why so many [book] news sites link to them each and every month, and republish their conclusions like it’s delivered by a burning bush, or at least carved in stone. As I myself have recently pointed out, though, we often conflate publisher revenue with retail sales – and even though we all “sell” “books” it doesn’t quite work that way. [Compare for yourself: AAP numbers ≠ Census retail numbers]

For the past two years, when it comes to bookstore sales, you’ve been able to rely on my blog for three things: a willingness to find original sources, a proclivity toward math that borders on the downright obsessive, and a drunken disregard that adds that, flavour, a certain je ne sais quoi

Here, let me process those numbers for you: so, sure, there are sales reported in the millions. Bully for publishers. Book sales are great.

But.

And.

Assuming a hardcover book price of $26, a trade paperback price of $15, a mass market paperback price of $9, and an ebook price of $10 — we can twist the AAP numbers closer toward actual units sold

And now we have a storyline.

##

Aparently ebooks were crap until January 2009. Sure, growing, etc, but not enough to impact the other book sales trends. Throughout 2009, ebooks were trending slowly up, showing much improved sales but not impacting unit sales of other formats to any degree, yet. In 2010, the whole mess goes bonkers.

So What Changed?

Was it the simultaneous introduction in November of 2009 of the Apple iPad, which pulled in the early-adopter geek audience, and the B&N nook, which similarly engaged the die-hard book [weekly mass-market buying] audience?

I’ll leave that as an exercise to the student.

We’ve only nine months of data since i- and e- took my chosen field and new-technology-a-fied it. The picture is incomplete; we’re going to need data from this upcoming holiday sales period [Nov-Dec-Jan] to square the circle and see how ebooks [bought exclusively for personal consumption; you can’t “gift” an ebook to someone yet] affects (or doesn’t) the usual sales of books during Q4.

Still, it’s a pretty graph – just what can we learn here?

If you break it down by unit sales [given assumed price points, as stated above] why yes, indeed, e-book sales exceed hardcover sales, not only in January when Amazon Famously Announced This Feat but also in July and August of this past year — though one wonders why they didn’t similarly announce that hardcover sales exceeded e-book sales in March, April, May, and June – and presumably, given larger trends, Amazon’s sales of hardcovers in April were double the sales of Kindle e-books. Hm? Amazon? Am I wrong? You have your actual numbers, all I have are industry statistics and larger sales trends. If it is so important to note the first month Kindle sales exceed hardcovers (in units, not dollars) why don’t you report All the Sales Data from every month since?

Oh, because that might make you look bad, I suppose. It’s hard to admit that even e-book sales are seasonal, and that a January spike in e-book sales might perhaps be related to recipients of gifted Kindles trying out e-books before dropping the device in a drawer, never to be used again. [the same applies equally to B&N’s nook, and to all other devices even more so]

Those of us who can read a graph and who know book store sales are seasonal, and additionally, admit we’re in a freakin’ recession, look at the numbers graphed so far and wait with baited breath for the next three months of figures, from both publishers.org and the census bureau.

And three more months of e-book numbers will also help; to date — that is to say, from September of 2009 — it looks like ebooks are cannibalizing sales of both the new hardcovers and the mass market backlist: New Hardcovers, because e-books beat them on price (often by as much as $10) and the backlist not only due to price but also accessability: you can read that 12-year-old book next week, if a bookstore orders it for you, or in 10 minutes if you buy the ebook.

There are several classes of books that don’t do well e-, yet, but both hardware and software are catching up. Comics and Graphic novels are on this wish/hit/list. I can’t say if that’s a good thing or bad thing, yet.

##

And once again I manage to riff on the given topic for long minutes without answering the damn question: Mass Market Paperbacks: apparently, still selling in bookstores; so what’s up with the trend?

Part of that is market consolidation. When was the last time you saw a stand-alone news stand? And if you have, where was this rare beast? The “Mass Market” option for books is an anachronism; today “mass market” refers only to the format [smaller paperbacks, 4×6 or thereabouts, on the cheapest grade of print stock just above Russian Toilet Paper] and not to the sales outlets: Mass Market paperbacks are books, and sold through bookstores.

Many Traditional “mass market” retailers now sell hardcovers and trade paperbacks. – and sure, the smaller pulps are still there, too, but Oprah isn’t recommending ‘em. Books have moved from a specialty retail item to a general commodity; great, as one can pick up a book, even a hardcover book (if it’s a NYT bestseller) just about anywhere, but this also means there is little-to-no distinction between the book “trade” edition and the “mass market”

With the advent of the internet, both the Book of the Month Clubs & direct subscription services are dead. yeah, sure, you can bring up the anecdotal story of the 60-year-old grandma in Omaha who still waits for books [4-6 weeks] to arrive after mailing in the tear-out coupon from the back of her last great romance read — but this was an old model even in the 1980s when I was kid. Actually, I think the advent of Big Box Bookstores in the 90s killed this publishing model off long before internet sales of physical books or even e-books were the issue:

When a quality bookstore is available in 90% of cities and suburbs, what’s the need for an alternate sales strategy or channel? Drugstore paperbacks went the way of the general store dime novels of 1890-1910.

—so, more and more, the success of bookstores as a new class of retailers, and the slow death of newsstands, and retailers like Costco and Walmart stocking hardcovers, and mail-order subscription services slowly giving way to internet sales sites — which can often sell you a trade paperback or hardcover for very close to the same price as a retail MM paperback — and we see sales of the $5-$10 mass market books declining wholesale.

Mass Market Paperback sales are down.

Since publisher revenue is not the same as reported sales of “book retail”, a source like Publishers.org reports declines in the Mass Market format because there is no “mass market” for books anymore — or at least, there’s no differentiation between the sales mix at a supermarket, a Target, a Wal-Mart, the club warehouse, or the bookstore: we all sell hardcovers and paperbacks of various types.

Perhaps counter-intuitively, one of the few remaining places to find these formally “mass market” books – is what used to be the specialty retailer: the bookstore.

The only remaining distinction between bookstores and the “mass market” is that at a bookstore, we sell books: we have a much deeper backlist of individual authors, better representation of genre titles, the abilty to special order titles, and booksellers to recommend them.

Given the economy, the customer who used to buy a hardcover, a couple of trade paperbacks, a couple of magazines, and a Mass Market format backlist title is cutting back: now they buy just the magazines (though fewer of those) and the $8 or $9 paperback – because they still love books and love reading.

So we have both the perception (in bookstores) of increased Mass Market Paperback sales, and their increased percentage of overall sales (as unit sales of hardcover books are certainly down) and a certain pickup of sales that used to go out through other channels, even while the total sales numbers for the format (for publishers) decreases.

##

Hope that answers your question, Cassandra. And thanks for the email.

• public restroom facility

• “quiet place” to take that phone call on your mobile
  [It was quiet, before you showed up]
• …or a handy ‘public’ phone for when your battery dies
  […sure the battery on your phone just died. What’s that? Why, I guess you can’t make long distance calls on this phone; I’m as surprised as you are]

• a place to ask for directions
• …or restaurant recommendations
• …or tourist info
• …or a nearby bakery “so I can send a birthday cake to my son who happens to live in your city. Of course you’re going to know exactly the right store to recommend, and you’ll be able to give me their phone number; I mean, you work at a bookstore.” Duh, right?

• reading room
• study hall
• reference library
• …and an all-purpose reference and information line: for the spelling of difficult words (so I can use them in a search on the internet, natch) – or to convert celsius to fahrenheit – or to explain the difference between Siam and Thailand, or the name of that Korean fermented cabbage (what was that called again?), or to give a brief rundown of the late surviving eastern rump of the Roman Empire based in Constantinople (and why is it called the Byzantine Empire, anyway?), or the difference between a Philharmonic and a Symphony Orchestra, or to list composers and intial debut dates for the ten most popular Operas of the Standard Repertoire — “I mean, I can’t be bothered to look this stuff up on the internet, and you’re a bookstore. Who else am I supposed to call?”

• an incubator from which to launch your own small business
• …and do all the research to incorporate
• …and business forms
• …and internet marketing
• …courting angel investors
• …and grant writing for your non-profit sideline
• …and all that for free
• “Say, where’s your copy machine?”
  [we don’t have one, and I’d explain why but it’d just confuse you and the resulting conversation will give me a headache]

• meet-up
• hang out
• time killer
• date spot
• blind date spot
• awkward break-up spot

• homeless shelter
• … and public restroom. Don’t forget the all important public restroom. Why, one can even take a resonable sponge bath in the sink…
• a place where one can take off one’s shoes and relax
• convenient and apparently ‘safe’ spot to take a nap
• and a free storage locker for the luggage you just happened to ‘forget’ & left there overnight.

• coffee shop
• lunch counter
• picnic spot. “I mean, sure it’s fine if I bring in my own food, right? The sandwich shop is right next door, and the fried chicken place just down the street. You let people eat food in here everyday.”
  sure, for the food we sell

##

There are 1001 uses for a bookstore.

Hey, you know what? We also sell books.

##

This is a bit of a filler post; I’m still very much engaged in turning the store upside down in order to set all the holiday promos my corporate overlords would like us to have done by November 2nd — while continuing to conserve every last minute of payroll and doing at least three other things simultaneously.

And all customer questions, comments, concerns, polite objections, and bookstore/bookseller expectations indicated above are real — garnered from a decade of experience and mostly off the top of my head.

I’ll try to flesh this out into full essay on Bookstores: What Are They Good For? [insert reference here] when I have more time.

But for now, just pity me. Bookselling is harsh and it’s been a lot rougher this year than any I’ve worked yet.

In previous posts, I’ve often conflated publisher revenue with book retail sales — after all, a book sold is a book sold whether it’s the retailer or the publisher banking the sale, right?

Actually, no.

Publishers sell books to bookstores (and others: warehouse club stores, supermarkets, Wal-Mart, Target… & libraries, don’t forget the libraries) and the retailer then stocks the book on a shelf and hopes it sells.

There are all kinds of reasons a book will sell [Oprah] and twice as many why it might not, but bookstores buy lots and lots of books and merchandise them every which way to get you, the book buying customer, to part with some hard-earned money.

It doesn’t always work. And sometimes we send the books back to the publisher, maybe 3 or 4 months after it was initially “bought” and listed as a sale on the publisher’s bottom line.

##

Since no one else called me on it, I’m forced to correct myself and illustrate the point with another handy graphic.

So far, I’ve previously posted two data sets:

Book Retail numbers from the Census Bureau

and Publisher Revenue as reported by the Association of American Publishers at publishers.org

In that big-picture publishing post, I also separated out the “trade” publishing from the overall book revenue by excluding sales of text books, which turns out to be a really profitable (and rather large) chunk of the business.

& given these three data streams, I can extrapolate a fourth:

Follow the green (money) line and compare it to the blue one: In this case, blue is Total Book Retail (including text books) and the green line is my best guess at the “trade” book number — adult and children’s paperbacks and hardcovers.

The spikes that result from massive text book sales in August and January are gone, so my formula must be doing something right, but I’m at a loss to explain the predicted drop in September/October — I know sales slow a bit in early fall but didn’t realise it was this drastic a drop. Since the bookstore is gearing up for the holidays during this time period, I’m more than busy (I’m typically exhausted) so I can’t say I’ve noticed this phenomenon before — and it may just be an artefact of the math.

The other 10 months look pretty close, though. I’m fairly confident in this estimate.

##

To guide you to some other points of interest: Comparing blue (retail) to pink (total publisher revenue) you can see first, the 35% or so margin retailers enjoy — total book retail is a good bit more than publisher revenue. You can also see retail lagging a month behind reported publisher sales (which only makes sense, as it takes time to ship things)

There is less of a correlation between trade book sales at retail and the corresponding trade book revenue reported by publishers.

You can see the bookstores ramp up orders in the Autumn, resulting in greater trade book shipments (& revenue) but the December spike doesn’t seem to trickle down to Publishers. At retail, we’re selling all sorts of books that have been in the store for 3 months, 6 months… or years — and we’re also selling board games & gift wrap & calendars & boxes of Christmas cards and all kinds of crap lovely and valued seasonal merchandise — so perhaps this disconnect should have been expected.

Graphing it out is kind of interesting, though. From a peak in Dec. 2006 (followed by expected, average sales through August of that year) it appears to me that trade books have been showing a general decline (unrelated to e-books, as this merely reflects prevailing economic trends) and while that single month of December is still a great time to be a retailer, the dips are getting deeper — and if you squint a bit you can see the trend, and it’s going down.

As a baseline, though: that first mark on the y axis above zero: That’s 500 Million Dollars — oh, sure, it looks like the market for books is bottoming out, but the downward trend isn’t all that drastic yet, and a half a billion dollars (per month!) is still a great business to be in.

Amazon is so damn annoying.

Oh, it’s not that they’re a competitor and want to put both me and book publishers out of business so they can sell crappy books cheaply as some sort of book monopoly (though that sucks, too) — no, it’s the half-assed reporting of their financials.

Here, go to their annual report [pdf] and skip all that introductory crap that makes them sound good, go down to page 25: there they list a summary

Net Sales – North America: $12,828 – International: $11,681
Consolidated: $24,509
(in millions)

…and that’s it. Oh, but there are more tables and numbers to go, obviously we just need to read down a bit… ah, here it is on page 28, “Supplimental information about our net sales is as follows:”

Net Sales – North America
Media: $5,964
Electronics and other general merchandise: $6,314
Other (1): $550

Total North America: $12,828

Numbers still in millions, and that footnote (1) reads “Includes non-retail activities, such as marketing and promotional activities, Amazon Web Services, other seller sites, and our co-branded credit card agreements.” That’s worth noting, in fact, as it would seem amazon makes a half billion off of ‘non-retail’ — I wonder how much of that is from ad revenue off of the ads that cover each and every Amazon page — sheesh, I know they’re in it for the money but it went way past tacky two years ago…

Anyway, their whole retail operation, close to 12.3 Billion Dollars, is summed up by those two categories: Media, and not-Media.

Real helpful, guys.

##

All I’m interested in is Books, so I’m going to have to independently re-create a media number and then work backwards to figure out just what Amazon is selling.

Sounds easy, right?

My go-to source for numbers on publishing is The Association of American Publishers, a trade group that among other things, puts out monthly sales numbers broken into a dozen different categories and posts the figures to their web site.

That’s what I’m talking about. For 2009, they reported sales of $23.9 billion.

That’s an awfully big number, and it includes things like college textbooks, $4.3 billion all by itself. El-hi (a book publishing category that encompases the other big text book market, grades k-12 — elementary to high school, hence the abbreviation) is even bigger, $5.2 billion. For a back-of-the-envelope calculation, I’m going to take those out. Call it an adjusted trade book total: $14.4 billion.

So what else is “media”? Well, there are CDs and Music, DVDs, and video games.

For music, I found this release [pdf] with the year end 2009 Neilsen MusicScan statistics in it — though it lists units sold for 2009, not dollars. That’s OK. I figure 99¢ a track on downloads and $10 an album and with the barest gloss of extra math: that’s music media sales in 2009 of roughly $4.9 billion.

Not bad for an industry that’s going out of business, and that doesn’t include concert ticket sales, music licensing, prestige vinyl, or international sales. Just a ballpark number.

For DVDs, I found the Digital Entertainment Group, another trade association. Their members include just about every manufacturer and distributor of both DVDs and Blu-ray, and while they have an annoying flash site that doesn’t allow me to link direct to their numbers, they also have some pretty good numbers on the industry (including some yummy historical data going back 11 years, so you can watch VHS die all over again!)

The DEG figure for DVD, Blu-ray, and Digital Downloads is $20 billion. Down a bit, actually, from 2008 — it’s a lot closer to the 2003 total — but hey, we all knew sales were down. Unfortunately, this also includes money made off of rentals, so we’re going to have to back down a bit from the ‘headline’ number. DEG’s report cites Rentrak Corporation’s estimate for rentals in 2009: $6.5 billion. That puts DVD & Blu-ray retail sales at a still healthy $13.5 billion.

The final chunk of media is video games. Here’s an msnbc.com link posting the Associated Press article that quotes numbers from research firm NPD Group for 2008 — not as handy, as I need 2009 numbers, but it gave me the breadcrumbs I needed to find this press release from NPD Group itself, which not only has the total number (including hardware), it breaks it down a bit further into just what I need: Game software sales for PCs, portables, and consoles at $10.5 billion.

So “media” as Amazon reports it had total sales in 2009 of, well, let’s all do the math together:

(numbers in billions)
Books: $14.4
Music: $4.9
DVD/Blu-ray: $13.5
Games: $10.5

Total: $43.4

That’s U.S. only, but is made up of industry-wide estimates for each category. $43.4 billion.

Amazon, out of their big $25 billion gross sales number, only does $5.964 billion in US Media sales. About 13% of the total. Nothing to sneeze at, but not much to crow about either (else Amazon would have already done so: they’re secretive about some things —but not shy)

##

So, what else can I do with this shiny new “retail media sales” estimate?

Well, books may be old fashioned but they are still a third of the retail media market. Music is 11% (about a ninth), DVD/Blu-ray at 31% (close enough to also call a third), and Video Games are 24% of the total.

We could also have some fun doing different types of analysis (Game Stop, for example, sold $795 million in new games in 2009, so even a solid “market leader” in a category only manages 7% or so of the total business) but my focus today is on Amazon, and books.

Let’s assume that sales on Amazon are proportional to overall sales: that is to say, of the $5.964 billion in “media”, a third is books, a third is DVD/Blu-ray, a ninth is music (CDs and downloads) and the rest is video game software.

Look at your own purchasing history — from Amazon in fact, if you’ve bought anything from them this past year — and also remember the figures above are all dollars, not units:

• a handful of books, at $12 or less?
• a TV series box set (or two), at $20 or more?
• two or three albums, when they advertise those $5 downloads?
• any games? maybe so, if it was discounted enough, and you didn’t just go to Wal-Mart when they had it on sale.

It’s nearly impossible to say — which is kind of why I wish Amazon broke it out in their own reporting of financials — but in the absence of real data, I’m going with my best guess and this assumption:

Amazon is so big, I’d be more surprised if their sales didn’t mirror the overall retail market as a whole, particularly in sales of books and discs: easily shippable but occasionally hard to find physical media. It’s what they built their core business on, a decade ago.

As a number of industries turn digital, well, so is Amazon. I’m not sure if it’s enough to move the needle one way or another. So what if I end up being off by half-a-billion dollars or so? It’s not like anyone else is posting numbers.

##

Taking a leap in the dark, I think we divide up Amazon’s media sales proportional to the overall retail media market:

(in millions)
Books: $1,978
Music: $673
DVD/Blu-ray: $1,855
Video Games: $1,442

…but that video game number just looks wrong. Maybe with hardware added in, maybe, but the media calculations above specifically excluded hardware.

Gah! I hate Amazon!

Let’s say Amazon sells just as many games as they sell music? I’m on my third assumption, now:

(in millions)
Books: $2370
Music: $670
DVD/Blu-ray: $2240
Video Games: $670

I think the best we could manage is a range: Out of close to 6 billion in “media” sales Amazon earns between 1.8 and 2.5 billion dollars from sales of books, and about the same amount off of DVD & Blu-ray.

To make the math easier for my next post, I’m going with an even $2 billion.

OK, Internet. You’ve won. No one is going to buy physical books anymore, and even if they do they’re not going to do it from a bookstore — that’s positively medieval. Nope, might as well shut everything down now.

##

How much are the books worth?

I have no experience with liquidating the inventory of a closing bookstore, and quite sincerely hope to never know exactly what that’s like. However, at Big Box Books we do run clearance sales twice a year (pre-holiday and post-holiday, effectively: making shelf space for new December titles & product – and then, in January, selling the crap that seemed like a good idea at the time but just sat there for two months during our busiest 10 weeks of retail.)

Clearance looks something like this (assuming an average unit price of $10)

• 10% of the product sells when marked down to .75 of list price ($7.50)
• 20% sells at .50 of list price ($5.00)
• 30% sells at $2
• 40% sells at $1 — or wouldn’t sell at any price.

For the sake of math, let’s say 30% sells at a dollar and I end up throwing away 10% of the merch because it quite honestly was crap.

So, um… let me grab a calculator… (.1*7.5)+(.2*5)+(.3*2)+(.3*1)+(.1*0) = 26.5%

If your average price is $10 a unit and using the clearance regime described above and assuming my assumptions are correct [heh.] one could recoup 25% of the ‘book’ value of inventory in an “everything must go!” sale — and both the percentage and dollar value could be quite a bit more, depending on the actual list price and the appeal of the merchandise.

and the rest?

Tables, chairs, bookshelves, other fixtures, registers & computers, office supplies: you’ll be lucky to get 10¢ on the dollar. If you have a coffee shop in your store, the single most valuable thing you own is your espresso machine – even used, these ain’t cheap, and there’s a market.

Still and all: 10¢ on the dollar

Leases are an expense as you are still contractually obligated to pay the rent even if you close. Bankruptcy is your option here, as [when done correctly] it will allow you to break contracts (including leases) and you can weasel out of other debts and obligations as well. In the following hypothetical-post-internet-bookstore-meltdown we’ll take bankruptcy as a given.

Property, however, assuming you own your storefront, rather than lease, is quite a bit more valuable. Even in a ‘must sell’ situation you can likely recover 50% of your investment.

##

so the year is 201X and All Books Are E- and I’m out of a job.

Sucks to be me.

But: what do we do with the $16.7 Billion book retail industry? [$16.7B in 2010; no telling what it actually is in 201X]

To rephrase the question: even if no one cares to buy the books anymore and we have to close, what is the bookstore worth?

Independents

The indy bookstores will either close quietly before the crash, or live on [potentially] forever as niche retailers of historic curiosities (“books”) — and possibly also as coffee shops/gathering places/community centers. [but that’s a different post]

Hastings

[remember the RocketBomber service mark “We reading boring corporate reports, So You Don’t Have To.”]

per SEC filings dated 2 Jun 2010

Selected Assets
Cash and cash equivalents: $4,620,000
Merchandise inventories, net: $152,804,000
Property, equipment and improvements: $45,616,000

Chief Liabilities
Trade accounts payable: $69,973,000
Accrued expenses and other liabilities: $26,177,000
Long term debt: $26,435,000

Total liabilities of $128.9 Million, negotiable in bankruptcy, post-abookalypse. Cash is cash, Merch nets 25¢ on the dollar in liquidation, and property is certainly worth quite a bit, even in a depressed real estate market. Hastings also has an advantage with their already eclectic product mix: they could drop books entirely and continue to adapt the other media sales (& which currently includes already-stocked used and rental product) and still make a go of it no matter what the retail position of books.

Say they had to make a graceful exit, however:

Hastings, 154 stores.
Book value of assets per store: $1,318,400
Liquidation value of assets per store: $426,100

Current share price/Market cap: $7.41/$68.9 Million
Liquidation value of assets per share: $7.05
Book value of assets per share: $21.83

One could say that $7.41 is a fair price, as Hastings’s property and standing inventory are worth more than that & one might hope to recoup up to 95% of the value of your stock even in a bankruptcy-and-fire-sale.

Books-a-Million

[per the 2010 annual report]

Selected Assets
Cash and cash equivalents: $6,602,000
Merchandise inventories: $201,510,000
Property, equipment and improvements: $53,141,000

Chief Liabilities
Trade accounts payable: $88,843,000
Accrued expenses and other liabilities: $51,553,000
Long term debt: $6,360,000

Books-a-Million, 223 stores.
Book value of assets per store: $1,171,538
Liquidation value of assets per store: $374,664

Current share price/Market cap: $5.75/$90.4 Million
Liquidation value of assets per share: $5.31
Book value of assets per share: $16.61

Books-a-Million, like Hastings, is ‘worth’ much more than it’s current stock price and even with property and inventory discounted in a clearance sale, one might hope to recoup 90-93% of one’s investment.

Borders

[I won’t be mean and point out that unlike the previous two cases Borders may in fact go out of business in the next year. Except I just did.]

[per the 2009 annual report]

Selected Assets
Cash and cash equivalents: $37,000,000
Merchandise inventories: $873,800,000
Property, equipment and improvements: $392,800,000

Chief Liabilities
Trade accounts payable: $350,800,000
Accrued expenses and other liabilities: $257,400,000
Short- & Long-term debt: $282,000,000

Borders is bigger, with more stores, and with more inventory/assets to borrow against. Borders is also a hybrid, given that they operate 511 superstores and 204 smaller stores under the Waldenbooks name (among others) but I’ll ignore the extra math for now:

Borders, 715 stores.
Book value of assets per store: $1,823,200
Liquidation value of assets per store: $580,200

Current share price/Market cap: $1.10/$70.9 Million
Liquidation value of assets per share: $7.47
Book value of assets per share: $21.56

Liabilities per share: $14.72

So Borders has enough assets to borrow against (as is demonstrated by their ability to acquire credit) but if push came to shove, the liquidation value of assets wouldn’t meet their current obligations, and a share-holder (pretty low down on the ol’ bankruptcy priority list) would be, in business terms, screwed. It’s fine if the overall economy and book retail specifically recovers — in fact, you’d stand to make a fine pile of cash off of that ballsy bet — but right now, Borders is probably fairly valued at $1: You’re just as likely to lose your shirt as see gains of 800-1000%.

Barnes & Noble

Selected Assets
Cash and cash equivalents: $60,965,000
Accounts Receivable: $106,576,000
Merchandise inventories: $1,370,111,000
Property, equipment and improvements: $812,034,000

Chief Liabilities
Trade accounts payable: $868,976,000
Accrued expenses and other liabilities: $755,432,000
Long-term debt: $260,400,000

Disclaimer: B&N is the big corporate entity that signs my [non-blog] paychecks, and in fact takes up 40+ hours of my personal time each and every week. Per current FTC regulations, I have to disclose this relationship, but I can also note here that all of my blog posts are independent, and are neither vetted through, submitted to, nor approved by my employer. I’m digging my own grave here, and proud to do so. Anyway— analysis:

B&N as a company also merits one more line-item under assets: as a publisher (Owner of Sterling Publishing and SparkNotes, among others) they also sell books to other booksellers. That’s the Accounts Receivable listing above; $106 Million is a small fraction of the overall sales ($5.8 Billion if memory serves) but a significant line item in this calculation.

B&N, 1357 stores
[720 Retail superstores plus 637 B&N College bookstores]
Book value of assets per store: $1,731,530
Liquidation value of assets per store: $974,430

Current share price/Market cap: $14.66/$862.89 Million
Liquidation value of assets per share: $15.56
Book value of assets per share: $38.11

Liabilities per share: $32.02

Once again, if the company goes under, the shareholders stand to get hosed.

But: a goodly chunk of that long term debt is owed to Len Riggio (B&N Chairman of the Board) who might just be willing to extend very favorable terms, and quite a few extensions; The book value of the company is still greater than the extant debt – if the company does go under at current stock prices investors would stand to make a buck or two, and it really is the abookalypse if B&N goes out of business.

##

contextual disclaimer: all numbers as posted above are just the value of inventory on shelves and do not reflect revenue that could possibly be gained by, oh, I don’t know, actually selling those books to people.

more standard disclaimer: numeric values and conclusions as posted above are not intended to constitute, or even masquerade as, legitimate investment advice. Take all actions on your own initiative and do your own research. If you still feel I’m to blame for your mistakes, well, 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 numbers posted above as any more than what they are: 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.

##

So what is a big-box bookstore worth?

at least $1 million, and closer to $1.5-$2 million.

If one wants to compete with the Box, this is your scale.

And if one is looking to step into book retail after the big boxes fail, this is your target: a $1 Million Dollar Store (sales or inventory, take your pick)

##

Rethinking the Box is a collection of ruminations on retail & bookselling, with an eye towards comics (as one goal of the exercise is to guage 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, Set your main-aisle displays, consider Alternative display strategies, take a second look at What the Customers Want and Why Even Annoying Customers are Important. Answer for yourself whether raw dollars or customer service is more important to your store, and its future. Stare again in dismay at the Profit Margins. Try calculating your upper-limit affordable rent and affordable salaries along with revenue from inventory (with a side of coffee) and compare your numbers to average industry per-storefront sales.

Chronologically: 1 – 2 – 3 – 4 – 5 – 6 – 7 – 8 – 9 – 10 – 11 – 12 – 13 – 14 – 15 – 16 – 17 – 18 – 19 – 20 – 21 – 22 – 23 – 24

• Amazon is just 4% of the market and grossly overhyped
• Retail is at $4 Trillion even in a recession – yes, $4 Trillion even in a recession
• and the actual valuations of some companies need to be examined even if [especially if] they ‘seem’ to be ‘unprofitable’

and I can back that up with Math.

##

So, the Census Bureau (love those guys) post monthly retail numbers, and you all know how I ♥ #s.

The total retail picture includes two massive chunks that tend to distort the whole, however: Cars, and food.

Gotta eat. So food (restaurants and supermarkets) can be considered something akin to a fixed cost, and discarded. And cars (new & used sales, repairs, and sales of parts & gasoline) are Big Ticket Items. I currently do not have a car because the Cost of Repair (to say nothing of a NEW car) is beyond my current means. (Sucks. But at least I can use transit).

There are some other categories that could be considered capital expenditures (building materials) or necessities (prescription drugs, beer, liquor) and so also follow their own [occasionally contrarian] cycles, and fall outside of what I consider ‘retail’ —

If only some smart person could pull just the discretionary retail spending, discounting all these other special-and/or-fixed categories…

say, have I mentioned recently that the Census Bureau (love those guys) is full of smart people?

Let me introduce you to the GAFO number.

GAFO is “General Merchandise, Apparel and Accessories, Furniture and Other Sales” and encompases the following categories tracked by the US Census Bureau in this drool-worthy spreadsheet *

442 Furniture and home furnishings stores
4421 Furniture stores
4422 Home furnishings stores
44221 Floor covering stores
442299 All other home furnishings stores
443 Electronics and appliance stores
44311 Appl.,TV, and other elect. stores
443111 Household appliance stores
443112 Radio, T.V., and other elect. stores
44312 Computer and software stores
448 Clothing and clothing access. stores
4481 Clothing stores
44811 Men’s clothing stores
44812 Women’s clothing stores
44814 Family clothing stores
44819 Other clothing stores
4482 Shoe stores
44831 Jewelry stores
451 Sporting goods, hobby, book, and music stores
45111 Sporting goods stores
45112 Hobby, toy, and game stores
451211 Book stores
452 General merchandise stores
4521 Department stores (excl. Leased Departments)
452112 Discount dept. stores
452111 Department stores(excl. discount department stores)
4521 Department stores (incl. Leased Departments)
452112 Discount dept. stores
4529 Other general merchandise stores
45291 Warehouse clubs and superstores
45299 All other gen. merchandise stores
4532 Office supplies, stationery, and gift stores
45321 Office supplies and stationery stores
45322 Gift, novelty, and souvenir stores

The GAFO number includes my all-important bookstore retail (category code 451221) along with everything else in the mall [excl. the food court] and every damn big box besides, including Sam’s Club and Costco (45291); Staples and Office Depot (45321); Sears, Macy’s, K-Mart, & Target (4521); Wal-Mart (452 or 452112, one or the other); Best Buy, Game Stop (44311 & 44312) — and quite a bit of everything else, from new carpet to Ikea to the local game & hobby shop.

(* I have referenced these census numbers before and most assuredly will reference them again)

Here, let me put that in a chart for you:

The scale on the x-axis is millions; that red vertical line is the 50 Billion mark, the green one is 100 Billion. Dollars. Retail. Each Month — and retail excluding all food sales, gas, and cars.

Big Honkin’ Numbers.

I have one more census chart in reserve, but let’s fall back and first consider Amazon.com:

##

Amazon built itself from the ground up, starting in 1994 and advancing inexorably year after year, exploiting new technology to ream retail a new one and take its place as AMAZON, Retail Giant, destroyer of publishers, devourer of worlds.

Amazon is big, sure: for FY 2009 they reported North American sales of $12.8 Billion and overall sales (all product classes, internationally) of $24.5 Billion. [internets] Oh My God Amazon is Eating My Lunch & Just Stole My Girlfriend… Panic… [/internets]

Scale, folks. Scale:

Amazon managed $12.8 Billion in [US] annual net retail in a year when December retail sales were $136 Billion — just for December! — and just for that GAFO classification, which is comparable (if not an exact analogue) to Amazon’s market segments. If we expand that to all retail for 2009 [as tracked by the census] then Amazon manages just $12.8 Billion of $4.13 Trillion in overall economic activity, or about 3% of retail.

Even the $25 Billion Amazon does in the US & Internationally — is only 6% of the $400 Billion Wal-Mart does annually.

Amazon started as a bookseller, sure, in as much as they sold books online at a discount. And Amazon deserves credit for losing money for close to a decade before showing a profit (talking a line of shit about “the future” to whomever would listen to secure their funding, apparently) and now they are a multi-billion dollar business & showing a profit & bully for them.

[there is something in investing circles known as a P-to-E ratio: this ain’t it; just some simple math]

So, Amazon did $24.5 Big Bills in 2009. Best Year Yet.

AMZN has 448 Million outstanding shares, and [at today’s closing price, $127.57] a market cap of $57 Billion — at time of posting.

So that’s annual sales [not profits] of around $55 a share, and sales-to-“value” [value in quotes since market capitalization is based on stock prices and as such is completely arbitrary and subject to whims of the market] of 1:2.3 — that is to say, Amazon may be ‘worth’ $57 Billion but they do less than half that in sales each year.

Since I dragged Wal-mart into this:

Wal-mart had net sales of $405 Billion, outstanding shares numbering 3.7 Billion, and a market cap of 185.7 Billion [trading at $50.06 at time of posting]

That’s sales per share of $109, roughly, and sales-to-“value” of 2.1:1 — Walmart is ‘worth’ $185 billion and they do more than twice that in net sales each year.

Barnes & Noble is small fry in this fight: only 58 million shares at $15.20 [at time of posting] for a market cap of $895 million.

Not even worth a billion dollars. B&N sales must suck too, right?

per the most recent annual report: B&N 2009 sales of $5.8 Billion.

So, sales per share of $100 and (since B&N is trading at a fraction of Wal-Mart share price) sales-to-“value” of 6.5:1.

That is to say, B&N is valued at $895 Million (you could buy all outstanding shares for that amount) but in 2009 (a bad year for retail) and in bookselling (a niche market, apparently, with as quickly as the media has been to pronounce us dead each year for the past three years) still managed $5.8 Billion in gross sales and $1.6 Billion in gross profits.

Now, all kinds of things slowly whittle away that gross profit number, until we end up with only $36 Million in earnings. But:

For just .9 Billion Dollars one could theoretically buy a company that grosses six times that each year – and do I have to remind you we’re in a recession and with certain per-share statistics that seem to match Wal-Mart and at a bargain basement price of $15 a share. — And 58 Million Shares seems like a lot but Amazon has seven times that number and Wal-Mart 63 Times as many. You could buy B&N, actually; Walmart & Amazon, not so much.

Which is where at least one investor found himself: considering buying B&N at a bargain basement price. What Burkle didn’t consider is that there was at least one guy who was pretty sure he already owned B&N, and didn’t feel like selling.

##

As noted, Amazon is eating my lunch and my future and just stole my girlfriend; all my friends are saying they saw her hanging off of Amazon down at the local malt shop in a way that was much more than just friendly. Amazon has the black leather jacket, the motorcycle that’s “in the shop this week, but I’ll show you later” and the attitude.

Bookselling is old-and-busted, e-books are the new hotness.

And yeah, technology can change overnight.

Let me pull that other census chart:

E-Commerce is growing, and has been growing for a decade. Q4 (December, holiday sales) each year are spiking quite a bit actually, though the overall trend is a bit flatter.

Note that trend, though. look at it:

Not an explosion. Steady growth of a half percent each year, plus a smidge. Sure, some players [Amazon, one supposes] can demonstrate or manipulate numbers that make the e-volution seem like a much bigger thing, but actual, independently sourced numbers point to a process that is much more gradual. 2001 is post- dot-com-bubble, in fact, and is a decent starting point to track online sales: Yes, this is a growing and promising part of the business, but e-sales are, um, still just a fraction.

4 percent of the total. 4% of 4.3 Trillion. — yeah, that’s a lot [a whole lot] but still just 4% — And Amazon’s $25 Billion doesn’t seem quite so hot when considered as a mere fraction of $107 billion in total e-commerce

Amazon may be #1 but isn’t even a fourth of total online trade. There are (apparently) a lot of e-commerce transactions [porn] that have nothing to do with books, e-books, or kindles.

It’s all a matter of scale.

And selling things at a discount doesn’t help your bottom line as much. Sure, bookstores charge a bit more, but we also have to provide a more comfortable experience, and (provided we can sell something) enjoy a more comfortable profit margin.

And I’ve been so busy proving that Amazon is not only a [really, really minor] fraction of retail but also [and surprisingly] just a fraction of online sales, that I didn’t even have time to point out that e-books are a fraction of a fraction of a fraction of either $4.3 Trillion in retail or $11 Billion in book sales (just 3.3% per the AAP numbers I just linked to — which means that e-books are approaching but haven’t quite reached the same overall ratio of e-commerce to retail as posted by the Census Bureau — that is to say, e-books are new, but haven’t yet proven they are an exceptional category that will outperform ordinary e-goods (including physical goods ordered online)

—sure, Amazon reports that e-books outperfrom one format of physical books, but not that they’ve outperformed all physical formats — and Amazon is not the industry. Hell, Amazon isn’t even the whole internet. And, um, why only e- versus hardcover, Amazon? How does e- do against all books, including the popular paperback formats? eh? Oh, cat got your propaganda?

##

Amazon’s Billions don’t even crack 3% of retail — though they do manage 4% of the general goods GAFO number.

& E-Commerce isn’t quite 5% —

— so Wal-Mart, Sam’s Club, and CostCo are still the primary enemy
— and while digital is not to be discounted or laughed away, no one [no, not even Amazon] has the solution, let alone monopoly, on e-books yet.

Scale, folks, scale: Sure, Amazon has headlines, and would love for you to think all e-books are Amazon, but the reality is far from that, and Amazon is trading on a book ‘supremacy’ that is itself a myth.

Yes, I’m a bookseller, but look at the numbers: Even if all of Amazon’s 5.9 Billion of ‘media’ sales constituted books (and they don’t, as there are CDs, DVDs, digital music downloads, physical books, and yes, e-books in that total) that’s just half of an 11 Billion dollar market — And even if my assumptions are incorrect and we only get the scraps from Amazon, that’s still a 5 Billion dollar plate of scraps.

The truth is that Amazon is just another retailer and one that captures quite a bit of the holiday gift market, but day to day — not so much.

(that’s my interpretation of the census numbers previously posted – feel free to run your own analyses)

Yesterday I posted a wall-o-text about books & bookselling, and I know a lot of you [the comics folks] could care less about retail and the rest of you [the retail folks] could give a rat’s ass about my philosopical musings on the future of print in the larger context of the present and continued transmission of culture, and that even if you like the bullshit philosophical musings you honestly would prefer I not drink so much, so the points made could be more clearly, and concisely, expressed.

I fully admit my shortcomings. Among other things, I like web traffic for this poor blog. Kinda an attention whore that way.

So in an effort to both increase traffic and direct even more of you to the original essay, while making it more accessible, let me take a single, favourite assertion from yesterday’s post and expand on it, briefly, today:

Bookstores may be grossly inefficient compared to e-books and web sites and all that crap, but sex is also grossly inefficient if the only goal you consider is insemination. Sometimes inefficiencies are a good thing. Sometimes they have a value, even an economic value, well beyond what is most expedient or cost-effective.

Yes, if all you want is a book, you can log onto a web site, spend less than 3 minutes, order exactly what you want, wait the pre-determined time period, and soon you will be surprised with a tiny packet of joy, delivered to you via the offices of professionals who specialize in that sort of thing.

Seems ideal, right? let me replace one word

Yes, if all you want is a baby, you can log in, spend less than three minutes in the process to effect that end, wait the pre-determined time period, and soon you will be surprised with a tiny packet of joy, delivered to you via the offices of professionals who specialize in that sort of thing.

##

Obviously, there are occasional inefficiencies in any process that have little to do with the end result but that we engage in anyway.

One can drink absinthe without a louche and flaming sugar cubes and all of that, but the process is often the point of consumption. One can buy a burger without making reservations, meeting before-hand for drinks and conversation with friends, ordering the appetizer, and later dessert, and much later coffee or port while lounging with said friends in the restaurant’s bar. One can see the Mona Lisa without looking at a single other painting in the Louvre, or visiting the Eiffel Tower and the Cathédrale Notre Dame de Paris and Shakespeare & Co. or walking the banks of the Seine under lamplight and moonlight arm in arm with a smiling, laughing companion.

One can engage in the process of insemination without courtship, chaste hand-holding; the uncertain, halting, almost orgasmic first kiss; shared special memories of that night or this place; the arguments, the breakups, the forgiveness, the make-up sex; without foreplay and caresses and knowing that if I blow just so behind your ear I can feel the shudder at the base of your spine through my hand placed just at the top of the curve of your ass, and long sweaty nights and slow, leisurely sunday mornings and that quickie on the floor right before we go to your college-BFF’s wedding. Or the Valentine’s day right after our first anniversary. Or breakfast in bed on your birthday that ended up with me meeting the pizza guy wearing only a sheet because neither of us could be bothered to cook (or even get out of bed) all day and by 4pm we were starving.

Indeed, if one focuses only on the goal, there are many, enjoyable parts of the process that might be missed. And occasionally the process is a lot of fun in it’s own right, and the eventual goal might be a bit of a let-down, or undesired, or impossible to begin with.

Yes, one can easily buy a book online. Click, click, click: we’re done.

Bookstores aren’t about the quick sale of a book [though we’re up for a quickie if that’s all you have time for]

Bookstores are about inefficiency and the grand glorious meandering search, falling in love, and those rapturous perfect moments of book discovery — after a relationship that has lasted for years, a partnership you’re comfortable with, an easy familiarity that you fall into whenever you walk through the door. Those ‘perfect’ book moments may only come once a month, or once a week, if that’s all you can make time for. They can come as often as once a day [or multiple times a day] though it’ll take more of your time and quite a bit more effort on our part, as booksellers.

yes, Amazon and other web sites will satisfy that book jones in scant seconds — coldly, mechanically, and without the personal touch a patient, knowledgeable lover bookseller can provide.

Some days you know exactly what you want. And we’ll humbly provide that.

But we’re also open, ready, and willing to take you by the hand any other day of the week, and walk down those tempting aisles and through the grubby stacks packed from one end to the other with sexy, sexy books. Whether you only want to watch browse, or maybe just dip a toe into ocean of pleasures that books can provide, we’re here for you. And when you’re ready to take the plunge, we’ll be right by your side.

Yes. Bookstores are inefficient. So is really enjoying a meal, or talking to and meeting with friends in person, or travelling the world to see the major cities and centres of culture with your own eyes. So is sex.

Inefficiencies are Great. Love ‘em.

And I hope bookselling remains inefficient for centuries to come.

Some see e-books as the death of bookstores and traditional publishing. And I’ll chime in a little later in this essay with my thoughts on that, but I’ll be going the long way ‘round, so go ahead and get that second cup of coffee and settle in.

Every transaction in publishing [Author to Agent, Agent to Publisher, Publisher to Distributor, Distributor to Retail, Bookseller to You – and the many business transactions that shortcut one or two or all of those interactions] is about words being slowly converted into dollars, and then the flow of dollars back to the Author, ideally, though much like the Colorado River that stream often dries up long before it reaches its supposed final destination.

Books are not produced by Amazon. While an author might go directly to Amazon (or an agent might do so, on an author’s behalf, as has recently caused a stir) even then, Amazon is just digital-storefront and distributor of the files. In a fundamental way, this is no different from Amazon selling any other sort of books, and Amazon’s interest in the deal is limited to Amazon’s take. While I’ll concede that Amazon is taking on some roles of the publisher—production and distribution in the case of e-books—it’s only going that far because e-books are digital and these costs are negligible. What is missing is editorial & financial support, and any marketing of the book. Some books only get written because of the advance on royalties extended to the author by the publisher before the book is finished, sometimes before it’s even written. Amazon isn’t offering that. Sure, you might make more on the back end but you as the author are forced to bear all financial risk. You as the author have to pay someone to proofread and edit your book (assuming you value the polish a good editor can add to even the best manusripts) and you as the author are going to have to arrange your own book signings and tours, and submitting the book to awards committees, and getting listed in catalogues (wait, will there be any catalogues if the major publishers don’t exist any more?) so physical copies of your book can be ordered into bookstores, and placed in libraries.

Amazon just wants the e-book, and their cut of its sale. Of Course Amazon is willing to pay the author more in royalties, maybe even as much as 90% of the purchase price, as they did nothing and the book costs them next to nothing. Your agent is going to work a lot harder for her 10%, let me tell you. Amazon is a parasite, taking the finished product away from folks who worked hard to produce it, and offering money back if and only if it manages to sell.

And the same might be said of all retail (and publishing, if your publisher doesn’t get behind the book) — but editors, publishers’ field reps & marketing departments, and yes, booksellers can all do a lot more than Amazon in selling books. Your take is less, because costs are higher. Those costs are higher because people are actually working on selling the book. A link and a listing on an online sales site are not the same as “being published”

##

90 years ago, publishing worked differently. I’m not usually nostalgic, but it’s the death of the business model of the 1920s & 30s that we’re seeing, and mourning, now.

The book you need to buy (& read) is Jason Epstein’s Book Business: Publishing Past, Present, and Future, isbn 9780393322347.

From the publisher:

“Jason Epstein has led arguably the most creative career in book publishing during the past half-century. He founded Anchor Books and launched the quality paperback revolution, cofounded the New York Review of Books, and created of the Library of America, the prestigious publisher of American classics, and The Reader’s Catalog, the precursor of online bookselling. In this short book he discusses the severe crisis facing the book business today—a crisis that affects writers and readers as well as publishers—and looks ahead to the radically transformed industry that will revolutionize the idea of the book as profoundly as the introduction of movable type did five centuries ago.”

From Wikipedia, Jason Epstein:

A 1949 graduate of Columbia College of Columbia University, Epstein was hired by Bennett Cerf at Random House, where he was the editorial director for forty years. He was responsible for the Vintage paperbacks, which published such authors as Norman Mailer, David Rudomin, Vladimir Nabokov, E. L. Doctorow, Gore Vidal, Itai Guttman, and Philip Roth. In 1952, while an editor at Doubleday, he created the Anchor Books imprint. This was the first of the trade paperback formats, a format which has consistently remained profitable and popular since that time.

In 1963, during the New York City newspaper strike, he co-founded The New York Review of Books, with his then-wife, Barbara Epstein, Elizabeth Hardwick and Robert Lowell.
He wrote a book entitled Book Business: Publishing Past, Present, and Future. In 1979, he and his brother, Zach Epstein were the co-founders of the Library of America which was intended to market archival quality editions of American classic literature. The first volumes were published in 1982, and the company now prints about 250,000 volumes per year.

He has been the recipient of the first National Book Award for Distinguished Service to American Letters and the Curtis Benjamin Award of the Association of American Publishers for “inventing new kinds of publishing and editing and The Lifetime Achievement Award of the National Book Critic’s Circle.”

His most recent endeavour is On Demand Books, the company that markets the Espresso Book Machine, which he co-founded in 2004.

A [possibly ironic, if only in that it exists?] preview of Book Business is available online from Google Books — though currently there are no e-book editions.

You can argue against Epstein’s conclusions in the book [though he backs them with his own money and actions, see ‘Espresso Book Machine’ above] but to say anything about publishing, retail, and digital books without having read his excellent history (& personal take) on the industry you mean to replace is almost criminally negligent. Pitch it as either ‘know yourself’ or ‘know your enemy’ but educate yourself on traditional, 20th-century-style publishing before stepping into this new era.

[and this is just my introduction…]

##

Words Exchanged for Dollars: 5 questions.

What is a book? What is bookselling? Who is best able to sell books? In an era when some to most to all “books” are files, what does “bookselling” even mean?

that’s 4. And:

Are current players (Amazon, major chains, independents, bloggers) going to be future players? Where is bookselling heading?

5 questions to cover and I might not have the answers. There’s nothing to do but start writing.

##

1. What is a Book?

Yeah, I know, you wanted business analysis and advice on which stock to buy now, or even just a summary of book retail with a 3-5 year forecast of the industry, retail prospects, and a sideline on digital media as relates to traditional retail.

The last thing you were looking for was a philosophical discourse on the definition and very nature of the term/idea/form “Book”. But that’s how I roll.

Let’s start with what a book is Not: A book is not a collection of paper leaves bound on one vertical edge, and stained on their surface by heiroglyphic marks meant to represent words and ideas. A book is not a digital file of 1s and 0s, which when properly decoded correspond to those same heiroglyphic marks, a translation into digital of that bound collection of leaves. A book is not a collection of ideas, or a physical document. A book is not a history or story, or an argument or allegory, or a manifesto or call to action, or a summation of past arguments, or a presentation of scientific data, or a historigraphic survey of previously unknown culture, or a speculative excursion into the realms of what might be, or a devout and discrete distillation of mystic experience into a concise statement of the divine.

A book can be all of these things, and several of them simultaneously, but at its very base: a Book is nothing but a mess of words. — permanently recorded words, & ideally meant for posterity, but more often collected and presented for economic gain: Words to be exchanged for Dollars.

(Or pounds, yen, shillings, francs, euros, yuan, shillings, cedi, pesos, manats, pesetas, dinar, marks, kronig, lats, shekles, rials, lira, credits, gil, double-dollars, or geekcred – eventually someone may commoditize and monetize our attention, such that revenue from online ads aren’t ‘priced’ at all but are instead treated separately and traded at their own rates on currency exchanges)

A book is a collection of words presented to the public by the author for gain — whether that’s monetary gain [most common], enhanced reputation & recognition, to support other economic activity, or an increased awareness (and eventual sale) of additonal books or other merchandise. Not every use of a ‘book’ requires money to change hands, but if some economic value is not derived from publication (“the act of making something public”) then that mess of words might as well [most likely will] remain a personal journal or private correspondence.

Even if the only economic benefit is “being read by others”, and the author who gives books away for free is willing to take all other production and distribution costs upon themselves in order to obtain that benefit, there is an economic component to sharing: a perceived benefit for a given expenditure.

“Free” books are hardly that: Religious organizations gain converts, political movements gain members, webcomickers gain fans who buy t-shirts. “Free” is great as a marketing strategy, but nothing is ever free, even if it’s only your attention that is being sold (via online ads, or the visibilty/recognition/popularity/notoriety/loyalty gained and banked for later economic benefit — please reference The Attention Economy)

So. By my definition, every collection of words (including this blog) is a “Book”, and all books have costs, and all books are for “sale”

— we can argue that not all “books” are fully equal [which is obvious, as no matter what class of goods we’d care to consider, even substitutable, ‘equivalent’ goods are not equal]
— and while digital costs are amazingly low, for ‘free’ books those costs are still borne by the ‘publisher’ even if that publisher is a blogger and the cost of ‘publication’ is just the annual web hosting fee.

E-books and ‘new’ formats and ‘new’ publication models are in fact nothing new, and can be shown to have easy historical analogs & also fall into my definitions of ‘book’ and ‘publication’ – to me, the argument is not a matter of Publishing Books but instead Publishing Books for Profit.

##

2. What is Bookselling?

Paper print & publication, and associated retail via book stores and newsstands, have proved more-or-less profitable (occasionally massively so, though losses are just as common) ever since industrial methods were applied to the means of producing books. Costs have fallen, more books are available to more people in more places than ever before, and more people can read even if they don’t bother to. It doesn’t make a whole lot of money as a percentage of costs, but it’s enough to keep the whole thing going, and the whole is a $15 Billion dollar a year business

And profits are a fine side-effect from the need to publish (or perhaps, publishing is a side-effect of the profit motive, though I’d argue there are many, many easier ways to make a buck than writing novels – theft springs immediately to mind, as does digging ditches) and there are so many books and players in the market that we’re tempted to refer to the whole mess as an industry, and institution.

Which is fine.

It’s a great thing, actually, when the sheer volume of books makes one think that books will always be there and that the mass of books published are somehow ‘culture’ or [hang on a sec, let me find my own past wording…] the canon and corpus of all human knowledge.

But there are no guarantees. Even after publication, books only remain in the market if there is money to be made in the sales of new copies, or so long as someone (a library or other academic resource) subsidizes them.

• and let me note here: that could be money made by the author and original rights holders, or money made by pirates. Both activities—publication & piracy—promulgate additional copies [in the digital age, copies ARE the continued existance of a work, though more often than not the means to produce/procure them are morally wrong]
• and ‘sales’ refers to the direct paper-for-money transactions, ad revenue to be gleaned from web hits, circulation within a library system that prompts the purchase of replacement copies, or additional copies, or copies for new library branches, old-fashioned bookstore sales and even the new-fangled ‘ebooks’.
• While this month’s paycheck [and being able to eat] are the primary focus of authors and all other actors in the publication industry, today’s profits are no guarantor of future income, or even a good indication that a popular book will remain in print 10 years from now.
• Allow me to repeat that: most, if not all books, only get 10 years. After that, editions remain in libraries, used book stores, and warehouses, but new books are not being printed. 20 years out, dedicated readers can find a copy but it is no longer in general circulation or for sale at the original retail price. 30 years on and the last used paperbacks are either stuck in collections or discarded as they deteriorate – 40 years on the hardcover editions are either firmly held by collectors [first-editions, mostly] [if your book is worth anything] while the majority have been forgotten, sold by the library in a book fair, lost in basements and attics, slowly falling apart if still in circulation, and rarely if ever read. After 50 years, you’re either known as a genius and your works classic, assigned to students and subject to reprint in new editions every 8 years, or you’ve been forgotten.
• We all like to give lip service to the permanence of print, but paper (particularly the cheap pulp paper used through most of the last century) is not a proper medium for archives and even worse: there is only the scarcest minority that even cares: Collectors, historians, archivists, sociologists, and fans — and there are few enough of any of these classes — but past the core [maybe 500 people, total] that actively lobby to preserve the history of print, everyone else discounts ‘old’ stuff and only cares about what’s new — and I’m not just talking about genre fiction, the ‘pulps’ [sci-fi, mystery, noir, adventure stories with lurid covers] but also ‘serious’, ‘literary’ fiction. Literary fiction actually has very few fans. And if it’s more than 20 years old either it’s famous – or it is lost at this point. Print seems permanent, but in practice has proven to be even more ephemeral than radio and early film and television: I can buy a CD box set of the Lone Ranger radio dramas [c. 1933-54], but not only can I not buy any of the top 10 New York Times Bestsellers from 1933, I’d be hard pressed to even know what those books were. The vast, ever expanding internet only takes us back to the 50s [link] and only because some brave volunteer took the time to type those in from historical sources.

What is bookselling? Well, at its most basic it’s the exchange of words for dollars. But bookselling is also the mechanism that keeps books in print. Dickens would be just another magazine serialist, Shakespeare an actor who wrote sonnets to an unknown mistress, Homer a blind poet with an astounding memory, Dante a little known minor Italian politician, Twain a newspaper reporter with an adventurous streak, and the Brontës just three sisters who liked to tell each other stories. We know these authors, and their books, because the books have been sold more-or-less-continuously through the decades, centuries, and millenia since their deaths.

If books were not sold, it would be up to librarians to keep the flame alive. And I love libraries. I love librarians. I like ‘em so much I’d marry one.

But nothing gets books published and distributed quite like the corrupting influence of dollars. Dirty, filthy commerce with profit motives and scamming the marks for two bits. Exploiting authors, skirting the law, ignoring foreign copyrights, out and out piracy on occasion. It’s an occasionally vile business but it puts books on shelves and into the hands of readers.

So long as a buck can be made on the sale of a new or used book, there’s going to be a person [or multi-billion dollar corporation] there to accept your money and keep the books in print.

This is bookselling: exchanging words for dollars. The profit motive is the only motive. Ah, yes, but no matter how base the activity, the main side effect is that new books get written, and printed, and sold. Old books get new editions and the backlist grows deeper every year.

Bookstores may be grossly inefficient compared to e-books and web sites and all that crap, but sex is also grossly inefficient if the only goal you consider is insemination. Sometimes inefficiencies are a good thing. Sometimes they have a value, even an economic value, well beyond what is most expedient or cost-effective. Just because there is something new, doesn’t mean we forget the old; it takes minutes to microwave but hours to cook; seconds to txtmsg but days to really catch up with old friends; A week to read the Bible, or Koran, or Upanishads, or the Tibetan Book of the Dead, but a lifetime to put principles into practice and to truly lead a moral life. [allow me to note, smugly, that religion starts with books] [and atheism, even moreso]

You can use Amazon if you like: it’s quick, and sterile, and over in just minutes.

Books can be sold in many ways, but to me Bookselling means Bookstores, and I like bookstores for the same reasons I enjoy sex.

##

3. Who is best able to sell books?

Publish or Perish isn’t just an axiom in academia, it’s true for all authors. The best way to sell your backlist is to keep writing new books, minting new fans, and keeping yourself in the public eye. Some authors can get away with only one book [Mitchell’s Gone with the Wind, Lee’s To Kill a Mocking Bird, Sewell’s Black Beauty, Toole’s A Confederacy of Dunces] but most will publish at least two, or will also write poetry and plays and essays — a life in print, not a single masterpiece. And for fans of Nora Roberts or James Patterson, the constant output is comforting and affirming: there will [seemingly] always be another book.

And it’ll be a bestseller. There are many ways to consider best-sellers and “bestselling” authors: there is an elite cadre of 80 or so authors, living and dead who have sold more than 100 Million books apiece. This is the height to which we all aspire. More than 1,400,000 different titles are made available for sale each year (at least since 2007) of which three-quarters will sell less than 100 copies. Of the 300,000 or so remaining titles, only 1-2% could be considered ‘bestsellers’, a number that is a scant 3-hundreths of one percent of the total books in print. [2007 numbers: 1.45 Million Books, of which only 483 sold more than 100,000 copies – source: Harpers index].

The odds are slightly better than the lottery, though the cost of ‘tickets’ are higher (you have to write a book first) (and no data on how many of those ‘bestselling authors’ are in fact debut authors, who manage a bestseller right out of the gate; of the 500 bestselling books each year almost all will be from ‘name’ authors working on their 5th or 10th or 20th book. Maybe the lottery is easier.)

My point is that the one actor best able to sell books is the Author, and she can do that best by writing more books. Nothing moves the backlist like a new release.

If Agatha Christie had written only 4 books [pick your favorite 4] she might still be known today but she is recognized as a master of the genre because she wrote so much. Poe, actually, invented the mystery in three short stories [featuring proto-Sherlock Dupin] but few remember Poe as a mystery writer since he wrote so little. [so little mystery; obviously we remember him for other reasons].

While I turn it back on the author, saying, “Well, you are best able to sell your books” it’s not because I have given up my duties as a bookseller, but because it’s true: the best way to sell books is to write more books. You don’t obsess over your debut, and think, ‘I’ll write the sequel once this one is a bestseller’ — you write the sequel and the third book and a fifth and a ninth, especially if they all feature the same main characters, because this is what avid readers love most. Not a book, but a series; not an experience of hours but of days, and waiting patiently over years for the latest book from a favorite author.

Other than the author, friends telling friends about books is the best way to sell books. I can loan you the book, in fact, if I see you often enough and I like (& trust) you that much, but more often I just tell you about a title and leave you to your own devices in finding it. Bookclubs also operate in this friends-telling-friends mode, as does Oprah—in as much as some people love Oprah and take her recommendations with the same weight as they would the word of a friend.

So, dear Author, you can ‘sell’ the books yourself by writing compelling books and compelling sequels, lots of ‘em. Personal recommendations are next-best and most valued, & after that comes book reviews (when favorable) whether found on blogs or in print. Reviews can be hit or miss, though, as it depends not only on the opinion of the reviewer, but of the level of trust the reader has in the source (and on the review running in a publication which is itself widely read).

All other bookselling is in the hands of strangers.

Bookstores can shelve your books, which is a bare minimum. Your title can be faced-out (with cover fully visible) or merely spined, your book could end up on feature shelves, display tables, endcaps, front-of-store displays, or even the “Staff Recommends” display — sometimes with nothing more than a shelf-talker with a quick blurb from an enthusiastic bookseller, maybe moved to the most prominent display next to the bestsellers, maybe in a small stack next to the register or infomation desk.

Obviously, Booksellers can do a lot to sell your books for you. Bookstores specialize in books, and all kinds of books, not just the top 10 available at 50% off the cover price at CostCo., not the 40 books in a rack at the grocery store or the 200 titles at Target or Wal-Mart.

Yeah, sure we charge more. Unlike Wal-Mart, we’re not in the discount goods business: we sell books, dammit.

100,000 titles, Five Hundered times the books at Wal-Mart, Ten Thousand times the number of books at CostCo. Yeah, so maybe they sell more books that I do; which is fine and great. But unless your last name is “Patterson” you likely don’t see any of that and shouldn’t care. How do books become besellers? Through word of mouth, friends telling friends, and booksellers putting books into the hands of customers daily.

##

4. In an era when some to most to all “books” are files, what does “bookselling” even mean?

I’ve already covered this one once: Rethinking the Box: Selling Books in the Post-Book Era

let me summarize: even without a bookstore, I’ll be a bookseller. I will engage people, talk about books, recommend my favorites, and make readers enthusiastic about authors and titles. I can do that from a blog, if I have to, but I prefer to do it from a physical storefront. And there is a lot to be said for handing a book to a customer: here is the physical object, you can take it home today.

E-books are fine if readers already know they want the book, but there is a much higher curb to overcome if no one has heard of you as an author and is entirely unfamiliar with the book. There is no way to ‘browse’ an e-book. Some samples are available, but how do you encourage people to download them?

Word-of-mouth and friend-to-friend and Reviews & Recommendations become even more important. Expertise and experience becomes even more valuable, not just to sell the books, but to even know what’s out there given the millions and millions of options.

If Amazon kills bookstores, then my role as bookseller (and my experience, as a reader & lover of books) is all the more valuable. I might be out of a job, but with a little hard work I might even end up making more money. Amazon will have relieved me of the hard work of stocking titles, moving inventory, and physically handling books. All that is left is the high-touch, highly personal task of selling books and I can sign up as an Amazon affiliate and take my commission. Instead of selling to one person at a time, I can post to a blog and sell to 50. Nothing is guaranteed, and damn I’ll miss the bookstore, but bookselling isn’t tied to the physical store, and it’s a hell of a lot more than just listing books on a web site. Sales is an interpersonal skill, and so long as there are ways to communicate it will persist in that person-to-person interaction.

##

5. Are current players (Amazon, major chains, independents, bloggers) going to be future players? Where is bookselling heading?

Anyone with a billion dollars in this game will continue to be a player for as long as they want.

They may not have the same market share, and may be forced to abandon what they used to think of as their ‘core’ business, and maybe they can’t support the same staff, but the brand and the ability to at least try in the new market (whatever it is) is still there.

We’ll still have Amazon, and Barnes & Noble. Borders may end up as just a website with a handful of ‘showcase’ stores, or even just a single location, but they have a strong brand and millions of customers and aren’t going anywhere. Random House, Macmillan, Penguin, HarperCollins, Hachette, and Simon & Schuster will still put out books; the major publishers are either part of mass media conglomerates or are massive media companies in their own right. Publishers make books; the actual printing of books was long ago outsourced — in a world without print there will still be reasons for, and a profit made from, the packaging and marketing of books.

Maybe the current top 10 companies will look nothing like some future top 10, but they’ll all still be there (free standing or merged or bought out by upstarts, but present all the same) — an actual failure and exit from the game entirely will be rare. Yes, some few are going to fail to adapt, but I have high hopes for the industry.

I have no idea where bookselling is heading. But I get up each morning, put on my boots, and take each step, each day as it comes. I cannot see the path ahead of me but I’ll walk it to wherever we’re headed. And can I sell you a book?

[You’ll note that even in an essay on the uncertainty and potential failure of the market, I already ‘sold’ you one. Or did you miss my pitch for Epstein’s book at the top of the post?]

Disclaimer: as an employee of Barnes & Noble I’m one of the ‘assets’ that will be considered in any sale — a small part (.02% or thereabouts) of the field management team that actually runs the damn stores.

While B&N may sign my paychecks: My statements are my own, represent my own opinions and analysis, and were neither suggested by, vetted through, nor approved by my employer, and as always I run the [very slight] risk of getting fired over something I had the temerity to say in a public forum.

That, and I’ve been drinking for about 4 hours, and while that has nothing to do with my employment, in a spirit of full disclosure it likely colours the following analysis. ;p

##

The media is going to have fun with some of the possibilities and potential of the official press release, Barnes & Noble to Evaluate Strategic Alternatives, particularly after speculating for so long on the sale of Borders. Here’s an annotated, paragraph by paragraph translation, with highlights for key portions, and a bit of dramatization:

##

New York, NY – August 3, 2010 – Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today announced that its Board of Directors intends to evaluate strategic alternatives, including a possible sale of the company, in order to increase stockholder value. The Board came to this decision based on the price of Barnes & Noble shares in the marketplace, which the Board believes are now significantly undervalued.

Key phrases: ‘to increase stockholder value’, and that one at the end of the paragraph, ‘the price of Barnes & Noble shares in the marketplace, which the Board believes are now significantly undervalued’.

Nothing there about the company, or losses (or past profits for that matter), or potential, or performance. No changing publishing models, new hardware, or digital initiatives. Just the stock price. And if I owned 10 or 20 million shares of a stock, I’d likely be worried about the paper-profits-but-more-recently-losses too. Ah, yes, but the stock price is about investor perceptions and expectations and has very little to do with company performance or actual value, especially in a recession.

It’s a recession, we’re talking about retail, of course the stock is down. Duh. But I guess they felt they had to say [and do] something.

The process of evaluating strategic alternatives will be overseen by a Special Committee of four independent directors: George Campbell Jr., William Dillard, II, Margaret Monaco and Patricia Higgins, who will serve as Chair of the Special Committee. The Special Committee will consider all alternatives to increase stockholder value and will recommend a course of action to the company’s full Board. The Special Committee has selected Lazard to serve as its financial advisor and Morris, Nichols, Arsht & Tunnell LLP to serve as its legal advisor.

“See? Even when this special committee comes back with the result I want, I took pains to tell you it was independent, and we hired an accountant and a lawyer and everything“

Also note the use of the terms ‘all alternatives’ and ‘recommend’ — it still has to go to and through the full board of directors, no matter what the conclusions are

The Board stated: “As the world’s largest bookseller, Barnes & Noble has an iconic brand and unique competitive advantages we believe will position the company to succeed over time in a rapidly changing market. The Board is confident in Barnes & Noble’s strategy and fully supportive of the senior management team, which is delivering explosive growth in our fast-developing digital business. The Board has concluded that a review of strategic alternatives is the appropriate next step to take full advantage of our compelling digital opportunities and to create value for shareholders, customers, and employees.”

Here, they insert a direct quote into the press release to give the impression that this is an objective news article [see, it reads just like one, right?] and to also work in at least five nebulous ‘assets’ and ‘advantages’ of the company, along with Big Plans and Strategery and junk, all of of which “create value for shareholders” — oh, yeah, and the customers.

and? “And, um, do we have to bring up the employees? Yes? [*sigh*] OK, we also pay people to sell things. But they’re not as important as the Unique & the Digital & the Explosive! See, Wall Street? We had to mention that we pay people to sell books, but we mentioned it last. Can we a least get half-credit for that?”

Leonard Riggio, the company’s founder and largest stockholder, has informed the Board that, in light of its decision to explore strategic alternatives, he intends to consider the possibility of participating in an investor group to acquire the company.

This is chaff, cover, and whiffs ever so slightly of self-serving bullshit.

The board of directors is setting up an ‘independent’ committee to review ‘strategic’ alternatives, and the Chairman of that Board (who is also the largest shareholder) says, “Well, if you guys are looking at all the alternatives, and no really this just occurred to me, maybe I could just buy the whole mess outright.”

Wait, was this a PR relating relevant steps Barnes & Noble and its Board are taking in a tough market to secure their business and reassure skittish investors, or just a back-door way for Riggio to advertise that he wants to [perhaps fully intends to] take the company private, and you should buy in with him now while the stock price is cheap and the gettin’ is good?

Let’s ask Len – next ‘graph:

Mr. Riggio stated: “I fully support the Board’s decision to evaluate strategic alternatives at this time. Regardless of whether I participate in an investment group that buys the company, I, as well as the entire senior management team, am willing and eager to remain with the company and see it through the challenging years ahead.” Mr. Riggio continued: “Having spent a lifetime in bookselling and building this great company, I am as committed as ever to the future of Barnes & Noble.”

Might I be permitted a translation? “Hey Burkle: You think you know B&N, but you don’t know B&N. You can buy the stock, but you can’t buy the company, I’m the damn company. [*obscene gesture*] …and either me or a dozen people who think like me are going to be running B&N, still running B&N no matter who owns it, unless you plan to fire all of us—might as well cut the femoral artery—in the process of taking over.”

A number of other analysts will no doubt form different conclusions based on this surprise press release. Some Already Have. There is the now hoary 3-year old titter over a Borders/B&N combination — which is like buying two gas-guzzling clunkers instead of one, when what you really need is an electric bike — and 3-decades old ‘greed is good’ models of leveraged buy-outs and Profits For Everyone [except current shareholders, customers, employees, book lovers, and publishers]

Oh, and while market wet dreams and the merest hint of buyout encourage all the hyennas and vultures to salivate and circle ‘round, remember:

There can be no assurance that the review of strategic alternatives will result in a sale of the company or in any other transaction. There is no timetable for the review, and the company does not intend to comment further regarding the evaluation of strategic alternatives, unless a specific transaction is recommended by the Special Committee or the process is concluded.

This press release lands with a big splash, and yet: Nothing has been announced. In the end, maybe nothing will ever be announced.

It did have one effect, though: at time of posting, B&N’s share price was up 28% in after-hours trading. That’s all the Board wanted, after all, and in addition to goosing the stock price, this PR also has the handy side-benefit of pushing Kindle 3 news off the top of the link blogs and well out of the discussion. Barnes & Noble rumour mill = Media Win.

That’s my first impression; more to follow, as I now have to spend all of tomorrow figuring out just what this means.