Barnes & Noble Draws Its Line Against Amazon

Many book retailers — chiefly Barnes & Noble (NYSE:BKS) — have drawn the proverbially “line in the sand” against Amazon (NASDAQ:AMZN) by refusing to carry any titles in stores printed by the online retailer’s new publishing arm. Barnes & Noble, the biggest book seller in the United States (by sales), spear-header the move some weeks ago, and they have been joined by Indigo Books & Music from Canada. IndieCommerce, run by the Independent Booksellers of America, has also removed over 300 Amazon ebooks from its service.

The move is seen in part as a retaliation against Amazon’s fairly aggressive attempts to gain its own presence in the publishing world, and specifically to its push toward exclusivity deals in the growing market for ebook marketplace that they believe unfairly restricts their ability to sell books to customers. Amazon has recently inked exclusive deals with Indian self-help guru Deepak Chopra, actor James Franco, director/actress Penny Marshall, and the controversial basketball coach Bobby Knight.

Amazon’s publishing efforts are also a perceived threat to both agents and publishers, since they essentially seek to “cut out the middleman” and ostensibly allow authors to deal with Amazon directly.  The move fits nicely into its very broad diversification strategy, with including cloud computing, and serves it larger goal of shortening the distance between producers and consumers.

Moves like this are most definitely a direct threat to brick-and-mortars like Barnes & Noble, and almost certainly played a hand in the demise of mutual competitor Borders last year. Also, given the sometimes mutually beneficial relationship between booksellers and publishers, many in the publishing world, at least quietly, are rooting against Amazon.

“We’ve got to push back and make the case that they have ulterior motives that are not in the best interests of the book industry,”  said Oren Teicher, chief executive of the American Booksellers Association. “Amazon’s long-term objective is to convert these book buyers on to a lot of other commodities.”

Right now, Barnes & Noble’s ban has real potential to damage Amazon and limit the company’s ability to sell its exclusive books and/or sign new authors. Besides cutting into a very significant source of revenue for any author, many still have the understandably ego-driven desireto see their books on a shelf in a bookstore, something they can’t do as easily if they’re barred from the shelves of Barnes & Noble and others.

It’s also been a source of frustration for many retailers that their stores often serves as “showrooms” for products, such as books, that people will then buy online, sometimes at lower prices (which are themselves lowered to be a loss-leader for retailers like Amazon).  Amazon, among others, even makes this much easier due to smartphone apps that will compare prices and allow users to immediately order the item through their device.  Also, in most parts of the country, Amazon users are not subjected to state sales taxes, which some also assert gives the retailer an undeniable pricing advantage over brick-and-mortars.

Then, of course, there is the arena of ebooks; with Barnes & Noble producing the Nook to compete with Amazon’s Kindle for market share.  The former’s concern is that if Amazon restricts ebooks under exlcusivity deals, that they will lose market share, they argue unfairly.

“Their actions have undermined the industry as a whole, ” said Barnes & Noble’s chief merchandising officer, Jamie Carey. “It’s clear to us that Amazon has proven they would not be a good publishing partner to Barnes & Noble, as they continue to pull content off the market for their own self interest.”

Barnes & Noble has made clear that they will sell Amazon-published books not covered by exclusivity deals through their website, but have stated that they have, so far, not encountered any great demand for them.

Here’s how these stocks are reacting to the news:

Barnes & Noble, Inc. (NYSE:BKS): BKS shares recently traded at $13.49, up $0.43, or 3.29%. They have traded in a 52-week range of $9.35 to $18.73. Volume today was 738,108 shares versus a 3-month average volume of 1,790,980 shares. The company’s trailing earnings are $-1.14 per share.

Amazon.com Inc. (NASDAQ:AMZN): AMZN shares recently traded at $189.46, up $3.92, or 2.11%. They have traded in a 52-week range of $160.59 to $246.71. Volume today was 3,573,213 shares versus a 3-month average volume of 6,423,810 shares. The company’s trailing P/E is 138.41, while trailing earnings are $1.37 per share.

To contact the reporter on this story: Jonathan Morris at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com