Barnes & Noble Goes Digital in a Big Way: 20% of Revenues Stem From E-Books

Time for doubts about the future of the book business to go out the window. It's definitely e-media, as the latest earnings report from Barnes & Noble (BKS) shows. Many have noticed the growth of the company's Nook-related sales. But few seem to have pulled together two numbers in B&N's release that show the entire e-book category -- media, accessories, and content -- to be a full fifth of the company's gross sales.

B&N's total sales for the quarter ending July 30 were $1.4 billion. The company said that its Nook business, including "sales of digital content, device hardware and related accessories," increased year-over-year by 140 percent, which is almost two and a half times larger than it was. The total of $277 million is roughly 20 percent of total revenue.

This might not be so surprising if you consider the context of other information. According to a Pew Internet and American Life Project study, e-reader ownership is growing faster than tablets. As of May 2011, there were 50 percent more people who owned e-readers than owned tablets like the iPad.

Not only was there a big jump overall in Nook sales, but digital content sales were up by a factor of four. Compare that to a 3 percent decline in store sales, with comparable store sales down by 1.6 percent. Much of that may owe to Borders continuing its liquidation, as the company expects comparable store sales to increase by 2 percent to 3 percent for the full fiscal year. More interesting is the guidance for the Nook business:

The consolidated Nook business across all of the company's segments, including sales of digital content, device hardware and related accessories, is expected to double this year to $1.8 billion from $880 million last year and $123 million in fiscal 2010, on a comparable sales basis.

There's also another possible area of growth. A Forrester analyst estimated that if Amazon (AMZN) could launch a tablet as expected and it came in at under $300, it could sell between 3 million and 5 million tablets next quarter.

Forrester may think that Amazon will be synonymous with Android on tablets next year, but I wouldn't be so quick to ignore B&N's chance to create a full tablet version of the Nook. You can already run Android Honeycomb on the Nook Color, turning it into a full tablet. Why wouldn't B&N want a slice of that growth pie?

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Erik Sherman

Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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