Tim Worstall reported in Forbes that Barnes and Noble should consider splitting the company. Separate the physical bookstores from the virtual business of the Nook and allow that digital business the room and capital to compete with Apple‘s iPad and Amazon’s Kindle?
Barnes & Noble has had a troubled few years. Part of the problem is that it continues to be a tablet business with a chain of bookshops connected to it rather than the other way around – with the tablet and ebook reader business growing at a savage pace, while the bookshop dawdles. From the stock market’s view, from the investors’ view, this is pretty much a no brainer. We would always prefer to see businesses broken out rather than hidden in some conglomerate. Unless there is a substantial reason why the two businesses work better together than apart that is.
The separation would also allow the Nook business to compete more directly against both Apple’s iPad and Amazon’s Kindle. This would be to the benefit of consumers and they are the people that we’re supposed to be considering in our organisation of the economy.
There is also one more thought on offer: By adding Jana Partners’ involvement this week there is the potential for an even more convoluted deal. Jana owns a significant piece of McGraw Hill and has been pushing for its breakup as well, separating the text book publishing business from financial services. If the Nook, through the Jana connection, could be sold with a captive textbook market place, courtesy of McGraw Hill, as well as an arms-length bookshop relationship with Barnes & Noble, the deal has the potential to create a mini-Amazon, and through internationalisation, a genuine force in eBooks as well as in tablets generally.
It offers a competitive strategy that neither Apple’s agency model nor Amazon’s wholesale one does. Unique and exclusive must have content.