Barnes & Noble’s Nook Not a Best Seller in Q3

Barnes & Noble reported this week that it will be rethinking strategy for its Nook division, since slow sales of its e-reader led to a tough recent quarter for the nation’s largest book retailer.

The company reported an overall total revenue slump for its third quarter, down 8.8 percent to US$2.2 billion. Before interest, taxes, depreciation and amortization, Barnes & Noble had earnings of $55 million, a 63 percent drop from the $150 million it brought in last year.

Lackluster Nook sales contributed to the earnings slump. Revenue for the Nook division was down 26 percent from the same time a year ago, dropping to $316 million. The sinking sales did not come as a complete surprise; the device had a strong showing over the Black Friday weekend, but Barnes & Noble reported in January that the e-reader “fell short” of expectations over the remaining holiday shopping season.

Digital content sales did increase 6.8 percent from the same time last year.

The company announced Thursday it would be switching its focus with the Nook going forward, with content development — especially educational — as a top priority. It will also trim costs associated with the Nook.

As part of an effort to secure future financing for the Nook, Barnes & Noble last year entered joint ownership partnerships with Microsoft and Pearson. Barnes & Noble now owns 78 percent of the unit.

Barnes & Noble did not respond to our request for further details.

Is the Nook Cooked?

When the company debuted its e-reader, it was praised for launching a product that could help the traditional book retailer survive in an evolving market, unlike competitors such as Borders. With heavyweights like Amazon’s Kindle and the iPad on the scene, though, the Nook seems to have had trouble keeping up.

“Today the black and white e-reader market is in decline, the field has obviously gotten more competitive and, as a result, it’s been more difficult to sustain the initial Nook momentum,” Pete Wahlstrom, analyst at Morningstar, told the E-Commerce Times.

The Nook’s initial momentum was a huge accomplishment for Barnes & Noble, which put up a valiant fight against competitors with more experience in the hardware or digital content business, said Ezra Gottheil, principal analyst at Technology Business Research.

The e-reader field has grown beyond most expectations, though, and many consumers can afford to spring for a functional tablet rather than simply a device they use to read.

“The Nook was a lovely product, but the handwriting has been on the wall,” Gottheil told the E-Commerce Times. “The prices of effective smaller tablets have come way down, and their power and flexibility has gone way up. Frankly, I can’t think of a way Barnes & Noble can compete.”

How to Save the Nook

Amazon and Apple have compelling hardware, but it’s also their established ecosystems that make it so difficult for the Nook to stand up against the iPad and Kindle products, said Gottheil.

It’s easy for those with a Mac computer, iPod or iPhone to gravitate towards the iPad when shopping for an e-reader or tablet; they know they could read a book they purchased on iTunes on any of the devices. Amazon, with its worldwide customer base and deep library of digital content, can afford to keep hardware prices low, knowing it can make up the difference with sales of e-books.

“Amazon’s got a much bigger store and many more products, not to mention much more bandwidth for promotions and advertising,” Gottheil noted. “What’s more, they can tolerate running losses to drive sales. If Barnes & Noble had more unlimited resources like that, they might have a better chance. But their resources are constrained and they’re going up against the major content networks with Apple, Google and Amazon. When you’re at the bottom, there’s not much to do.”

A short-term solution could be to slash Nook prices to try to boost its customer base, said Wahlstrom, but that’s not necessarily a sustainable solution. Barnes & Noble has some long-term strategic planning to do, and it wasn’t clear from the earnings report exactly what some of those strategies might be.

“The Nook would need to leapfrog the competition in order to entice customers to shift over to the Nook platform, a difficult proposition at best,” he said. “We think the cuts need to go deeper to help Barnes & Noble generate larger profits. Perhaps this means joining Microsoft’s engineers in outsourcing or changing suppliers for the Nook hardware or, in a more extreme move, cutting out the Nook device altogether.”

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License Change May Spark New Pricing Trend for Open-Source Projects

software license

Cloud-native microservices platform Lightbend wants open-source licensing to better meet developers’ needs and is doing something to make that happen. However, the replacement fix is not a traditional open-source license. Rather, it transitions there in time.

The company, whose user base includes some of the world’s largest brands, on Wednesday announced significant changes to the licensing model for its Akka technology. The platform is used extensively by industry leaders in financial services, e-commerce, automotive, web services, cloud infrastructure, and gaming.

Akka offers devs the ability to deliver concurrent, distributed, and resilient event-driven applications for Java and Scala. Lightbend is changing the license on all Akka modules from Apache 2.0 to Business Source License (BSL) v1.1, starting with Akka v2.7 which will be delivered in October.

That change will bring hefty licensing costs to high-end users. But Lightbend expects it to bring no major problems on open-source projects.

“The goal is to have as little impact on the open-source community and projects as possible. Open-source projects using Akka can contact Lightbend and apply for a license to use Akka within the realms of the open-source project. We have already called about the Play Framework in the Additional Usage Grant in the license itself,” Jonas Bonér, Lightbend’s founder and CEO and the creator of Akka, told LinuxInsider.

The new license will ensure a healthy balance between all parties, shared responsibility, and by extension, contribute to Akka’s future development, he explained.

Addresses Broken Business Model

The “open core” business model on which Akka is based has shown its limitations for Lightbend and many other organizations in similar circumstances, he offered. The toolkit’s licensing changes will ensure its future development.

Once an OSS project becomes so critical to an organization’s daily operation, many larger enterprises turn to self-supporting this software, without contributing anything more to its development or the community at large, Bonér observed. In many instances, these organizations are generating significant profits leveraging this “free” technology.

Under Akka’s new licensing model, any organization with less than $25 million in annual revenue will not require license fees for production usage of the software. However, Lightbend must still grant those users a $0 commercial license.

Larger businesses with more than $25 million annual revenue must now acquire a paid license plus a subscription for production usage. The BSL is available with several options. The new license does not permit back-porting of any software released.

“I think it is a viable path toward sustainable open source. I expect more companies that are building a business around open source to go down this path,” Bonér noted about the impact the BSL license switch will have on open-source projects.

How It Works

MariaDB Corporation crafted the BSL v1.1 now used by Cockroach Labs and other organizations. The BSL is not an open-source license.

In short, the difference is slight between the BSL 1.0 and BSL 1.1, explained Bonér. Version 1.1 fixed the loophole where a company could opt to never convert to a “change license” by now making it explicit that it could not be more than four years. A full discussion of the version change is available at MariaDB.

Akka’s new license works in two stages. First it has commercial overtones. Then it becomes “customizable.”

Under the commercial stage, users can view the source code of the software they obtain for the $0 license. They can download and use it in non-production environments. However, production usage requires users to obtain an upgraded software license from Lightbend.

The second stage kicks in under an open-source license after three years. That version then is released under the current Apache 2.0 license. It offers a customizable “Additional Use Grant” that will be used to grant usage for other OSS projects such as the Play Framework.

Pricing and Versioning Matters

Each new minor version of the software will have its own change date. A “minor version” is defined as a release that changes the second digit of the version number.

For example, a change from Akka 2.7.19 to 2.8.0 would reset the change date. A patch build change from 2.7.19 to 2.7.20 would not, according to Bonér.

Based on this license revision, here is Lightbend’s revised pricing and packaging for the Akka software:

Lightbend's Akka platform, packaging and pricing options

Organizations seeking more information about the implementation of BSL licensing can explore Bonér’s blog.

Jack M. Germain

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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