Here's why Barnes & Noble attracts John Malone

Liberty Media, which operates the Starz cable networks and the Home Shopping Network, offers to buy the bookstore chain for $1 billion. It makes sense for Malone. Will it make sense for Barnes & Noble?

By Charley Blaine May 19, 2011 10:24PM
Credit: (C) Gene J. Puskar/APUpdated: 5:45 p.m. ET Friday

If you think about the totality of what John Malone does, then you begin to understand why he wants to buy Barnes & Noble (BKS).

Late Thursday, Malone's Liberty Media (LINTA) offered to buy the big bookstore chain for $17 a share, or about $1 billion, a 20.5% premium over the company's $14.11 closing price. The stock traded as high as $17.60 after hours, which is a signal some investors expect the offer to increase somewhat. The shares closed up 29.9% to $18.33 on Friday.

The offer comes with a condition: Chairman Leonard Riggio needs to stay, and he needs to have an equity position in the business. Barnes & Noble wouldn't say what it or Riggio will do. But it will consider the offer, which will need financing. 

Malone is interested because he is in the media business, and he sees Barnes & Noble as a media business because of its sizable online operation and its Nook electronic reader.

Malone's company owns Gifts.com; 40% of Expedia (EXPE), the online travel agency; 81% of Backcountry.com. Malone has interests in cable television, including Starz, the premium cable network; HSN, which operates the Home Shopping Network, and QVC, which operates a host of online retailing businesses.

There's more: a 67% stake in McNeil/Lehrer Productions, which produces the "PBS News Hour"; a 40% interest in satellite radio operator Sirius XM Radio (SIRI). His Leisure Arts business publishes needlework, craft, decorating, entertaining and other of what his company calls "lifestyle interest how-to books." He has a host of smallish stakes in other media companies, including Time Warner (TWX) and Time Warner Cable (TWC). Barnes & Noble

Apple's (AAPL) iPad may get a lot of attention, but, according to a Goldman Sachs report in February, the fact is that Amazon.com's (AMZN) Kindle has a 67% share of the electronic-reader business. Barnes & Noble has a 22% share. But Barnes & Noble has a 27% share of the electronic-book business, compared with Kindle's 58% and Apple's 9% share.

Barnes & Noble's online business, which is where Nook resides, saw revenue jump 52% to $319.4 million in its fiscal third quarter, which ended on Jan. 31. Most of the gain is Nook-related. The online business represented about 14% of Barnes & Noble's business in the quarter, up from 10% a year earlier. In March, Marc Parrish, a Barnes & Noble executive predicted that ebooks would dominate the book business perhaps as soon as two years.

Barnes & Noble has offered two versions of the Nook; a third version may be introduced next week, The Wall Street Journal said.

But the traditional book business has been troubled in recent years. Borders is in Chapter 11 bankruptcy and is shutting down stores. Independent shops are closing. Riggio put Barnes & Noble up for sale a year ago.

So, a great deal about Barnes & Noble would interest a John Malone, especially if Riggio stays. Riggio built Barnes & Noble from a modest New York bookseller into a national book chain and was willing to invest in Nook to compete against Amazon when a lot of analysts thought he was crazy.

Would Riggio be willing to sell? Yes, because he might get some backing to continue to build up the Nook business. Certainly, he would be able to tell his shareholders -- especially Ron Burkle, who owns 19% or so of the company --  he got them out of a horrible situation. The stock was at $47 in 2005 and fell to as low as $8.77 on April 18.

Barnes & Noble operates more than 700 bookstores across the country and is the world's largest specialty retailer, with revenue of nearly $7 billion in the last four quarters. Riggio started out running a college bookstore in Manhattan’s Greenwich Village. In 1971, he bought the Barnes & Noble name and its flagship store in Manhattan. The company expanded through acquisitions, buying B. Dalton Bookseller and Doubleday Bookshops.
25Comments
May 20, 2011 12:10PM
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ShopperBen, you obviously do not own an e-Reader. The iPad does not even come close to the Kindle or Nook for a reader. The important thing that differentiates the devices is the screen. Reading from a e-reader is exactly like reading from a paper book and there is no glare or bright screen to hurt your eyes. You can also read it outside or in any light. You would be an idiot to buy an iPad primarily for reading.
May 20, 2011 12:28PM
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The problem with the Nook and Kindle is that it will never surpass the technology and the force behind the iPad and iNet.   

Ummmmm...they aren't trying to. Kindle doesn't want to be an Ipad or even a PC tablet. That's not the point.

 

And surpass them? In e-reading? e-books? Apple has a miniscule share of that market (did you not read the article? They have about 10%) and that didn't change even though they sold 15 million Ipads. Soooooooooooooo....w​hy is it going to change?

 

What this does tell you is apple is not interested in a "reading consumer" people who have that misconception don't understand their marketing, their goals, etc. They make devices for people who want to only use devices to surf the web and listen to music. That's it.

 

It's not a bad move to aquire the Nook brand. Revenue jumped 50% in that segment for Barnes and Noble, is 1.2 billion a year annualized, and the margin is extremely high. There's no overhead for stores, etc. It's just online retail of e-books. No storage at all either.

 

In fact, most analysts said the bid was low.

May 20, 2011 10:54AM
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NO, NO, NO. . . .please Barnes and Noble don't sell out to ANYONE!  I love you just the way you are.  I am so tired of watching all thesre great stores and corporations selling out to some other big conglomerate that doesn't know your customer base. Money, money, money is all that matters anymore in this country.  It will eventually be our downfall I am afraid.
May 20, 2011 10:59AM
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By the way I bought the Barnes and Noble Nook and I love it.  It is great to just go on line and purchase a book and download it.  My Nook goes with me everywhere.Smile

 

AND, I am not a spam artist.  This is just an honest statement . . .Wow!  Can't believe what you said my comment was!

May 20, 2011 2:34PM
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I love to go to B and N. , look through the books, can find anything from antiques to novels or how to do it books. Have a comfortable place to sit while looking at books. I can see why they might try to get in the tec. and improve money, ok. But hope they keep the old stores the same, I go in an spend an hour or two sometimes more, when there. Don't get into town much, but love the store. Books that are hard to find you can call them and if don't have one will find it for you. This doesn't happen on on line stores or auction places. It would be very sad to loose the  Barns and Nobles store.
May 20, 2011 11:42AM
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Love love B&N. Hope they don't change. I too have an e-reader. The way of the future especially when I borrow library books for it.
May 20, 2011 4:04PM
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I like Barnes and Noble.  People like window browsing book stores like people used to like window browsing in movie rental stores.  (Some still do.)  Yes, online can be cheaper for certain services.  For example, you can usually find hardback books on Amazon at a discount.  And don't even get me started on the crazy DVD prices that B&N marks on their items.  The true niche of B&N is the smaller paperback book side of the business.  These books (which seem to run around $7.99) aren't discounted on Amazon at all, which makes a B&N more convenient.  If you buy a lot of paperback books and use their internal Starbucks cafe a bunch, then their 10% discount program is really worth paying the annual $25.

 

B&N is a niche.  Their Nook is expanding its business.  They are very price competitive on the traditionally sized paperback book.  If B&N focuses on these areas, then they should do fine as a business.

May 20, 2011 2:15PM
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Barnes and Nobles would get more business if the prices were cheaper. However, when I went looking for a specific book a few months ago, I looked at online prices and went to the local Barnes and Nobles as well as the local Books-A-Million. Cheapest price was Amazon.com by as much as 10 bucks cheaper. I was told I could get the book from Barnes&Nobles online shipped to me in a week for less than I could buy the book in the store but they still could not beat Amazon.com prices which were 5 bucks cheaper online (and that was taking in to account the shipping cost as well). If I am going to wait for it to be shipped then I am going with the cheapest price I can get. If I am wanting it right away, I will pay extra but when it is a 7-10 dollar difference, most people are willing to wait. A few dollars difference for convience of having it right away in store is not bad but 7-10 bucks difference? Unless one shops the sale books section, online is cheaper most the time I have found. So when I have no idea what I want other than something new to read, I browse the sale section or go to a used book store. When I know what I want, so far Amazon prices win almost ever time.
May 20, 2011 6:45PM
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I love my NOOK! I bought it before the price reduction & I purchased the two year warranty. I had a meltdown with the first one and had absolutely NO problem having it replaced within days.  It is so much nicer than the Kindle.  I also purchased the Kate Spade cover for it and love it too. (Got that at 75% off the original price so really got a deal on that...makes up for the $269 I paid for the NOOK!)  I enjoy being able to receive my books immediately without leaving the house. Additionally, I like that you can buy the books before they come out and start reading on the day they're released, again without leaving the house!  With the price of gas and the closest B&N 30 miles away, that's a great convenience.  I compared the Kindle and the NOOK and NOOK won!  I would highly recommend it to anyone wanting an eReader.  I LOVE IT!
May 20, 2011 6:16PM
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Sounds like B&N might be heading the way of the other big boys. See ya.

 

I've never been that fond of B&N, I was more of a Borders person, RIP.  Now they are about the only game in town, so I go there if I need to pick up something (or someone gave me a gift card).  I used to like B. Dalton, until B&N bought them out and shut them down.  I really loved The Book Stop, but B&N did the same thing.  Waldenbooks is also gone, so these are about the only big guys left.  It's just no fun browsing the stacks in our local B&N.  If I'm in the mood to look around, I'll visit our local independant bookseller.  If I know what I want, I'll either get it from Amazon or the book club.

May 20, 2011 10:30PM
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Many have already said. Amazon is the best cheapet way to go for used and new books. That's mostly true. The nook is good with periodicals and magazines, going color has made all the difference. Kindle competes with Sony with the advantage of bringing the price of books down and wi-fi technology instead of downloads from a computer everytime.What I don't like about Kindle, is there ability to take your books away.  

 

Tablets and iPads are really a waste of time, literally, they are entertainment devices, web surfing, movies, youtube, music. social networking, email. Perhaps productiviity will go up with reading pdf's easily and other documents. Nook with the android technology, now upto 2.2 gives you some of the above with the emphasis on reading.  

 

Allowing businesses to take over media is a bad idea, though. But with everything in politics and business this is USA, Inc. I just wonder when States default in their budgets if businesses will then take over, too. 

May 20, 2011 6:21PM
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Actually, the more I think about their business, B&N might be around in some capacity for quite a while.  They've managed to get a very large portion of the lucrative College Book Store market. I'm talking about the official ones on campuses, not the alternative, mostly-used ones off campus.  B&N has a gotten a number of them under management contract over the last decade. Liberty may be eyeing those as an outlet for their other business that they are not penetrating at this point.
May 20, 2011 5:12PM
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If you own Liberty Media after this purchase goes thru:

 

sellsellsellsellsell

May 22, 2011 9:17PM
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malone is an operator--he spends large amts of $ on continually re-organizing and re-structuring--and it's a nuisance for tax purposes--although now with the irs mandated rules on brokerage tracking of basis it will make life easier.  that said--it's unclear the value he sees in barnes and noble--but they have valuable assets in the bookstore leases, locations, customer good will, consumer interest in retail purchases--and yes their cafes make it a place to go. reggio is also an operator--but he is willing to fight for the"family" business, and in the end--it may survive the internet since people really need places in the community to go and connect--with people, books, and ideas.  the danger is giving malone this much power over the intellectual content--what exactly are his political ideas and who does he support? 
May 20, 2011 5:35PM
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I sincerely hope that the executives at Barnes & Noble do NOT let this sale go through.  It would just mark another retail giant being overtaken by an even larger giant.  Who is it going to hurt in the long haul???  Surely not the investors.  How about the CUSTOMER.  And I'm frankly getting tired of the super giants stabbing the customers in the back.
May 20, 2011 9:00PM
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I gave up on Barnes & Noble quite a while ago because there are many times when, after I make a purchase, I want to get a scone or a small snack and sit down for a minute.  But all the tables are taken up by people using their laptops, milking a drink and keeping us paying customers from using the tables.  Doesn't the corporate office see that this drives paying customers away while these moochers, who by the way, take books from the shelves, use them at these tables and then put them back!  All the while taking up valuable space for paying customers.  I have my Kindle, plus I buy all the used books I want from Amazon and I have never, ever been disappointed by Amazon.  Imagine a table for 4 paying customers taken up by a selfish person with a cheap drink, sitting at the table for hours.  I've seen it.
May 20, 2011 5:11PM
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Barnes & Nobles: lousy customer services, expensive merchandises, and not too friendly employees in San Jose store, but she is very sweet to her supervisor.

May 20, 2011 5:37PM
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I wouldn't give you a penny for that retail outlet and their store practices. I have not went into a Barnes & Snoble since 1998. When you make decisions on the store level that are absurd and anti customer....i never forget.

My wife sent me there to pick up a book for her and I forgot what the title was so I tried to call her. I discovered I left my cell phone on my kitchen table so I went to the front desk to ask to call home quickly.

What did Barnes & Snoble tell me?

Was it:

A) Of course Sir, what is the phone number and I'll dial it for you.

B) What type of book was it Sir, maybe I can jog your memory OR

C) I'm sorry sir, you will have to buy something before I can let you use the phone. That's what I'm trying to do maa'm, buy a book. I need the title and I'll buy the book.....I'm sorry but you need to purchase something first even if its a water or something small before I can let you use the phone.

Did you folks choose C? DING, DING, DING  you won. That was the incredible response I got from the person at the Barnes and Snoble book store in the Eagleridge shopping center in Pueblo Colorado in 1998......

I have never set foot in that store again and have created the new name Barnes & Snoble. I hope it was worth it....I wonder how many people I have told about this since 1998? Hmmmm



May 20, 2011 5:12PM
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No longer a fan of Barnes and Noble.  Made the mistake of buying the Nook at it's highest retail price $259.  There was a problem with the Nook, and had to be replaced within 2 months of buying it.  Then it crapped out again in January of this year.  I was without a Nook or favorable customer service for over 10 weeks.  Then i ended up gettiing a Certified Pre Owned Nook replacement.  That is not what I bought the 2 year extended plan for!!  And just yesterday, they sent an email telling me they were charging me for a book that I did not download nor had I even heard of it or its author.  Their customer service is the poorest that i have found.  I am sincerely disappointed in the Nook.  As soon as this one craps out, I'm going Kindle.
May 20, 2011 1:48PM
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B & N might have what looks like the ability to grow, but I doubt it. As more and more people eschew reading a book made with tree products and go to one made with petroleum products, we will see stores like Wal-Mart that have book sections get rid of them, too.
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