Revenues from its Nook device and digital content division increased by nearly $10 million in its second-quarter, but Barnes & Noble couldn’t stop the bleeding for the unit as it continued to pile on the losses.
While revenue increased for Barnes & Noble’s Nook to $160.3 million from $151.8 million in the same period a year prior, losses also increased to $51.4 million from $50.8 million a year ago. At the same time, digital content sales were up 38% versus the same quarter last year.
“We believe we maintained our healthy 25% to 30% share in digital books,” in the quarter, said Barnes & Noble chief executive William Lynch on a conference call discussing the earnings. On a related note, he estimated Amazon’s UK ebook market-share to be above 90%.
Internally, Barnes & Noble leadership is still optimistic about Nook’s long-term prospects.
“The Nook business will scale in 2013,” said Lynch on the call. Helping it scale will be its partnership with Microsoft, which will pay Nook $50 million a year for the next three years as an advance on profits (read: unless there are profits, it’s financing for Nook). Lynch also said that the company anticipates its educational digital content business to grow by 50% a year over the next several years. “The key to the Nook business is to continue to grow digital content sales,” he added.
Matching Amazon’s growth in Kindle unit sales, sales of Nook devices doubled over the “black Friday” holiday shopping weekend, Lynch said. These sales will be reflected in the company’s third-quarter earnings.
Overall, the company saw its revenue in the quarter decrease 0.4% to $1.88 billion and its earnings before interest, taxes, depreciation and amortization (EBITDA) increase by 15.6% to $64.8 million. The growth was driven by the company’s retail bookstore business, which saw EBITDA increase by about 100% to $28.4 million.
In a statement, Lynch touted the quarter for its growth in EBITDA and for the successful formation of its Nook Media subsidiary, a joint venture with Microsoft.
“We expect our two highly acclaimed new NOOK products, and our Microsoft partnership on Windows 8 to further fuel the growth of our digital business, and are encouraged by the promising start to the holidays in our retail and digital businesses,” he added.
On the conference call, he said, “we are pleased with our overall financial performance in Q2.”