Amazon is making it hard for brick-and-mortar book retailers like Barnes & Noble to compete, because they have the luxury of not needing to make money from eBooks.
This topic was addressed in a panel of analysts today at Digital Book World called “What’s the Future for Brick-and-Mortar Bookstores?.”
Marianne Wolk, Amazon Analyst, EVP, at Susquehanna Financial Group, said: “Amazon seems to have little to no profits on eBooks right now as they compete for market share, which makes it very difficult for Barnes & Noble. Amazon only has about 15% of print books, but they have 70-80% share of eBooks and a very diverse business, that can support this. It is not a main goal right now to make a lot of money in eBooks, it is the goal to make market share.”
Matthew Fassler, Barnes & Noble Analyst/Managing Director at Goldman Sachs agreed that Amazon is making it difficult for B&N. He said: “The economics of the digital business for B&N today looks a lot worse than it should. eBooks should be making more money when you think about the lack of physical inventory and the agency model. The startup costs to enter this market are enormous, but we are concerned that it is not making enough money, which reflects a competitive marketplace.”
Is Barnes & Noble doomed?