Let’s Take A Moment To Appreciate The Nook

Think about it this way: A bookstore chain — Barnes & Noble — has developed, successfully executed, and iterated a computer hardware and digital media business — the Nook — into something that should generate well over $1 billion in sales this year.

That’s pretty special. It would be the equivalent of Blockbuster Video inventing the Roku, or Best Buy creating a successful videogame console, or something. (Let’s see how successful Starbucks is with its new Verismo brewing system, for example.)

The most impressive thing about the Nook is that it even exists.

Today, some Nook data, via B&N’s October quarter earnings release:

• Nook segment revenue, including hardware and media, $160 million, up 6% year-over-year. (Comparison: Apple’s iPad revenue grew 9% in the September quarter, to $7.5 billion — not including media.) The Christmas quarter should be a lot more interesting and telling, as B&N’s newest Nooks didn’t go on sale until after the quarter ended. Still, this suggests perhaps around 1 million Nook sales last quarter, including e-ink readers. (Sammy the Walrus IV, who’s been tweeting about the Nook this morning, estimates similar volume.)
• Digital content sales increased 38% year-over-year. That’s more than the overall Nook business grew, and about the same growth rate as Apple’s (much larger) iTunes business, which grew 36% in the September quarter. But it’s down from 46% year-over-year growth in the prior quarter.
• Nook EBITDA losses were $51.4 million, flattish. Not ideal; B&N reported EBITDA profit as a whole of $64.8 million. The problem is that by chasing Amazon in tablet pricing, B&N will have a tough time making a profit here. And it’s hard to imagine digital content sales ever generating enough profit to matter, especially as long as Apple runs iTunes near break-even to drive huge hardware profits.

Then there is the bigger problem that B&N is still a bookstore chain, without a clear path forward. But we’ll save that for another time.

So, the Nook: It exists, it’s growing, and it’s not profitable. It’s not great, but it’s good. We’ll see what the holidays bring. But it is impressive — seriously — that B&N has even been able to get this far with the Nook.