B&N turns to Google to save the NookMay 3, 2013: 1:07 PM ET
Barnes & Noble's tablet business is struggling mightily. So what's the book chain to do? Let Google in.
FORTUNE -- Ask Stephane Maes, Barnes and Noble VP of Product, why holiday sales of its Nook tablets were weaker than expected, and he'll tell you it wasn't due to lack of interest. When shoppers looked at the Nook HD, one of the first things they asked was whether apps bought for their Android phones would also work on the tablet. "When the answer was 'no,' we had people walk away," he tells Fortune.
Although Barnes & Noble (BKS) does not disclose how many Nook tablets and e-readers it has sold, the book chain has said sales have not met expectations. Overall revenues for the Nook segment during Barnes & Noble's most recent quarter were $316 million, a significant 26% plunge compared with the same period the year prior. Given the company's announcement last January that it would shutter roughly one-third of its retail stores, bringing the total number of locations to 500 or less, it's clear Barnes & Noble is still struggling to find its footing in its ongoing digital transition.
"The more consumption-based tablets like ourselves and Kindle had some challenges because of that," explains Maes. "People were looking for the more full, multipurpose tablet that had everything and has that ecosystem that's spread between phones and tablets."
Which is why this week, Barnes and Noble is rolling out a major software update that signals a major shift in strategy. Now, Nook tablets will have access to Google's (GOOG) online store, Google Play, which includes 700,000 apps, as well as digital books, movies, music, and magazines. To be clear, this means Nook tablet owners will be able to buy and read e-books from Google Play just as easily as they can buy books from Barnes & Noble itself.
In essence, that makes the Nook a truly full-fledged Android tablet, but it also introduces a possible challenge for Barnes & Noble, which is seeing continued growth in digital content sales, an area that includes e-books. If Nook owners can just as easily buy e-books via Google Play now, won't that hurt Barnes & Noble's bottom line even further?
"Will we lose some content sales? Of course," Maes admits. "But we also believe we will also gain a lot of content sales at the same time because we are world-class merchandisers and curators of content. There were a lot of people who didn't want to enter our ecosystem before ... Now, all that has changed."