Why Barnes & Noble Is Good for Amazon

[Commentary] E-book sales boomed last year, including a 42 percent rise in sales of fiction. Net revenue for publishers also climbed more than $1 billion in 2012, to $15 billion, according to BookStats, an annual survey of the book business. But while publishers revel in the robust margins provided by e-books — no manufacturing, no shipping and no remaindering — the growth of Amazon leaves them as secondary characters in a business they used to control.

Apple may be the one that was found guilty of setting prices, but Amazon has the kind of market power that allows it to set prices unilaterally. The company is already pulling back on discounts on scholarly and small-press books. Barnes & Noble tried to keep up with the technological shift, but the company’s earnings were perforated by a $177 million loss from its Nook division, and that news took out William Lynch Jr., the chief executive, and threw a deep scare into publishers. In my view, Barnes & Noble is a company that did the right thing, and got clobbered anyway. When most media companies get into the device business, what pops out is clunky and useless, but the Nook is an excellent reading device that drew critical praise and, initially, buyers. At a time when legacy media companies are derided for letting the future overtake them, Barnes & Noble aggressively innovated.