By Jeffrey A. Trachtenberg
Of THE WALL STREET JOURNAL
Barnes & Noble Inc. (BKS) acquired Fictionwise, a leading
retailer of electronic books, and said it will launch a new
e-bookstore this year, as the e-book market heats up.
The purchase, for $15.7 million, comes only a few days after
Amazon.com Inc. (AMZN), the country's largest online bookseller,
said it is making its Kindle e-books available for reading on Apple
Inc.'s (AAPL) iPhone and iPod Touch devices.
"We bought Fictionwise because we like how they've approached
the digital and e-book markets," said William Lynch Jr., president
and chief operating officer of Barnes&Noble.com. "They have one
of the most popular applications on the iPhone, and they really
understand merchandising. They also have a lot of institutional
knowledge about this space."
(This story and related background material will be available on
The Wall Street Journal Web site, WSJ.com.)
At a time when book sales are lagging, e-books have been one of
the few publishing categories to show significant growth, although
they still constitute only a tiny fraction of book sales. Amid the
industry downturn, Borders Group Inc. (BGP) on Thursday said it is
laying off 742 employees, almost 3% of the company's work force.
This is the third round of layoffs this year at the nation's
second-largest bookstore retailer, after Barnes and Noble.
A Borders spokeswoman said the layoffs will primarily affect
behind-the-scenes employees, such as training supervisors,
merchandise supervisors and store leadership personnel and that the
average customer won't notice the change on the floor.
Fictionwise, based in Chatham, N.J., launched in June 2000. The
company stocks 60,000 to 65,000 titles and is adding 500 new titles
a week, said Stephen Pendergrast, a co-founder.
Pendergrast, who noted that Fictionwise is profitable, said he
and his brother, Scott, decided to sell because "the business is
exploding and we needed to partner with a corporation that could
provide us with necessary firepower." He estimates that Fictionwise
has sold as many as five million e-book titles.
The single largest category is romance, which he said now
accounts for 50% of all sales. He estimated total e-book sales in
the U.S. at $100 million in 2008, although he said that some
believe the market is larger. Fictionwise will operate as an
independent subsidiary.
Barnes & Noble was an early proponent of e-books, offering
Dean Koontz's "The Book of Counted Sorrows" in e-book form in 2001.
The retailer reversed course in September 2003, when its online arm
ended its e-book sales, citing a lack of public interest in the
format.
Now that has changed significantly, in large part because of the
success of Amazon's Kindle e-book reader, which enables customers
to download its books wirelessly. Amazon unveiled a new version of
its Kindle earlier this year with improved battery life. Customers
are able to download new best-sellers priced at only $9.99,
compared with $25 or more in the bookstores.
Lynch said that Barnes & Noble is still developing its
e-book retail strategy and that the retailer hasn't committed to an
exact date. "Our strategy is to be platform-agnostic," he said.