Pearson to Take 5 Percent Stake in Nook Unit

The following is an excerpt from an article in:

The New York Times

Saturday, December 29, 2012

Pearson to Take 5 Percent Stake in Nook Unit 

By JULIA WERDIGIER 

Barnes & Noble moved to shore up its struggling Nook Media division Friday, agreeing to sell a 5 percent stake to Pearson, a British publishing and education company, for $89.5 million. 

In a sign of the headwinds the bookseller is facing, the company said in a regulatory filing that holiday sales were weaker than expected and that its Nook unit would fall short of projections for 2013. 

The forecast underscores the difficulties Barnes & Noble is having as it tries to build out its digital business and compete in a crowded market with giant companies like Amazon, Apple and Google. Sales for the first generation of e-readers have been dropping rapidly as consumers shift to tablets that can offer other forms of media like music, games and video. Just this week, Amazon was trumpeting banner sales of its Kindle Fire tablet over the holidays. 

By contrast, worldwide shipments of e-readers fell by 36 percent in 2012, according to a report released this month by IHS iSuppli, a market research firm. 

"The market's growth is slowing down," said James L. McQuivey, a media analyst with Forrester Research, referring to e-readers. "The easy customers have been snatched up. And the first customers are the best customers, who buy the most books. In the case of Amazon, you can compensate by selling merchandise to later adopters. Barnes & Noble doesn't have that luxury." 

Still, investors seemed to be cheered by the infusion of cash and the tie-in with Pearson's large education and textbook business. That market has trailed trade books in switching to a digital format, and Barnes & Noble could benefit as education books catch up. It could also try to make the Nook tablet a preferred device for educational content. 

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