Friday, January 6, 2012

Is John Malone Responsible for B&N Desire To Split?

John Malone has been a master at building shareholder value for his companies. He acquires, he invests, and he splits his companies into separate stocks each producing value for its shareholders. It is what he has successfully done with Liberty Media, but his role as a shareholder of Barnes and Noble, may not do well by this strategy.

Like Netflix, B&N watched its share price drop significantly on the news of a possible split of digital and store. Certainly the remainder of the financial report did not help but as they say in the market, much of that was already priced in; it is the future that pushes a price's direction. B&N might have learned from the Netflix fiasco what not to do; unfortunately, it looks like history repeating itself.

I simply wonder if these two businesses, Nook and bookstore, have two separate P&L businesses, each competing with the other. As the Steve Job's book brilliantly articulated, Steve made everyone accountable for the whole business. The rise of the iPhone would hurt the iPod business, but rather than take a conventional business strategy to work independently, Apple worked together to move the iPhone forward despite a negative hit on the other business. If you also consider the DVD/streaming business, film distributors have been pressed to keep the DVD alive. These distributors had different teams with different P&Ls so the concern for lost DVD business actually slowed then down in releasing films on a new streaming platform. It is when the streaming and DVD businesses were combined that they could embrace the new world despite the fear in the old one.

Barnes & Noble faces the same challenge and separating the business will only quicken the death of the bookstore and not propel the Nook forward any faster. Working together as one unit is the key. One example would be to embrace the B&N reward card with the Nook. Currently the membership does not support Nook book purchases, only physical books. Why? It's affect for this family was to simply not renew our membership fee. And I am confident there are more marketing moves that B&N can undertake to improve and build a successful relationship between Nook and store.

Breaking up the B&N business is not the cure. It is in better operational and marketing strategies that embrace the synergies of the products and services they offer and the consumers that use them. I can only hope that wiser heads prevail.

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