Are we about to see bookstores closing across the country? I suspect so.
Look at the depressing proxy battle for what remains of Barnes & Noble (BKS, news, msgs), the world's largest chain of bookstores. You could hardly dominate an industry more than B&N has dominated the landscape of traditional bookstores. Yet its fortunes have fallen so far that management has hoisted the white flag and put it up for sale.
Barnes & Noble stock, which was flying above $45 five years ago, has plummeted to around $15. Wall Street's view of its prospects is so dim that not even the news of a bid battle has set it alight. The only bright spot: the company's e-book sales, which rocketed 51% last quarter.
(A vignette of a company in decline: Barnes & Noble's annual filing shows that management and staff own 5.5 million stock options, granted to them in previous years to give them an incentive to work harder and smarter. The options have an average exercise price of $20.19 -- meaning most of them, if not all, are now seemingly worthless.)
As for the other giant of traditional bookstores: Borders Group (BGP, news, msgs) stock has plummeted by as much as 95% from its peak. Indeed, Borders stock, at around $1.29, is now a fraction of the cost of a book.
Meanwhile, e-books have now reached that tedious cliché, the tipping point. Amazon.com's (AMZN, news, msgs) latest Kindle e-book reader has sold out -- weeks before it even started shipping. The new device is smaller, cheaper and has a better screen.
Amazon says it's now selling more e-books than hardcover books -- about 43% more in the last quarter, including about 80% more in the final month.
It doesn't end there.
Expect prices for e-book readers to start collapsing. How can Barnes & Noble still charge $149 for its Nook, or Borders charge $149 for the Kobo reader, when Amazon's newer, better product sells for $139?
And, of course, it's not just about e-book readers. People are also downloading electronic books onto their laptops, cell phones and tablet computers like the Apple (AAPL, news, msgs) iPad.
But e-book readers are the key for serious readers. Their screens, unlike those on regular devices, emit no light into your eyes. So they are much better suited for reading.
While prices collapse, screens are getting better. The latest Kindles have the newest, improved version of "eInk" screens. (I've used one of these screens, and it's a noticeable improvement.)
Change comes quickly
We already know how this story is going to end. We saw it with the cell phone and with the iPod. The devices and services get better and better until suddenly they go mainstream.Three years ago, there was a limited supply of e-books and an e-book reader cost $400 and came with a dark gray screen that wasn't so easy on the eyes. Today, readers are just over $100, the screens are excellent and there's an almost unlimited choices of books. And, naturally, you can download books over the air.
When I was growing up, record stores were a place you could hang out. In a really great store -- one of those big city leviathans spread over several stories -- you could spend the best part of a day flipping through the racks looking for hard-to-find records, obscure titles, things you'd never even heard of.
Teenagers today probably have no idea what I'm talking about. Who goes to a record store? Why don't you just download your music onto your iPod?
In 2002 the iPod took off. Today the number working in music stores is 20,000 -- a 75% collapse.
As for the book industry: About 125,000 people still work in book stores and news dealers, according to the department. How many of them will still have jobs in two years? Another 75,000 work in book publishing. When writers self-publish in electronic format, how many publishers will still be left?
I will be sorry to see the bookstore go. I love browsing for books, finding titles I wasn't expecting or didn't know existed. I love discovering an out-of-print gem in a second-hand bookstore.
Even today, if you make the full use of money-off deals and coupons at places like Borders you can often get paper books for less than e-books. And there's a limit to how much you can carry, so there's a limit to how much you can buy. I'll admit I'm getting fed up with technology. I dislike computers. I've even taken to reading an old-fashioned newspaper again.
But it's "progress." We'll have to deal with it.
