HMV’s sale of Waterstone’s, one of the UK’s leading booksellers, removes some weight from around HMV’s neck, but doesn’t necessarily set Waterstone’s up for a digital future.
Last year, HMV (LSE: HMV) Group took joint ownership of aNobii, a soon-to-relaunch digital books discovery and retail service backed by publishers. aNobii was all set to use the e-commerce and cloud storage technology of HMV’s 7digital to power its own retail.
But jettisoning Waterstone’s from HMV Group would appear to divorce aNobii from the bookseller. aNobii CEO Matteo Berlucchi tells me: “HMV remains the shareholder. We carry on with our strategy and we’ll see what happens to Waterstone’s in the next few months.”
Waterstones is not entirely isolated online – it already sells its own e-books on its web store. It sold a million e-books in 2009/10, mostly in .epub and .pdf formats, transferred to e-readers with Adobe (NSDQ: ADBE) Digital Editions Installer, which doesn’t work on my computer. It got in to the e-book game through an early partnership with Sony (NYSE: SNE), whose e-readers were stocked in stores.
The more pressing issue, now that e-book sales are beginning to actually take off, is: what should Waterstones be doing in this area? The company has high brand association with book consumers – maybe it should do its own e-reader, Waterstones’ e-commerce manager Alex Ingrams suggested at the recent World E-Reading Congress.
When asked if Waterstone’s should ape Barnes & Nobile, which came to market with its own Android-based Nook device (also available as iOS, Android and PC software), Inghams told delegates:
“It’s certainly interesting. Waterstone’s is looking for a new owner – there is a clear candidate – I would hope that new owner would invest in a similar way. There are a number of plans we can advance quite quickly that would move us down a similar line.”
Barnes & Noble (NYSE: BKS) debuted its Nook relatively early, Inghams explained, because: “The U.S. market is seeing quite a stronger decline of physical earlier. They are pushing Nook front and centre to make it work as their stores change.
“The fundamental question for us is, what is the right brand and what is the right device? Nook answers this very well.”
The sector is in flux, but a Waterstone’s e-reader and on-board store of any particular brand could help reduce the possibility that Amazon (NSDQ: AMZN) and Apple (NSDQ: AAPL) will have this market to themselves. However, it could be costly and time-consuming to come to market.
In one way, HMV’s sale of Waterstone’s is untimely – HMV has targeted technology-related growth areas for focus, and e-books is certainly that at present.
Reporting Christmas results, HMV had said “Progress at Waterstone’s this year has been pleasing” and ” improved like-for-like sales reflects the success of the turnaround action”. In the previous period, it had said “the recovery plan is on track” for the bookseller, despite its sales continuing to fall.
But the fortunes affecting both the HMV chain and Waterstone’s itself – the migration of consumer media spend from physical product to digital content – has apparently proved too challenging to sustain each effort. Borders has already vanished from the high street; Barnes & Noble now has a suitor, too.