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The challenge of blending physical business with on-line
Slate's ''The Big Money'' blog offers a fascinating analysis of the new Barnes & Noble eBook reader, the Nook. Author Marion Maneker suggests that while the Nook is designed to compete against Amazon's Kindle, it might only underscore the fundamental differences between Barnes & Noble's business model and that of Amazon.

In brief, Amazon is in the business of delivering books through on-line sales. If that book can be delivered digitally, rather than in physical form by mail, Amazon wins by delivering a comparable product with vastly lower cost. Barnes & Noble, on the other hand, is a bricks-and-mortar retailer. And while their Nook strategy offers incentives to actually bring the device to one of their stores, the cost implications are vastly different -- prices drop, more digital books are purchased instead of physical books, but the retail side of that equation gets hammered in the process.

Barnes & Noble still needs to stock shelves, pay rent, and hire staff...at least for the immediate future. And if they're successful with the Nook, their margin to do so will get narrower and narrower (and perhaps negative) really quickly.

For arts and cultural managers, the analysis offers a sideways glance at the challenge of adding on-line strategies to place-based businesses (theaters, museums, galleries, and the like). It's a necessity if your goal is really to engage an audience. But it can have consequences that accelerate the business problems you already have in your primary endeavor. And you don't get a lot of time to decide. Says Maneker: 

In an orderly world where change takes place incrementally, the Nook might be a smart long-term strategy to shift Barnes & Noble's base from physical stores to e-readers. But we don't live in that world. The book business has shifted into hyper-space with dramatic change taking place within a compressed time frame.
October 26, 2009 9:06 AM | | Comments (8) |

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8 Comments

It is a shame to go away from the very basic needs of a human being. Books in their material form are very important connection to a person. The book takes you away and holds you grounded; your mind takes you on the adventure while your hands are touching the pages of the adventure. Arts should be seen in person for you to connect with all that it is. You may not be able to touch the art with your hands; but all your other senses come into play to bring the experience alive for you. The excitment of all the performers, everyone looking forward to a great evening of entertainment, and having friends with you; all makes the evening what being people is all about. The electronic words or pictures are only good for the information part of your brain. There is a reason for material things to be around us, for performance to be live, and us to be in the middle of it all. I am sure anyone who reads this will know, but there are many others who do not care. mesp

As an author, i certainly don't know what to think of all these dramatic changes, and how they will change/damage incentives for authors. I have two national bestselling books (current book, The Leap), and so far have not made a penny from either. (but that is not really why you write).

As for Barnes And Nobel, as Seth Godin would say, it is going to happen with or without you - at least get in the game!

Rick Smith

I agree that Barnes and Noble is in trouble if they try and compete with Amazon in the digital-only content space. If I were them, I would use the e-book reader as channel to announce events happening in-store. Author signings, new releases, holiday sales. Get the people in the door, offer an experience they can't get at home.

Amazon is for people who know exactly what they want. Barnes & Noble is for people (admittedly, me) who do last minute holiday shopping in the calendar/journal aisle and drink coffee to hide from the rest of the mall.

In that way, theatre orgs are like Barnes and noble. I'm afraid we are going to find a similar problem justifying the costs of location in a e-commerce world.

An example: my box office charges $4 _extra_ to purchase a ticket online or by phone. Phone/online is more costly for us because the boxoffice windows need to be staffed anyway, and the internet service, online ticketing software, database backend, and overflow phone banks are all additional costs above and beyond that person at the window.

So the cheapest way to buy a ticket is to walk up and pay cash, the most costly is to buy online. This could be a real problem with our patrons, who are used to the Amazon method of online only as the cheapest method of fulfillment.

I'm all for offering online goodies for free, in the hopes that it drives ticket sales. But like ticketing, "free" to our patrons still costs us something to produce. My question is: do we tell patrons what this is costing? Or do we charge everyone more instead?

I am the first person to say that museums (my specialty) must consider the _entire_ experience offered to their visitors. I certainly do not assume that the direct experience of the work is the "sole purpose" of a visit. In the end, though, you do have to visit if you want to see the work. That is essentially a different case with books.

Great thoughts, Charles,

Embedded in your response, however, is the assumption that the direct experience of the work is the sole purpose for attending a symphony or visiting a museum. While I'm an absolute advocate for the unique power of sharing space with the original, or experiencing the live performance, I'd nudge that assumption as a general conclusion.

People go to museums or attend live events for all sorts of reasons, usually intertwined: sharing a conversation around art, finding a reflective space, escaping, remembering, connecting, creating, and on and on. Some of this is not exclusive to proximity with the unique original. And as cultural organizations extend their efforts online, they'll probably want to be pretty clear about how they're enhancing or diffusing the work they think they do.

The comparison between literature and visual or performing art doesn't really hold up. One can fully experience a painting or symphony only in the presence of the unique original. I see no way around the physical "store" (museum, concert hall), at least until reproductions are good enough to be mistaken for the originals, which does not seem to be the trajectory of current technologies. (Photography is one visual art exception that should eventually prove the rule, though the continued popularity of photography exhibitions tests that thesis.)

Of course, we can derive a great deal of satisfaction from a decent reproduction. But, in the long term, the reproduction tends to build demand for the unique original.

The book business (and to a lesser-extent place-based cultural presenters and producers) have to look closely at what has happened to the music industry for the best example of what goes on when digital media usage collides with analog and other forms of media/media delivery.

It will take some time to find the right mix of physical store vs. online portal, etc.

Interesting post, Andrew. I'd be interested to hear more about what consequences you see an increased online presence having for place-based businesses like museums. I know this was something we in the museum community fretted about for a long time, that a really good online presence would cannibalize visitorship to the physical museum, but (and I'm willing to be talked down on this point if there are studies out there showing otherwise) that hasn't really happened.

I think actually the reverse issue might be the bigger problem; that the physical building is cannibalizing potential users from the online presence. At least for museums, our Web sites are still geared towards steering people to the building. This means that, for the purely online visit, there isn't actually that much to do. While I sympathize with B&N's problem here, museums/galleries/theatres have a "uniqueness" asset that no B&N store will ever have. There's a reason to go to the actual building, and it is to witness the embodiment of "culture" firsthand. But very few cultural orgs have figured out how to translate that asset into the online space.

(And, if I may sheepishly insert a blatant plug here, I'm doing a series of posts on this very issue right now over at kovenjsmith.com...)

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