More revelations concerning the DOJ’s cunning plan to put an end to predatory practices by punishing everyone except the predator
“To make a small dent in Apple, the Department of Justice will need to take a big swing. The danger is it will inadvertently whack Barnes & Noble.” Or at least, so says John Jannarone in a Wall Street Journal report. “Whether the department’s action results in a suit or settlement, there likely will be some attempt to dismantle the current arrangement. That has big implications for B&N.”
Jannarone theorizes that …
… if retailers gain any power to set book prices, it could lead to a pricing war. Amazon, known for undercutting rivals even as its margins continue to shrink, has sold e-books below cost in the past.
The timing would be difficult for B&N. The company recently has pumped large sums into its Nook tablet to compete with Amazon‘s Kindle and Apple’s iPad. While Nook has gained market share, it doesn’t appear profitable yet, according to John Tinker of Maxim Group. The big hope was that high-margin e-book sales would take off and drive profits higher.
If Amazon cut prices, B&N’s digital business could stall. Already, B&N appears to have struggled to generate enough cash from its traditional bookstore business to tide it over while the Nook matures. The company has forecast free cash flow of $25 million to $75 million in the year through April; a recent earnings shortfall means that may be tough to achieve.
In other words, no one emerges undamaged from the DOJ case except the company actually violating antitrust law: Amazon.
Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House.