Friday, May 2, 2008

Information goods and disintermediation

Regular readers know I enjoy topics about how the Internet is impacting information goods. One of the first business cases I wrote was about Barnes & Noble’s e-commerce strategy. As a professor (and a blogger) I’ve been musing on how newspapers are (failing) to deal with the end of dead tree businesses.

Competing with online sellers, Borders (the bookstore) is going through wrenching changes. One reaction has been cutting back on some of the traditional sources of value. The company is trying a new format, and the first one on the West Coast opened yesterday near San Diego.

As the San Diego paper reported, the problems of the retail book industry are daunting:

Pity the poor bookseller, stuck between two less-than-heartening statistics.

One in four adults read no books of any kind in 2006, according to an Associated Press poll released last year. And those who do read increasingly like their page turners to be digital: Sales of e-books have grown at a compound rate of 55.7 percent a year since 2002, compared with a 2.5 percent growth rate in sales of paper books, according to the Association of American Publishers.
The response? Have a physical store where you can buy download goods, like mix-your-own-CDs.

IMHO the Borders plan is doomed to fail, and if Borders fails re-invent itself, the company too. Will Barnes & Noble follow? Or are the cross-promotion opportunities of clicks-and-mortar (the purpose of my old teaching case) enough to insulate it from the problems of their retail-only problem.

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