Goes Private

Barnes & Noble today announced plans to pay US$115 million for the 25 percent of that it doesn’t already own and to turn that publicly held online operation into a private subsidiary. That news might be perceived due to failures in’s online sales, e-books or printing on-demand technologies, but the real answer is behind the scenes. was launched in 1997 as a publicly-held company of which Barnes & Noble and Bertelsmann owned the majority of shares. Much of that launch was in reaction to the rise of sold books, magazine subscriptions, e-books, CDs, DVDs and software and had developed equipment to print paperback books on-demand in Barnes & Noble stores, which would have greatly reduced those stores inventory costs. has never seen a profitable quarter. Last year, it closed its book on-demand printing operation, despite successful tests of that technology. In July, Barnes & Noble bought Bertelsmann’s shares for US $164 million. And, in September, stopped selling e-books, citing poor sales and limited technology.

Outside observers might perceive those moves as somehow due to failures in’s online sales, e-book or printing on-demand technologies. But, as we wrote in September when stopped selling e-books, the closure was mainly due to’s never having reached Barnes & Noble’s overarching, Internet Boom era sales targets for it.

In actuality, the brothers Leonard and Stephen Riggio, who respectively are chairman and vice chairman of Barnes & Noble, are also respectively the chairman and and vice chairman of, its largest individual investors, and control most of’s shares. They’d initially launched as a public company as a means to enrich themselves via their equity holdings. Profitability was a secondary goal; their primary goal was as an equity play. By owning the largest portion of the shares and selling those bit by bit when the stock went stratospheric, the Riggio brothers planned to become billionaires, the way that Jeff Bezos of has.

Unfortunately for the Riggios, they launched a bit late. Although their holdings briefly made them billionaires, the Internet Boom busted not long after their launch. With shares now worth a fraction of the old value, their plan for an equity play has evaporated.

As the controlling managers of the Barnes & Noble ‘brick & mortar’ bookstores, they don’t now foresee any immediate threat to their stores from e-books or on-demand printing by competitors, so they stopped spending on further development of those technologies. They’ll keep operating as a continuing defensive measure against But they no longer have any motive to share ownership of that with anyone else. So, they’ve bought up the other owners’ shares for fractions of the previous value and are making privately theirs.