The Next Harry Potter Could Save Barnes & Noble

Instead of selling off its publishing division, Barnes & Noble BKS should use it to hunt for the next Harry Potter. Harry Potter was more than a book franchise; it was an event – an event that consumers lined up for in endless anticipation. From afar, onlookers might have thought that a new Star Wars film was opening, or that a new game console was being released. Most recently, you could have mistaken a Harry Potter line for the launch of a new Apple AAPL device. That's because Harry Potter, more than any other book franchise, turned people into genuine diehard readers. It transformed kids, teens and adults into lifelong fans of something that did not have a single visual or interactive component. It is, in essence, the very definition of a mainstream-revolutionizing work of art. It is also the most important franchise bookstores have ever sold. While many readers are content to buy from Amazon AMZN and wait for the book to arrive by mail, Harry Potter provided readers with a reason to abandon online retailers and return to traditional bookstores While Barnes & Noble execs will tell you that physical store sales lead company profits (in fact, that's just what CEO William Lynch told CNBC this morning), they acknowledge that digital books that will experience the greatest amount of growth. “The growth will be in digital, hence our investment in digital,” Lynch told CNBC. Like any chief executive in his position, Lynch won't concede that his company is in trouble. Instead, he told CNBC that the average Barnes & Noble store carries 92,000 different SKUs. He spoke about the rising sales of toys and games. And he said that the physical business will continue to provide the biggest part the company's sales. But if Barnes & Noble is serious about maintaining the success of its stores, why would the company sell off Sterling Publishing? To do so would be a Netflix-sized mistake. Sterling Publishing could be the lifeline Barnes & Noble needs to survive. Instead of allowing this publisher to, well, behave like a publisher and throw more garbage on store shelves, Barnes & Noble should transform the company into a book publishing powerhouse that is dedicated to finding the next Harry Potter, the next Twilight, the next Hunger Games – and even the next Stephen King. If Sterling Publishing could acquire just two major franchises per year for the next 10 years – and if those franchises achieved just 10% of the success of Harry Potter – it would be enough to save Barnes & Noble. Barnes & Noble could build its entire business around major book launches. It could offer unprecedented exclusives (signings, readings, and meet-and-greets with the author), and be the first retailer to release its own highly anticipated books. Barnes & Noble could rebrand its stores as event locations – a place where people go when major books are released. This strategy could slowly be used to re-train people to like the idea of buying books in-store. None of this would be easy. In discussing this story with other writers at Benzinga, one asked, “How many Harry Potters could there be?” “We don't really know,” I replied. “A lot of great stories go unpublished.” To be successful, Sterling Publishing – and most importantly its current parent, Barnes & Noble – would need to scour the world for great, untapped writers. Contrary to popular belief, they are out there. But just as Hollywood loves to waste money on garbage nobody wants (including three attempts to make a show based on the website Texts From Last Night), book publishers do the same. They publish based on flawed data that shows that Johnny Reader and Bob Bookworm might like Novel X. They don't care about quality, originality, or the true art of storytelling. But Barnes & Noble must. If it could accomplish the aforementioned goals, the company would (if nothing else) have two major book launches per year. Assuming that each launch is part of a franchise, then the number of major launches will quickly multiply. At an average of three books per franchise, Barnes & Noble would have six major launches (two new franchises per year times three years) on the third year! Better still, humans are habitual creatures. The more they come to Barnes & Noble, the more they will come. During any given weekend, GameStop GME locations around the country receive a steady stream of customers. Whether they're selling games or buying them (or both), GameStop wins. People could choose to buy their games online in physical form (which most gamers still prefer over digital downloads). But they prefer to buy them in-store – partially because the prices are rarely any better online, but mostly because they can't wait for the game to be shipped. When consumers want to play a game, they want to play it right now. Barnes & Noble needs to build a similar future for its own book franchises. While GameStop can rely on game publishers like Activision ATVI and Take-Two TTWO to build long lines for the retailer, book publishers are not doing the same for Barnes & Noble. Thus, the retailer must take this matter into its own hands. Otherwise the critics will be right, and Barnes & Noble's days will be numbered.
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