Mr. Leonard Riggio
Barnes & Noble, Inc.
122 Fifth Avenue
New York, NY 10011

Dear Mr. Riggio,

I am founder and CEO of E-Reads, a leading independent e-book publisher. I’ve just learned that Barnes & Noble has put its Sterling Publishing subsidiary up for sale (Barnes & Noble Said to Put Publishing House Up for Sale). I would like to tender our offer for the company, and though the deadline for bids has passed, I hope that when you hear our proposition you will extend the closing date for us.

When I read the Sterling announcement in the trade news I could scarcely believe that you would contemplate shedding a publishing company boasting a backlist of 5,000 titles, one of the most valuable sources of content to come on the market in the Digital Age. While your principal rival Amazon builds its publishing list incrementally, you possess a ready-made trove of e-book content that is the envy of every competitor. The fact that both this treasury and the Internet channel to distribute and retail it are controlled by one and the same corporation gives B&N an almost unimaginable business advantage.  Yet you are prepared to abandon it in order to concentrate on marketing your Nook e-reader. No one I know understands the strategic or financial benefit of dumping all those books. Is content no longer king in your value system?

Well, Mr. Riggio, it is in mine, and thus with this letter I am happy to extend our offer to acquire the Sterling list for one dollar plus 50% of our revenues in perpetuity.  Though this may seem facetious we are absolutely serious and confident that you will make more money this way than the best buyout offer on the table. If you project the annual sale for each of those 5,000 titles at somewhere between 1,000 and 10,000 e-book units – a far from unreasonable projection — and the average net revenue per sale at $5.00, the potential annual revenue is in the hundreds of millions of dollars. Of which Barnes & Noble’s share would be 50%. Compared to the return on investing in hardware, the yield on book content is laughably superior.  If you can’t see it, give the content to someone who does.

I trust you will take our offer under the most serious consideration, and I look forward to hearing from you.

Sincerely,

Richard Curtis
President and CEO
E-Reads

Circle September 28th in red on your calendar. That may be the last day of Barnes & Noble as we know it.

September 28th is the day of the company’s shareholders meeting. The fate of the world’s largest bookstore chain will be decided when its founder Leonard Riggio and the second biggest shareholder, billionaire Ronald Burkle, duke it out for control of the firm. You would not believe the contriving, conniving, jockeying and maneuvering going on as these sumos confront each other with hate in their eyes.

Hard as it may be to believe, because of sagging financial performance against its relentless rival Amazon, Riggio stands to be ousted from his own company’s managing board. If he is, what will happen to the company and some 1357 trade and college bookstores? No one knows, because Burkle’s intentions are unclear.  He has been articulate about what he doesn’t want – Riggio and his policies – but far from clear about what he will do with B&N if he gets his mitts on it.  (See What Does This Investor See in B&N That We Don’t See?). Burkle has not evinced much love for books, but he loves money passionately and he obviously sees plenty of value in B&N. Or is it the land that B&N’s stores sit on.

For a in-depth analysis of both men and the empire they are fighting over, read Andrew Rice’s splendid New York magazine profile The Billionaire and the Book Lover.

Richard Curtis

Every Blogger owes a debt of gratitude to newspapers and magazines. This posting relies on original research and reporting performed by New York magazine.