Fictionwise acquired by Barnes & Noble for $15.7 million in cash

logo_btmnew6Fictionwise has been acquired by Barnes & Noble, said to be the world's largest bookseller, for $15.7 million in a stock deal that TeleRead revealed earlier today.

I spoke with Scott Pendergrast of Fictionwise at 7:20 a.m. EST this morning and he told me that all the Fictionwise sites---Fictionwise, eReader and eBookwise---will continue as they currently exist. Fictionwise will still be managed by its current team as an independent entity under Barnes & Noble. Scott said that Barnes & Noble was fully behind Fictionwise's philosophy of "platform neutrality and eReader everywhere".

A full press release and FAQ were to go up on the Fictionwise site at 8:30 a.m. EST today. (Update: Here's a press release (source of the $15.7 million figure) which we'll reproduce at the end of this item. The FAQ is here.)

Analysis: In his exclusive telephone interview with me, Scott Pendergrast said he and his brother, Steve, shopped the site around to a number of buyers with the understanding that the current philosophy toward e-books would survive---and that presumably means that you'll still be able to buy nonDRMed books from Fictionwise when publishers allow.

The actual transaction is notable for who did not buy Fictionwise: a company like Amazon or Ingram that might have ended Fictionwise's nonDRMed multiformat releases.

If the Pendergrasts' current plans survive, this could also be good news for the ePub standard, which will be the core format for a reinvented eReader.

What's more, if the Pendergrasts' vision remains, eReader will be available for Linux, complete with DRM capabilities for publishers that insist on "protected" books.

The fact that Amazon or Ingram didn't buy Fictionwise also could be good news for Lexcyle (developer of Stanza) and other e-reader vendors interested in licensing Fictionwise's DRM.

Of all the major DRM systems, the one in Fictionwise's eReader softare could well be among the gentlest, allowing you to copy a book to an unlimited number of your own devices--unlike systems from, say, Mobipocket. Fictionwise DRM uses encrypted credit card numbers as a way to discourage copying.

In retail terms, the deal might open up all kinds of financial and inventory resources for Fictionwise.

Not everyone sees full positives here. "Fictionwise was the big independent in the industry, and also the company most willing to work with small publishers and non-DRM," Rob Preece of BooksForABuck.com, a small e-publisher, said in a TeleRead comment. "I’m sorry to see them go as an independent force, and not especially happy that BN made the purchase as they haven’t traditionally been especially friendly to small publishing.

"Still, great news for Scott and Steve to cash out their position after a lot of hard work. And wonderful that if FW was to be acquired, it would be acquired by someone committed to books and not automatically leading to more consolidation in the industry."

If B&N respects the Pendergrasts' philosophy, then, as noted, the nonDRMed books will indeed continue.

Press release follows

Barnes & Noble Acquires Fictionwise
Thu. March 05, 2009; Posted: 08:30 AM

NEW YORK, Mar 05, 2009 (BUSINESS WIRE) — BKS | Quote | Chart | News | PowerRating — Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, announced today that it has acquired Fictionwise, a leader in the e-book marketplace, for $15.7 million in cash. Barnes & Noble said it plans to use Fictionwise as part of its overall digital strategy, which includes the launch of an e-Bookstore later this year. In addition to the closing purchase price, Fictionwise may receive earn out payments for achieving certain performance targets over the next two years.

Headquartered in New Jersey, Fictionwise was founded in 2000 by Steve and Scott Pendergrast. Barnes & Noble intends to keep Fictionwise as a separate business unit and the founders will continue to operate the business.

ABOUT BARNES & NOBLE, INC.

Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller and a Fortune 500 company, operates 799 bookstores in 50 states. Barnes & Noble is also the nation’s top bookseller in quality, and for the fifth year in a row, the top bookseller brand, as determined by a combination of the brand’s performance on familiarity, quality, and purchase intent, according to the EquiTrend(R) Brand Study by Harris Interactive(R). Barnes & Noble conducts its online business through Barnes & Noble.com (www.bn.com), one of the Web’s largest e-commerce sites.

General information on Barnes & Noble, Inc. can be obtained via the Internet by visiting the company’s corporate website: www.barnesandnobleinc.com.

SAFE HARBOR

This press release contains "forward-looking statements." Barnes & Noble is including this statement for the express purpose of availing itself of the protections of the safe harbor provided by the Private Securities Litigation Reform Act of 1995 with respect to all such forward-looking statements. These forward-looking statements are based on currently available information and represent the beliefs of the management of the company. These statements are subject to risks and uncertainties that could cause actual results to differ materially. These risks include, but are not limited to, general economic and market conditions, decreased consumer demand for the company’s products, possible disruptions in the company’s computer or telephone systems, possible risks associated with data privacy and information security, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, possible disruptions or delays in the opening of new stores or the inability to obtain suitable sites for new stores, higher than anticipated store closing or relocation costs, higher interest rates, the performance of the company’s online and other initiatives, the performance and successful integration of acquired businesses, the success of the company’s strategic investments, unanticipated increases in merchandise or occupancy costs, unanticipated adverse litigation results or effects, the results or effects of any governmental review of the company’s stock option practices, product shortages, and other factors which may be outside of the company’s control. Please refer to the company’s annual, quarterly and periodic reports on file with the SEC for a more detailed discussion of these and other risks that could cause results to differ materially.

SOURCE: Barnes & Noble, Inc.

Mary Ellen Keating
Senior Vice President
Corporate Communications
Barnes & Noble, Inc.
(212) 633-3323
[email protected] For full details on Barnes & Noble Inc (BKS) click here. Barnes & Noble Inc (BKS) has Short Term PowerRatings of 5. Details on Barnes & Noble Inc (BKS) Short Term PowerRatings is available at This Link.

14 Comments on Fictionwise acquired by Barnes & Noble for $15.7 million in cash

  1. Wow.

    Fictionwise was the big independent in the industry, and also the company most willing to work with small publishers and non-DRM. I’m sorry to see them go as an independent force, and not especially happy that BN made the purchase as they haven’t traditionally been especially friendly to small publishing.

    Still, great news for Scott and Steve to cash out their position after a lot of hard work. And wonderful that if FW was to be acquired, it would be acquired by someone committed to books and not automatically leading to more consolidation in the industry.

    Rob Preece
    Publisher, http://www.BooksForABuck.com

  2. And it’s been confirmed by a press release. The deal was valued at $15.7 million. Pocket change for a shop like B&N, but not a bad price for a standalone e-book shop.

  3. “If the Pendergrasts’ current plans survive…”

    I’ll wait and see, but I’m not optimistic. Most mergers and acquisitions end up no where near being what the original bright and shining vision was.

    If Barnes and Nobles goes with no DRM and multi-formats, I’ll be happy. If they lock the entire shop down into eReader and DRM, oh well, there’s always Baen and Gutenberg and Manybooks…

  4. I’m of two minds. On the one hand, this provides much more support for FW. On the other, it’s one less retailer in the marketplace. We’re back to B&N and Amazon as defaults for online purchasing for most customers. It would be nice to balance out the market with a few other ebook retailers.

  5. Congrats to the Pendergrasts. Well done.

  6. Any counterbalance to Amazon at this stage is a good thing. True competition will be good for this process. DRM issues aside, my biggest hope is that B&N finds a way and the courage to take a smaller ebook royalty than Amazon’s 60%. Their doing so, if they can become a major player, might force Amazon to do the same. Lack of physical inventory and distribution, I feel, means that a 60% cut for the seller of ebooks is absolutely unreasonable.

    For more on my crazy ideas about how B&N (or someone) might do this, click the link on my name.

  7. A kiosk in every B&N where you can purchase an ebook and either download it to your hardware or have it burned to CD/DVD–a consummation devoutly to be wished.

    B&N’s lack of support for small publishers is strictly based on the requirement that print books be returnable, which many small presses with tight budgets can’t afford. They have always been willing to add small press books of sufficient quality to their database or get them via Ingram if available there for special orders. Emphasis being on “sufficient quality.”

  8. It seems to me that this is a smart move by Barnes and Noble. It doesn’t take much analysis to realize that the only part of the publishing industry that is growing right now is e-books. Whats further, they have to have recognized that they are quite late to the e-book game. Amongst the dedicated reading devices it is the Kindle, the Sony PRS and everything else is a fairly distant third. The PDA/smartphone/iPod/iPhone world is better balanced but still it would be a big leap for B&N to start from scratch at this point. It makes a lot of sense for them to acquire an independent like Fictionwise; it gives them access to developers, product and a built customer base.

    Now the key of course is recognizing that Fictionwise’s success is built on a particular model. If B&N is smart they will leave that model essentially unchanged… Try to support lots of devices, keep a friendly DRM scheme and if possible get eReader software on dedicated reading devices.

    With Kindle software now on the iPhone, B&N, Sony and others are I think going to have an uphill battle to prevent Amazon from becoming the dominant player in the industry, but at least it is still doable.


    Bill

  9. I am terrified! Brnes and Noble is an *American* giant company. Not that there is anything inherently wrong with that—I suppose Fictionwise was too—but they are a very large American company, and I worry that we will start to see things like geographical restrictions a la Books on Board in Europe, or even worse, exclusivity a la Amazon Kindle, still not available to non-Americans.

    Paul, if you really do have an inside line wit Steve and Scott, can you put my mind at ease and confirm for me that they intend to continue supporting their international customers and that any new products and developments will be available to everyone?

    I am going to stick with the freebies, and my existing unread purchases, until the dust settles on this. I am not spending any more money until I get some kind of assurance that I am not going to be locked out of this anytime soon.

  10. ficbot: all I can tell you is that Scott was quite clear in saying to me that they would only sell to a company who has the same vision as they have. He said he anticipates no changes in the way Fictionwise is currently operating.

  11. Paul Bristow // March 6, 2009 at 4:53 pm //

    I’ve bought hundreds of books and magazines from Fictionwise, with only one restriction. I will not buy anything with DRM. Fictionwiise has been great because with one purchase I can read my books on multiple devices. The fictionwise team understand this, and I just hope that B&N maintain this non-DRM business. If they add DRM, I stop purchasing.

    Having said that, as long as Fictionwise continues in the way it has been, I will continue to be a very happy, very satisfied customer.

  12. Mixed feelings. Happy for the Pendergrasts, uneasy about the implications. Like another writer, I am skeptical about BN following through with the Fictionwise vision. I like Amazon, but I BUY Fictionwise because they do not limit me to one device and the nonDRM. Before Fictionwise, I frequented another ebookstore (I cannot remember the name–digital something) that went belly up with no notice and I lost access to a lot of purchased material. I am afraid that such a thing could happend as a result of this deal. I also hope that the size of the inventory will not change. FW has the largest and most diverse inventory of all the ebook vendors and at really good prices.

    Please do not change a thing.

  13. I have had the Fictionwise ebook for a few years and loved it, but I foung the ebook inventory. I looked around and found the only alternatives to be Amazon and Sony. You can’t buy the Amazon book in Canada, so I bought Sony’s new $400 job because it has the bakclight while the $300 one does not. I did this after finding that Sony’s ebook inventory was substantially larger than that of Fictionwise. However, the Sony unit has been a big disappointment. While I would have bought it enyway, because I wanted the backlight, they don’t tell you that having the backlight means that the screen loses it’s special background which makes it easier to read in daylight and especially sunlight. So, the readability is the same as the Fictionwise unit but costs more than 3 times more. Furthermore, it is not a backlit unit as it the F unit. Instead, the light, which is a much harsher light, comes from the side and is quite distracting. You cannot lower the light intensity.
    In the dark, the F unit is much more comfortable to read. Finally, I have to return my unit to Sony because very shortly after receiving my unit, it started to develop tiny specks of dust? behind the glass screen and this is intensifying to the point where there are over a dozen of them. It seems that the unit is improperly sealed and dust somehow gets inside it. The bottom line is that while Sony has a lot more books, their unit is far more expensive, and far lower in quality, than the Fictionwise ebook. So, I am happy to hear that Barnes and Noble is buying the company because it will likely mean a much greater inventory of ebooks, which will be available in a much better unit than that offered by Soney. (IF the new company doesn’t change the unit!)

  14. And, in the end, all B&N wanted was some of Fictionwise’s underlying technology. I am impressed that B&N is providing a transition path for those who purchased from Fictionwise, but, nonetheless, the ebook world would have been a better place if Fictionwise and eReader had never been sold.

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