Bookstores still more profitable than online selling

I hear many people talking about how much more profitable ebooks are than print. It's an easy assumption to make...after all ebooks cost virtually nothing to make (no printing, warehousing, and shipping). What I find amazing is that distributing ebooks seems to be more of a challenge. Let's look at the most recent numbers from Barnes and Noble. These are from the 3rd quarter filing ending January 2011)

• retail stores generated $471M of gross profit on $1.46B in sales
• bn.com generated $30M of gross profit on $319M in sales

When we take expenseses into consideration we find EBITDA (Earnings before interest, taxes, depreciation and amorization)

• retail stores: $177.5M profit
• bn.com: $50.5M loss

If we look over the last 3 quarters the disparity is even greater:

• retal stores: $204.4 profit
• bn.com $147.4M loss

CEO William Lynch expects that physical books "will remain the majority of the market for the foreseeable future." He went on to say that BN.com's rapid growth in e-book sales and of its share of the market will allow it to become profitable quicker than originally planned and that losses in fiscal 2012 will be "minimized greatly."

For those interested in the % of sales between the retail stores and bn.com it is now 13.7% which is up from 9.6% a year ago.

I think for me, this is pretty eye opening as I figured the ebook revolution was making tons of money for authors, distributors, and publishers alike. I wasn't aware until I pulled back the covers that online selling is losing money and in pretty significant amounts.

So for those predicting the end of bookstores...let's hope they hang on long enough to keep funding the online channel into profitability because if they sink we're going to lose bn.com and then Amazon may be the only substantive game in town.

If you want to see the full set of data you can here.