In mid-June, six weeks before he put his company and his legacy on the block, Leonard Riggio was sitting on the top floor of Barnes & Noble’s Flatiron headquarters, facing down the relentless forces of obsolescence. “I still like books,” he said, though it didn’t really need saying. All around him, in a conference room that evoked an elegant old library, were shelves lined with hardbound classics. Books had made Riggio a fortune. For decades, he had been delivering them to consumers at monumental scale in his ubiquitous superstores, a strategy that won him more fear than love in the world of publishing but made him arguably its most powerful player. Books had been very good to him, and now they were dissolving into the ether.
The founder, chairman, and guiding spirit of the company that calls itself the “world’s largest bookseller” is a slight, mustachioed 69-year-old with a Napoleonic temperament. But when he talks about books he fills with sentimentality. Riggio wanted to say something, but he couldn’t quite find the words, so he burst out of his chair and charged over to one wall. “I don’t know how you can intellectualize this,” he said, “but a book is …” To continue his thought, he pulled down a copy of The Count of Monte Cristo, shook it, felt its substance. “This bound volume of Dumas is content. We have to understand people want to own this content. They want this. It’s very important.”
Riggio was trying to say that, whatever becomes of books as physical objects in this new age of digital distribution, he is certain people will still pay for the pleasure of reading. Assuming he’s right, the more pertinent question is whether they will be spending their money at a Barnes & Noble. Sales numbers are down, and the company is valued at a third of what it was worth four years ago. If it is to avoid the fates of Tower Records and Blockbuster, it will have to figure out how to compete in a world where prices are falling and nimble competitors like Amazon and Apple are offering in actuality what the superstore bookseller used to promise only figuratively: immediate, cheap, and limitless selection.
To counter the threat, albeit belatedly, Riggio has radically retrenched his company, replacing its veteran CEO— his own brother, Stephen—with William Lynch, an executive whose experience is in e-commerce, not bookselling. Last fall, Barnes & Noble unveiled the Nook, its answer to Amazon’s Kindle, igniting a price war that has since driven the cost of an e-reader down to around $150. Riggio is wagering that a strategy combining bricks-and-mortar stores with high-volume digital sales can be profitable, and in June he was pleading for a little patience. “We’ve been around long enough that I think it’s appropriate for us to look at our business in terms of a decade in the future and not next month,” he told me. But it turned out he didn’t have the luxury of time.
Ever since the markets crashed in 2008, Riggio has had to worry about restive shareholders—and the ominous intentions of one in particular: the billionaire Ronald Burkle, a longtime acquaintance who has lately been positioning himself for a potential hostile takeover bid. Burkle is interested in Barnes & Noble’s formidable brand and its valuable real estate, but he’s not particularly passionate about books, and he has made clear his distaste for how Riggio has run the company. Over the course of a year, as their conflict has escalated from an exchange of angry letters to a lawsuit—and finally to a battle at September’s annual shareholder meeting, where Riggio himself could be ousted from the company board—a larger question has hung in the air: Who really wants to own a bookstore anymore, let alone 1,357 of them?
If you want to understand what Len Riggio has spent his life building, and what he might lose, drive out to the New Jersey Turnpike. Right off Exit 8A, you’ll find a million-square-foot warehouse, Barnes & Noble’s East Coast distribution hub. Built just five years ago, it’s four stories tall and long enough to fit the Empire State Building sideways; inside, it looks like something dreamed up by Fritz Lang or Willy Wonka. Workers scoot around on three-wheeled bicycles beneath an elevated latticework of conveyer belts and wire baskets that climb and descend like gondolas. The air is full of the musty scent of paper. Books arrive by the truckload and are routed into storage, where they await the call from the superstores (which offer up to 200,000 titles) or orders on the company’s website. Barnes & Noble says that the warehouse stocks at least two copies of every title in print.
At this year’s BookExpo America, the buzz on the floor of the Javits Center was all about Editions, Google’s soon-to-debut online bookstore, which harnesses the capacity of the digital “cloud” to deliver e-books to consumers. At Barnes & Noble’s warehouse, workers in blue smocks—known as “pickers”—perform the same task in a labyrinth of shelves. The process isn’t as elegant as the click of a download button. But for Barnes & Noble, it’s profitable: Under the prevailing system, it pays $13 wholesale for a hardcover book that retails for $26. With e-books, margins are far lower—as of now, typically in the neighborhood of $3 or $4.