The Nook is starting to slip in sales, which surprised Barnes & Noble as it is the holiday season, when the company should be seeing a boost in its e-reader and e-book revenue.

“We are way beyond the point where you should see content sales accelerate. That hasn’t materialized and that’s concerning,” said analyst Peter Wahlstrom.

The Nook has been a large draw for the bookseller, since it launched in 2009 and took on the only other comparable e-reader on the market at that time, Amazon.com’s (News - Alert) Kindle.

The Nook gained immediate success, so much so that Microsoft invested heavily in the product just last year. It has been said that the physical book is being replaced by the digital book, and the Nook has been Barnes & Noble’s way of staying in business despite the shift in book form.

Now, however, the digital reading style may be falling out of fashion. 


Image via barnesandnobles.com

Barnes & Noble’s report shows the Nook segment’s revenue falling 12.6 percent from last year at the same time, finishing up 2012 with a consistent nine-week decline in unit sales and prices.

Additionally, sales of digital e-books and magazines outside of just Barnes & Noble grew at a much lower rate (13.1 percent) this holiday season compared to the same time last year (113 percent).

Even just last quarter the growth rate was 38 percent, more than double the holiday growth rate, which goes against all expectations for the future of the e-book and e-reader market.

Barnes & Noble is now tasked with determining the reason behind these disappointing numbers, and somehow adjusting their business strategy to turn the trend around for 2013.

“The investment question for Barnes & Noble in 2013 is the Nook’s staying power as a legitimate tablet device,” said analyst Gary Balter, for Credit Suisse. According to Balter, one reason behind the Nook slump could be that the capabilities of tablets have expanded to include all the functions available from an e-reader.

If Nook is facing competition not only from the Kindle, but from Google’s (News - Alert) and Apple’s tablets, the New Year is not looking so good for Barnes & Noble.

While the company picked up business when its competitor Borders went under, Wahlstrom believes the falling sales could lead it in the same direction as Borders.

“The Borders tailwind is over,” said Wahlstrom.

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