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- [00:00]
Lindsey Graham
Want to get more from business movers? Subscribe to Wondery for early access to new episodes, ad free listening and exclusive content you can't find anywhere else.
- [00:09]
Leonard Riggio
Join Wondery in the Wondery app or on Apple Podcasts. It's October 1995, in New York City, Central Park. 54 year old Leonard Riggio sits on a bench tossing bread to the ducks. Leonard is CEO and chairman of the bookseller Barnes and Noble. His company is worth around a billion dollars, and Leonard himself is a wealthy man. Yet in his rare moments of downtime, Leonard finds joy in this simple, free pleasure. He he likes that the ducks don't ask him for more than a few pieces of stale bread. The sound of an approaching bicycle interrupts his peace, though. He looks over his shoulder to see his 41 year old brother, Stephen Riggio, dismounting the bike and then leaning it against the bench as Leonard greets him. You know, you've done this since we were kids. Just kind of show up wherever I am. Well, you pay the most attention when I can catch you outside the office. Stephen takes a seat on the bench and unfolds a copy of the Seattle Times. He begins reading aloud. There's a big new bookstore in town. Story time in the park, is it? Look, I told you, I don't care if the press thinks we're the bad guys. I haven't finished reading you the rest. And there's a catch. You won't find it on any Seattle street map. So if you want to wander down its aisles and peruse the selection, you'll have to hook up to the Internet. Stephen looks up from the paper expectantly. Leonard just shrugs. So? So this is what I was telling you. Everything is moving to online, to computers. Oh God. You and computers. He's beat us to the punchline. And who's that? It's called Amazon. Some ex hedge fund guy started at Jeff Bezos.
- [02:00]
Lindsey Graham
Bezos?
- [02:00]
Leonard Riggio
I don't know. It's an online bookstore, though. Oh, well, of course it's a Wall street guy. But what do you want me to do about it? We're already online, aren't we? With the Sears thing? Barnes and Noble has recently started selling a small number of books online through a service operated by Sears and IBM called Trintex. Oh God, that thing. Trintex is useless. It's third party. It's no good. Other companies have their own web pages. People buy direct. And that's what you want us to do? And so you're going to ask me for more money? Well, you are handing out bread, aren't you? Only to things with beaks and feathers. I've given you money already. You let me hire one computer guy, lan, part time. Yeah, and what do I have to show for it? I need experts, people who can get this thing up and running. So more money then, right? More capital? It's an investment. I think it's throwing money away and you know I hate that. Trust me, Mr. Billion Dollar Bookseller, you're good for it. You know how I became Mr. Billion Dollar Bookseller? I put my head down for 30 years. I stayed the course. I did what worked. And what worked was opening bookstores. Hundreds of bookstores where people could walk in and find whatever book they wanted. That made me and you, by the way, very wealthy. So why would I panic about some nerd with a website? Because it's not going to take him 30 years. Leonard. Stephen tosses the newspaper onto Leonard's lap. This is a punch on the nose. We've got to decide on how to respond. With a big right hook or with our hands tied behind our back. When Stephen Riggio returned to Barnes and Noble headquarters later that day, he found a memo on his desk in the familiar handwriting of his brother, Leonard Riggio. It read, do it whatever it takes. But Stephen's relief at his brother's change of heart was quickly by a sense of urgency. Newspapers across the country were already covering Amazon's online bookstore with breathless excitement. The age of Internet shopping was coming at a faster pace than even Steven had imagined, and Barnes and Noble had to respond or risk being left behind. Business Movers is sponsored by Grammarly.
- [04:06]
Lindsey Graham
You only get one shot at a first impression. And if you're running a business that can mean all the difference between new client and no reply. Communicating exactly what you mean clearly, intelligently and with purpose can also stop a single bad email from turning into 20 and then a meeting on top. When every word your team writes is clear, concise and on brand, everything gets better. And teams that communicate better with Grammarly report 25% faster time to resolution for support tickets and 52% less time spent writing sales emails. All with enterprise grade privacy and security measures and seamless integration with the apps.
- [04:42]
Leonard Riggio
You use every day.
- [04:43]
Lindsey Graham
Join over 70,000 teams and 30 million people who trust Grammarly to get results on the first try. Go to Grammarly.com enterprise to learn more Grammarly Enterprise Ready AI Business Movers is sponsored by Shipstation. So let me tell you about my week. I am sick first week back from the holidays and for me, even a little cold can lead to absolute chaos in our production schedule. Many of you may relate. A little chaos can spell big trouble for businesses. But for those of you in charge of order fulfillment for an e commerce business, there's Ship Stat to keep your day to day remaining calm. Save time and money every month by shipping from all your stores with one login, automating repetitive tasks and finding the best rates among all the global carriers. Calm the chaos of order fulfillment with the shipping software that delivers. Switch to ShipStation today. Go to ShipStation.com and use code movers to sign up for your free trial. That's shipstation.com code movers.
- [05:44]
Leonard Riggio
From Wondere. I'm Lindsey Graham and this is its business members in 1995, Barnes & Noble was at the height of its success. Under the leadership of its pugnacious CEO and chairman, Leonard Riggio, the chain had grown from a few stores in Manhattan to become the largest bookseller in America. With hundreds of locations across the country, it was a retail empire that dominated its industry. For its customers, Barnes and Noble was synonymous with choice, low prices and convenience. For its critics, it was a symbol of unhealthy corporate culture that drove independent stores into the ground in an endless pursuit of growth. But Leonard Riggio didn't care about the critics. Business was booming, annual revenues had soared into the billions, and Leonard had no intention of slowing down. But away from the malls and main streets where Leonard had built his empire, change was coming. In the mid-1990s, the Internet was rapidly transforming from a tool used only by researchers and academics into a part of everyday life. Millions of people were logging on for the first time, and the opportunities and possibilities of this increasingly interconnected world seemed limitless. Steve and Riggio had recognized the business potential of the Internet and had persuaded Leonard to experiment with online sales through a third party service. But as more and more companies launched their own websites, it became clear that Barnes and Noble would need a dedicated presence on the World Wide Web. Barnes and Noble certainly had the resources to compete in this new marketplace, but building the website would take far longer than Leonard and Steven expected. By the time it finally was ready, Amazon hadn't just gained a head start. It would be redefining where the race for online shoppers would go next. This is the second episode in our three part series on Barnes and Lost in the Amazon. It's May 10, 1997 at the Science, Industry and Business Library in New York City, almost two years after Steven Riggio read an article about Amazon in the Seattle Times. Stephen leans against a bar set up Inside the library for a special occasion, Barnes and Noble is throwing a party to celebrate the official launch of the company's website. BN.com Stephen is taking in the buzzing crowd when he feels a tap on his shoulder. He turns to see a woman in a blazer holding a notepad. She introduces herself. Stephen, Doreen Carvajal, New York Times. You have a moment? Yeah, let me grab my drink and I'm all yours. A moment later, a bartender puts down a martini and Steven takes a sip off the top before following Doreen to a nearby table. He's excited about being interviewed.
- [08:44]
Lindsey Graham
It's usually his older brother, Leonard Riggio, who gets his spotlight.
- [08:47]
Leonard Riggio
But he tries to not let his eagerness show. So, Stephen, tell me how you're feeling right now. We're celebrating the launch of your online store. This is a pretty big moment for Barnes and Noble. Well, to be honest with you, I'm exhausted. I'm a little relieved, and I'm very, very excited to deliver what our customers have been asking for. Well, let's talk about that relief for a moment. Okay. Amazon.com launched two years ago and you guys are just now coming online. You feel like it's too late. Too late how? Well, Amazon has a two year head start on you. What's taking you so long? Well, we wanted to make sure we got it right before going live, and I think we have. We're excited to make buying books more convenient and affordable than ever. Cheaper than Amazon. Barnes and Noble has always been competitive on pricing and that won't change. Okay. I'm sure you've heard about Amazon's IPO valuation of 300 million having come from nowhere a couple of years ago. And that kind of growth is unprecedented, I think. If you don't mind, let me ask you, do you want to talk about Amazon or do you want to talk about BN.com Doreen raises an eyebrow and then scribbles something down on her pad. A little flustered, Steven continues. I just want to make sure we're spreading the good news about our website. That's what tonight's all about. Look around. It's a celebration. We'll be discounting books online even more than we are in our stores. Customers are going to see 30% off hardcovers, 20% off paperbacks. These are thunderously low prices. And what about delivery? Amazon is pretty fast with that. Sorry for the comparison. Again, Stephen doesn't rise to take the bait. We expect to be offering next day delivery by the fall, so someone will be able to log onto the web Order a book from BN.com and get it at their doorstep the next day? Absolutely. But do you worry that these online sales will start cannibalizing your retail business? That you might be teaching people to stop shopping for books at your actual stores? No, I'm not worried about that at all. Our stores will continue to offer an unparalleled retail experience. It's a place where people love to shop. The website offers a different experience, more convenience. All right, last question, Stephen, and then I'll let you get back to your party. Oh, it's been my pleasure. What's your question? Amazon is calling itself the Earth's biggest bookstore. You think that's accurate this time? Stephen smiles. When Amazon's brought up, at the end of the day, they're going to say whatever they think is good for their marketing. But take a look around. I don't know about you, but I would say they're getting a bit ahead of themselves. Though Stephen Riggio might have tried to play it cool with the New York Times reporter, there was little doubt in his mind that Amazon was a growing threat. Two days after the launch of BN.com, barnes and Noble filed a lawsuit against Amazon for the use of the phrase Earth's biggest Bookstore. This suit would eventually be settled out of court and the slogan would remain on Amazon's website. But shots had been fired. The war for the future of bookselling had begun. In Amazon's first year in business in 1995, it had generated just over half a million dollars in revenue, or about twice that in today's dollars. But the following year, that number had jumped 3,000% to $15 million. By the time BN.com went live in 1997, Amazon's revenue has surged to almost 148 million, another near tenfold increase. Amazon's growth had been meteoric and its potential seemed limitless. With figures like this, even Leonard Riggio had to recognize that Amazon was a threat. But he still believed Barnes and Noble had advantages that its Internet based rival couldn't match. Barnes and Noble was a household name with hundreds of stores across the country. Its relationships with publishers and wholesalers spanned decades and its inventory was second to none. But Amazon wasn't just growing, it was innovating. By 1997, Jeff Bezos had begun building a nationwide network of warehouses and distribution centers, strategically positioned to ensure that orders reached customers doorsteps as quickly as possible. By contrast, Barnes and Noble had no warehouses dedicated to E commerce. Instead, its online store was dependent on the wider company's existing logistical infrastructure. That was a vast and highly developed system, but it was designed around the locations of the booksellers physical stores, not its customers. And in the new age of Internet shopping, that was a problem. Leonard soon saw that orders placed through BN.com were more expensive for the company to process and they took too long to reach the customers. The Amazon way was both quicker and cheaper. Leonard knew this had to change. Ever the dealmaker, he proposed a bold acquiring Ingram Book Group, the largest book wholesaler in the United States. This $600 million agreement would give Barnes & Noble control of 11 massive distribution centers and position the company as both a retail and logistics powerhouse. But before Leonard could close the deal, the Federal Trade Commission stepped in. Regulators in Washington D.C. argued that the merger would give Barnes & Noble 2 much power in the market and make it harder for smaller competitors to survive. Leonard's acquisition of Ingram Book Group was blocked. And without Ingram, Barnes and Noble was forced to start its E Commerce Logistical network from scratch. The company began by purchasing warehouse space in Tennessee and Nevada. But the process was slow and costly. With every month spent building infrastructure, another month Amazon could pull further ahead. Unlike traditional rivals, Amazon had no stores to maintain and no sales clerks to pay. This lean model allowed it to undercut even Barnes and Noble on price while delivering convenience that Leonard's company couldn't match. By 2000, the Barnes & Noble website was generating $200 million in annual sales. But that same year, Amazon's revenues were over 10 times higher. But if the challenge from Amazon wasn't damaging enough for Barnes and Noble, the broader book industry was also entering a period of decline. By 2002, nearly 90 million Americans were classified as non readers, almost half the adult population. Bookstores across the country were now competing with Amazon over a customer base that was steadily shrinking. And at Barnes and Noble, this meant slower revenue growth and eroding profits. By now, Leonard Riggio was in his 60s. He had led Barnes and Noble for over three decades. But for the first time in his career, he was facing genuine questions about the future of his company and his place at the top of it. He decided it was time to signal to the public that Barnes and Noble was willing to change to keep up with the times. So in 2002, Leonard shifted to a new role of executive chairman and named his younger brother Stephen as his replacement as CEO. Leonard remained deeply involved in all decisions at Barnes and Noble. But it was the 47 year old Stephen who became the face of the company. Under his leadership, Barnes and Noble continued to develop its E Commerce infrastructure. But it also tried to double down on its strengths as a physical bookseller. In 2003, Barnes & Noble acquired Sterling Publishing, which specialized in books for hobbyists on topics like gardening, cooking and crafts. The goal was to diversify Barnes and Noble's offering and appeal more to niche audiences, who Stephen thought were less likely to migrate online. But despite these efforts, Barnes and Noble's struggles continued. Between 2003 and 2006, revenues grew only by 1% annually. Profits shrank, and even Steven's natural optimism began to waver. In the meantime, Amazon's momentum showed no signs of stopping. Their revenues were rising by up to 40% a year. And in 2007, the the company opened a new front in its war with traditional booksellers, unveiling the handheld Kindle, an E reader designed to change how people consumed books forever. The Kindle could hold thousands of titles in a slim device, the same size as a single paperback. It proved immediately popular with consumers, selling more than 40,000 units in its first year alone. For Barnes Noble, the Kindle was a new and dangerous menace. The rise of online retail had undermined the company's business model. But a shift to digital reading could threaten Barnes and Noble's very existence. Steve and Riggio decided that the best strategy wasn't to fight the coming change, but to join it. In 2009, Barnes and Noble released its own E reader, the Nook. The response from critics and customers was mixed. Time magazine named it one of the top 10 gadgets of the year. But the New York Times called the the device's software sluggish and its screen achingly slower than the Kindles. Barnes and Noble sold 60,000 units of the Nook in 2009. But by contrast, that same year, Amazon sold 2.4 million Kindles. Barnes and Noble's entry into E Reading was off to a rocky start, and the Nook's disappointing launch was just another setback for an increasingly beleaguered company. In 2009, most businesses businesses were facing strong headwinds. The global economy was still in the grip of the Great Recession, and people across America were cutting back on discretionary spending. Barnes and Noble had been hit hard, with profits declining and comparable store sales falling by almost 5% from the previous year. 2008, and for the first time since Leonard Riggio purchased the chain, Barnes and Noble was planning on closing more locations than it would open. These struggles didn't go unnoticed. In the press, Barnes and Noble was described as beset by challenges and under attack. And among shareholders, there was widespread discontent at the Bookseller's persistently disappointing results. One investor in particular began agitating for change. The billionaire businessman Ron Burkle already owned 19% of the company when he was trying to buy more. His aim was to supply plant Leonard Riggio as Barnes and Noble's largest single shareholder, potentially giving him the power to force Leonard and Stephen out of the company. But when the Riggio brothers got word of this plan, they fought back. They persuaded the Barnes and Noble board to adopt a shareholders rights plan, otherwise known as a poison pill. This plan allowed certain shareholders to purchase new Barnes and Noble stock at a significantly discounted rate. This diluted Ron Burn Merkel's holdings and thwarted his attempted takeover. Ron was outraged. He claimed that this poisoned pill was unfair to shareholders whose last names weren't Riggio. And at the beginning of 2010, he took his complaints to the New York Times. To Leonard, it looked like Ron was trying to turn other shareholders against him and find a new way of pushing him out. So something had to be done. But Barnes and Noble's ongoing struggles left Leonard with limited options. The raging success of the 1990s seemed a long time ago now, and shareholders weren't so interested in what Leonard had done for them in the past. It was what he could do for them in the future that mattered. Leonard would have to do something radical to show shareholders he understood their concerns that it wouldn't just be business as usual from now on. So he gave it a lot of thought and came up with a solution. He decided that what he needed was a sacrificial lamb. Business Movers is sponsored by Attentive. Imagine for a moment if you got a message from your favorite brand, and.
- [20:04]
Lindsey Graham
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- [20:08]
Leonard Riggio
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Lindsey Graham
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Leonard Riggio
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- [20:24]
Lindsey Graham
And maximizing marketing performance.
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Leonard Riggio
It works like this.
- [20:28]
Lindsey Graham
Attentive's AI learns what subscribers actually want based on their real time interactions with your brand. And that means it customizes the content, tone and even timing of every message so they always resonate. If you're ready to take your customers on a journey created just for them.
- [20:44]
Leonard Riggio
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- [20:49]
Stephen Riggio
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- [21:28]
Leonard Riggio
It's March 2010 at Barnes & Noble's headquarters in Manhattan. One month after investor Ron Burkle went public about his dispute with The Riggio Brothers. 56 year old Steven Riggio takes a moment to collect himself before exiting the elevator. Then he heads down the hallway to his brother's office. Barnes and Noble Executive Chairman Leonard Riggio has requested his brother Steven's presence this morning via email. A strangely formal communication for the two. So, nodding to a secretary as he passes, Stephen knocks apprehensively on Leonard's door. Come in. Hey, Leonard. You had your secretary email? You never do that. Steven takes a seat as Leonard busies himself straightening out some papers on his desk. Yeah, I wanted to keep everything above board official in writing, you know. Okay, but what's this about? Well, it's this whole Ron Burkle thing. It's a bit of a fiasco. No, it'll blow over. I'm not so sure. Our last quarter's results have only given him more ammunition. So I've decided we need to make some moves around here to prove to shareholders that we're aware of the challenge. What kind of moves? Leonard doesn't say it, but he doesn't have to. Steven knows what his brother has in mind. Are you kidding me? No. So you're gonna fire me? Well, I'd prefer it if you made it your own decision to step down. It would be better for optics. Optics? I don't know if I've ever heard you say the word optics. 40 something years you've done things your way, critics be damned. But now you want to fire your own brother and you're thinking about the optics. I don't want to fire my own brother. Then don't do it. I have no choice. Of course you do. You're their chairman. It is literally your choice. Oh, Steven, don't you see? We're losers right now. We can't be stubborn no more. A thick silence hangs in the air. Steven has never seen his brother come so close to admitting defeat. We've had an incredible run, Len. We were due some hardship. I wish it had come 20 years ago. A decade ago, I could have handled it Then you can handle it now. We both can. Leonard shakes his head. No, I don't think so. I mean, you'll still be on the board. You'll still be calling a lot of the shots. Ah, Len. Steven looks out of Leonard's office window for a moment, as if hoping a different solution might somehow appear from out of the sky. When it doesn't, Steven looks back at Leonard. Oh God, what's it like? What's it to always have done things your way? It's not my way. And I am so sorry. It's just something we gotta do. Stephen gets up well, you know what, Lynn? I don't really care if you're sorry or not. I just really hope you're right. The next day, Steven Riggio announced his resignation. He would remain as Barnes and Noble's Vice Chairman while a new CEO would be appointed to replace him. But that was not enough to satisfy the billionaire investor Ron Burkle. Later that same year, Burkle forced a shareholder vote aimed at ousting Leonard Ringgio from the company. Leonard survived, but only by a narrow margin. And to Leonard, it was a victory that felt more like a defeat. And for both brothers, it was an undeniable sign that they had to take a step back from the business. It was time for the future of Barnes and Noble to be decided by a new generation. Barnes and Noble's new man at the top was 39 year old William Lynch. William had previously run the company's website, bn.com and this move was intended as a signal to investors and the public that Barnes and Noble was embracing a new strategy. From now on, its business would be all about digital. William had only been with Barnes and Noble for a year, but had cut his teeth as an executive Vice President of market marketing for HSN.com, the e commerce platform for the Home Shopping Network. And when he became Barnes and Noble's new CEO, William was tasked with turning the company into a modern retailer that could compete in the new digital first world. Central to his strategy was the Nook the E Reader, which Steven Riggio had introduced to compete with Amazon's Kindle. Under William's leadership, Barnes and Noble fully committed to the Nook device. William believed that digital reading was the future of bookselling and that Barnes and Noble could carve out a significant share of this fast growing market. The company invested heavily in marketing research and development, creating an entire ecosystem of Nook compatible content. Meanwhile, Barnes and Noble's stores were redesigned around the E Reader with large kiosks promoting the Nook given prime spots at the expense of traditional books. William touted the novel Nook as the company's best chance to remain relevant in the Internet age. And in late 2010, a color version of the device was released, praised by some reviewers as the best E reader on the market. That was followed by a tablet, Nook designed to compete with the Apple iPad and Amazon Fire. Analysts praised Barnes and Noble's aggressive push into digital. And at first, Williams strategy seemed to be paying off. By 2011, William the Nook had captured nearly 30% of the US e reader market, lifting Barnes and Noble's total sales by 20% to a record $7 billion. But those results hid a continued weakness in the business. Comparable store sales continued to decline. And the Barnes and Noble's leadership team was about to receive an unwelcome reminder of the fragile state of the retail sector they were in. In 2011, Barnes and Noble, fiercest brick and mortar competitor, filed for bankruptcy. Borders had more than 500 stores in the United States, employing almost 20,000 people. Over the previous two decades, it had expanded aggressively abroad, and there were persistent rumors it would try to buy Barnes and Noble itself. Now, though, it was shutting its doors for good. Normally, the collapse of a business rival would be welcome development. This was a chance for Barnes and Noble's retail stores to snap up a larger share of the market. But in the business climate of 2011, borders failure cast a shadow over the entire industry. It was a stark reminder of the challenges facing traditional booksellers. And while Barnes and Noble absorbed some Borders customers, the broader lesson was no bookstore was safe with Amazon around. By now, they were far more than just a bookseller. Amazon had diversified into electronics, cloud computing, even groceries, creating a multifaceted business model that was crushing competitors on all sides. Its endless expansion had allowed it to reinvest profits into cutting prices and expanding its logistical advantage over traditional retailers like Barnes and Noble, making it seem like the faster Barnes and Noble race to catch up, the further Amazon accelerated ahead. And by 2013, the flaws in William Lynch's digital first strategy were becoming evident. It simply could not compete with Amazon's aggressive pricing and the Kindle's seamless integration with a vast online store. Attempting to cut costs, William announced that Barnes and Noble would cease production of the tablet version of the Nook. But that sudden change of strategy only spooked investors, causing the company's share price to tumble more than 15%. Meanwhile, Barnes and Noble's neglected brick and mortar stores continued their decline. 51 stores had closed over the past half decade, and sales at those that survived were falling every year. With its retail and digital businesses both faltering, in the summer of 2013, Barnes and Noble posted an annual loss of 155 million. That was twice the loss of the previous year. And just a few weeks after those results were announced, William lynch resigned to stabilize the company. Barnes and Noble Chief Financial Officer Michael Huseby was promoted to president, and like a true accountant, he focused on cutting costs rather than growing revenues. Under his leadership, Barnes and Noble reduced workers hours, scaled back its investments in digital, and accelerated its program of store closures. Even its famous location on Fifth Avenue in Manhattan wasn't safe. That store had been the cornerstone of the company's identity since it opened in 1932, but at the beginning of 2014, it closed its doors permanently. These cutbacks helped to temporarily restore Barnes and Noble to profitability, but revenues continued to Decline and in 2015, Michael Husby stepped aside. He was replaced by a former Sears and Best Buy executive, Ronald Boer, who tried to reinvigorate Barnes and Noble's retail sales with non booked merchandise, including toys and games. Then he planned to overhaul stores with full service restaurants to create a more engaging environment for customers. But his tenure at Barnes and Noble was short. In 2016, the board determined that the new CEO was not a good fit and after less than a year on the job, Ron was fired. Next in line was the company's chief operating officer, Demos Perneros. He oversaw sweeping layoffs in the eliminated nearly all full time positions in Barnes and Noble stores. It was hoped he could save $40 million a year with the move, but it came at a steep price. Morale among remaining employees plummeted and Barnes and Noble's customers soon noticed. So while Demos insisted he had a plan to turn the company around, he never got the chance to implement it. In July 2018, he was fired following allegations of bullying and sexual harassment. He denied these accusations and instead pointed the finger at Leonard Riggio, who had remained company chairman throughout all this upheaval. Demos said Leonard had refused to relinquish control and had trumped up the charges against him to force him out of the company. The matter would eventually be settled out of court, but Demos departure left Barnes and Noble searching for yet another new CEO. The future seemed increasingly uncertain, but that didn't mean Barnes and Noble was without admirers. In October 2018, the Board of directors announced that several parties had expressed interest in acquiring the chain and a special committee had been formed to decide which proposal would be the winner. Among the bidders was Leonard Riggio himself. He was still Barnes and Noble's largest shareholder, having taken the company public in 1993. He now believed that if he could take it private again, he could turn Barnes and Noble around. But analysts and insiders at the company were more skeptical. As executive chairman, Leonard already wielded enormous power at Barnes and Noble. So if he had a plan to save the company, he could just implement it. The fact that he had not seemed to speak volumes. The special board committee seemed to agree, and in the summer of 2019, it recommended the bid from the hedge fund Elliott Investment Management. The all cash transaction valued Barnes and Noble at $683 million, a fraction of what it was once worth and a thousand times less than the market cap of its adversary, Amazon. When he heard the news, Leonard didn't fight the decision. He had promised to abide by the committee's decision and the deal went through. For almost half a century, Barnes Noble had been a Riggio family business. Leonard and Steven Riggio had grown the chain from one location to over 600. Now, though, it would be up to someone else to stop it going from 600 down to zero. The track record of Elliott Investment Management inspired cautious optimism among analysts. They were already the owner of Waterstones, a British bookstore chain that had faced its own crisis in the Internet age and survived. Now it was hoped that Elliott could rejuvenate Barnes and Noble in the same way. But turning the company around would require more than just a financial investment. It would take someone with the vision to reimagine what bookstores could be and have the skills to make it happen. Barnes and Noble has struggled for years to find such a leader in corporate America. So Elliott Investment Management would have to look elsewhere.
- [33:15]
James Daunt
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- [33:53]
Kay Daunt
N o o m.com Climate change is battering California. Wildfires, heat waves, droughts, floods, sea level rise, they're all getting worse. That's why the Golden State is burning less oil and gas and investing in renewable power. I'm Sammy Roth. I've been reporting on energy and climate change in California and across the American west for a decade. I've seen firsthand how these stories touch lives, livelihoods and landscapes, sometimes for worse, sometimes for better. From the Los Angeles Times, this is Boiling Point. I'll be asking scientists, politicians, activists and journalists the same questions. What are the challenges we face to building a better world? And what are the solutions we need to embrace even when it's hard? Boiling Point will be available everywhere you listen to podcasts starting January 16th.
- [35:06]
Leonard Riggio
It's the summer of 2019 in Hampstead, an upper class neighborhood in North London. Shortly before Elliot Investment Management's acquisition of Bon, Barnes & Noble, 55 year old bookseller James Daunt wipes down the kitchen counter as his wife Kay finishes up with the dishes. James is trying to find the right moment to give Kay some big news. So as Kay begins drying the dishes, James decides now's the time. Hey, I wanted to run something by you. Oh yeah? It's important, actually. Kay flips the dish towel over her shoulder and turns to look at James. Important good. What are important bad? Oh, good. Probably. Who knows really? Well, I guess that's reassuring. Anyways. Tell me. You're making me nervous. Okay. Elliot called. Elliot is Elliot Investment Management, the parent company of British bookselling chain Waterstones, where James is the managing director. They've come to him with a proposition. They're buying Barnes and Noble in the US and they want you to run it? Yeah. How'd you guess? Well, you're the obvious choice. Barnes and Noble is doing poorly then, I assume. About as poorly as Waterstones were. Yeah, maybe even worse. Is that possible? Well, you know the Americans, they always have to go bigger. They've been through something like five CEOs in as many years. Well, it sounds right up your alley. It would require me to be in the US a fair bit. Especially at First. New York. Manhattan. Yeah. Well, that's lovely. You're not upset? Why would I be upset? Well, you know, just back in the 80s when I was working in New York, you desperately wanted me to get a job here. Oh, James, that was 30 years ago. We were in our 20s. I hadn't a chance to get sick of you yet. James jokingly presses his hand to his chest as if heartbroken. K looks at him more seriously. But the question really is, do you want this? I think you need to be honest with yourself. If. If it's as bad as you say it is, can you really fix it? Okay. You've injured me again. Such a vote of confidence. It's just that I don't want you walking into an impossible situation. Well, books are books, right? I think I can fix it. Alright then. So I have your blessing? You don't need it. Well, I'd like it. Kay waves her dishtowel dramatically in the air over James head. Be blessed, then go forth and save that sinking ship. Just a few weeks after this kitchen sink conversation, it was official. The ailing American retail giant Barnes and Noble had new owners and a new chief executive. James Daunt had years of experience in corporate rescue acts, having already transformed the fortunes of the struggling British bookstore chain Waterstones. But this new challenge would be on an entirely different scale to what he'd faced before. Because to many in the United States, what Barnes and Noble needed was not a turnaround, but a miracle. Although born and raised in an upper class English family, James Daunt began his career in America in 1985. Fresh out of school, he started working on Wall street as a banker for JP Morgan. James enjoyed his time in New York, but he found the world of finance unfulfilled. He longed to do something more meaningful with his Life. So in 1990 he returned home to the United Kingdom and took a gamble. That year, James opened an independent bookstore in London's Marylebone neighborhood. He called it Daunt Books and designed his shop to evoke the charm and sophistication of an Edwardian library. Local readers delighted in its cozy atmosphere. Then over the next 20 years, Daunt books expanded into a small chain of successful independent stores, mostly in and around London. But then in 2011, the bookseller Waterstones came calling and James career took a pivotal turn. Founded in 1982, Waterstones had long been a stalwart of British retail, and by the early 2000s it was the largest bookstore chain in the country, with over 300 locations. But the rise of Amazon damaged Waterstones in the same way it did Barnes and Noble. In a move to streamline operations, Waterstones adopted a heavily centralized, one size fits all approach to its stores that reduced costs. But with the same layout and inventory in every single Waterstones, the stores seemed increasingly sterile and uninspiring. Sales slumped, and by 2011, the chain was on the brink of collapse. At this low point, it was acquired by a Russian billionaire named Alexander Mammut. Alexander was a frequent customer at Daunt Books in London, so when he went looking for a new CEO for Waterstones, he knew just who to ask. When James Daunt took over Waterstones, he implemented a radical strategy for an established national chain, he decentralized, granting store managers the autonomy to curate their own inventories and tailor their stores to suit local tastes. This shift allowed each Waterstone's location to to develop more of an individual character, fostering a sense of community and engagement with its customers. And for a time, James also bowed to the wider book industry's embrace of E readers. He agreed to Waterstones selling Kindles directly from its stores in 2012. But James was reluctant to yield too much floor space to these devices, and in 2015, he removed them from Waterstone stores entirely. Instead, he maintained an emphasis emphasis on physical books and personalized service. As a result of these changes, James achieved what many had dismissed as impossible. In 2016, Waterstones reported its first profit in seven years. It was only the equivalent of around $20 million today, but it was a start. And year by year after that, the company's finances continued to recover. These positive results attracted the attention of the hedge fund Elliott and investment management. In 2018, it acquired Waterstone for an undisclosed amount. But the new owners retained James Daunt and the rest of the management team that had delivered the turnaround. And when Elliot then acquired Barnes and Noble the following year, James Daunt was the obvious choice to lead the charge. But the pressure on stores like Barnes and Noble was greater than ever. In the eight years since James took over at Waterstones, Amazon had grown tenfold. It now seemed to have a stranglehold on every part of the market and presented no weakness for Barnes and Noble to attack. They had tried competing on price, on selection, on digital technology, and they had been comprehensively beaten at every turn. Now James Daunt had to somehow find a competitive advantage that others had missed, and quickly. Every month that passed, Barnes and Noble's network of stores was diminishing. Its reputation with co customers was sliding, and its books were slipping deeper into the red. Still, as James boarded his flight for New York, he remained confident that the.
- [41:49]
Lindsey Graham
Strategy that had rescued Waterstones could be.
- [41:51]
Leonard Riggio
Just as effective on the other side of the Atlantic. But almost as soon as James arrived in Manhattan, a new crisis would emerge. One that no amount of preparation could have anticipated. At the beginning of 2020, the COVID 19 pandemic would sweep across the globe, killing millions and forcing many more to shelter in place. For the retail industry, it would be nothing short of disaster. Foot traffic would vanish, stores would be forced to close, and people's reliance on the safe, virus free option of online shopping would only deepen. The pandemic threatened to push Barnes and Noble over the edge yet, as unprecedented and frightening as the situation was, James dawn didn't just see the Pandemic Pandemic as a storm they had to outlast. For Barnes and Noble, it was also an unmissable opportunity from Wondery. This is Episode two of Saving Barnes and Noble for Business Movers. On the next episode, James dawn uses Pandemic store closures to his advantage and radically shakes up Barnes & Noble's business model. If you like Business Movers, you can.
- [43:00]
Lindsey Graham
Unlock exclusive episodes found nowhere else on Wondery and access new episodes early and ad free. Join Wondery plus in the Wondery app.
- [43:08]
Leonard Riggio
Or on Apple Podcasts.
- [43:09]
Lindsey Graham
Prime members can listen ad free on Amazon Music. And before you go, tell us about yourself by filling out a survey@wondery.com survey.
- [43:20]
Leonard Riggio
If you'd like to learn more about Barnes & Noble's history, we recommend the Noble Legacy by Betty Noble Turner and the Late Age of Print by Ted Streepus. A quick note about our dramatizations in most cases, we can't know everything that happened, but all our reenactments are based on historical research. Business Movers is hosted, edited and executive produced by me, Lindsey Graham for Airship Audio editing by Mohamed Shazi sound design by Molly Bond Music by Lindsey Graham. This episode is written and researched by Cody Hoffmuthel. Executive producers are William Smith Simpson for airship and Aaron O'Flaherty, Jenny Lauer Beckman and Marshall Louie for Wondering.
- [44:04]
Narrator
Hello ladies and germs, boys and girls, the Grinch is back again to ruin your Christmas season with Tis the Grinch Holiday Podcast. After last year, he's learned a thing or two about hosting, and he's ready to rant against Christmas cheer and roast his celebrity guests like chestnuts on an open fire. You can listen with the whole family as guest stars like Jon Hamm, Brittney Broski, and Danny DeVito try to persuade the mean old Grinch that there's a lot to love about the insufferable holiday season. But that's not all. Somebody stole all the children of Whoville's letters to Santa, and everybody thinks the Grinch is responsible. It's a real Whoville whodunnit. Can Cindy Lou and Max help clear the Grinch's name? Grab your hot cocoa and cozy slippers to find out. Follow Tis the Grinch Holiday Podcast on the Wondery app or wherever you get your podcasts. Unlock weekly Christmas mystery bonus content and listen to every episode ad free by joining Wondery in the Wondery App, Spotify or Apple Podcasts.