Apps Are ‘Huge’ For Barnes & Noble

Seeking to advance the narrative that the Nook Tablet is a true multimedia tablet and not just a big expensive e-reader, Barnes & Noble (NYSE: BKS) CEO William Lynch said in an investor call today that apps are the company’s fastest-growing content area, and “within apps it’s entertainment, movies, Netflix (NSDQ: NFLX), games, kids.”

Apps are “huge,” Lynch said in the call following this morning’s earnings report. Angry Birds is still the company’s most-downloaded app, while Netflix “toggles between #2 and #3.”

When asked if Barnes & Noble will release a tablet with a larger screen — as it is rumored that Amazon (NSDQ: AMZN) will in coming months — Lynch declined to discuss specific form factors, but said the company “will innovate in the areas we think we can add value. There’s a lot of innovation left in digital reading.” One comment could be seen as a hint at a digital video service: “We’ve always sold a lot of products in entertainment and we’ve had a big DVD business in our stores.”

Lynch said that customers who buy Nooks also spend more on print books, echoing the sentiment expressed by B&N’s Jim Hilt at Digital Book World last month. “They not only buy the hardware, accessories, warranties and, more meaningfully from a margin standpoint, the digital content,” he said, “but they also continue to buy phsyical books. The idea that people who are digital readers just stop buying physical books is…not true.” This contradicts recent Bowker research suggesting that the majority of e-book “power buyers” switch to digital books exclusively within a year.

Lynch wouldn’t say whether Barnes & Noble is taking a loss on its new $199, 8GB Nook Tablet. (According to market research firm IHS iSuppli, each $199 Kindle Fire costs $209.63 to manufacture.) The $249, 16 GB version is “gross margin positive,” he said. “We feel good about this product as well.”