Perhaps it’s not the decline of traditional retail or of the physical book. Perhaps Americans, brains corroded by reality television, simply don’t much like reading. On Thursday, Barnes & Noble reported that in the same quarter that its main bricks and mortar competitor, Borders, closed up shop, its retail sales were nonetheless slightly down. Sales on the web site and of ebook downloads were up 17 per cent, but that is a sharp slowdown from the previous four quarters, which averaged 50 per cent growth. Sales of e-readers and content fell to $220m, from $277m in the prior quarter. Investors sent the shares, which had enjoyed a sharp rally in November, down by nearly a fifth.

Take a broader view, though. The stores are hardly in the red. Over the past year, they have generated $400m in earnings before interest, tax, depreciation and amortisation, up from the year before. The company has an enterprise value of just 3 times that.

That leaves the electronic business, of course, where aggressive investment has led to $225m in losses over the same period. Growth did slow as Barnes & Noble was between the launch of its latest e-reader in the prior quarter and the launch of its first tablet computer in the next.

But investors are not overpaying terribly for the stores, which are hanging in there for now, and they can hope for upside if the e-readers and tablet computers turn profitable. Too bad, then, that it is hard to see how lucrative the e-reader and low-end tablet markets will be a few years down the road. The dominant competitor here, Amazon, is content to operate on zero margins with its shareholders happy to play along. Other potential rivals are clambering to get in. The economics of content acquisition are in flux. Barnes & Noble’s next chapter remains a matter of speculation. Now read on.

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