Barnes & Noble Inc. BKS +0.43% has sharply reduced the number of Simon & Schuster titles it carries in its stores as well as the promotion it gives those books as a result of a financial dispute between the two companies, say people familiar with the matter.
The dispute, which one publishing executive likened to a blackout of TV channels by a cable operator, reflects tensions created by the shift to digital reading and the impact of online discounting, which are shaking up publishing.
The disagreement covers an array of issues. These include the question of which side will bear the financial burden of e-book discounting that has returned in the wake of a settlement between major publishers, including Simon & Schuster, and the Justice Department of an antitrust lawsuit, the people say. Under an earlier model, publishers set the consumer prices of their digital books, eliminating unwanted discounting.
Barnes & Noble is also pressing Simon & Schuster for more compensation, such as costs associated with in-store promotions. Publishers typically give retailers money to cover certain store marketing costs. The retailer is arguing that its stores serve as the primary way for consumers to discover new writers, say people familiar with the situation. The retailer worries that consumers use its stores as "showrooms" to find titles that they then order online at a discounted price, the people said.
"We do not comment on specific relationships with publishers. However, we do support those publishers who support our physical and digital businesses," Barnes & Noble said in a statement.
In an interview, Carolyn Reidy, chief executive of Simon & Schuster, described negotiations between the companies as tough but said she is confident the matter will eventually be resolved.
The dispute holds risks for both sides. Simon & Schuster is losing sales and promotions at the biggest book chain in the U.S. While the retailer is still carrying the publisher's biggest books in quantity, titles by lesser-known authors have been cut sharply, said the people familiar with the matter. Orders for some titles have been reduced by as much as 90%, according to one literary agent.
A recent walk-through at one of Barnes & Noble's stores in Manhattan found hard-cover editions of such current Simon & Schuster best sellers as Jodi Picoult's novel "The Storyteller" and Clive Davis's memoir "The Soundtrack of My Life." Elsewhere, however, the paperback edition of veteran author M.J. Rose's novel "The Book of Lost Fragrances," published in February, was out of stock and a search of the retailer's online site showed that the book was also unavailable at three other Manhattan locations.
For Barnes & Noble, the dispute could cause customers who can't find the books they want to instead shop online at Amazon.com Inc. AMZN +1.68%
The dispute was reported by Publishers Weekly in late January, shortly after Barnes & Noble curtailed its Simon & Schuster orders. At that time, the two companies believed they would soon resolve their differences. Instead, the dispute has continued.
The disagreement comes as readers increasingly embrace e-books. At Simon & Schuster, for example, digital-book sales grew 24% in the fourth quarter, even as total publishing revenue fell 6%. Digital books represented 24% of total publishing revenue that quarter, up from 18% a year earlier.
Several writers published by Simon & Schuster expressed dismay that their books have been affected by the dispute but said they understood economic forces were involved and didn't blame their publisher or Barnes & Noble.
Jamie Mason, author of the thriller "Three Graves Full," published by Simon & Schuster imprint Gallery Books, said Barnes & Noble was "incredibly supportive" of her book during preproduction and that the chain was instrumental in changing the cover. "It was really cool," she said. But shortly before publication on Feb. 12, she learned that "Three Graves Full" would no longer receive the promotion at Barnes & Noble stores that had been expected. "It's frustrating," she said. "I'm a debut novelist. I don't have name recognition." She said Simon & Schuster has worked to boost sales elsewhere.
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