Barnes & Noble has found a new, major partner in its fight to get an edge over
Amazon and
Apple in the market for e-books and the devices being used to consume them: it is teaming up with
Microsoft in what the two are calling a strategic partnership, name yet to be determined.
It will come in the form of a new subsidiary of B&N that will include all of its
Nook business as well as its educational College business. Microsoft is making a $300 million investment in the subsidiary, valuing the company at $1.7 billion in exchange for around 17.6 percent equity in the subsidiary.
The news leaves the door open for B&N to eventually spin these off into a separate business altogether — or even sell them to Microsoft. And it leaves a load of questions about what B&N will do next with the Nook, which is currently built on a forked version of
Google’s Android platform.
The new company, referred to for the moment as Newco, will contain B&N’s digital business, as well as its College division. While Microsoft will take 17.6 percent, B&N will own 82.4 percent of the venture.
This is a key way of getting more content on to the Microsoft platform — specifically e-books content to ensure that its Windows 8 tablets will be able to compete not only against the best-selling
iPad but also the
Kindle Fire from Amazon, along with the rest of the company’s e-readers. The Kindle Fire has stolen a march among Android tablet makers and part of the compelling offer is not only the low price ($199) but also the fact that it contains so much content, including seamless access to all of Amazon’s e-book offerings.
This is also a progression — a very big one — of the funding etudes that Microsoft has been making to developers to make sure they are making apps for the Windows Phone platform, a way of getting more content on its platforms, which, it can be argued, may have come too late to the market. The first product to come out of the door? A Nook application for Windows 8, the companies say.
And given that education has been one of Apple’s bigger pushes this year, and the obvious and close links between education and e-reading, it’s not too surprising to see that B&N has also put its College division into this subsidiary. Microsoft, too, has been courting the education market — making its biggest-ever cloud-services deal in the education sector. Nevertheless they have a long road ahead of them. In January, Apple noted that there were already 20,000 educational apps for iOS and that there were already 1.5 million devices deployed in schools, numbers that will inevitably have grown in the last 4-5 months with the launch of the new iPad and numerous initiatives to spread the tablet in the educational sector.
And there is a legal twist to the deal, too: the two companies say they have definitely sorted out their patent litigation now: “Moving forward, Barnes & Noble and Newco will have a royalty-bearing license under Microsoft’s patents for its NOOK eReader and Tablet products,” the two write in the release below. If Microsoft doesn’t use this as an opportunity of possibly persuading B&N to swap over to Windows 8 for a version of the Nook, it will also give it a very interesting inroad into developing more for Android.
As for B&N and the future of these products… this deal looks like it could potentially pave the way for B&N to spin off this business into its own standalone operation, if not into the waiting arms of Microsoft itself — long speculated to be looking at ways of gaining a stronger foothold in the area of mobile devices to better implement its bigger strategy. The idea of a subsidiary was something that B&N had first floated back in January, when it noted that it was weighing up how best to separate its digital business to “maximize shareholder value.”
There are many more questions — such as what this could mean for the company’s broader strategy for growing the market for the Nook (international being a key push that the company has yet to make, apart from some baby steps); and how well, exactly, those products are doing for the company: IDC puts the Nook’s share of the tablet market at just 3.5 percent.
Via
techcrunch.com
