Monday, April 30, 2012

TEAM-UP! Microsoft+B&N = NOOK Viability

Own a Nook? Like the Nook platform? Don't really care, just don't like the idea of Apple and/or Amazon dominating the ebook market? If your answer to any of these questions was "yes," then you're in luck:
Books and bits united Monday as Microsoft provided an infusion of money to help Barnes & Noble compete with top electronic bookseller Amazon. In exchange, Microsoft gets a long-desired foothold in the business of e-books and college textbooks.

With Microsoft Corp.'s $300 million investment, the two companies are teaming up to create a subsidiary for Barnes & Noble's e-book and college textbook businesses. Microsoft is taking a 17.6 percent stake in the venture.

The agreement underscores the importance of electronic bookstores as traditional booksellers and technology companies jockey for position in the increasingly competitive market. While no definitive numbers exist, e-books are believed to account for some 20 percent of book sales in the U.S.
So this is mostly of interest to college students, some of whom may be nerds, but who are rarely asked to read the right kind of nerdy books for their courses.
Comp-lit students demo B&N's new, funnel-shaped e-reader
However... does have some tangible implications for our realm:
The deal gives Barnes & Noble ammunition to fend off shareholders who have agitated for a sale of the Nook e-book business or the whole company, but the companies said Monday that they are exploring separating the subsidiary, provisionally dubbed "Newco," entirely from Barnes & Noble. That could mean a stock offering, sale or other deal. The deal also puts to rest concerns that Barnes & Noble doesn't have the capital to compete in the e-book business with market leader Inc. and its Kindle, said analyst David Strasser at Janney Capital.
Newco sounds about as stupid a name as Qwikster, but you can't expect the boardroom types to be all smart n' savvy about everything and s***. But I digress... The deal makes sense for B&N, clearly, but what's Microsoft's game here? A convincing argument from Slashgear:
So, Microsoft buys into ebooks; it’s natural to assume that Amazon is its target. Safe, but wrong. Amazon isn’t a natural competitor for Microsoft. We’re not going to see the Windows maker suddenly decide to start offering vacuum cleaners, and coffee machines, and Nike shoes. In fact the only thing Microsoft could learn from Amazon is its ecosystem, Kindle hardware supporting Kindle ebook sales with a heaping of lock-in thanks to a proprietary platform. 
It has a better example of that already. Apple is eating Microsoft’s lunch in mobile, and it’s stealing its allowance too to spend on computing treats. Windows Phone has grown too old to fit into the “bold new upstart” category and is now being eyed warily as the not-quite-convincing challenger that’s yet to prove it can fight in its weight category. Microsoft’s position in tablets is laughable; PC sales are, despite the best efforts of Intel and its ultrabook investments, sluggish. And all the time, across the aisle, Apple is selling Macs, iPhones and iPads as fast as it can make them. What Apple has – and what Microsoft has finally woken up to – is an ecosystem.
Take that, Tim Cook! Steve Ballmer be nippin' at yo heels.