Microsoft to buy NOOK division?

Microsoft to buy NOOK division?


TechCrunch article

by Eric Eldon and Ingrid Lunden has gotten a lot of play, and understandably so.

They claim to have seen documents about a proposed Microsoft buy-out of the NOOK part of Barnes & Noble for $1 billion.

That would include the NOOK tablets, NOOK reflective screen devices, and the college bookstore part.

Those elements were effectively separated from the brick-and-mortar Barnes & Noble trade bookstore (what most people think of when they think of Barnes & Noble) not that long ago.

The article (which I recommend you read) also suggests that B&N would be out of the tablet business by the end of next year (2014).

“Tab-tab-tablet, good-bye! Tab-tab-tablet, don’t cry!” ;)

Or perhaps…

“Don’t cry for me, Barnes & Noble!
The tablet was just bad business
Although the screen was bright
The timing wasn’t right
We’re still a bookstore…
Until that’s no more”


One of the interesting things is that I think many people liked their NOOK tablets, and of course, they’ve just added the Google Play store (which, as I wrote earlier, puts the NOOK tablets into a hardware business instead of a content business).

That’s really the heart of the problem.

Barnes & Noble and Amazon have clearly been seen as competitors as online bookstores.

When Amazon introduced the Kindle, and later the Kindle Fire, Barnes & Noble, like one of the blind people encountering the elephant in the old story, processed just through the book lens.

They thought that to compete with Amazon, they’d have to also introduce e-book hardware. Honestly, they did a very good with it (eventually). They even led in a few important points (like frontlighting the screen and peer-to-peer book lending).

However, the Kindle Fire was never, in my opinion, about e-books. I’ve always said that the device is there to get you to buy physical goods through Amazon (diapers and windshield wipers).

It’s a little bit like…let’s see. You are challenged to a sword-fighting duel. You train and train and get a really good sword. However, you find out that your opponent has jet aircraft…so you figure you’d better get them. You put all your time and energy into getting jet aircraft…even though, as it turns out, your opponent isn’t going to use those jet aircraft during the duel at all.

That doesn’t mean Amazon doesn’t want to sell e-books…I think they do. I think the money, though, is in getting you to buy the physical stuff (they also do a lot business providing services, like fulfillment and web storage, but that’s another story).

So, while Barnes & Noble was competing with Amazon on tablets, they were doing it to sell books (and apps…digital stuff). Amazon was using them as a gateway to something else. Maybe that’s a better analogy. Amazon built a nice door. Barnes & Noble built a nice door…but B&N didn’t have a store behind their door. ;)

I do think it could happen. Microsoft could buy the NOOK business…and shut down the NOOK tablet part of it (which underperformed in the last holiday season) a year from now (maybe a bit more than a year…one more holiday season).

The question is, why would they do that? Why buy the NOOK tablet business and then shut it down?

It’s not, I think, because it is a competitor for Microsoft hardware.

I think they aren’t really buying the tablet business…they are buying the NOOK customers.

This deal would include the NOOK reflective screen devices, and it didn’t say what they might eventually do with those (if this story is all accurate).

I think for Microsoft, they want retail customers…and this would give them to them.

They could then sell Windows tablets to those customers.

I haven’t seen this in many stories, but Microsoft had an e-book business before…and eventually abandoned it. Those people who bought into .lit might be a bit wary of this.

Barnes & Noble’s investors aren’t wary, though. Take a look at this

CNN.Money stock chart

for B&N…up more than 25% in two days.

Does that mean people are saying, “Yay! Microsoft is going to buy B&N and then Barnes & Noble will make a lot of money as I stick with it through retirement?”

No, for many of them it means, “Good! I can get a better price for this turkey before I dump it.” ;)

What would happen to the brick-and-mortar Barnes & Noble stores?

I think Leonard Riggio, the B&N founder who has made an offer for them, would get them.

Microsoft would own the NOOK hardware, NOOK Books, really all the digital content, and the college bookstores.

Riggio would own, and try to re-invent, the brick-and-mortar bookstores.

Going farther out, Microsoft would dump the NOOK hardware (including the reflective screen devices, eventually). NOOK would basically just become an app that was part of Windows. You’d have access to your NOOK books, and it would come on Microsoft devices. They might continue to sell digital content online.

Riggio…might figure something out, but I think the stores would look very different than they do today. I do think it’s still possible to make brick-and-mortar bookstores work, but you need them to be destinations. You need the shopping experience to be vastly superior to what it is online…otherwise, as Amazon gets same day delivery going, there’s not going to be much point in going to one.

We’ll see how this all plays out. If this was a leak, I don’t think the players are upset about it. They are getting valuable feedback about how the public sees the idea…and I’d say it’s been generally positive.

Could we lose Barnes & Noble as a chain trade bookstore? I think so…at least in the current configuration of it.

We’ll see what happens.

I’m interested to know what you think…you can let me and my readers know by commenting on this post.

P.S. Thanks for all the well wishes about my surgery! I’m doing pretty well…my Significant Other has been very supportive, and I think my surgeon did a great job. :) Thanks also to those who gave me a heads-up on this story…even if I’ve already seen something, I appreciate those!

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

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5 Responses to “Microsoft to buy NOOK division?”

  1. jjhitt Says:

    This is sad. I like the Nook. Not enough to buy one, but enough that I don’t want to see it go the way of the Zune music player.

    The Kobo is still around as competing hardware, but the Nook is a much better piece of hardware.

  2. Anthony Says:

    Microsoft would own the NOOK hardware, NOOK Books, really all the digital content, and the college bookstores.

    Nookbooks (e-books) is not part of Nook Media. E-books is part of B&N would still be the e-book store for NOOKs if NOOK Media gets sold.

    • Bufo Calvin Says:

      Thanks for writing, Anthony!

      Could you point me to an official source that says that? It contradicts my understanding of it. For example, on Barnes & Noble’s site, it says,

      “Our NOOK Media LLC subsidiary is a leader in the emerging digital reading and digital education markets. The NOOK® digital business offers award-winning NOOK products and an expansive collection of digital reading and entertainment content…”

      The use of “digital reading content” suggests the e-books to me.

      In the press release originally announcing NOOK Media, the say:

      “NOOK Media LLC comprises the digital and College businesses of Barnes & Noble and will continue to have a very close and mutually beneficial relationship with Barnes & Noble’s retail stores. The partnership includes a $300 million investment from Microsoft in NOOK Media LLC.

      “As demand for digital content continues to increase, we are focused on bringing ground-breaking reading and learning content and technologies to more people in more formats than ever before, including the imminent launch of our exceptional NOOK reading application for Windows 8,” said William Lynch, CEO of Barnes & Noble. “We look forward to working closely with our new partner Microsoft to add value to their innovative new platform by bringing great reading experiences and one of the world’s preeminent digital bookstores to millions of Windows 8 users.”

      The press coverage I’ve seen also suggests that, if the deal exists, it would include the NOOK books going to Microsoft.

      I’d be happy to correct that if you can point me somewhere official online…and I appreciate your desire for accuracy.

  3. Edward Boyhan Says:

    Technically, Leonard Riggio is not a founder of BN. BN as a company is over 100 years old. Riggio is their largest shareholder, and their chairman. He started a college bookstore business, and in 1971 bought BN using the BN name on the bookstore business. Apart from the original BN store on lower fifth Avenue (which was mainly a purveyor of college textbooks), BN didn’t really get into the book “superstore” business until later.

    Riggio’s offer for the brick & mortar stores does not include all of them (many of them, but not all). William Lynch (CEO of BN) is reputedly cool to Riggio’s offer. The MS offer hasn’t really been confirmed in any substantive way so it’s hard to know how things might turn out. I can see scenarios in which BN becomes a ghost of what it once was — following Borders into functional oblivion.

    From MS perspective I can see a couple of scenarios. One is for the Nook software base which could be incorporated into the rumored 7/8″ “surface” tablet rumored to be announced at the MS //Build conference 6/26-28 (which I will be attending :grin). The other could be for the customer base and/or the existing book and media contracts that BN already holds. That “package” could then be bundled into a free-standing service hosted on MS’ Azure platform, or (more likely IMV) combined with existing XBOX services behind a rebranded XBOX services offering.

    The new XBOX (rumored to be called Xbox Infinity), the small Surface tablets, and the next version of Windows are all expected to be announced over the next 6 weeks (before the end of June) — so perhaps things will clarify by then (though based on past form, every MS announcement seems to create more questions than it answers).

    I would say BN is definitely “in play”.

    Keep in mind that John Malone of Liberty Media owns 17% of BN (Riggio owns 30%) and at one time evidenced interest in the Nook technology. Interesting days ahead.

    • Bufo Calvin Says:

      Thanks for writing, Edward!

      Technically ;) you are correct. Search for “Riggio” and “Founder”, though, and you’ll find many articles that refer to Riggio as the founder. For example, here is the Forbes profile:

      It is, perhaps, more accurate to say that Riggio founded the modern chain.

      I believe Riggio bought what was then one store in 1971. It had become Barnes & Noble in 1917 (not quite 100 years…you know, if we are being technical). ;) The company had existed before 1917, but not with that name.

      Nitpicking aside :), your insights are always valuable. I do think they are more interested in the customers than the software (is the B&N software really that good?).

      I’ll look forward to your report after the conference, and we’ll keep an eye on what develops from Microsoft in the next few months…

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