Microsoft to buy NOOK division?
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!” ;)
“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
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.