30 Apr

B&N teams up with MSFT

Everyone in book land is looking at the new announcement by B&N and Microsoft teaming up to spin off B&N’s Nook ecosystem:

Barnes & Noble is breaking itself apart, by spinning off its fast-growing digital unit from its slow-growth bookstore business. And it’s doing so with help from Microsoft.

Redmond will put $300 million into the new business at a $1.7 billion valuation, and will get 17.6 percent of the new company. That will leave Barnes & Noble with a stake in the new unit worth about $1.4 billion.

That’s about $600 million more than the value the market placed on all of Barnes & Nobles until this morning. Not surprisingly, Barnes & Nobles investors love this idea, and are bidding up the stock a staggering 80 percent this morning.

The best point of view is to look at it this way. Until the Kindle Fire, the B&N Nook Color was the best selling Android tablet that industry people didn’t think of as an Android tablet. Every time I would see an article trying to poise yet another crap-ass tablet as being the next iPad killer, I would point out that the B&N Nook had already outsold it.

Of course, the Fire has done a very good job moving units.

But that still makes the Amazon Fire and the B&N Nook Color and the B&N Nook Tablet the best selling tablets.

But someone recently made the argument, and I can’t find the link, that the choice of buying a tablet is really a decision to buy into an ‘ecosystem’ of media content. You buy a Fire, you’re not just buying a Fire, but a window into Amazon MP3, Amazon eBooks, Amazon cart, Amazon video, and Amazon Prime Videos (their answer to Netflix), as well as software installs. But an iPad, you’re buying into iTunes (movies, music, eBooks) as well as software (interestingly, on an iPad you also can carry over your B&N and Amazon books, but not as much other media.)

So Microsoft now has a way for you to buy into an ecosystem (B&N). And if B&N’s smart, they have abilities to reach out to either Google Play or MSFT media options.

NewCo (the name of the new joint company) needs to think ecosystem as fast as it can. Grabbing Microsoft’s contacts and getting them to put a stake in is actually a smart move.

No wonder stock doubled in pre-trading.

If you’d told me that B&N and MSFT had teamed up back in 2002 I would have thought ‘how Orwellian,’ and yet in this picture, they’re both the underdogs.

But this will give Microsoft things to offer as it tries to come out with a tablet soon.

And while I’m not the world’s biggest Microsoft fan, I do love competition. As I’ve pointed out before, tech journalists are always trying to recast every brand competition in the frame of MSFT vs AAPL from the early 90s, and that has done us all a tremendous disservice. Consider Xbox–Nintendo–Playstation. I prefer a healthy competitive environment. Look at the world of smartphones right now (iPhone/Android/Blackberry/Windows/Symbian), there’s been a lot of innovation in the last four years, and I’ve enjoyed the benefits of seeing good ideas on different phones migrate, which has benefitted me.

This will be interesting.

That being said, who the hell thought naming the company NewCo was a good idea? (Update: it really is a placeholder name until they can come up with a better one, they’ve stated as much, it just got missed in following coverage)

That doesn’t exactly inspire confidence.

But again, to summarize, it’s probably not about the Microsoft OS showing up on future Nooks as much as it’s about giving MSFT tablets access to *content* to give customers a reason to buy one, I think, as well as goose Microsoft’s existing smartphone sales by giving them access to an ecosystem of content.