Barnes and Noble’s spin-off of the Nook and its college education business into a newly formed subsidiary, and Microsoft’s $3 million investment for 17.6% of the newly-formed subsidiary Newco announced April 3th, 212 as part of a strategic partnership between Microsoft and B & N, has the potential to not only disrupt the eBook industry but also to change the tablet and publishing business all together.
Tablets and Windows 8
Both personal computing and publishing have been undergoing lots of disruption and change, and industry forecasts project tablet sales to outpace personal computer sales. As Microsoft continues to lose market share in terms of their install base for Windows, it is critical for Microsoft to make Windows 8 the OS of choice for non-Apple tablet devices. If Microsoft wants to establish Windows 8 as a smart choice for tablet manufacturers, 212 tablet sales will be critical.
Amazon’s Growth and Success
The success of Amazon’s Kindle Fire has proven that Apple’s lead in the tablet wars can potentially be overturned. It also signals to the market just how important tablets are for content sales. When you buy a new tablet or eBook Reader — be it the iPad, Kindle or Nook — eBook software comes pre-installed. This provides a huge benefit for content sales and helps to establish a continuously growing consumer base.
This is especially good news for publishers, as they continue to be reminded of Amazon’s continued effort to chip away at their role in the publishing industry.
Opportunity and Dependence
As Amazon continues to gain market share in print sales, eBook sales and publishing, traditional publishing companies are looking for ways to compete in a future where most consumers will be buying books online.
The strategic partnership with Microsoft creates new opportunities for publishers who are currently dependent on Amazon despite knowing Amazon’s intentions.
In the announcement by Barnes and Noble, CEO William Lynch highlights the strategic value of the partnership:
“The formation of Newco and our relationship with Microsoft are important parts of our strategy to capitalize on the rapid growth of the NOOK business, and to solidify our position as a leader in the exploding market for digital content in the consumer and education segments. ”
With this deal comes the benefit of added distribution for the Nook eBook platform. The Nook reader will be made available for Windows 8, opening up a massive existing install base of Windows users and what looks to be a quickly growing selection of tablet devices running Windows 8. Lynch highlights this in the announcement:
“Microsoft’s investment in Newco, and our exciting collaboration to bring world-class digital reading technologies and content to the Windows platform and its hundreds of millions of users, will allow us to significantly expand the business.”
Access to Microsoft patents and new technology could also play an increasingly important role in the future. With books online, it is only natural that companies will begin to explore the possibility of new reading experiences. Having Microsoft as a partner greatly improves Nook’s ability to provide next-generation reading experiences. It also enables Nook to tap into the knowledge and experience that Microsoft has amassed from exploring digital reading and interactive media for more than a decade.
The strategic partnership announcement between Barnes and Noble and Microsoft has the potential to fundamentally change the future of publishing, content sales and tablets.
In the least, it is going to disrupt the tablet market, alleviate some of the publishers’ dependence on Amazon and establish Microsoft as a player in all of these areas.
Overall, the partnership looks to be good for consumers, providing them more competitively priced tablet options. It is good for the publishing ecosystem because it will help to eliminate the dependence and near monopoly that Amazon currently holds, as well as laying the foundation for next-generation reading experiences.