Should and could Microsoft buy Nook Media for $1 billion?

Should and could Microsoft buy Nook Media for $1 billion?

Summary: A report claims Microsoft is considering buying the Barnes & Noble Nook Media venture for $1 billion. Are there any signs indicating this is in the cards?

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TechCrunch is reporting that Microsoft is mulling the idea of buying out the Nook Media venture in which Microsoft invested $300 million last year. TechCrunch claims it has obtained "internal documents" which indicate Microsoft may pay $1 billion for the assets of Nook Media.

Update (May 9): The New York Times, citing an unnamed person "briefed on the matter," said the documents are real and only several weeks old. That person was said to add that any kind of possible acquisition is several weeks away.

nookwin8

Does a Microsoft Nook Media buy-out make any sense? Given I thought rumors of Microsoft buying Skype and Yammer (both of which Redmond ended up purchasing) were pretty ludicrous, I'd say I'm probably not the best one to judge.

Microsoft officials, as one might expect, are saying they have no comment on rumors or speculation involving Microsoft's reported interest in Nook Media.

I can contribute the little I do know about what I've seen/heard about Microsoft and Nook Media.

Nook Media is the venture that Barnes & Noble created last year. At that time, it was known as NewCo. Nook Media includes Barnes & Noble's Nook devices, online bokstore, e-content publishing and college business.

The Nook tablets are Android-based. Barnes & Noble recently added support for Google Store to these devices. Hopes by some for a Windows-based Nook and/or Microsoft Surface e-reader with Nook's catalog of digital content have not materialized.

For now, there's not a whole lot that Microsoft seemingly has gained from its Nook Media investment. There's a Windows 8 Nook app. There's still no official Nook app for Windows Phone (in spite of seeming plans to field one). Microsoft isn't offering access to the Barnes & Noble/Nook digital media catalog as a built-in part of its Surface, Windows or Windows Phone devices.

(I asked Tami Reller, the Chief Financial Officer of Windows client, about Nook this week. She said that Microsoft was supporting Nook Media "in all the right ways," and that it was working with Nook Media on the next iteration of the Windows 8 Nook app and support for the Nook Media catalog. She said that Brian MacDonald -- the head of Microsoft's AppEx team, which is building new first-party Microsoft apps for Windows 8 -- was working closely with the Nook team.)

As I noted in a blog post from earlier today, there could potentially be some kind of tie-in between Nook Media and Microsoft's Office division.

The Barnes & Noble college business -- digital and physical -- is part of Nook Media. B&N bought it in 2009. Pearson invested late last year in Nook Media largely because of this business.

Even though Nook unit sales are down, Nook Media grew its digital content sales. Barnes & Noble officials say the Nook digital bookstore service contains about a 25 percent share of the total e-book market and 35 percent share of the digital magazine subscription market in the U.S.

In late November 2012, as part of its second quarter 2013 earnings call, Barnes & Noble CEO William Lync said the company was seeing "an increase in the pipeline of RFPs (requests for proposals) from schools looking to outsource their physical and online campus book stores. These schools see the growth in textbook rentals and recognize the pending growth of digital content and are unable or unwilling to invest in managing the distribution of course materials in these formats themselves."

Lynch noted that the company was building out a Nook Study platform "for the management, merchandising and distribution of digital content."

"This gives Barnes & Noble College a one-stop suite of Retail and Digital services for schools and students which is a valuable competitive advantage," Lynch said during B&N's most recent earnings call.

What do you think? Could and should Microsoft pay for Nook Media and try to capitalize on its digital-content distribution offering and/or to jump start some kind of new Surface e-reader/tablet offering? Or would Microsoft be throwing money away by buying Nook Media -- for $1 billion or any price?

Topics: Mobility, E-Commerce, Microsoft, Tablets

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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58 comments
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  • It would be a waste

    Just like a number of MS purchases over the last several years, buying themselves further into a product that has little chance of selling. When was the last time anyone saw a Nook in the wild? I see iPad and Droid tablets everywhere, as well as a number of Kindles. Nooks... not so much.
    alan@...
    • Yes, but....

      But, it fills a huge hole that Microsoft has in their current store (for Windows and Windows Phone). iOS has iBooks, and Android has Google Play Books.

      Microsoft really needs it in order to further fill out their ecosystem. They wouldn't be buying it for the Nook devices, but instead for the content.
      JHoff80
      • Also

        Also, a revamped version of Nook Study running on the Surface Pro (or any other device with a pen digitizer) could be VERY compelling for students.
        JHoff80
      • Before you worry about the icing

        you really should have an appealing cake ready to be frosted.
        baggins_z
    • Me!!

      I have a Nook Simple touch, and I wouldn't give it up if you paid me.
      Seriously, can you read a FULL book on an iPad (or any other bright, non e-ink reader) as quickly as you can on a Nook?
      But yes, it is a wasted investment, for a number of reasons.
      tappette
      • Of course you can...

        I read full books on my iPad all the time. People seem to forget that you can adjust the brightness over a really wide range on tablets. Plus, reader apps allow you to change the font size and background to make reading even more comfortable.

        Regarding the question of the article: Microsoft should not buy Nook. It's a waste of money that they're going to need in order to survive their future dwindling revenues.
        BillDem
        • What dwindling revenues?

          Once again you prove you know nothing.
          Moosehouse
        • Huh?

          Bill your comment makes no sense you First you say they should not buy Nook but they you say they need it in order to survive? Which is it?
          Djblois
          • He said

            They need the money, i.e. they need to keep their cash for the rainy days that are coming soon.
            mil7
    • Nook in the Wild

      Today.
      hayneiii@...
      • Nook in the wild

        All of my children have Nooks as well as my wife.

        I fear this will be a hostile take over because Microsoft has a viable tablet already they will be buying this to shut it down. The 1 billion price tag is pocket change since Microsoft made 20 Billion in revenue last quarter (a 3 month period). Shutting down the Nook might be the nail in the coffin for Barnes and Noble, say your goodbyes to your local stores now.
        lightningcpu@...
    • "When was the last time anyone saw a Nook in the wild? "

      That's very easy to answer. Not including the two that my wife and I own, I see them every time I walk past the electronics counter at Walmart. They are right next to the Kindles and the iPads. And the article did say they have 25% of the e-book market and 35% of the e-magazine market. So someone must be buying them.
      cornpie
  • google buy

    I think it would be wise if Google bought them instead.
    sgodsell
    • Sure...

      ...and then Google would end up paying Microsoft directly for the settled patent infringement.
      itpro_z
    • Google is trying...

      to be a seller of e-books of its own. And they already have their own tablets. The only reason for them to buy Nook would be to bury it and take over its customer base - which would be a bad thing for consumers
      cornpie
    • Perhaps Google Should Buy

      You. Oh yes they have.
      Moosehouse
  • Should and could Microsoft buy Nook Media for $1 billion?

    Microsoft could buy Nook Media but they shouldn't. It wouldn't make sense since they have the Microsoft Surface which can handle the same functions of the Nook and to make modifications would cost less than $1 billion. Plus I don't trust TechCrunch. Didn't trust them when Michael Arrington was in charge and I don't trust them now.
    Loverock-Davidson
    • @ Loverock Davidson

      On the contrary, a Microsoft-Nook Media deal absolutely makes sense. There are not many ways that Microsoft can build a book publishing platform all on its own. It does not have the book publisher relationships on its own. Nor does it have the ecommerce book store business that Amazon to a large extent and B&N to a smaller extent own.

      Education sector is an important part of the consumer productivity market. Along with home business users et al. Instead of wasting money worth billions of dollars on buying or licensing new hit music and movie and tv show franchises (which can be left to the Xbox business abilities and where Microsoft seriously lags competitors including Apple and Amazon), it makes better business investment sense to tie up either with Amazon or B&N or actually buy Nook Media business. And then use it to build a school/college/university course book and test publishing platform. That couples well with the Office platform for synergies at the school level for things like student document uploads to Office servers. This can also include automated Office based test software that reduces teachers' manual involvement in test preparation and delivery. This can bring in annuity like revenues since neither book publishers nor schools change each other fast enough. This keeps the platform stable and used long like enterprise software.

      Please refer to recent pronouncements by Bill Gates (in China or S Korea) referring to the education sector as being on the cusp of a fundamental technology change. The deal will play into it if Microsoft plays it well and develops it well.
      calahan
  • The Surface Pro is probably the best college student PC right now

    It weighs about 900g, has reasonable battery life (for a PC), runs full Windows and, most importantly, supports OneNote and a precise stylus. The battery life will likely improve in the next release (as Intel lowers the power requirements for its CPUs)

    Add in a textbook library, and it would make a for a nice college-student tool.

    That said, I'm not sure what the benefit is to Microsoft - Windows will run anyone's software. But, the folks in Redmond think in mysterious ways (something I believed while I worked at Microsoft).

    For what it's worth Mary Jo, you left out Microsoft's ridiculous bid for Yahoo way back when. Never under-estimate Microsoft's capacity to make poor acquisition decisions.
    Flydog57
    • Windows Will...

      But Windows RT and Windows Phone, they only run what Microsoft permits. And even though Windows runs anyone's software, if the Nook stuff were integrated into the "Don't Call it Zune" Store, this would be front and center for eBooks and eMags on Windows. And could be a lock-in on the mobile devices.

      And if the Nook textbook were a superior experience -- supposedly the kind of thing Apple's doing, too -- that might help Microsoft in education. Or at least render them competitive. Only just over 5% of all PCs sold worldwide are Macintosh, but on college campuses, Apple's much more popular, 25%-75% of new student PCs on many campuses (with my two kids it was 50%, and that's because my daughter's program at MSU "strongly recommended" Macs for their program, despite the 2x cost factor). And those kids often go on to buy Macs later in life. This is also a fairly recent thing, Macs being this popular and it's not good for Microsoft.
      Hazydave