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

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?
Written by Mary Jo Foley, Senior Contributing Editor

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.


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?

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