Joe wikertMicrosoft’s $300 million investment in B&N’s digital businessis about more than ebooks. Much more. Or at least I hope so. Success in this venture will not be measured by sales of ebooks. Microsoft should instead use this as an opportunity to create an end-to-end consumer experience that rivals Apple’s and has the advertising income potential to make Google jealous. But how will that happen by investing in the distant #2 player in the ereader space?Microsoft has spent billions over the years as it repositions itself from the makers of Windows and Office into a much broader brand. They’ve done a good job as Microsoft is one of the most recognized brands on the planet. But is it really considered a consumer brand like Coke or (wait for it) Apple? Even though they’ve built an amazing customer base with Xbox and the innovative Kinect accessory, I’d say the answer to that question is “no.”

Barnes & Noble isn’t exactly up there with Coke or Apple, but the B&N brand conjures up other images Microsoft could benefit from (e.g., trusted in-person retailer, growing digital content retailer and even a place where you can get answers to your questions about nooks and books). The initial investment with B&N is about the .com world, but who says the larger relationship has to be online-only?

Think about the nook areas in today’s B&N superstore and consider what they could become with a broader Microsoft alliance. I’ll bet you didn’t know that there are almost 20 Microsoft Store locations in the U.S. That sounds a lot like Apple’s strategy, right? It remains to be seen whether Microsoft can create the same sort of buzz or ROI in their stores that Apple has managed to achieve, but why go to the trouble and expense of creating a larger standalone presence when a store-within-a-store might be even more effective? What if B&N stores added mini Microsoft Stores in each of their locations? The foot traffic is already there and what a great place to showcase and sell that new Windows 8-based nook they’ll undoubtedly create.

This isn’t just about selling Windows-based nooks in brick-and-mortar stores though. This new alliance needs to sell devices, ebooks, music, video, apps and more. The nook platform is almost exclusively about ebooks. Compare that to Apple’s platform where ebooks are probably a rounding error for iTunes. B&N desperately needs to diversify their business beyond ebooks and Microsoft has the cash to help make it happen.

Let’s also not forget about how the Xbox could fit into all of this. Xbox is one of the brightest stars in the Microsoft product portfolio and Microsoft needs to get some mojo in the mobile/tablet space. Given the ongoing decline of print book sales it might make a lot of sense for B&N to reduce their superstore title count inventory and make even more room for that Microsoft section I described above.

The brick-and-mortar presence is something Amazon doesn’t have, at least not yet. This is a great opportunity for B&N to use that to their advantage, assuming the deal goes further than the digital investment.

All of this might never happen, of course. As a publisher and a consumer I’m still intrigued by the possibilities though, even if it only means B&N is now funded to be a more serious ebook retailing competitor for Amazon.

[Via Joe Wikert’s Publishing 2020 Blog]


  1. Saturday, someone at Microsoft told me that it’s planning an online store like Apple’s that’d include ebooks of all sorts. Buying this slice of B&N’s business would jumpstart that store with hundreds of thousands of titles. There’d be no need to persuade publishers to sign yet another nasty, niggling contract and submit book files in yet another format.

    Hopefully, Microsoft will do with B&N did and Apple only pretended to do, which is go with an industry standard ePub. If I were Microsoft, I’d give publishers an 80/20 split if they forgo DRM. Without DRM, it’d be easier for Microsoft-bought books to run on all the major platforms.

  2. I agree with your vision- Barnes and Noble can out-Best Buy Best Buy.

    But I don’t think that’s what they are planning to do at this time.

    Buried in the 8-K form announcing the details of the creation of the newco company is a line stating that newco will be the exclusive hardware/ accessories provider for Barnes and Noble stores.

    Since newco is a new company, rather than a subsidiary of Microsoft, I think this arrangement would also exclude other Microsoft products like xbox.

  3. Peter, could you expound a bit on that? I’ve been buying eBooks for a long time, and I don’t remember Microsoft’s efforts as disastrous. They introduced a new, better format (at least, from a technical standpoint) that became the basis for ePub. The DRM was relatively easy to crack and tools to do so were trivial for the user to run once written. I switched all of my purchases to Microsoft’s format and converted to what I needed, but the old options were still available.

    I just don’t remember it being a disaster. *shrug*

  4. Logan, the key bit in there was “the DRM was relatively easy to crack.” If you didn’t have the knowledge to disinfect your books (or even to re-register your copy of Reader after upgrading to a new version of Windows, at least before Microsoft took down the authentication servers) you got screwed. Even if you did, if you didn’t have backups of all the books you’d “purchased”, you were still screwed when they took down the servers. I’d qualify “having hundreds or thousands of dollars worth of books become unreadable overnight” as “a disaster”.

    Can’t wait to see the wailing and gnashing of teeth when Adobe (or Amazon) do the same thing

  5. I don’t think that’s going to be the strategy,unless B&N finally thinks seriously of extending abroad with Microsoft support. Microsoft is an international company, while B&N is only local to you US citizens, and has been actively refusing to sell abroad. If Microsoft was thinking of some international store partnership, I would think Kobo as a more natural move.

  6. @Ana: More recent reports (WSJ, etc) have clarified that MS will in fact be providing $125 Million for Nook international expansion.
    They will also be guaranteeing B&N a *minimum* of $180 Million (over five years) worth of ebook revenue, which implies that MS will be selling ebooks through *some* product that connects to the Nook ebookstore.
    Nook is late to the international game (4th out of 4 majors) but at least they’re in the game now.

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