Microsoft, Barnes & Noble Take On Digital Rivals
STEVE INSKEEP, HOST:
The last few years have not been a good time in the bookstore business, but Barnes & Noble stock is climbing after the company announced its dealings with a business partner. Microsoft is investing $300 million in Barnes & Noble. The money goes to the bookstore chain's efforts to expand in digital books and tablet computing. NPR's Wendy Kaufman reports.
WENDY KAUFMAN, BYLINE: In the world of tablets, Apple is the undisputed leader. And in total merchandise, Amazon is content king. Microsoft and Barnes & Noble have been playing catch up to these very formidable rivals in the digital realm and analysts see this deal as being good for both the bookseller and the software giant.
JAMES MCQUIVEY: What we make of this is Apple and Amazon are poised to take over the world and Microsoft and Barnes & Noble don't really want to take that lying down.
KAUFMAN: That's James McQuivey of Forrester Research. He notes the deal gives Barnes & Noble, which has been struggling, a badly needed infusion of cash. It gives Microsoft access to a trove of new content. As part of the deal, Microsoft will get a nearly 18 percent stake in a brand new Barnes & Noble subsidiary. For now at least, it will be called Newco, as in new company. It will include the Nook, book downloads, digital textbooks and educational software.
Bob O'Donnell, an analyst at the research firm IDC, says the deal assures the future of the Nook and the Nook e-reader platform.
BOB O'DONNELL: There had been a lot of concerns with the dominance of Apple and of Amazon, could Barnes & Noble continue? And now, clearly they're going to be able to continue.
KAUFMAN: And perhaps thrive, providing real alternatives.
O'DONNELL: I think that's important. I think people are looking to have competitors so that there's not one dominant force. And this sort of helps balance things a bit.
KAUFMAN: More competition could mean better prices for consumers and a better deal for publishers. Many of them have complained that Amazon has been squeezing them to sell their books for prices that were just too low. Indeed, the CEO of Barnes & Noble says publishers are going to like this deal a lot and says he's received encouraging e-mails from many top publishers.
While Barnes & Noble gets what looks like a bit of a new lease on life, Microsoft gets a content boost as it tries to compete with Apple's iPad. Tablet computers running Microsoft's brand new operating system, Windows 8, will be out this year and now Nook's digital offerings will be bundled with it. Still, Wes Miller, an analyst at the independent research firm Directions on Microsoft, says competing against the iPad will be extremely tough.
WES MILLER: In order to do that you've got to have apps. You've got to have games. You've got to have books. You've got to have music. You've got to have a whole - it's a really broad platform and it's taken Apple, you know, 12 years to build this platform out and Microsoft is attempting to do it in a couple.
KAUFMAN: And Miller believes Microsoft's total package will fall short. The analyst says Microsoft has sometimes embraced a strategy of turning out products and services that weren't quite as good as the market leaders but were good enough to bring in healthy profits.
MILLER: But it may be a harder challenge when you're going up against somebody where the whole company's mantra is exceptionally good. You know, no compromise seems to be Apples motto. So how do you compete with exceptional when you're good enough?
KAUFMAN: Despite some concerns, Barnes & Noble's shareholders loudly applauded the deal. They'd been clamoring for the sale of the Nook business or even the whole company. And a sale of the new digital division remains a possibility. The deal also puts to rest the nasty patent fight between Microsoft and Barnes & Noble over the Nook's operating system. Taken together, all of this was enough to drive Barnes & Noble stock up more than 50 percent.
Wendy Kaufman, NPR News.
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