May 10, 2013

Microsoft may buy Nook, B&N grows hair in strange places


“Come on, Been, all the cool kids are letting me buy their digital divisions. This won’t be like Zune, I swear.”

Barnes & Noble has been going through some changes this year. They have been swelling in odd places. They are sometimes angry or sad without knowing why. And people are paying attention to them in ways that make them feel funny in the pit of their stomach. Also: so many pimples.

They’ve begun hanging out with a rougher crowd: as Techcrunch reported Thursday, it appears that Microsoft is in the middle of a bid to buy Nook Media LLC, the digital arm of Barnes & Noble’s business. Microsoft bought 17.6% of that company for $300 million last year, and while the valuation of Nook Media now would run to something like $1.8 billion, the reported offer from Microsoft is just $1 billion.

Their new look is making them popular with other kids, but maybe for the wrong reasons: news of the deal goosed investors, driving B&N stock prices up 18% over the course of the morning. All of this comes months after  B&N CEO and confused former best friend Len Riggio publicly mulled over the possibility of buying the awkward, sullen retail chain’s 689 brick and mortar stores without the Nook division. B&N has reportedly been spending much of this spring locked in their room with the stereo turned up, moping over lackluster sales reports for Nook devices over the holiday season.

To be clear, what Microsoft is seeking to buy—and the news has yet to be confirmed by Microsoft representatives—are not licensing for the Nook devices themselves, but rather the digital side of the company, including the Nook app, to be used on third party devices using the Windows platform. The Nook app is already available for Windows, following an additional $180 million paid by Microsoft last year for that purpose. The proposal leaked on Techcrunch also outlines the 2014 end date for future iterations of the Nook, were the deal to go through.

This news comes just days after the Barnes & Noble announcement that they would be offering the Google Play app on the Nook, effectively allowing Nook users to circumvent the bookseller’s only real means to make money off of the devices. When confronted about what this strange and seemingly contradictory flirtation with the competing cool kid media giants might mean, B&N reportedly looked at their shoes and mumbled “I’unno.”

There are a few eventualities as things stand now.

1. Microsoft buys Nook Media and Riggio buys the stores. The Nook would quickly go the way of the Zune, everyone smokes clove cigarettes, and the app would linger on a bit longer propped up by Microsoft’s favorite weapon: pre-installation on Microsoft devices. The stores likely collapse under the weight of their real estate expenses and pressure from Amazon, but might be propped up a bit longer by an outlet agreement with Microsoft to continue displaying the Nook.

2. Microsoft doesn’t buy the Nook. Riggio buys the stores. Growth slows for the Nook, B&N wears the same black t-shirt for two weeks and grows its bangs long. Google Play cuts into ebook revenue. The Nook drags the stores down with it unless Riggio cuts it loose and keeps cutting, so much so that B&N loses clout with publishers and again, folds under mounting pressure.

3. Microsoft doesn’t buy Nook Media, Riggio doesn’t buy the brick and mortar stores, the Nook still stops production in a year or so, it’s parents just don’t get it, and the stores, chained to it, fold at a furious pace.

Whether Microsoft buys Nook Media or not, one thing remains true: the transition to adulthood is a painful lesson in diminished expectations. Not all of us can or should be hardware companies, sometimes just selling books is enough and even that is more than B&N will probably get.



Dustin Kurtz is the marketing manager of Melville House, and a former bookseller.