Well, unless you’ve been under a technology-blocking rock for the last several days, you have probably heard about Microsoft’s $300 million USD investment in Barnes & Noble’s NOOK (soon-to-be spun-off) group. The investment and approximately 17% ownership in the eventual new group/division/company was a part of a settlement between Barnes and Noble over Android and Microsoft patents (a story for another day). A lot has been said about the agreement over the past few days and I have been watching and reading with interest. What finally pushed me to write about this was not so much the opinions / feelings of people regarding the deal; those are what they are. Instead, it was the common attitude I found with people being absolutely certain in their predictions about the future for this partnership, especially the ones that were stating the partnership would fail.
While I cannot predict the future any more than anyone else, I saw quite a few reasons why a partnership between Microsoft and NOOK could actually work out. The best part of it all – it didn’t take much “deep thought” to bring these points to light.
I’ll take a moment to list some reasons why this partnership makes sense from my perspective.
Picture courtesy cnet
REASON #1 – What’s $300 Million Amongst Friends?
The first thought that came to mind when I read this was quite simple. The entry point in this agreement from a financial perspective is, well, pretty cheap (when you’re a big company). Factor in a 17% stake in the spin-off at that price, and there’s not a whole lot to lose when it comes to the arrangement. Of course, there is the potential of a whole lot to gain, which leads me to…
REASON #2 – Joining In The eBook Party
It sure did take long enough (over a decade), but the eBook industry is big-time. Everyone and their brother has either a direct or indirect stake in this business, and Microsoft is no exception. While Microsoft sees revenue from eBook publishing, they haven’t (until now) had any direct stake in what is now a huge revenue opportunity. Even if Microsoft does nothing else, they have invested in a business that, while not #1 (Amazon clearly owns the market today), still owns a nice share of the market. There is still plenty of room to grow here as well, as there is not only the potential to increase market share, but the untapped market that has yet to invest in eReaders and eBooks. That market should continue to grow as the push for eBooks in education and business continues to march along.
While Microsoft may be new to today’s market, they are by no means new to the eBook market, which takes us to…
REASON #3 – When You’ve Got Something To Offer…
Most people forget that Microsoft was, at one time, a leader in the eBook segment. In many ways, they were once again a bit ahead of their time in this regard. Over a decade ago, Microsoft provided the world Microsoft Reader. Yes – eBook reading software back in 2000. If you don’t believe me, just check Wikipedia. While Microsoft Reader itself never went beyond “niche” status, some good technologies evolved as a result of the effort, including work with ClearType font technology and text-to-speech.
With a history in eBook technology longer than any of the current major players, Microsoft definitely has the potential to provide some value to the partnership from an experience (and possibly intellectual property) perspective. In addition, Microsoft can bring to bear it’s resources from an R&D perspective and also it’s focus on user experiences around “appliances”. By that, I mean…
REASON #4 – Is That Microsoft Tech In Your Car (or Medical Device), or…
As someone who has spent years working both as a developer and advisor on Microsoft mobile technologies, I have always been keenly aware of Microsoft’s efforts (and success) with it’s technology focuses on embedded devices. Basically, we are talking about Microsoft technologies running specialized hardware. You may not be aware of it, but many types of hardware you see in your daily travels actually has Microsoft “under the hood”, and I am not talking about PCs or notebooks here. Many medical devices, manufacturing components and scanners run with variants of Microsoft’s Windows technologies. Microsoft’s work in the automotive space has led to Ford Sync as well as other in-vehicle systems.
From a technology perspective, an eBook is a specialized device. The NOOK currently runs a customized version of the Android operating system (hence the original patent issues between Microsoft and Barnes & Noble), but there is nothing to say that Microsoft could not bring more to the table with their experience (and success) in embedded technologies. Of course, the core software is only a part of the equation. Microsoft’s experience in tailoring these solutions to optimize both functionality and user experience for the mediums is also something that could benefit the partnership and even differentiate the NOOK from other platforms. This, of course, leads to…
REASON #5 – Is That Windows 8 On Your eBook Reader?
While this is number 5 on my list, this is the #1 (with a bullet) source of speculation around the Internet regarding the Microsoft / NOOK deal. While most are dismissive that this could actually work, I respond simply with – “Why not?” Some things to consider when contemplating a NOOK eBook Reader running Windows 8 -
- eBook readers are evolving into tablet computers. Don’t believe me? Look at the Kindle Fire, NOOK tablet and iPad with iBooks. Especially look at the iPad with iBooks, as it demonstrates the potential for positioning a tablet as an eBook reader platform. While there is (and will likely continue to be) a market for dedicated eBook readers, it is becoming increasingly apparent that a larger target segment exists that longs for a solid reading experience – and more. Note: For the record, I currently fall into this category. While I currently own a first-generation NOOK, I no longer use it (my 11 year-old son does, however). Instead, I use an Android tablet with both the NOOK and Amazon Kindle applications, and love the experience.
- Windows 8 on ARM (“WOA”) is targeted for just these kinds of devices. Microsoft wants to compete in the tablet space. The idea behind WOA and Windows RT is to go after this market. So, now we have the platform, complete with Metro applications to buy and run on the device. Of course, you also need hardware partners to buy in, so…
- The NOOK gives Microsoft an immediate “dance partner” for WOA. I think the big question mark here will still be the cost of production and final selling price. However, if Microsoft and NOOK treat the device in a fashion similar to how cellular companies view phones and the resulting subsidizing model (sell the phone at a lesser cost in the hope of making up for that loss with eBook and software sales), there could be the possibility to have a hit on their hands. Remember – the Kindle Fire was, for many, a “must-have” device because it was more than an eBook reader; it ran Android. If nothing else, Microsoft has a platform to use as a “proof point” for other hardware vendors to show off the potential of the Windows 8 platform.
Incidentally, I left off one reason from this list due to a lack of objectivity – Finally get a NOOK application for Windows Phone. While this could be included in the list, I left it off because of my frustration in there not already being a NOOK application for my HTC HD7 despite having an Amazon Kindle application
Look, folks – I cannot predict the future of the Microsoft / NOOK partnership any more than anyone else can. Only time will tell. But I can say that for all the reasons why this partnership is doomed to failure, there are a number of good reasons why it could succeed. Personally, I would love to see success here. Seeing the NOOK become a bigger player in the eBook market leads to price competition. Seeing a successful Windows 8 tablet in that market also leads to more competition. All that competition invariably leads to wins for consumers – and that’s always a god thing.