

Microsoft Mulling Nook Media LLC Purchase For $1 Billion - 9nimo4
http://techcrunch.com/2013/05/08/microsoft-mulling-nook-media-llc-purchase-for-1-billion/

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yajoe
tl;dr -- meh. Newfound hope for Nook brand. B&N can go private. Microsoft has
a shot to win at digital college textbooks. Bearish on rest.

For anyone curious about the motivations behind this -- this sale frees up B&N
to take its brick and mortar stores private. The CEO Riggio (? -- name escapes
me now) has been asking for different private equity groups to buy the nook
("New corp") assets for some time since he thinks the stores are much more
profitable. Last quarter results only confirmed as much (Nook did horribly,
brick and mortar held their own). The one piece holding up spinning off the
brick and mortar business was what to do with new corp and how much of a
premium to give back to shareholders. Probably more interesting is how much of
the college textbook business Microsoft got in the deal (distribution rights,
retail locations, etc.). The textbook business combined with the emergence of
new interactive college education is arguably more strategic than the reader.
Microsoft could try to compete with iBooks for the next generation of
textbooks and thus require people to get Surfaces (or Win8 or whatever) for
college classes. We have to wait for the SEC paperwork to see for sure. I have
little confidence MS can execute on such a strategy, but it sure looks good on
powerpoint. There also is a bit of bravado at play -- Microsoft needs to
demonstrate to its partners and their investors it will come rescue them when
needed (think Nokia and Dell).

The reality is that Amazon won the current generation of e-ink and online
e-books. If color were to come to market (still just a prototype), it wouldn't
be enough of a game changer. The next form factor to watch for and opportunity
for someone to disrupt in e-ink is thin, flexible, and transparent e-ink --
the kind you can roll or fold up.

For tablets, Microsoft would likely adopt the Nook brand since it's slightly
better known than the Surface, but otherwise they would throw all of the
existing tech away. It's too dependent on Android, and Microsoft would prefer
to push its own tech. It makes me wonder if Nook's announcement to open up the
tablet was the GM's way of doing right by customers should Microsoft make an
extreme change (this deal would have been known by the people who approved
betting on Google Play for Nook).

The content play from this is questionable -- B&N is basically an American
brand with most e-book sales growth happening elsewhere. Yes, Microsoft needs
content in the US, but tech growth and new customers are elsewhere and this
purchase doesn't really help Microsoft that much beyond what they could have
gotten from the existing partnership.

------
eclipxe
Will be interesting to see the direction that Microsoft takes the team. I ran
the mobile apps division at BN/Nook for a few years and there are a lot of
talented engineers there. It is interesting to see that the focus on hardware
is being shifted more to apps on third party devices. I fought many long and
hard battles arguing for investment in that direction.

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acabal
It's too bad this basically means the death of the e-ink Nook. It was really a
much better reader than Kindle for a long time, but BN couldn't stay a step
ahead and Kindle ended up running circles around them.

If Nook had just cleaned up its dictionary, bumped up the resolution on the
screen, improved its frontlight (as it was the frontlight "glaze" or whatever
washed out the display significantly), and kept polishing the software, they
might have stood a better chance. The epub capability is a huge win too.

Oh, and they should have chopped off the tablet arm long ago. How a bookseller
thought they could compete with the likes of Apple, Samsung, and MS boggles
the mind.

Edit: Musing out loud here, Nook could also have seen better success by
selling a hacker-friendly Nook, maybe for a much higher price. In a world of
walled-garden devices, the already-strong hackability of Nook was a huge win
for them and, I think, kept them relevant for longer than they would have been
otherwise.

~~~
eclipxe
I don't think the market for a hacker-friendly Nook is as big as you think it
would be.

~~~
acabal
Perhaps, but there certainly was (and still is) a not-insignificant amount of
people interested in hacking both Nooks and Kindles. Sell a hackable version
at a big markup to please the nerds and make some money; regular folks will
find them useless or too difficult and stick to the standard offering;
meanwhile the nerds will evangelize the hardware for you.

I think their big fear is people buying a hackable version and setting it up
to be a generic epub reader instead of a walled-garden sales point, thus
losing money on the hardware or perhaps support costs for people who messed up
their devices. But hacking hardware, even if it just means transferring a .deb
and restarting, is utterly beyond the kind of people who would rather just
press "buy & download" and forget about it, which of course is 90% of the
market anyway.

In either case a premium hackable ereader would be an interesting (though
perhaps not profitable?) direction for anyone, even an indie company, to
pursue.

~~~
eclipxe
The nook pretty much _is_ a generic ePub reader. I made sure of that when we
decided to go with Adobe's ePub engine. Side-load all of the ePubs you want,
hell you can use it to read library ePubs.

It is simple economics - as much as us (engineers, developers, etc) believe we
are a large market, _we are not_. The overhead of creating a different SKU to
serve <1% of a market is not enough. Besides, the money is not in hardware, it
is in content.

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mappu
> _Nook e-readers, meanwhile, do not appear to fall into the discontinuation
> pile immediately. Rather, they’re projected to have their own gradual,
> natural decline_

How is this anything other than Embrace-Extend-Extinguish? And what does
microsoft have to gain from paying $1bn for a company (that's running a loss),
and then discontinuing their product?

~~~
icebraining
EEE describe embracing standards, extending them with proprietary features and
then using those features to drive out the software that implements the actual
standard. I don't see how it applies here, even if MS buys the Nook to kill
it.

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shmerl
This must be the money that MS bribed B&N with, after they they realized that
their patent litigation against B&N was falling apart, and it could threaten
their protection racket against other Android vendors. I guess B&N didn't have
guts to reject the bribe and to fight against the troll to the end.

~~~
throwawaykf1
Wow, the MS hate really turns people stupid. Here's another way to look at it:

Amazon spends many billions and almost a decade creating a real e-book market.
Apple spends many billions and almost a decade building the first "modern"
tablet, and leverage their tablet dominance to create the first real
competitor to Amazon's ebook monopsony. Along the way they fight off an
antitrust lawsuit. Google spends billions and many years building specialized
scanning infrastructure to scan every dead tree book in existence so they can
index them. Along the way they fight off a lawsuit from the Authors Guild. And
I'm still not sure if they have significant monetization from that.

Microsoft, which has NO ebook story for their struggling mobile ecosystem,
swoops in and suddenly becomes a player in the ebook market for 1.3 billion in
one year.

And people like you, mtgx and rbannfy think this means MS patents were weak.
Why don't you think about how much this was _really_ worth to Microsoft and
how much they actually paid for it? That might lead you to adjust your views
about various aspects of "M$" besides just their patents, but I won't hold my
breath.

~~~
rbanffy
> throwawaykf1 (...) Wow, the MS hate really turns people stupid.

And anonymity makes them brave.

No. Not really.

~~~
throwawaykf1
Way to address the points. Ad homs and downvotes are the only recourse you
have left, I suppose.

~~~
rbanffy
Throwaway anonymous accounts are unusually resistant to ad hominem attacks. As
frivolous as it may be, let's destroy your arguments one by one:

> Wow, the MS hate really turns people stupid

There is no research about that, but I'll agree hatred may cloud your
judgement. In this case, however, the relationship between B&N and Microsoft
is very suspicious - Microsoft tried to extort B&N who, in turn, threatened to
disclose the patent list and then, miraculously, they became a strategic
partner, Microsoft paid them US$300M, and the list was forgotten.

> Microsoft, which has NO ebook story for their struggling mobile ecosystem,
> swoops in and suddenly becomes a player in the ebook market for 1.3 billion
> in one year.

Something that makes very little sense. Microsoft's focus should be in
preventing the erosion of their software ecosystem - once its share drops
below a certain point and network effects stop being relevant, it's hockey
stick all the way to the bottom. Having a failing e-book distribution deal
that is not attached to Windows does not help that. And attaching it to
Windows will only make it irrelevant.

> And people like you, mtgx and rbannfy think this means MS patents were weak.

Addressed in the first point.

~~~
throwawaykf1
You realize all of Microsoft's patents are public, right? That's the deal with
patents: you publish them in order to get a temporary monopoly. There is
little significant data that B&N could threaten to "disclose" that you
couldn't find by doing an assignee search on the USPTO website. They may have
patents assigned to shell companies, IV-style, but their negotiation power
comes from having a very visible humongous portfolio, and using shell
companies would just make it less visible.

Maybe B&N could "disclose" what patents MS is licensing related to Android,
but you could make a good guess of those too by filtering the previous list of
patents for keywords related to mobile and operating systems.

B&N had jack squat on MS in this lawsuit, which is why they made a big noise
about antitrust, which of course went nowhere. I suspect you've been getting
your info from Groklaw, which could explain a lot of misconceptions around
here.

> Something that makes very little sense.

How does a content deal not make sense in today's world? It is exactly to
prevent the "erosion" of their ecosystem. The ecosystem today is so much more
than PCs. They don't want people to go somewhere else (like, say, iTunes or
Amazon) to get their content, because that's a very strong lure to join
another ecosystem. Every major player is out there making content deals to tie
into their ecosystem, and MS is right up there with them... Except ebooks was
the glaring hole in their content story. And it's not going to be attached to
just Windows, but to their phone, tablet and cloud offerings too.

As to the strength of their patents, you just gotta look at who is getting
injunctions and who is getting paid in the "smartphone wars". Nobody's getting
any lasting injunctions, but MS has been getting paid all over. (OK, Apple got
that one big win over Samsung, but it's still up in the air.)

Just for some disclosure, I've been tangentially involved in patent licensing
efforts for a small firm. It is very, very difficult to get any licensing from
big firms, who would prefer to role the dice in court if there's the slightest
chance they can win or out-lawyer you. Given that, I find it impressive how
many royalty-bearing licenses MS has managed to get in the past few years.
Including, of all things, Foxconn.

------
transfire
I wish I could just use my Kobo E-Ink reader to browse my file server and read
files from there. To me that would be the perfect E-Ink reader.

~~~
doneallison
I'm not sure exactly what you have in mind, but a rooted Nook Simple Touch
might have the functionality you are describing. See, for example, this
Lifehacker post: [http://lifehacker.com/5926798/turn-your-rooted-nook-into-
the...](http://lifehacker.com/5926798/turn-your-rooted-nook-into-the-ultimate-
ereader-with-these-10-apps)

------
methodin
What does the future hold for E-Ink readers? They are far superior for reading
but useless in general. I could see myself getting a Kindle in a few months (I
have a first-gen Nook) but after that I don't think they will be relevant as
tablets continue to advance.

~~~
acabal
I see them as exactly that, dedicated reading devices. Tablets are great for
some folks, but others like ereaders because:

-E-ink can be stared at for long periods and in bright light; staring at a tablet screen for long periods gives many (including me) eye strain.

-Tablets usually include many other apps and internet access, which is a huge distraction when you just want to focus on reading a book. When I'm reading, I prefer to just read.

-Good tablets are much more expensive, so people might hesitate to drag them all over the place like they would a paperback.

The technology is already pretty cheap to produce, and I imagine big players
like Amazon, BN, Kobo, etc. will eventually just sell them for a token few
bucks and make up the remainder in walled-garden sales.

In the end their usefulness depends on what kind of reader you are. If you
read for just 30 minutes a day, then a tablet will probably be fine for you.
If you spend hours with a book, a dedicated reader is nice just for the e-ink.

~~~
dougk16
Much longer effective battery life is also a huge deal for me personally.

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transfire
How does this effect Barnes and Noble?

~~~
apalmer
I wonder, I remember talk that the Nook was the reason that barnes & noble
survived when all the other rick and mortar bookshops went out of business due
to Amazon.

Not sure if its true or not, wouldnt think the Nook was THAT popular.

~~~
robryan
Wonder if there physical stores business has rebounded a bit now that most of
the competition has been knocked out?

