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.
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.
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.
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.
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.
>
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.
How does that saying go? If squares were round they'd be circles, or something like that.
> 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 $1bn for a company (that's running a loss), and then discontinuing their product?
EEE describe embracing standards, extending them with proprietary features and then using those features to drive out the software that implements the actual standard. I don't see how it applies here, even if MS buys the Nook to kill it.
This must be the money that MS bribed B&N with, after they they realized that their patent litigation against B&N was falling apart, and it could threaten their protection racket against other Android vendors. I guess B&N didn't have guts to reject the bribe and to fight against the troll to the end.
Wow, the MS hate really turns people stupid. Here's another way to look at it:
Amazon spends many billions and almost a decade creating a real e-book market. Apple spends many billions and almost a decade building the first "modern" tablet, and leverage their tablet dominance to create the first real competitor to Amazon's ebook monopsony. Along the way they fight off an antitrust lawsuit. Google spends billions and many years building specialized scanning infrastructure to scan every dead tree book in existence so they can index them. Along the way they fight off a lawsuit from the Authors Guild. And I'm still not sure if they have significant monetization from that.
Microsoft, which has NO ebook story for their struggling mobile ecosystem, swoops in and suddenly becomes a player in the ebook market for 1.3 billion in one year.
And people like you, mtgx and rbannfy think this means MS patents were weak. Why don't you think about how much this was really worth to Microsoft and how much they actually paid for it? That might lead you to adjust your views about various aspects of "M$" besides just their patents, but I won't hold my breath.
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.
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.
M$ ruined their reputation for good, so much that all their actions look questionable by default. To be honest they never even tried to restore it, and it doesn't look like they care. They continue their racket with brazen conceit, and there is no one to blame except themselves, that they lost the benefit of a doubt.
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.
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.
For me it's all these things, but most especially the massive difference in battery life. Even on the best tablets you might get around 10 hours of usage. On my old Aztak EZReader Pocket Pro I can easily read 2 Game of Thrones books (~2k pages) on a single charge.
I was on vacation for the last week and along the beach I counted at least 20 Kindle eInk devices. Maybe 2-3 iPads/generic tablets. E-Ink readers can't be beat outdoors and for long form reading.
It all depends on where E-ink technology goes. Can they master color? Can they do better on refresh?
I haven't heard anything new lately on how e-ink technology is continuing to advance, so I'm wondering if they've hit some kind of snag where they just aren't advancing fast enough to be very relevant outside of the ebook niche.
The current market where e-ink does well (kindles and other e book readers) I think is too limited to make e-ink very compelling.
Tablets are one place where we would love to see e-ink solutions (with color and a bit better refresh). Or consider e-ink wallpaper. The possibilities are many, but the tech needs to break out of its rut before its too late.
My guess is that E-ink readers will get cheap enough that everyone will have one. If I remember correctly, we've even had a wink and a nod from Bezos that their intention is to give them away. Get a free E-Ink reader with your Amazon Prime subscription, or something of that sort.
They will probably work out something to continuing selling Nook devices in B&M stores. It will be interesting from a content licensing standpoint however. Will Nook/MS still have the same content rights and publisher relationships that B&N has?
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.
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.