Microsoft and Barnes & Noble announced a strategic partnership on Monday. Microsoft is investing $300 million in an e-reading subsidiary that Barnes & Noble will form from its digital and college businesses. The interim name of the subsidiary is Newco and Microsoft will own a 17.6% equity stake in the business with Barnes and Noble owning the remaining 82.4%.
The companies have disclosed limited details of the partnership but did announce that a Nook application will be available for Windows 8, making Barnes & Noble’s library of books, magazines, and newspapers available to Windows customers worldwide. The impact of this partnership on both companies depends on a number of key details that have yet to be disclosed, among them the extent of the roles of each company and the goal of the partnership.
Thus far the companies have said that they are aiming to accelerate innovation in e-reading across a range of devices, which is vague but the partnership does put an end to the patent litigation between the two companies. Barnes & Noble and Newco have a royalty bearing license to Microsoft’s patents. Representatives have said that the partnership isn’t exclusive, so each company can work with other partners or on their own in the e-reading market.
The sense is that this partnership is more about a digital media strategy which recognizes that accessing digital content and having a common experience across devices will become a significant trend going forward. While tablets are and will continue to be an integral part of the device universe, they do not appear to be central to this partnership. The partnership does provide both companies with significant assets to enable a better experience for both their respective efforts: Microsoft in terms of investing in content that when accessed could potentially have a common feel across a growing array of device types, and Barnes & Noble in terms of proliferating its service across a wider reach of devices. The app essentially becomes a sales channel for Barnes & Noble to sell content to all Windows 8 devices that have the app downloaded.
Given that Windows 8 won’t be available until the end of the year, the impact of this partnership at this point is likely to remain fodder for speculation but is an encouraging sign for the e-reader market nonetheless.