Who needs apps? Microsoft buying Nook Media would be a a brilliant move: Microsoft would add millions of e-books that consumers want, to supplement tens of thousands of apps that, well, they don't.

Is Microsoft About To Buy Nook For $1 Billion?

TechCrunch reported Thursday that Microsoft is considering paying $1 billion for Nook Media, the division of Barnes & Noble that includes both the Nook tablet as well as its e-book business. That works out to a discount of about $700 million to $800 million compared to what Barnes & Noble valued the Nook at just a few months ago. A deal at that level would be a clear indication that B&N wants out of the digital business.

So much so, in fact, that there have been rumors that Barnes & Noble plans to kill the Nook by the end of April 2014, instead selling its e-book content on apps from "third-party tablets" from an undisclosed manufacturer or manufacturers. That could mean Microsoft's own tablet, the Surface, steps in to replace it - and we're already getting reports of smaller, Nook-like Windows tablets in the works. Of course, Nook is already available on the iPad and non-Amazon Android tablets.

(See also Microsoft, Barnes & Noble Release Windows 8 Nook App: Is A "Nook Surface Next?)

TechCrunch's report suggests two key factors: developing, manufacturing and selling a tablet like the Nook isn't a profitable business. But e-books are. By itself, the Nook unit lost $262 million on $1.2 billion for the fiscal year ended April 30, TechCrunch's secret documents alleged. Meanwhile, B&N itself publicly disclosed that its Nook segment revenue dropped 26% last quarter, but e-book sales grew 6.8%. (Some 10 million Nook tablets and e-readers have been sold, and the service boasts more than 7 million subscribers.)

We also know that Microsoft has already forged ties with software developers, including game creators; has established relationships with the music business to create Xbox Music; and has developed a network of cloud servers which can serve that content up virtually anywhere. Adding book publishers to the list should be relatively simple.

Microsoft has already proved its interest in the Nook platform. In 2012, Microsoft dumped $300 million into Nook Media, which later generated a Nook app for Windows 8 and not much else. It certainly looks like Barnes & Noble isn't heavily invested into the relationship. It's time for Microsoft to take over.

Patching The Windows App Store With Books

People need a compelling reason to buy a new device, and Microsoft hasn't given them much of one. Microsoft's Surface is a terrific piece of hardware, but is overpriced compared to rival tablets. Meanwhile traditional PCs are on the decline, perhaps even being pushed down the slope by Windows 8. Microsoft's platforms simply lack the app support of iOS and Android.

Windows Store apps, as measured by MetroStore Scanner.

Moreover, if apps are now a key tablet selling point, Microsoft doesn't have that much to offer. Microsoft's app store is growing quickly - but that's due to the fact that it's starting from a very small base. As of Thursday, MetrostoreScanner, which tracks the apps that appear and are updated on Microsoft's Windows Store, showed a total of 70,182 apps in the Store - about double what it had at the end of December. Google and Apple, on the other hands, each claim about 800,000 apps in their respective app stores.

In the company's defense, Tami Reller, Microsoft's Windows chief, has argued that the Windows Store has aggregated more than the number of apps that iOS did during the same period. She also said that almost 90% of the entire app catalog is downloaded every month - a puzzling statement, meaning that either Microsoft is doing an excellent job promoting app discovery, based on its Mimvi technology - or that Windows uses really don't have that much to choose from. 

E-Books Complete The Windows Store 

Adding e-books won't make Microsoft's app problems go away. But they could provide a pretty big distraction. Not to mention that owning the Nook platform would dramatically broaden Microsoft's content strategy to include iPads and Android tablets. Microsoft has also hinted at plans to integrate Nook content in Office, putting its digital content in front of millions more users. That would be a welcome change from Microsoft's decision not to rush out Office for iOS and Android. 

(See also Why Microsoft Is Tying Barnes & Noble's Nook To Windows, Office And Bing.)

Finally, it may seem simplistic, but one of the more compelling reasons to add Nook content is simply what users see - or don't see - on the Windows 8 Start screen: Games, Music, Video - but not Books. It's a glaring omission, and one that Microsoft could solve with a single stroke of the pen - and a billion dollars.

Image Sources: Pearson Media (Nook App) Barnes & Noble (Nook)

Barnes & Noble and Microsoft have finally delivered a Nook e-reader application for Windows 8 and Windows RT, giving Microsoft's Surface tablet a dedicated bookstore to compete with tablets and e-readers from Apple, Amazon, and Google.

The Nook app is downloadable from the Microsoft Store for Windows 8 and Windows RT, but not Windows Phone. 

The application uses what B&N calls its first implementation of a “paper” interface, with a texture that mimics the look of real paper. (That technique, also called skeuomorphism, had been widely adopted by Apple, which also uses a paper-like background inside its iBooks app.) Both Apple and B&N’s Windows 8 app also use a “bookshelf” motif to display the books and magazines that the user has purchased, although only Apple actually places the books on a simulated shelf.

To date, little has been said about Microsoft’s $300 million investment into Barnes & Noble, which took place last June, to form a subsidiary company that would be jointly owned by both B&N and Microsoft. But the release of the app was signaled months ago.

In September, Barnes & Noble began advertising for a “director of engineering, Windows 8” posting, that would lead the B&N app. 

“As the Barnes & Noble leader of the Microsoft Alliance, you will be responsible delivering on our contractual commitments on Windows 8 applications, Cloud, commerce, content integration with the Microsoft ecosystem and for defining and delivering on product strategy of Nook integration with Microsoft ecosystem including Windows, Office, Bing... You'll lead a cross functional team of engineers in design, development, test, and deployment of a range of products on a Windows mobile 8 platform.”

Lees' Work With Barnes & Noble Is Done

The app’s release also explains why Andy Lees has been named Microsoft’s new head of corporate development and strategy, a post that he assumed a month ago, according to a source close to Microsoft. Lees was originally head of the Windows Phone division, then was shuttled into a separate advisory role by chief executive Steve Ballmer. He then took over the partnership between Barnes & Noble and Microsoft, the source said.

Lees’ new post “had nothing to do with the Sinofsky situation,” the source said, referring to the unexpected departure of Windows chief Steven Sinofsky from Microsoft on Monday. Lees will oversee the corporate strategy team and the corporate development team, with a “holistic approach” to mergers, acquistions and other moves, the source said. 

With a 22-year pedigree at Microsoft, “he knows the products inside and out,” the source said. Lees’ bio has yet to be updated to reflect his new position. 

However, the source also said that it was incorrect to think of the new Nook app as the “culmination” of the partnership between the two companies, although he declined to comment when asked if a co-branded Microsoft Nook Surface tablet was in the works.

Why A Microsoft Nook Tablet Makes Sense

At the end of September, Barnes & Noble announced the 7-inch Nook HD for $199 (8GB) and $229 (16 GB) as well as the 9-inch Nook HD+ for $269 (16GB) and $299 (32GB). Both tablets feature high-resolution screens capable of challenging the updated Amazon Kindle tablet; the Nook HD+ is capable of displaying full 1080p video on its 1920 x 1280 display, versus the 1280x800 HD screen used by the 7-inch Kindle Fire HD. 

A Nook-branded Surface makes sense in that the Windows RT Surface and the Nook share a common ARM architecture. If there’s any drawback to the hardware engineering of either tablet it’s that both have been praised as superlative; it would a difficult decision to favor one design over the other. 

Microsoft’s Surface tablet, meanwhile  is about the size of an iPad, at 10.81 inches × 6.77 inches with a 10.6-inch widescreen display. Some of the online raves in support of the iPad mini and Google's Nexus 7 seem to indicate that full-size Surfaces, iPads and similar tablets might be a little large for e-reading. Some people clearly prefer large tablets. But others seem to prefer a smaller, more manageable device, about the size of the Nook. If a Surface mini is coming to focus on e-reading, why not co-brand it as a Nook?

Why A Microsoft Nook Tablet Is A Bad Idea

The Nook HD’s weakness, if it has one, is that the tablet only has about 10,000 apps, according to a review in the Wall Street Journal. Other reviews have characterized the Nook as a great e-reader tablet, but without the ability to do much more.  

Unfortunately, pairing a Nook tablet with Microsoft’s app ecosystem would, for now, actually restrict the app environment even more. Microsoft has argued before that optimized websites can be used to replace dedicated apps, but that’s a harder case to make against a robust Android or iOS ecosystem. The Microsoft operating system could also be an issue - while iOS and Android straddle both phones and tablets, Microsoft has three OSes for mobile devices: Windows 8, Windows RT and Windows Phone.

Finally, there’s the keyboard. Designing a version of the Touch or Type Cover for a 7-inch tablet would likely prove less of a differentiator and more of a drawback. It just doesn't seem feasible.

The question comes down to this: Has Microsoft's $300 million bought it a Barnes & Noble roadmap onto Microsoft devices? Perhaps, but it's not likely to be B&N's exclusive path. While Apple’s iBooks can be read only on Apple devices, Amazon has done better partly by making its Kindle apps nearly universal. While an optimized e-reader version of the Surface might bring some advantages, don't expect Barnes & Noble to limit its choices.

Lead image source: Flickr/AMagill,