Microsoft’s decision to invest $300 million in Barnes & Noble’s Nook e-reader business earlier this year was a fascinating move that aligns the Redmond company with Amazon.com’s archrival in the digital reading industry.
But was it a smart bet by Microsoft?
An analysis by media news site PaidContent.org suggests that it wasn’t, at least not based on the Nook’s direction. Barnes & Noble’s latest financial results show the Nook business struggling as it tries to keep up with the Kindle. In particular, aggressive pricing by Amazon is making it difficult for Barnes & Noble to boost revenues.
As PaidContent’s Laura Hazard Owen explains, “Barnes & Noble also attributes falling Nook device revenues to price cuts. But the company is going to have to keep dropping prices on its e-readers and tablets to stay in line with Kindle and with budget tablets like Google’s Nexus 7 and the anticipated iPad Mini. It can’t increase prices to increase revenues.”
We’ve yet to see any major product announcements by Barnes & Noble, but the companies are expected to start with a Nook app for Windows 8. Their partnership was the result of settling their previous patent litigation.
In the meantime, along with Microsoft’s Nokia partnership on Windows Phone, this is starting to feel like a pattern, where Microsoft bets on a well-known brand in decline, in hopes of benefiting if its partner is able to turn things around with its help.
(Thanks to Isaac for the link)