Microsoft may take on Kindles and Nooks
Microsoft pays $300M for a Barnes & Noble app for Windows 8 and may build its own e-reader
Microsoft is investing $300 million in a Barnes & Noble spinoff that has agreed to create a free Metro style Windows 8 application so customers can shop at the spinoff’s store, but Microsoft reserves the right to compete against Barnes & Noble with its own e-reader hardware presumably based on Windows 8.
As part of the Securities and Exchange Commission (SEC) filing that details the agreement between the two companies, Microsoft can make its own e-reader — akin to Barnes & Noble’s Nook and Amazon’s Kindle — and include an interface to the store and support any content customers buy there.
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The new company, called NewCo for purposes of the filing, will create a Metro style application for x86 Windows 8 machines as well as Windows RT for ARM-based devices, including tablets.
“If Microsoft creates a reader, Microsoft may include an interface to the NewCo Store in that reader and may surface in that reader all Content purchased by customers from the NewCo Store,” the filing says.
The app itself will be available free at the Windows Store, and NewCo will support it once it’s installed on customers’ machines. NewCo will also update the application as needed, the filing says.
The application will include other functionality, but what that is exactly is redacted from the SEC filing because Barnes & Noble requested confidential treatment.
Barnes & Noble commits to directly shift its agreements with publishers for content such as e-books and digital magazines to NewCo if possible.
The agreement also hints at more cooperation with Microsoft. “NewCo will make good faith commercially reasonable efforts to enhance the NewCo Windows App to exploit features and functionality available through Windows and its extended Microsoft ecosystem,” the filing says.
It further states that the company will help Microsoft software and services interoperate with the NewCo store under specified circumstances. “NewCo will use good faith efforts to enable Microsoft Products and Services to be used with the NewCo Store and distribution system in the following scenarios, the delivery and nature of which will be subject to the Microsoft product and service strategy,” the filing says. The scenarios are redacted from the filing.
The agreement has a clause to prevent Microsoft from hijacking the NewCo Store name or masking the fact that Microsoft customers are accessing it and giving the impression that it is a Microsoft store. “Microsoft will not white-label (which for the avoidance of doubt includes rebranding or presenting as Microsoft’s) the NewCo Store or obscure NewCo’s branding or the fact the NewCo Store is the NewCo Store, including in Microsoft Products and Services,” the filing says.
The agreement calls for transferring to NewCo its e-reading assets and content, and to sell the content in a marketplace called the NewCo Store, apparently a replacement for the Barnes & Noble Store. As long as Barnes & Noble holds the majority stake in the company, Barnes & Noble will use its influence to supply digital content to the NewCo Store. The pricing of content available on the Windows application will be set by NewCo, according to the filing.
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