Some points of note about the Barnes and Noble deal with Microsoft:
- The company being spun out of the deal, in which Microsoft acquired a 17.6 per cent stake in B&N's ebook and college businesses, is so new it's still unnamed – the documentation refers to it as "NewCo".
- Despite NewCo being new, it's worth a lot. The $300m Microsoft paid for its stake values the overall business at $1.7bn. Yesterday evening, Barnes and Noble had a market cap of $1.5bn. Some investors have just got very rich, very quickly.
- The sale represents an acceptance that Amazon owns the dedicated e-reader market. B&N were keeping afloat by being more technologically daring than Amazon, launching touch and colour versions of the Nook, their e-reader, long before the Kindle, but those low-hanging fruit have now been picked.
- NewCo is going to pay the "Apple tax". Currently, the Nook apps on iOS use the same loophole that Amazon does avoid paying Apple the 30 per cent margin that they demand for in-app purchases. Customers must make all sales on B&N's website, and the app is not allowed to give instructions as to how to do this. Yet the filings for NewCo indicate that "NewCo will ensure that the NewCo Phone App will provide for in-app purchasing and will not link out of the NewCo Phone App to complete purchases of Content." So Microsoft and B&N are banking that the increased sales will be worth the cost.
- NewCo will come to Britain. The Nook was slated to launch in the UK this year, but the London Book Fair, where an announcement was expected, came and went without event. Whether or not that delay was because the details of the partership were being finalised, or just a failure of expectation management on B&N's part, is unclear, but the new company has definite plans to exist on this side of the Atlantic.