The deal between Microsoft and Barnes & Noble, where Microsoft is investing $300 million dollars in the NOOK. One opinion piece on Forbes claims this will be the end of Kindle. Of course, the author declines to give any sort of timeline, but they believe that this deal will result in a far stronger competitor to Kindle, one that will displace Kindle from the top of the e-reader heap. I question whether the author truly understands the dynamics at work here, particularly when they try to use the Microsoft investment in Apple in 1997 as a parallel.
Microsoft Dollars Helped Apple, But…
The first thing I take issue with in the Forbes piece is the implication that this deal is like the Microsoft-Apple deal in 1997. In that case, Microsoft bought non-voting shares in exchange for cash, which Apple most certainly needed at the time. But to imply that this was the primary reason for Apple’s resurgence overlooks some other, very important, factors. Had the MS money been the only event, Apple would still be a marginal player making computers only a tiny fraction of the population wants.
What was more important was the return of Steve Jobs, and the resultant focus on two things: improving current product, and finding new opportunities. The author of the Forbes piece overlooks the primary importance of improving the Mac, the introduction of the iPod and the growth of iTunes as the foundation behind Apple’s current success. I’m fairly certain that those would have happened, even without Microsoft’s money, but the extra cash certainly was important. I certainly don’t want to trivialize the Microsoft investment. But to imply that it was the primary reason is a bit of a stretch. To imply that the B&N deal will be the same is beyond credulity.
More Money, But More Of The Same?
So, Barnes & Noble gets some more money, which will be useful for them. They will get some help to build a NOOK app for Windows 8. But let’s face it,this would have happened anyways. NOOK, like Kindle, is more than just a tablet. It is also an app available for most of the major mobile platforms (iOS and Android, but curiously not Windows Phone, at least not yet) and well as for Windows and Mac. I can pretty much guarantee that the Windows app would have been upgraded for Windows 8, including making it touch-enabled.
Beyond that, what else does Microsoft really offer? The NOOK tablet remains on Android. There was nothing in the announcement to indicate that the NOOK hardware was going to move away from that. Sure, Microsoft might be able to help with some things around back-end services and scalability. And yes, Microsoft has lots of smart people. But I’m really not sure what real value Microsoft brings that is anything more than just incremental.
What this looks like is more money, but more of the same. There does not appear to be a bold plan for B&N to offer their own content beyond books. The NOOK depends on services like Netflix and Hulu to provide video content. Music is provided through services like Rhapsody and Pandora. There appears to be little here beyond “add more platforms” to the future of NOOK.
What Microsoft doesn’t bring is a solid story for mobile devices. Microsoft’s presence and impact on mobile computing was in decline at the start of the 21st century, as it lost ground to Blackberry in North America and Symbian globally. By the time the iPhone arrived in 2007, Windows Mobile was a scant 5% of the mobile computing and smartphone space. The release of Windows Phone 7 was supposed to change that. In reality, it had no effect. WP7 basically took over the Windows Mobile share, and remains mired around 5-6% of the market. The Nokia Lumia phones appear to have done nothing to move the needle. Now, whether Windows 8 stands a chance at unseating iPad in the tablet space remains to be seen, but Microsoft’s track record here isn’t exactly stellar. Microsoft wouldn’t have been my first choice as a partner in the mobile computing space, given their lack of success in the past few years.
So, What Threat To Kindle?
The reality is that Kindle is the leader in electronic books, and a major player in other content. The Kindle Fire is starting to gain traction, and while it may not have made up much ground on the iPad just yet, it is probably the only tablet that stands of chance of giving iPad a run for its money. The reason for that is the content, and not the technology. The Fire is at best an average device from a technical specification viewpoint. It’s the content that is helping Amazon sell millions of the things.
For now, though, Kindle books are the one to beat. The B&N/Microsoft deal does nothing to change that. It doesn’t give B&N any sort of advantage in terms of content. The technology isn’t as important as some analysts (like the Forbes author) believe. Kindle, like NOOK, is available on every major mobile platform, as well as on Mac and PC, and via the web. What is important is the content. That is where the money is, and Amazon is still the go-to destination for electronic books. Amazon can sell their hardware at cost. It gives people a cheap portal into the real money, the content. Better technology doesn’t really make much difference. If it did, the Fire wouldn’t be selling nearly as well as it does. The Fire sells because it is a good price point, and offers an affordable way to consume Amazon’s content.
Victory and Disruption
Does this mean Amazon can sit still? Can they just lean back and declare victory, resting on their laurels? Certainly not. B&N may not be an immediate threat, but there is always the risk of disruption. Amazon will face some pressure from Apple and iBooks, although being limited to Apple platforms will limit the reach of iBooks. Still, Apple has managed to thoroughly dominate retail music sales, and their only non-Apple platform there is Windows. What Amazon always needs to be aware of is new players, who come at the business in a completely different direction. Disruptors generally don’t pre-announce their arrival. They just show up when you least expect it.
But this deal is no serious threat to Amazon. It doesn’t improve B&N’s catalog or content. It doesn’t radically change the platform or how content is delivered. This deal is not disruptive to Amazon’s business. It is more money for more-or-less more of the same.