Deep discounts on Nook tablets may have Windows tie-in

Barnes & Noble moves to clear shelves of Nook e-reader. Is a deal with Microsoft over digital content and a Windows RT tablet in the making?

In a move reminiscent of Microsoft's ongoing Surface fire sale, Barnes & Noble has chopped from 35 percent to almost 45 percent off the price of its Nooks -- a move that was expected to run over Father's Day weekend but has been officially extended indefinitely. The price of a 7-inch Nook HD 8GB, previously $199, fell 35 percent to $129; the price of a Nook HD+ 8GB, formerly $269, now runs $149 -- nearly 45 percent off. Both machines were launched last year in late September, just one month before the iPad Mini.

While it's clear B&N wants to ditch its old stock at almost any price, the move makes me wonder if B&N and Microsoft are playing footsie, connected to the widely discussed (but still only rumored) smaller Surface machines. Perhaps B&N is clearing out stock in preparation for announcing the demise of the Nook, with Microsoft taking over B&N's huge digital library (more than 3 million books) and rolling it into the Windows Store repertoire. Perhaps there's a platform switch in the works, with the Android-based Nook going through a radical makeover and casting its lot with Windows. Indeed, both possibilities could occur simultaneously.

It's been a long, strange, and largely secret courtship.

On April 30, 2012, Microsoft and B&N shocked the industry -- and rocked the stock market -- by announcing a completely unexpected joint venture. At the time, Microsoft and B&N were knee-deep in lawsuits, with Microsoft accusing B&N of pilfering patents and B&N countersuing with claims of prior art. Their litigation turned into something of an open street brawl, with accusations playing out in the press on both sides.

Then suddenly B&N announced it was spinning off a subsidiary -- now named Nook Media -- and Microsoft announced it was buying a 17.6 percent share in the subsidiary for a cool $300 million. It appears Microsoft's Andy Lees was in the middle of the negotiations, but the details have never been made public. As recently as last month, Gregg Keizer at Computerworld reported, "Microsoft has gotten little from a 2012 investment of $300 million with Barnes & Noble ... there have been few outward signs of a payoff for Microsoft."

B&N created the "Nook for PC" program for Windows back in 2010. Nook for Mac arrived in June 2012. Nook apps for iOS and Android appeared in November 2012. Surprisingly, a Windows 8 version of the Nook app didn't appear in the Windows Store until November 2012, in spite of Microsoft's big investment in Nook Media and the intense pressure to deliver Windows RT apps around the time of RTM in August.

B&N and Microsoft have made up for lost time, though, by officially declaring last week that Nook apps for "legacy" versions of Windows, including Windows XP and Windows 7, as well as Nook for Mac, are no longer supported. If you want the Nook app, you have to run Windows 8, Windows Phone 8, iPhone, iPad, or Android -- or use the notably inferior Web-based program.

This past February, Leslie Kaufman at the New York Times presented B&N's dilemma. She cited unnamed sources as saying, "They are not completely getting out of the hardware business, but they are going to lean a lot more on the comprehensive digital catalog of content ... the company will emphasize its commitment to intensify partnerships with other tablet producers like Microsoft and Samsung to make deals for content that it controls."

That led to further speculation about a B&N-Microsoft deal, where the Nook re-emerges as a Windows 8 (or Windows RT) tablet. Computerworld's Preston Gralla makes a compelling case for the change.

Early last month, TechCrunch reported that Microsoft intends to buy Nook Media. "Microsoft is offering to pay $1 billion to buy the digital assets of Nook Media, the digital book and college book joint venture with Barnes & Noble and other investors, according to internal documents we've obtained." I've seen no independent confirmation of those documents, but with Apple and Google far, far ahead of Microsoft in selling media, buying out the Nook effort just for the media certainly would make some sense.

Nook's future is cloudy, but for B&N there may be a silver lining -- indeed, several. Although I think it's unlikely that B&N would sell its digital family jewels in their entirety, I could see Microsoft boosting its share of Nook Media, probably combined with some sort of royalty deal that will continue to line B&N's coffers for years to come. I could also see Microsoft licensing the name "Nook" to use on small-form-factor Windows RT machines, to differentiate the little critters from the Surface big brothers. "Surface RT" is such an abomination of a name that it's easy to imagine "Surface 8.1 RT Mini" driving customers, screaming, out of Best Buy. "Nook RT," on the other hand, has a decent ring to it.

Will the dice actually roll that way? It'll be interesting to see.

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