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Summary:

Barnes & Noble and Microsoft welcome Pearson to the Nook Media table as the education publisher lays down $89.5 to help secure distribution. But Nook is already set to miss targets set during its recent spin-out.

NOOK Simple Touch with GlowLight_Angled
photo: Barnes & Noble

Talk about vertical integration. Pearson is taking a five percent stake in newly-reconfigured ebook device and retail brand Nook Media in order to gain favourable distribution for its education books.

Its $89.5 million investment values Nook Media at $1.789 billion, the same as when Barnes & Noble span the digital book outfit out in to a separate company in October.

But its comes on the same day Barnes & Noble told Wall Street its holiday sales, announced on January 3, results “will be below expectations and that the Nook business will not meet the company’s prior projection for fiscal year 2013″.

John FallonWhen Barnes & Noble span out Nook, Microsoft invested $300 million for a 17.6 percent stake. Pearson’s announcement today, however, puts Microsoft’s stake at a reduced 16.8 percent. Barnes & Noble’s stake is put at 78.2 percent (down from 82.4 percent).

That is because new equity was issued. Pearson, whose John Fallon (pictured) becomes CEO on January 1, has a further option to buy another five percent later on.

Why is Pearson putting up the money? Its North America CEO Will Ethridge (via announcement) says:

“With this investment, we have entered into a commercial agreement with Nook Media that will allow our two companies to work closely together in order to create a more seamless and effective experience for students. It is another example of our strategy of making our content and services broadly available to students and faculty through a wide range of distribution partners.”

Barnes & Noble says (via announcement):

“Pearson’s strategic investment in Nook Media will accelerate customer access to digital content by pairing its leading expertise in online learning with Nook Media’s expertise in online distribution and customer service. This will facilitate improved discovery of available digital content and services, as well as seamless access.”

Separately, Barnes & Noble adds: “Nook Media and Pearson will be also entering into a commercial agreement with respect to distributing Pearson content.”

In other words, it’s a classic vertical integration play — for the digital age. By owning both content production and a part of retail distribution, Pearson can begin to become more certain about selling its wares — at a time when publishers, in the consumer space, have been pit against all-powerful retailers like Apple and Amazon.

Pearson has previously conceded its printed text book business is challenged, whilst its Penguin book publisher saw ebook sales grew 33 percent during 2012.

However, Pearson’s investment is not solely about digital content. Its announcement notes that Nook Media now also operates Barnes & Noble’s network of 674 booksellers at US college campuses — giving it continuing certainty over the delivery of those printed education books.

For Nook, guaranteeing content supply in the increasingly important education sector could prove positive.

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  1. I can see the sense in the move, but with tablets forecast to outsell e-reading devices, I wonder if this is such a clever move? The leader in effective presentation of digital content at present is Apple’s iBooks and its products are readable on everything from iPhone to iMac – going with a niche player seems less than wise.

    1. The Nook App is going to be available for Windows 7, Windows 8, Windows RT, Windows Phone and of course Android and iOS. This assures pearson that their books will be available to read not just in the Nook Hardware but the Nook App as well.

    2. The one reason I focus on Amazon for publication is specifically because iBook is NOT available on iMac. It is an iOS platform only format. Unless you know something I don’t.

    3. The one reason I focus on Amazon for digital publishing is the simple fact that iBook is an iOS only platform and is completely unavailable unless you have a newer device. Unless you know something I don’t.

      I publish on the Apple store and after waiting almost 3 months for approval on nook, but my promotions go toward where the widest audience lays… Amazon.

    4. 3rd attempt at commenting.

      The one reason I focus on Amazon for digital publishing is the simple fact that iBook is an iOS only platform and is completely unavailable unless you have a newer device. Unless you know something I don’t.

      I publish on the Apple store and after waiting almost 3 months for approval on nook, but my promotions go toward where the widest audience lays… Amazon.

  2. Nicholas Paredes Friday, December 28, 2012

    If Amazon can get content development tools and processes in place, there is almost no need for these publishers. They long ago frittered away there competitive advantage. At the primary level they began feeding content development to India. How long before those developers seek entrepreneurial opportunities?

    1. Amazon’s gift is distribution. Pubisher’s gift is editorially reviewed content. It would be a lot easier for Publisher’s to partner with successful distribution models than it would be for those distribution models to develop intellectual property that is presented in such a way as to be successful and enduring in a very compettive market. The skill required to make that happen doesn’t happen overnight.

    2. I’m not sure what educational publishers you are talking about when saying they are feeding content development to India. The value an educational publisher adds to the process is vetting content, signing qualified experts in their field of study, and developing content to specific outcomes in a given course, or course area.

  3. Robert – Try “spun out” not “span out” for past tense.

  4. I bought a Nook HD+ last month, after being a total Kindle user ever since Kindle was released. Prior to that I had used pioneering ebook readers. I am more happy with the Nook than I have been with any of the others. I don’t know whether I would like the regular Nooks that much–my daughter started out with a Nook and then bought a Kindle too–and she and I, both book reviewers, agreed that today it is really necessary to have a Nook and a Kindle both. But HD+ is an incredibly easy reader to use, and it has NEVER frozen. My Kindles freeze several times per book and have to be restarted at the cost of about five minutes. I wish Pearson luck with this purchase. I used to be a college teacher, and ebooks are definitely the future of education. I used to land in my doctor’s office for a shoulder injection about once a month because of y 48-pound book bag. That is totally unnecessary with today’s technology.

  5. Dr. Mark Wyatt Thursday, January 3, 2013

    While I agree that ebooks are the future of college textbooks, it strikes me as odd that Pearson would put all their eggs in the basket of a company that is something of an “also-ran.” It reminds me of the old VHS vs. Beta days, with Apple (specifically iPad) and Amazon’s kindle playing the part of VHS. It remains to be seen if Nook Media will be bolstered or weighed down by the brick-and-mortar stores, so I wonder why Pearson has chosen this dark horse on which to ride out their investment.

    1. Dr. Wyatt, Five percent or $89M is hardly putting all their eggs in one basket. Pearson has a LOT of eggs. Additionally, Nook has an app for all platforms, including iOS, so titles can be read on any device.

  6. short term business vision creator always has edge over acquirer

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