GigaOM » andy-lees

B&N and Microsoft finalize partnership, creating Nook Media

Laura Hazard Owen — Thu, 04 Oct 2012 16:13:02 +0000

Barnes & Noble and Microsoft have finalized the strategic partnership that they first announced in April. The new subsidiary, called Nook Media, comprises Barnes & Noble’s Nook and college businesses. As previously announced, Microsoft is investing $300 million in Nook Media and will hold a 17.6 percent stake in the new company, with Barnes & Noble owning the remaining shares.

The partnership means more ebooks and a Nook app for Windows 8. “We look forward to working closely with our new partner Microsoft to add value to their innovative new platform by bringing great reading experiences and one of the world’s preeminent digital bookstores to millions of Windows 8 users,” Barnes & Noble CEO William Lynch said in a statement.

The partnership will also focus on international expansion. Barnes & Noble is launching the Nook in the UK for the first time this fall, and Microsoft president Andy Lees said Microsoft is “excited by Nook Media’s product roadmap and expansion into markets around the world as demonstrated by their recent launches in the United Kingdom.” Microsoft will pay Nook Media $25 million a year for the first five years to assist with the development of local-language reading content and technology.

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Microsoft invests $300m in Barnes & Noble’s Nook; more e-books for Windows

Laura Hazard Owen — Mon, 30 Apr 2012 12:14:44 +0000

A few months after Barnes & Noble announced it was looking to spin off its Nook business, Microsoft and B&N are forming a strategic partnership that combines Nook and the B&N college businesses into a new, still unnamed company (for now called NewCo). Microsoft is making a $300 million investment in the new company “at a post-money valuation of $1.7 billion in exchange for an approximately 17.6% equity stake.” (As Om points out, that valuation deems Nook worth more than Barnes & Noble itself.) Barnes & Noble will own the rest of the new subsidiary, “which will have an ongoing relationship with the company’s retail stores.”

Barnes & Noble “intends to explore all alternatives for how a strategic separation of NewCo may occur,” the release says. The 8-K filed this morning explains that under a separation “B&N would continue to sell NewCo’s devices and device accessories and provide service and accept returns in B&N’s retail stores.”

The partnership with Microsoft “will allow us to significantly expand the business,” said B&N CEO William Lynch. Part of that expansion is a Nook app for Windows 8, “which will extend the reach of Barnes & Noble’s digital bookstore by providing one of the world’s largest digital catalogues of e-books, magazines and newspapers to hundreds of millions of Windows customers in the U.S. and internationally.” The release notes that B&N and Microsoft settled their patent litigation and “Barnes & Noble and NewCo will have a royalty-bearing license under Microsoft’s patents for its Nook e-reader and tablet products.”

Microsoft’s Andy Lees said, “Our complementary assets will accelerate e-reading innovation across a broad range of Windows devices, enabling people to not just read stories, but to be part of them. We’re on the cusp of a revolution in reading.” As my colleague Kevin Tofel notes, Microsoft has experimented (mostly unsuccessfully) with e-reading in the past, and the B&N partnership could help it regain some momentum.

A focus on international growth

Barnes & Noble has said it will launch the Nook in the UK this year, reportedly in partnership with bookstore chain Waterstones, but the London Book Fair came and went with no announcement.

In an investor call following the announcement this morning, Lynch said “the large majority [of new users] are going to be incremental. If you look at where most of our content sales come from today, clearly we think the biggest opportunity through this partnership is in terms of growth internationally.” He added, “Anything internationally by definition is incremental because we haven’t been there yet.”

Microsoft will help cover the costs of international expansion. The 8-K explains that Microsoft will pay NewCo $25 million a year for the first five years, “for purposes of assisting NewCo in acquiring local Reading Content and technology development.” As Publishers Marketplace notes, “local actually means international.”

Microsoft will make advance payments to NewCo

According to the 8-K, Microsoft will pay NewCo $60 million for each of the first three contract years and an unspecified amount after that, up to an unspecified amount. Microsoft gets an unspecified revenue share from NewCo.

Publishers will sign e-book contracts with NewCo, not B&N

“Content lies” with NewCo, Lynch said. “The relationships with publishers will be Newco relationships.” In other words, book publishers would sign e-book contracts with the new company, not with Barnes & Noble.

Don’t worry too much about the Android part for now

The Nook e-readers and tablets are Android-based. Windows is not! “We’ve always said we want readers to be able to read in the device of their choosing,” Lynch said, adding, “if you want to read your book on an iOS product or Android product…you can of course do that.”

However, the 8-K notes that “NewCo will use the [Windows Phone] Marketplace as the in-application commerce transaction platform, when available, for commerce transactions in the NewCo Phone App, including payments and fees associated with Content acquisition and subscriptions (if available). 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.” That would mean a change to Nook iOS apps, which currently get around Apple’s revenue share requirements by not allowing in-app purchases.

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Take A Seat, Andy: Report Says Microsoft's Lees 'Benched' For WP7 Efforts

Tom Krazit — Thu, 15 Dec 2011 04:12:06 +0000

So who exactly is running the show when it comes to Microsoft’s mobile efforts? A few more details emerged Wednesday about the reassignment of former Windows Phone head Andy Lees, and it doesn’t sound like he was rewarded for his past efforts with his new role.

The Verge reported that Lees was “benched,” citing an unidentified source who claimed that Lees met his downfall by over-promising and under-delivering when it comes to Windows Phone. The software is well-liked by critics but sales have been virtually nonexistent, and Lees didn’t help matters by alienating current and potential Windows Phone partners such as HTC and Motorola (NYSE: MMI), according to the report.

Lees is going to be working directly for Microsoft (NSDQ: MSFT) CEO Steve Ballmer in a new role that lacks definition but involves overseeing the integration of Microsoft’s forthcoming Windows 8 release–probably one of the most important in the company’s history–into its overall mobile strategy. The Verge’s report suggests that there is some meat to that role, but it still clearly removes Lees from the day-to-day running of the Windows Phone group just as the Nokia (NYSE: NOK) relationship is starting to bear fruit.

Given that several sources quoted by the report also expressed admiration for new Windows Phone head Terry Myerson, you have to wonder how much of this involves throwing the old guy under the bus and sucking up to the new guy. But if you judge a leader by the performance of his or her division, you have to admit that Lees had yet to accomplish really anything toward establishing Microsoft as a player in the modern mobile market in the year since Windows Phone 7 has been available.

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Three hurdles for Microsoft’s mobile future

Colin Gibbs — Wed, 14 Dec 2011 22:00:34 +0000

Microsoft quietly made a personnel move this week that may indicate the company is working toward a unified operating system for handsets, tablets and PCs. But this is a critical moment for Windows Phone, and Microsoft should first tackle a few other important things to regain its lost relevance in mobile.

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Microsoft's Windows Phone Head Lees Taking On New Role Ahead Of Huge Year

Tom Krazit — Tue, 13 Dec 2011 06:43:54 +0000

Microsoft (NSDQ: MSFT) is shaking up the leadership of its Windows Phone unit heading into a huge year for its revamped mobile strategy. Andy Lees, who was previously in charge of the overall effort, will give way to engineering head Terry Myerson but remain with Microsoft in a new role that sounds very post-PCish for a PC-oriented company.

CEO Steve Ballmer announced the changes in an internal memo Monday, according to AllThingsD. It’s not clear whether Lees is getting kicked upstairs and out of the way or whether or not he’s being given responsibility for a crucial part of Microsoft’s bid to evolve: how to roll out Windows 8 across phones, tablets, and PCs.

“I have asked Andy Lees to move to a new role working for me on a time-critical opportunity focused on driving maximum impact in 2012 with Windows Phone and Windows 8,” Ballmer wrote, according to the report. Microsoft definitely faces a challenge defining how it can contribute to a new era of computing that is largely being driven by Apple (NSDQ: AAPL) and Google (NSDQ: GOOG), and it’s still not entirely clear how Windows Phone 7.5 and Windows 8 will co-exist across phones and tablets.

Windows Phone is a lot like that indie movie that all the critics adore but nobody goes to see: the Metro user interface is definitely a different take on mobility from what Apple and Google have been advancing, but Microsoft and its Windows Phone partners have little to show for those design breakthroughs. Given that Nokia (NYSE: NOK) has no choice but to do everything it can to help make Windows Phone a success that may change in 2012, but changing leaders right before that huge year is a little curious.

Lees will continue to report directly to Ballmer, but it wasn’t clear from the report whether Myerson would continue to report to Lees.

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