B&N, Microsoft team up on Nook, college businesses

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The Nook has pleasantly surprised publishers, who worry about Amazon’s domination of the e-market. Unveiled to skeptical reviews in 2009, the Nook is estimated to account for about 25 percent of the U.S. e-book market. The Nook helped to cut Amazon’s share from what was believed to be 90 percent to around 60-65 percent. David Pogue in The New York Times called the initial device “an anesthetized slug,” but praised the new Nook Simple Touch as a “very big deal” that offers “spectacular, crisp pages to read in any light.”

Barnes & Noble investors have also been concerned about the recent government lawsuit against Apple and some leading publishers over alleged price fixing. When Apple launched its iPad in 2010, Simon & Schuster, Penguin Group (USA) and other publishers switched to an “agency” model that allowed publishers to set prices for e-books, a system many believe helped Barnes & Noble.

Amazon had been offering top-selling e-books for $9.99, a cost publishers, agents and writers believed was so low it could drive competitors out of business. Three of the five publishers sued_ Simon & Schuster, HarperCollins and the Hachette Book Group _ have already agreed to settle, meaning prices for their e-books likely will again drop on Amazon.

Microsoft has a long-standing interest in the e-book field. It launched e-book software in 2000, but was never able to build a substantial library of books. It’s discontinuing the software on Aug. 30.

Barnes & Noble, based in New York, currently runs 691 bookstores in 50 states. The companies said that the subsidiary will have an ongoing relationship with Barnes & Noble’s retail stores, but what that relationship will be is unclear.

“The whole reason the Nook business is expanding so rapidly is because bookstores are committed to it and know how to market the product in that environment,” said Michael Norris, an analyst at Simba information.

The possibility of a separation of Barnes & Noble’s digital and college businesses has been brewing.

In January, Barnes & Noble said it was considering options for its Nook business, including possibly spinning it off or expanding overseas, and said it expected the review to be complete by the end of the year.

And in March, private investment firm G Asset Management, a Barnes & Noble shareholder, offered $460 million for a 51 percent stake in the company’s college bookstore unit, Barnes & Noble College Booksellers LLC.

Under that plan, the college bookstore unit was proposed to begin as a private business but become public within a “reasonable” amount of time. G Asset’s offer was contingent upon Barnes & Noble keeping current management in place and separating its Nook e-business from the rest of the company. At the time the offer was made, Barnes & Noble declined to comment.

In 2009, Barnes & Noble Inc. bought the college bookstore unit from Chairman Leonard Riggio in a deal worth $596 million. The deal ended up costing Barnes & Noble $460 million after accounting for the unit’s cash on hand at the closing date.

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AP Retail Writer Mae Anderson, Business Writer Michelle Chapman and AP National Writer Hillel Italie contributed to this report.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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