Pearson’s Strategic Investment in NOOK Media

Back in February I shared my thoughts on Pearson and why I think they should target the market with their own tablet device. Back then the iPad 2 was still the king of the hill with rumors that the iPad 3 (which eventually ended up being the new iPad) was just around the corner.

Today the tablet market even left that device behind and we saw the launch of the latest iPad in late October along with the iPad Mini and competitors like the Nexus 7 and 10, the Kindle Fire HD and so on.

Now, while I still think that a cheap or even free tablet that would be subsidized by the paid content on the device (digital textbooks and services) is an intriguing idea, Pearson has now entered the tablet space through a backdoor.

The publisher announced that it acquired a 5% stake in NOOK Media, the newly formed company that spun out the Nook e-reader from Barnes & Noble in partnership with Microsoft. Pearson invests $89.5 million and has an option to acquire another 5% later on. Microsoft invested $300 million for a 17.6% stake back in May and it is now reduced to 16.8% according to paidContent. Barnes & Noble now holds 78.2% in Nook Media.

The goal of the Pearson and NOOK Media partnership is

“[…] 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.”

says Will Ethridge, CEO of Pearson North America in the press release.

Now what is this all about? As Robert Andrews puts it in his article, this is

“[…] 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.”

NOOK Media also operates the 674 campus bookstores of Barnes & Noble which certainly helps Pearson to distribute the printed versions of their textbooks to students. But I think another interesting aspect of this strategic investment is the part that Microsoft might take in it.

With the launch of Windows 8 and the Surface device Microsoft is clearly trying to prepare for the post PC era, if such a thing exists or not. One thing is sure, the future is more and more mobile, may it be on a smartphone or tablet.

In order to compete with Apple, Google and Amazon Microsoft needs a decent content strategy which includes music, movies, books and educational content. Through their stake in NOOK Media Microsoft has access to the content and online distribution channels of one of the remaining competitors. So I wouldn’t be surprised to see some kind of a partnership between Pearson and Microsoft to bring their educational content on Windows 8 devices, probably through a NOOK Media app.

This is one of the big advantages of a working Windows 8 ecosystem. Users have one unified login and get all their content delivered to the device they are currently using. From a desktop PC to the smartphone, tablet or even Xbox. Today Microsoft still holds over 90% of the operating system market, and although Windows 8 is off to a rather slow start it doesn’t mean that it won’t become a success in 2013 with more devices being available on the market.

All in all one more interesting move from Pearson.

Picture: via Barnes & Noble