New Partnership of Barnes & Noble and Microsoft Will Promote Digital Textbooks

April 30, 2012

Barnes & Noble is spinning off its college-textbook and digital divisions into a new subsidiary, bolstered by a $300-million investment by Microsoft, that is aimed at turning more college students on to electronic textbooks.

The partnership, which officials announced on Monday as the two companies were settling a patent dispute, isn't likely to change the day-to-day operations of the nearly 700 campus bookstores that are managed by Barnes & Noble, said Jamie Iannone, president of Barnes & Noble Digital Projects. But he said it should "accelerate the adoption of e-reading in the college space."

Even though e-textbooks make up a small portion of the bookseller's business, that market is likely to grow in the next several years, and teaming up with Microsoft will strengthen its ability to grab a larger share of the college bookstore market, Mr. Iannone said. One of the first new features the joint venture will offer is a Windows 8 application for Nook, Barnes & Noble's e-book reader.

The new subsidiary, which has yet to be named, is being referred to for the time being as Newco. Barnes & Noble will own 82.4 percent of the venture, and Microsoft will have 17.6 percent.

While e-books have soared in popularity among adults, who have snapped up devices like Barnes & Noble's Nook and Amazon's Kindle, college students haven't shown much interest in trading in their print textbooks for electronic versions.

Charles Schmidt, a spokesman for the National Association of College Stores, said three-quarters of the college students the association surveyed last fall prefer the printed version of textbooks. But he said he expects sales of digital textbooks to increase as younger students who grew up reading online move on to college, as faculty members become more comfortable with e-textbooks, and as content becomes more interactive.

"Most e-textbooks are slightly glorified PDF's of the print version, although that's changing," he said. "Digital e-books sell for about 60 percent of the cost of a new printed copy. Since students can go to their college store and rent a print copy for between 33 and 55 percent of the cost of a new book, the e-book really needs to have more functionality to make the higher price worth their while."

Kenneth C. Green, founding director of the Campus Computing Project, which studies the role of information technology in higher education, said e-readers "have not been delivering on the promise or the expectation of being less expensive."

And he said it remains to be seen whether the merger of two fundamentally different divisions—one digital and the other primarily bricks and mortar—will be able to change students' textbook reading preferences.