Barnes & Noble and Microsoft – back to college

Coverage of the Microsoft/Barnes & Noble alliance over the past 24 hours has been copious – the story even appeared above the fold on the front of the UK edition of the FT this morning.

Here’s a series of links to the most thought-provoking articles:

The New York Times provides a succinct summary of the deal.

Bloomberg notes that, last Friday, B&N was worth $800m; at close of trade yesterday, that valuation (essentially for the core superstore business) had jumped to $1.3bn – but the Microsoft/B&N Nook/College deal was valued at much more, $1.7bn.  Bloomberg’s piece has some great lines, including the observation that: “[the] news reflects tech’s prevailing World War I-style balance of power, where an enemy of your enemy is suddenly your best friend”.

Tools of Change’s Joe Wikert is always worth reading, and he notes that a physical retail presence (where Xbox and other Microsoft and Windows 8 hard and software could be showcased) could create real value.

Gigaom is sceptical – Microsoft is taking what it can get; it missed out on overpaying for Yahoo, has it made a sensible deal here, or is Nook just the only game in town?  On the other hand, Philip Jones at FutureBook says that he has been “watching Microsoft dance around the digital reading business for more than a decade, [and] this may be the first time they’d actually worked out a way of doing it well and making money out of it”.

All of this excitement, and no one’s mentioned the much-speculated Waterstones/Nook tie-up (pause to contemplate Waterstones stores as Xbox showrooms).  But I continue to be convinced that, despite the continuing sector upheavals, there is a strong – but different – future for physical retailers.

(After all, there’s really nothing to stop all of us doing all of our shopping online, right now.  But – although online – or, more correctly, multichannel – continues its exponential growth, we aren’t quite making that leap.)

For many years, the Barnes & Noble brand was used by two separate organisations: the publicly-traded superstore business, and the Len Riggio-owned college stores.  In 2009, the two organisations were finally rolled together, but the Microsoft deal separates them again.  This looks smart to me.

B&N’s college stores are much more than campus bookstores – they’re  sophisticated, multi-purpose, student-targeted marketing vehicles.  New stores are opening regularly, selling new and used books, and a wide variety of other student consumables, from educational products to letterman sweaters.  They serve 4.7m students at 650 colleges.  These students are the tastemakers of tomorrow; B&N College already showcases technology (not just Nook), and this audience has to be an attractive one for Microsoft.

Furthermore, college stores tend not to require the sort of real estate investment that stand-alone big boxes demand.  Located on college premises, where faculties want to ensure a bookstore thrives, they have more scope to negotiate their fixed costs down, and to occupy a small but right-sized, on-brand space.

The College division also owns B&N’s old 5th Avenue flagship, which was (bluntly) in dire straits last time I saw it, but is well-located to test a whole new approach to books-plus retailing.

And of course, separating the college stores from the superstore business makes a future restructuring more straightforward.

This isn’t just a tech story, it’s a bricks-and-mortar story too, and in a world of Amazon, Apple and more Amazon, it’s one that has to be vigorously welcomed.