Tuesday morning, Barnes & Noble, Inc. (NYSE:BKS) announced NOOK Video – an on-demand video streaming and download service, initially featuring content from major studios including HBO, Sony Corporation (NYSE:SNE), STARZ, Viacom, Warner Brothers, and Disney. Barnes & Noble, Inc. (NYSE:BKS) customers will also be able to buy physical media in stores that include UltraViolet capability (essentially buying a digital copy as well), and will be able to link their UltraViolet account with the NOOK Cloud (allowing for “buy once, play anywhere”).
Details are scarce, but investors expect this is NOT a subscription service offering, and is instead more of a traditional retail model Barnes & Noble, Inc. (NYSE:BKS) selling content a la carte, and receiving some margin for the sale. Investors do believe there will be incremental costs associated with the program ramp. Investors also note that the closer investors get to Fall/Win8, the more likely it is the Microsoft Corporation (NASDAQ:MSFT) deal will be, in fact, closed.
Investors see this as a necessary step for the NOOK platform – investors thoughts, following thinner/lighter tablets introduced this year, were that the hybrid device is happening for the mass market and e-ink will remain a relevant product for heavy readers. Amazon.com, Inc. (NASDAQ:AMZN)’s Prime Instant Videos gave a significant edge to the Kindle platform, but continued NOOK improvement helps keep NOOK owners from leaving the platform (due to relatively high switching costs).
Yet, just like with hardware, the battle for content means incremental costs (and any battle with Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Google Inc (NASDAQ:GOOG) will be long and expensive). Investors do see potential for further hardware innovation on the horizon (likely with the help of Microsoft Corporation (NASDAQ:MSFT) via Newco), but the DOJ case against Apple Inc. (NASDAQ:AAPL) and publishers continues – driving uncertainty in the future profitability of e-books.
The latest reports state that Barnes & Noble is now partnering with Dixons Retail, owner of the UK large retailers, Currys and PC World, to get the Nook in stores before Christmas.
Disclosure: No positions in any securities mentioned