The tablet wars escalate

A major business deal took place in the United States yesterday that could revolutionise the books market. Microsoft has invested $300 million (£185m) in Barnes and Noble’s Nook eBook reader. The two companies have created a subsidiary, named Newco for the time being. Microsoft controls 17.6 per cent of the equity.

The standard analysis is that this is a win for Barnes and Noble in its battle against the Amazon Kindle, which is scarcely surprising given that Amazon holds perhaps 60 per cent of the digital market. The key for B&N is a prominent place in Microsoft’s next version of Windows, which is due to be released in the autumn. The deal has boosted Barnes and Noble’s value by 76 per cent, up to $1.7 billion, a resounding vote of confidence from the market about the company’s ability to compete with Kindle, iPad and Kobo.

But the other side of the story is that this is the latest chapter in Jobs versus Gates. Microsoft has been lurking on the edge of the digital publishing world for more than a decade, since it first created publishing software in 200. But Apple is already immersed – it’s even at the centre of a Justice Department suit about price fixing with New York’s ‘Big Five’ publishers.

Yesterday’s deal gives Microsoft a platform to explore this fertile ground. It will also have a substantial voice in a company which sells tablet readers that use Google’s Android mobile software and is also available on i-Phone; devices that, as the Guardian points out, are major competitors for Microsoft’s smartphone programme. Wider and deeper competition is coming to the eBooks markets, which can only be good news for the consumer.