Is Microsoft About to Step on Google’s Face?

Barnes & Noble (NYSE:BKS) has announced that its free Nook Metro app will be distributed through Microsoft’s (NASDAQ:MSFT) Windows Store, which dispels rumors of Microsoft embedding the program in Windows 8. Under the new partnership, Microsoft and B&N will work on ways to integrate digital content purchased through the Nook app with other Microsoft products and services.

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According to several filings to the U.S. Securities & Exchange Commission earlier this week, B&N issued a redacted version of the commercial agreement made with Microsoft. The computer giant invested $300 million in B&N’s new digital content subsidiary and promised payments of another $305 million over the next five years. In turn, Microsoft will receive a 17.6 percent stake in NewCo., a temporary name for the subsidiary that B&N created from its Nook and College textbooks businesses.

The Windows Store will offer content-selling app designed for Windows 8 and Windows RT’s Metro interface later this year. Microsoft’s strategy will mimic Apple (NASDAQ:AAPL), which does not include its iBook app with iOS, rather users must download and install the program from the App Store. The Amazon (NASDAQ:AMZN) Kindle also requires the same method for installation. So, Microsoft will not bundle the Nook app with Windows 8 and RT.

The stipulations of the agreement dictate that Microsoft will provide assistance and support, including devoting employees’ time and helping NewCo. create and launch the Nook app. Microsoft has not yet announced the release date for Windows 8 or Windows RT-powered tablets, notebooks, or ultrabooks.

The deal threatens to erase Google’s (NASDAQ:GOOG) Android from the market. Most hardware companies have until now been building their tablets using the Android operating system, but because Android is open source, they were able to tailor it to their various platforms.

Amazon provided its own media services that generated far less traffic for Google. As a result, the Kindle Fire dominated the Android tablet on the market. Microsoft would happily replace Android with Windows 8 on every mobile device, while collecting licensing revenue from Android devices in the short term.

Microsoft and B&N will share the revenue generated from sales through the Nook e-store. Sales through other Microsoft products or services will also be shared, but not any sales that were purchased using a browser.

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