NEW YORK -- Why buy a bookstore?
John Malone, who made a fortune in cable television, is offering $1 billion for Barnes & Noble -- trying to jump into a business so sick that its No. 2 competitor, Borders Group Inc., is on life support.
The difference is that Malone and his Liberty Media conglomerate aren't betting on the books-and-mortar past, analysts say, but the promise of the electronic future.
Barnes & Noble's Nook electronic reader now accounts for 28 percent of the market for those devices. And the Nook has the potential to go beyond books to deliver all types of digital products, including music, magazines, TV shows and movies. That makes it a competitor not just to Amazon.com's Kindle but also to Apple's iPad.
"This deal is all about the device," said Sherif Mityas, a partner in the retail practice of global management consulting firm A.T. Kearney. "As Apple proved, you need to have the content and the device. Malone has the content, and Barnes & Noble has the device. You're not buying the stores; you're buying the Nook."
Malone's empire, Liberty Media Corp., operates three publicly traded companies -- Liberty Interactive Inc., Liberty Starz Group and Liberty Capital Group -- through which it runs home-shopping network QVC and movie channel Starz. It also holds stakes in numerous other online, media and communications companies. Some think that QVC could be used as a marketing vehicle for Barnes & Noble's Nook.
With the backing of a media conglomerate, Barnes & Noble's digital business would be able to compete better with Amazon, Apple and others, said Gary Balter, a retail analyst at Credit Suisse.
Barnes & Noble's 700 stores may appear to be an albatross. But they could be transformed into places that highlight mostly digital devices and content and mimic Apple's successful stores. Barnes & Noble already has cleared space at the front of its stores to display the Nook and push e-books.
"You don't want the old-fashioned bookstore customer who goes in and sits and reads a book for two hours. You want people going in there who are hungry for experience," said Richard Hastings, a consumer strategist with Global Hunter Securities.
Barnes & Noble's shares surged almost 30 percent Friday and passed Liberty's bid of $17 a share, closing at $18.33. The companies haven't yet signed an agreement, and the deal is subject to closing conditions, including one that founding Chairman Leonard Riggio keep a stake in the company and remain in a management position, Barnes & Noble said.
Barnes & Noble reiterated Friday a committee of its board is evaluating the offer.