The Rise of the Nook: Barnes & Noble Feels the Love

Barnes & Noble (NYSE:BKS) is getting some love from investors on Wednesday as shares jumped over 7 percent in morning trading. America’s last major brick-and-mortar bookseller has been successfully hedging against a future where paperback sales dwindle, delighting many investors and pushing the stock price up over 28 percent in the last month.

The stock surged at the beginning of October when Microsoft (NASDAQ:MSFT) invested $300 million in Barnes & Noble’s Nook Media venture in exchange for a 17.6 percent stake, putting a $1.7 billion post-money valuation on the division. Barnes & Noble CEO William Lynch later appeared on CNBC, suggesting that his company may be undervalued, adding that “with the Nook HD and Nook HD Plus, we launched the two best products ever created for reading.” Reading is clearly not the only thing Lynch wants users to do with the devices.

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While the Barnes & Noble push into the tablet market is interesting, Nook devices may initially look weak compared to market-champ Apple (NASDAQ:AAPL) and market try-hard Amazon (NASDAQ:AMZN). The incoming holiday season will serve as a proving grounds for the new Nook devices, but what what will define success or failure is how well Barnes & Noble builds its content pipeline.

On that front, the company is making progress. On Tuesday, Barnes & Noble announced a video licensing partnership with major studios such as NBC Universal – owned by Comcast (NASDAQ:CMCSA) and General Electric (NYSE:GE) — and 20th Century Fox Home Entertainment, owned by News Corp. (NASDAQ:NWS). The announcement comes the same week that the new Nook devices will begin shipping.

Nook Video, compounded with Microsoft’s clear interest in the Nook Media venture, add to the air of disaster that some investors see surrounding Netflix (NASDAQ:NFLX). The stock surged last week on rumors that Microsoft could buy the company, but the idea has since been squelched.

Content is a key factor in the appeal of devices. Netflix has attracted some negative attention recently surrounding its relationship with content providers, a position that could harm the company’s long-term prospects. Amazon is on record as saying that money is to be made in content, not the hardware — although Apple probably disagrees. Regardless, both companies have aggressively pushed to secure their own content pipelines.

It’s still too early to determine whether or not the Nook and its content platform will be successful. However, there seems to be a healthy amount of hype surrounding the launch, suggesting that the Nook may be around for a while.

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