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U.K.-based media giant Pearson PLC (NYSE: PSO) has made a “strategic investment” of $89.5 million in cash in Nook Media LLC, a joint venture between Barnes & Noble Inc. (NYSE: BKS) and Microsoft Corp. (NASDAQ: MSFT). Pearson, which owns the Financial Times newspaper, will take a 5% equity stake in the joint venture, which now has a valuation of $1.789 billion, according to the B&N announcement.

Microsoft paid $300 million for a 17.6% stake in the company back in October, with B&N retaining the rest of the stock. After Pearson’s investment, B&N will own about 78.2% of Nook Media, and Microsoft will own 16.8%.

The odd thing about this, and about the whole Nook Media business, is that e-reader demand is falling like a rock. IHS iSuppli noted earlier this month that demand for e-readers will total just 14.9 million units this year, compared with tablet demand of 120 million units, from vendors like Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG), Amazon.com Inc. (NASDAQ: AMZN) and Samsung Electronics, among a host of others, including Microsoft.

Demand for e-readers like the Nook is expected to fall to 7.1 million units by 2016, compared with demand for 340 million tablets in the same year. What does Pearson — or Microsoft for that matter — have to gain from selling a device fewer and fewer people want? For B&N, the Nook Media business may be the only thing standing between the company and bankruptcy, so it is easy to see why B&N is wildly optimistic.

Investors like the deal too, driving B&N’s shares up 5.5% in early trading to $15.15, in a 52-week range of $9.35 to $26.00.

Paul Ausick