One of the most anticipated uses for Apple’s (AAPL) forthcoming tablet device is as an e-book reader: With a bright, colour touchscreen, it could be an awesome device to read books and magazines on. (And a formidable rival for Amazon’s Kindle and other reader devices.)
So what is Apple talking about with the publishing industry? As a reader points out, the last line of the FT‘s article over the weekend about Apple’s developments in digital music — and its tablet device — may be its most interesting:
“Book publishers have been in talks with Apple and are optimistic about their services being offered with the new computer, which could provide an alternative to Amazon’s Kindle.”
Obviously Apple is going to market the tablet as an e-book reader, among other things. But:
- Is Apple talking to publishers about running its own iTunes for books?
- Or is Apple merely going to act as middleman, allowing e-book vendors like Amazon, Barnes & Noble, ScrollMotion, and others to go after each other?
Neither would be surprising.
Apple probably thinks it could make the best e-book shopping and reading experience in the world, and might want to retain all of the profits that would come along with selling e-books and subscriptions to digital magazines or newspapers.
On the other hand, Apple may decide it doesn’t want to interfere with the e-book ecosystem that’s already developing for the iPhone and iPod touch. It could instead use the fact that it supports a handful of e-book stores as a marketing advantage over the Kindle, which only supports one. And it could collect some revenue from e-book stores that use the iTunes e-commerce platform, such as the Iceberg e-reader that ScrollMotion showed off at WWDC.
So which will happen?
Let’s get a little more basic: What matters the most to Apple? Selling high-margin tablets, not low-margin e-books. Because Apple would likely be using e-books the same way it uses iTunes music — as a breakeven or barely profitable business to drive more high-margin hardware sales — Apple should favour the strategy that maximizes hardware sales, while keeping costs low.
For now, that seems like the second option: Preserving the existing e-book ecosystem and not competing directly.
Why? Remember, Apple needed iTunes to help sell iPods. Digital music was hard to find legally before iTunes. And when it was available, the shopping experience was lousy and most files wouldn’t play on an iPod. Similarly, Apple needed iTunes movies and TV episodes to help sell the video-watching features on the iPod, the iMac, and later, Apple TV. There wasn’t (and still isn’t) a similar, legal video store that works with Apple hardware.
But e-books are a different story. There’s already plenty of places to get almost any e-book or magazine you want, and the shopping and reading experience isn’t that bad. Apple doesn’t need more e-books to sell tablets. Unless we’re missing something — let us know in comments or via email to [email protected], confidentiality guaranteed — it seems that it should leave that business up to others.
So, without poking around for leads yet, we think that Apple will choose the path of nurturing third parties, including the Amazons and ScrollMotions of the world, and even publishers selling directly to consumers — and collecting a 30% cut off any in-app iTunes commerce or subscriptions instead. All it would need to do is organise the e-books section of the App Store a little better.
In a sense, that is a halfway-there equivalent of building an “iTunes for books.” But the distributors and publishers — not Apple — would control content and pricing. And both get to sell what they want to sell — books for publishers, and tablets for Apple.
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