Apple’s New Sandbox – Textbooks: It Might Disrupt More than Just the College Textbook Industry

Hola Todos!

Being an Apple aficionado and a college professor, I watched Apple’s announcement of iBooks 2, iBooks Author, and iTunes University with great interest (click here to see Apple’s presentation). Here’s my take on the new initiatives.

First, Wall Street was not that excited.  Apple’s stock was down a number of points the day before and closed down on the day of the event.  Friday didn’t bring it back either but today, the stock earned back all the points Apple lost on Wednesday-Friday.  I bet this has more to do with Apple’s upcoming and expected record earning call on Tuesday than any of last week’s announcements.  As I like to poke fun at Wall Street, the Street was probably not excited because (1) Apple leaked many of the big thoughts in advance of Thursday’s presentation in the Big Apple but more importantly, (2) Wall Street is overly near-term and short-sighted as none of the new initiatives will impact Q2 in a major way.  While I agree nothing announced was mind-blowing like an iPad3, iBooks 2 has the potential to do what iTunes did to the record industry and that my friends, will be mind-blowing many quarters down the road.

Second, it was interesting to play “Monday Morning Quarterback” and blurt who were the big losers based on Apple’s new initiatives.  The most obvious are firms who run college bookstores like Follett and Barnes & Nobles. College students know all too well that it is very easy to drop at least $400 to $500 per semester on textbooks.  That revenue will disappear in the very near future.  Also middlemen/wholesaler firms involved in selling in the K to 12 marketplace will be disrupted.  All “used” non-university run college bookstores will disappear as well as rental services for educational books.  The other big losers are again Barnes & Nobles and especially Amazon.  Both of these firms have the relationships with the textbook publishers, the network to distribute textbooks AND an electronic device to distribute electronic textbooks (e.g., Nook and Kindle/Fire, respectively).  Yet, both of these firms dropped the ball and let Apple walk in al take this market away from them.  Apple did the same thing to Sony with the iPod/iTunes marketplace even though Sony had all the elements to do what Apple did in the Music industry. I’m sure the other firms will scramble around to cut deals with the college textbook publishers and these publishers would probably want to more sure Apple isn’t the only game in town.  But Apple got there first, and Apple by far has the best electronic device to experience electronic textbooks.  Round one goes to Apple.

Third, not discussed in a major way by Apple was self-publishing. Thursday’s event was powerful because not only are the three largest textbook publishers are onboard from day one, two of the three CEOs of these firms participated via pre-recorded video.  The way the iBooks Author program is set up, I could self-publish any book project rolling around in my head. Apple could not play this card up given the players involved in the announcement.  Yet, Amazon has been publicly trumpeting this song for the better part of three to six months, even to the extent of going after authors and signing them to lucrative self-publishing contracts.  My guess is none of the big three textbook publishers are happy with Amazon right now and I bet it made the deal making easier from Apple’s side of the equation.

Fourth, I think Dean’s and Universities should pay close attention to this iTunes University play with strong paranoia. Think about it this way, if this open or online initiative goes viral and expands quickly, small or mid-tier initiations could easily disappear.  Right now, MIT can only handle (e.g., classrooms, dorms, professors, etc) so many students a year.  For argument sake, let’s say its 20,000 students at $45,000 per year.  However, the MIT online degree program (which is taught by the same professors who are on campus) could handle 250,000 students at $7,500 per year.  (Please note; I am making this numbers up for pure illustrative purposes).  Given the realities of higher education today, some students might choose an online MIT option over a $20,000 per year pubic or $40,000 per year private University option. Now that would disrupt more then just the college textbook industry, it could up-end a multitude of higher education institutions.

Finally, I expect a new iPad in the very new future.  Yes this is an easy call, as we know iPad3 will be around sometime in March/April 2012.  However, I would also expect an iPad Mini or iPad Lite or iPad something closer to the $149 – $199 – $249 price points of the Nook/Kindle devices.  We all know the money is in the hardware.  Apple created the iTunes store to sell more iPods.  Apple created the iBooks2 store to sell more iPads.  Too many K to 12 students and K to 12 school systems are cash strapped and cannot buy a $499 device to read a $14.95 textbook.  Before the end of this year, if Apple is smart, that will change. We all know all is smart – ask Sony, Microsoft, Dell, Amazon, etc…

Best regards,

Dr. Dan-o

 

4 thoughts on “Apple’s New Sandbox – Textbooks: It Might Disrupt More than Just the College Textbook Industry

  1. Dan,

    Thanks for the update on the iBook app. I think many of your broader points are well taken … particularly as they relate to the broader move to digital delivery, open courseware, etc. As I have noted before, IT will eventually disrupt our business model as effectively as it has others, e.g., music, video, print media and publishing. In fact, if we lose our legislatively mandated monopoly on credentialing we are relatively defenseless as we are presently organized. And, given the pressure on our industry to address the cost issue alternative models are already developing and will only gain more traction in the future.

    I do think, though, that Apple has built what could be a significant bump in their model. The iBook license agreement prevents authors who publish via the iBook app from using any other distribution channel if the author plans to charge for their book. Apple did not address this question during their announcement but the LA Times discusses the issue here. And Sasha Segan (PC Mag) is even more adamant about the implications of this development. It is worth noting that Amazon’s approach to self-publishing provides for a variety of distribution alternatives. Also, since Amazon does not assert similar control over the finished product, authors are free to take their manuscript and “publish” it on other, completing platforms.

    That said, Apple has an almost magical way to convince customers to “buy into” their approach.

    However it turns out … it will be very interesting!

    GO PIRATES!!!

  2. A lot of my current textbooks are available online, but most of them are equal price of the print textbooks and because digital text books cannot be resold online, the value still is not there unless the prices of digital copies come down to actually be an adequate substitution for hard copy. Hopefully with the proliferation of digital text books will come greater value.

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