Is iPad a Game-Changer for Publishers? It Will Be If They Have a Plan
Even though the giggling over the name Apple (AAPL) chose for its iPad has mostly subsided, speculation whether the device will change the business of books -- with a dedicated e-bookstore application called iBooks -- continues unabated.
Comparisons to iTunes make sense. iBooks will have a broad selection of titles priced from $7.99 to $14.99, conveniently formatted in industry-standard ePub, and available to peruse and download via the iTunes-like shopper-friendly format. As such it poses a formidable threat to Amazon's Kindle on everything from cost (at $499, the most basic iPad is $10 more than the Kindle DX) to expectations of functionality (iPad's vibrant color, select-your-own-font, and tactile screen trump the static grey scale).
Predicting how iPad will affect future of the industry itself is a little murkier. Pundits can throw around a lot of predictions about the rise or fall of this house or that magazine based on the presence, or absence, of key players to the negotiations table, but the proof is in the planning.
Sure, you could say that Terry McGraw, McGraw-Hill's CEO, got a slap on the wrist in the form of not sharing the stage with Jobs during the presentation. That's what you get for leaking information on CNBC the day before the official announcement. But you can hardly blame McGraw.
Giddy with the company's first quarterly increase in earnings per share in two years, and the fact that 95 percent of its materials are already in ebook format, he knows the tablet will open up the higher education and professional markets. Will Jobs hold a grudge and keep them from peddling textbooks in the new iBookstore? Probably not.
The student market should prove to be a lucrative one for Apple, especially with a pay-by-chapter model for textbooks. Will McGraw-Hill's expanding digital products and services continue their double-digit growth rate? Perhaps, unless they fall down on their digital marketing strategy.
Speaking of strategy, there's been plenty of wondering why the largest player in the book business stayed away from those 11th hour negotiations with Apple. Random House, under the umbrella of Bertelsmann, chose not to come to tea with Simon & Schuster, Macmillan, Hachette, HarperCollins, and Penguin. Random House offered a brief statement instead, indicating that conversations would continue about "how best to work together."
Is their plan to hold out for better terms? The other five agreed to give Apple a 30 percent cut in return for the ability to set their prices and retain their ebook files. This effectively eliminates the wholesale model, but it remains to be seen if publishers can set a price that will hit customers' sweet spot and make them buy.
For Random House, this issue is bigger than a price point. Recently re-hiring Madeline McIntosh (a former SVP for audiobooks who'd left to work for Amazon) as president of sales, operations, and digital, sent a clear message that the hallowed halls of RH would soon be abuzz with digital strategies. However, strategies are not formed overnight (or in McIntosh's case, less than three months).
Like everything else in this new, blinking infancy of hand-held digital publishing, profitability is going to take some serious planning and vision. The publishers who find the balance between careful thought and nimble decisions are the ones who'll really capitalize on iPad's game-changing potential.