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Why Callaway Digital Arts is Poised to Take Digital Publishing to the Next Level

Talk about killing two birds with one stone. Callaway Digital Arts (CDA), a publisher of iPad apps, announced a partnership with Martha Stewart and $6 million of Series A financing from Kleiner Perkins Caufield & Byers' iFund today. Ram Shriram, a founding board member of Google (GOOG), and Mark Pincus, founder and CEO of Zynga, also participated in the round.

It's hard to understate the potential apps have to change the future of digital publishing. Certainly for specialty titles and children's books, they're a simple but vital solution to elevating passive content into a dynamic interactive experience.

Nicholas Callaway, who founded Callaway Editions back in 1980, has always been a champion of lavishly produced print books (think Georgia O'Keefe's 100 Flowers), so it wasn't much of leap to think he'd do similar justice to developing apps. The first, based the children's book series Miss Spider, captured the attention of Steve Jobs himself according to Publisher's Marketplace (subscription only link). Jobs connected Callaway with the venture capitalists and voila. A small company with some sizeable intellectual property (think Sesame Street and Thomas the Tank Engine) is about to get a whole lot bigger and more influential.

Case in point: the partnership with Martha Stewart to extend her mega-brand even further into the digital realm. The first iPad app, Martha Stewart Makes Cookies, is available in the Apple app store today. CDA says it will reveal several more high-profile content partnerships for the iPad in coming months.

Publisher's Marketplace notes that Callaway's planning to produce150 apps a year by the end of 2012, including 100 for Miss Spider.

Callaway's not the only one convinced this is going to be the next big thing. Indeed, co-founder and CEO John Lee likened the company as a cross between publisher Random House and animated film studio Pixar. But don't take his word for it.

The $6 million in funding will be supplemented with a handsome $30 million Ready to Learn grant from the Department of Education in conjunction with the Hispanic Information and Telecommunications Network and the Michael Cohen Group. Lee estimates that will bring $15 million to CDA over the next five years.

There's even more revenue potential in the business model which won't rely on releasing its products as e-books, but as standalone apps. Callaway's shooting for his storefront with the App Store and rake in sales on downloads (the Miss Spider iPad app costs $7.99), subscriptions, and advertising.

In the press release, Doerr too, confirms that CDA has it's finger on the pulse of the digital zeitgeist. "Callaway Digital Arts is one of the very few interactive publishers to fully understand and exploit the iPad's transformative capabilities as a publishing platform."

Stay tuned.

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