Pluses and Minuses in Apple’s iBooks 2 Textbook Equation


Apple‘s (NASDAQ:AAPL) announcement this week of the iBooks 2, iBooks Author, and iTunes U apps may not have garnered the sort of consumer mania that typically comes with the announcement of a new iPhone, but make no mistake: It was a big deal. Research group BookStats and the Association of American Publishers won’t release 2011 sales figures until later in 2012, but studies released last fall reiterated the earning potential of the market. Higher-education textbook sales grew 23% over the past three years, totaling $4.5 billion last year.

Is Apple about to add yet another multibillion-dollar revenue stream to its stable? “I can’t say I’m worried,” says at least one publisher in the field.

A study conducted last year by social-learning platform Xplana projected that digital textbook sales would total $1.5 billion by 2015. That was, of course, before Apple decided with Pearson (NYSE:PSO), McGraw-Hill (NYSE:MHP), and other publishing heavyweights to take on the market. iBooks 2, released on Thursday, already supports eight interactive iPad textbooks sold through Apple’s iBookstore.

Instructors using the iPad in class also have access to iTunes U, a course management app that can be used for structuring classes and assignments. Both are complimented by iBooks Author, an app for corporate, independent, and individual publishers alike, easing the process of creating e-books for Apple’s platforms. Based on Apple’s past success with media initiatives like iTunes, it’s not unreasonable to think that Xplana’s $1.5 billion estimate is low-balling it.

Textbook production: not rocket science, but pretty close

Will iBooks Author self-published textbooks cut into higher-education sales? A production editor with a prominent independent publisher serving the higher-education market expressed skepticism to InvestorPlace that that would be the case.

“Unlike trade, textbooks tend to be insulated from self-publishing due to the sheer number of eyes and minds required to craft an informative, visually attractive book in any field,” this editor says. “There’s nothing to stop motivated professors or graduate students from collaborating on a self-published textbook, but if professors and graduate students had the time and motivation required to do so, we wouldn’t be in business in the first place.”

The iPad’s infiltration of the classroom does represent a potent opportunity for larger publishers, says the production editor, adding: “In the past decade, the book itself has become less important. We aren’t just pushing for adoptions of texts, but of entire courses, including ancillary products–Instructor’s Resource Disks, Test Banks, PowerPoint slides, supplemental online teaching tools, etc.”

The cost of a textbook – and an iPad

To that end, the iTunes U app is an opportunity to streamline these products for both publishers and customers, but will publishers actually want to participate? After all, Apple will continue to take a 30% cut of all sales through the iBookstore. Not only that but Apple claims exclusive rights to the output format of books created using its iBooks Author tool. (iBooks Author-made e-books won’t run on other platforms, but the rights issue is a sticky issue for publishers all the same.)

So Apple’s success in textbooks is far from guaranteed. The company has vowed to sell at least high school textbooks for $14.99, well below the $75 average for physical books, but these e-books will still need a $400 iPad to be read. Apple’s Phil Schiller boasted that Apple already has 1.5 million iPads in classrooms. Considering the iPad’s been on the market for two years, that classroom adoption rate is going to have to increase at an astronomical rate for the company’s textbook dreams to be realized. There are billions to be made in textbooks, but iBooks 2, iBooks Author, and iTunes U don’t guarantee that Apple will be making that money.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.


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