In the rapidly moving consumer-tech sector, moats are hard to come by. Constant innovation is ideal but difficult to achieve. Yet that's exactly what Apple (Nasdaq: AAPL) has managed for more than 10 years. With its just-announced digital-textbook service, Apple is keeping that moat firmly intact. Here's a wrap-up of Thursday's events and a look at what it all means for the company.
The fully interactive iBooks2
On Thursday at the Guggenheim Museum in New York, Apple unveiled its long-awaited move into the digital-textbook market. Officially dubbed "iBooks2," the service will allow textbook makers to create fully interactive titles for Apple's iPad. The service includes:
- A new bookstore specifically for iPad textbooks.
- A free publishing tool, dubbed "iBooks Author," to help authors create interactive instructional materials.
- A new application for its already existing "iTunes U" service for sharing university courses.
Supercharging the industry's shift to digital
Apple's two big partner publishers, and the two big players in the education-publishing game overall, are Pearson (NYSE: PSO) and McGraw-Hill (NYSE: MHP). They were also present at the event and unveiled a limited number of digital textbooks, priced at $14.99 or less. These digital texts will initially be aimed at the high school market.
Pearson is already quite progressive and on its game when it comes to digital publishing and in that sense is an ideal partner for Apple in this initiative. As of mid-2011, Pearson's digital education platform-and-service registrations were up 15%. McGraw-Hill is no slacker in the digital arena, either, and was reportedly working with Apple on this announcement since June.
Apple will take a 30% cut of titles sold through its new iBooks 2 application, a sizable slice. McGraw-Hill Chairman and CEO Terry McGraw told Financial Times, however, that he was "very relaxed" about the terms and believed Apple could "supercharge" the industry's shift to digital.
Getting the jump in a prime sector
Right now, Amazon.com (Nasdaq: AMZN) is one company that could give Apple a real run for its money in this space. Amazon is already pursuing the digital education market, and digital textbooks on Amazon's Kindle are easy to imagine. Plus, the more attractive price point of the Kindle could give it an edge with struggling college students and their parents. This is something Apple will have to consider moving forward.
But for the moment, with the innovative iBooks2, the success and proven capability of the iPad itself, and two of the education sector's biggest publishers on board, it looks like Apple has gotten the jump on the competition and is poised to become a leader in yet another burgeoning sector of the digital marketplace. So long as the company can continue to innovate like this, its moat, and its future, are quite secure.
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