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E-Commerce News.com January 24, 2012
The iBooks Profitability Puzzle
By Erika Morphy
MacNewsWorld Part of the ECT News Network 01/24/12 5:00 AM PT

Apple's new iBooks textbook market saw lots of activity over the weekend as users downloaded 350,000 copies of books, according to Global Equities Research. If iBooks catches on in a big way, it'll certainly be profitable to Apple. But whether it will be a good deal for authors and publishers has yet to be determined.

Apple's (Nasdaq: AAPL) iBooks textbook initiative, launched just last week, has clearly struck a chord in the market. Ditto its accompanying textbook authoring tool, iBooks Author. Both have taken off at a significant pace, according to a report by Global Equities Research.

More than 350,000 textbooks have been downloaded via iBooks over the past three days. In addition, there have been more than 90,000 iBook Author downloads. iBook Author is a free authoring tool to create textbooks for Apple iBooks.

A Big Impact
The numbers seem to indicate many students and educators at least interested in seeing how Apple wants to break into the market. However, as the ramifications of the textbook store and authoring tool become clearer, some industry observers are having second thoughts as to whether this would be a good thing.

For starters, textbook publishers could find their margins squeezed, perhaps uncomfortably so. As Global Equities notes in its report, more than 50 percent of textbook industry revenues come from the sales of introductory books.

Then there is the lock-in for authors that use Apple's authoring tool. Migrating to other platforms is simply not an option, at least with this current platform.

Global Equities Analysis
Global Equities' initial take on how publishers will fare in the system is that they will in fact make more money selling an iBook textbook priced at US$14.99 versus a traditional printed textbook priced at $125.

That is because 50 percent of the textbook industry consists of used books, which deliver zero revenues to publishers. Also, the textbook supply chain is a complicated one, consisting of distributor, wholesaler, retailer and finally student. At each step the markup is between 8 percent to 15 percent, for a total of between 33 percent to 35 percent -- excluding actual distribution costs.
Conversely, the cost of an iBook production is 80 percent less than a print product. Global Equities declined to provide further details.

Some publishes of textbooks, though, disagree with Global Equities' assumptions, not to mention its math. Larry Beller, president of Amsco School Publications, told MacNewsWorld the firm has been offering its own e-books for roughly a year and a half. Pricing for the two products -- print and e-book -- must remain roughly the same in order to provide revenues for the authors, he said, which are compensated differently than authors of fiction or non-fiction books.

"With Apple's platform coming out we will have to rethink some of the numbers, but it won't be a significant difference. It can't be." He added that there is still an important print market for college students -- and especially elementary and high school students -- that won't go away even if this platform becomes popular.

An iOS-Only Tool
For others, the authoring tool is the one that raises the most concern. For instance, writers who use iBooks Author to write books they intend to sell may only distribute them through Apple's services.

"There is a lot about this tool that I don't think authors will realize at first," Br