A la carte and the Apple tablet

Wired‘s Brian X. Chen has a vision of Apple’s tablet with an interesting angle: The potential for a la carte pricing of books. It’s not a new idea, but his point about college students being excited about buying individual chapters of a textbook rather than the whole book rings true to me.

Would publishers consider pricing a textbook by the chapter? I doubt it, but this is something their primary customers may respond to, giving publishers an opportunity to experiment profitably. After all, if a textbook in paper costs $80 and can be broken into 15 $5 chapters that can be sold separately to more buyers than could or would buy the whole book, the possibilities become intriguing.

Offering chapters as free promotions is old hat, of course. What about rewarding buyers of chapters with rewards that encourage more purchases? If, after buying three or four chapters, the reader gets the whole book or credits toward chapters of another book by the same author, that could be an interesting twist.

The rest of the article anticipates Apple’s wiping the competitive table with Amazon’s Kindle and solving the world’s problems with tablet-of-destiny. Chen suggests that application-based delivery of books is a good idea. It isn’t because it represents the ultimate form of DRM–a book that won’t play unless the customer complies with strict rules about the device, application and codebase of the iPod Touch operating system. Apple, unlike Amazon, does not provide forward compatibility for applications or, if iTunes is any indication, will not curate a customer’s collection of e-books for redownloading if the file is lost.

The writer confuses a monolithic distribution technology with convenience. Texts, however, need to be portable to be useful and profitable on the lower price readers expect to pay for e-books. Portability is good for readers, writers and publishers.

Moreover, Chen is eager to see Apple fix e-book pricing with “arm twisting.” That perspective ignores the fact that Apple’s interests are in selling the device (and content that runs on that device, and only that device) but not necessarily with the interests of authors and publishers who need greater freedom to explore creativity than a universally low price point for e-books would allow.

Apple’s mythic beast: These tablets don’t come from God

The flurry of reports about Apple’s rumored 10-inch tablet iTouch/e-book reader/Media tablet over the weekend have only one thing in common: All are wild guesses based on exchanged rumors taking on a life of their own.

Notable in today’s Financial Times, for example, is the devastatingly guessy comment from Oppenheimer & Co. analyst Yair Reiner: “I think it will have a lot of the functionality of the iPod touch, but will be quite a bit bigger.” Mashable jumped on the FT’s report this morning, saying it “adds credibility” before going on to list the same set of questions everyone has been guessing about. Will it be a Kindle competitor? Will it be a phone or not? And so forth.

Pointing to one article riddled with guesswork does not add credibility to the rumors reported. Another article in the FT today, which discusses Apple’s efforts to revitalize the “album” in music sales, at least has some sources speaking on the record. The only named source in the tablet article, Mr. Reiner, quoted above, offers speculation. A source, described as a publishing executive said of the tablet: “It would be a colour, flat-panel TV to the old-fashioned, black and white TV of the Kindle.” That is a characterization without any detail from someone speaking off the record—why speak off the record if you aren’t leaking substantive information? Why let a source play authoritative expert when they are offering guesses?

Wild-eyed guesses. That’s all people are running with, because everyone dearly desires a good horse race to report. There is no horse race, there is a breeding program underway that will yield a lot of mules and a few thoroughbreds. Watching a breeding program can get very dull, sometimes gruesome. Unfortunately, most press are looking for “winners” and “losers” rather than seeing that features and traits developed in each generation of device are the only Darwinian players in this story. No one device or platform will win, because media is a deeply fragmented marketplace with broad choice for buyers.

Here’s what we can be sure of:

  • Apple never races to meet Christmas season deadlines. The company manufactures enthusiastic buyers whenever it wants, making the primary claim of the rumors, that the device must launch between September and October, ring hollow.
  • The market evolution underway now assumes that people are going to adopt specialized devices for different activities, such as reading, watching movies and browsing the Web. We have computers, televisions, radios, personal media players and myriad other devices that do most of these same things.
  • No one, not even Amazon with the Kindle and its almost 800,000 units sold, has brought about the adoption of a new activity specifically suited to a small computer with a screen capable of displaying text. It’s still just reading and we’re being asked to buy another device to do it. Whether e-readers will catch on in the current form is still very much up in the air.
  • The first substantial change in publishing as a result of these devices will be in magazines and newspapers, which will find renewed vitality when they don’t kill as many trees.
  • Readers who buy books—the third of Americans who read more than one book a year—are not going to give up paper for formats that will be obsoleted or lacks substantial enhancements over paper, except for short-lived information, such as newspapers and magazines. Anybody remember interactive CD-ROMs, which did sell millions of units and went absolutely nowhere. The benefit of these devices is not eliminating books from people’s lives, yet that is how many characterize every step, as the “end of books.”
  • Kindle is the ultimate newspaper and magazine reading device, since it provides the benefit of relieving readers of a lot of trash. No more piles of old magazines and newsprint; instead, your subscriptions will all be stored for reference and searching on a Kindle. However, any portable device, including a computer, can do the same thing. An Apple tablet could offer this, too. So, choosing a device becomes a matter of preferences and priorities. The Apple tablet addresses different priorities than the Kindle.
  • Any device introduced as a Kindle-killer will be hyped, and any product Apple makes will probably be very pleasing to the eye, the ear, the touch and, because Steve Jobs will not ship a monochrome screen in an age of rich media, as he is no fool, Apple products will not deliver the long battery life that characterize e-reader devices.
  • Steve Jobs will not introduce a device for a market of less than 100 million. An Apple tablet will have to combine functionality to appeal to many target users in addition to readers.
  • All the devices on the market and in the offing will involve trade-offs between different classes of functionality. The Apple tablet, if it even exists, will aim for the video market and e-books will be an afterthought supported by third-party developers, meaning readers will only embrace it if they also feel strongly about carrying movies and television along with them.

Relax, the world will not end or dramatically change when Steve comes down from the mountain with his tablet, if he even does so this year.

Soon, Amazon, Apple and Google will not be e-book competitors

Observing a market in development, such as the e-book business today, teaches the thoughtful analyst one thing above all else: No company is making investments that lead to failure. They only fail by mistake, by placing too large a bet on one direction the market might take. Amazon is no more at war with Google than it is with Apple. Yes, they are competing for dominance. But neither company would kill itself over this one vertical within either of their much broader businesses.

Amazon can drop the Kindle hardware to sell more books on an Apple device or through Google Books. Google could embrace the Kindle format, as well as the Mobipocket format that Amazon owns. Apple could provide hardware to serve up both Amazon and Kindle books. Microsoft, as the odd-man out and dominant operating system player is least like to control the high ground in any of these markets, because it holds the largest share of revenue generated by consumers today.

None of them will destroy the rest of their business to control the book publishing market, which is worth only $46 billion annually according to the most optimistic estimates. Mobile phone hardware, search engine marketing and advertising and PC operating systems are all larger markets than books, though one could argue that publishing has the greatest potential to drive revenue if managed perfectly. It is easier for any of these companies, however, to sell hardware, advertising and operating systems and development tools than to undertake the challenges of publishing.

Instead, these companies are jockeying for leadership, which will allow them to dictate their share of the resulting market for e-books, e-magazines and e-anything that generates revenue. Eventually, and I believe it will not be long, Amazon will yield to Google, making its book available on Kindle, or by licensing its formats to Google to sell independently of Amazon (but sharing revenue when the Google-scanned books are sold in Amazon’s Kindle Store). Apple will sell hardware, driving sales of e-books through any channel that provides books that run on its hardware. Likewise, Microsoft, which know it has lost the high ground in electronic publishing, will cede publishing revenues in exchange for support of its OS by the widest range of e-readers.

Only Google and Amazon are so decidedly at odds that they cannot work together. One of Microsoft’s most profitable divisions has long been and remain its Mac software unit. Everyone else in the e-books market has only their long-term survival at the center of their calculations, and none of them depend on dominating publishing.