Why Apple's iPad Won't Rescue Big Publishing

The Digital Book World conference in New York didn't exactly grind to a halt at 1 o'clock yesterday, but it was definitely hot and bothered. Several dozen attendees gathered around their screens, squinting at buffering feeds and cursing intermittent Web connections, as they watched Apple (AAPL) CEO Steve Jobs unveil the iPad, the object of desire formerly known as The Tablet That's Going to Save Us.A day later, the moniker jokes are out of the way, the iPad is a real, live device slated to hit the market starting in March. Out goes the hoopla, in come the specs. And the publishing industry finally has a better sense of where it stands, now that, as Jobs put it Wednesday, "the floodgates have opened up."

There's plenty for Big Publishing to like about the iPad. It's the first Apple device with a dedicated e-bookstore, through an application called iBooks. Titles in the demo will be priced from $7.99 to $14.99, DailyFinance reported on Wednesday, and will be formatted in ePub, the publishing-industry standard.

Kindle's Chief Rival

If it wasn't clear that iPad and iBooks are two shots across the bow of Amazon's (AMZN) Kindle e-reader, Jobs's left-handed compliments drove the point home: "Amazon has done a great job of pioneering this....We're going to stand on their shoulders for this."

iPad's full-color 9.7-inch screen opens e-reading up to textbooks, comics, and other illustrated books that were incompatible with the Kindle's black-and-white, e-Ink-based screens, or limited by the far smaller screens of the iPhone and iPod Touch. The $499 price for the most basic iPad (16GB memory, Wi-Fi but no 3G) is just $10 more than the Kindle DX. And iPad's page-turning feels instantaneous, while Kindle's refresh rate doesn't hold up for speedy readers.

Does that mean "the Kindle is basically done," as Paul Constant writes in the Seattle weekly The Stranger? I'm not so sure. The iPad is certainly a more formidable competitor than Barnes & Noble's (BKS) Nook, but Amazon wouldn't have opened up its source code to application-happy developers if it didn't want to stay in the game.

Then again, the Kindle has accomplished several things. It's proved that e-reading (and Amazon's one-click retail experience) could be pleasurable and easy for what Amazon claims has been hundreds of thousands of consumers. It's forced publishers to bow to the $9.99 price tag, no matter how deep a loss Amazon takes. And it's established Kindle books as the dominant digital format, accounting for anywhere from 80% and 90% of digital book sales in 2009.

Five Publishers Sign On -- But the Biggie Waits It Out

But oh, that $9.99 e-book price point. How publishers have fought it! They delayed e-book publication. They plan enhanced e-books. And when Apple came calling, five of the big six houses -- Hachette Book Group (LGDDY), HarperCollins (NWS), Penguin (PSO), Simon & Schuster (CBS) and Macmillan -- signed on as iBooks partners, giving Apple its 30% cut as part of a so-called "agency model," with the remaining 70% split between publisher and author in ways still to be determined.

But the conspicuous publisher missing from Apple's list is also the largest: Bertelsmann AG's Random House. "Random House welcomes Apple's iPad and iBooks app, and we look forward to our continuing conversations with them about how we might best work together," read the publisher's cryptic, open-ended statement.

Random House's absence from iBooks may be related to a top exec, Madeline McIntosh, who was SVP and publisher of the Random House Audio Group in June 2008 when she decamped for Luxembourg and became Amazon's director of Kindle content acquisition for Europe, just before Kindle went global. Two months ago, McIntosh returned to Random House as president, sales, operations and digital, a new position reporting directly to CEO Markus Dohle. She's also a member of Random House's International Executive Board, tasked with developing the company's worldwide digital strategy. An exec so closely affiliated with Amazon probably won't deliberately burn that lucrative bridge.

Where's iBooks?

Even if Random House does eventually sign on Apple's dotted line, Wednesday's iBooks announcement leaves a lot of room for additional questions about Apple vs. Amazon, the fortunes of publishers large and small as digital books become even more popular, and where authors fit in.

But one odd aspect seems to lend credence to how much of an afterthought books are for Apple -- at least compared to games, sports, movies and other forms of entertainment. Most names associated with Apple's products -- iPod, iPad, iPhone, iTunes -- redirect Web users to Apple or have their own Apple-owned storefronts. But iBooks.com remains the property of one Heriberto Soto, who lists his billing address at a P.O. Box in Hollister, Calif., until January 7, 2012, and who didn't return messages. It's unclear whether Soto owns a highly valuable cyber-property, or if Apple doesn't care enough to secure the domain name.
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