Stock Talk: Why Apple's textbook announcement matters
"If Apple relies on the existing $500 iPad to hit the education market, I think they may just accelerate the ownership of their products to students who were already going to own them … kids in well-to-do families."
Yesterday Apple made one of those cool little announcements that probably won’t affect too many of us in the short term. But I think their initiative with iBooks 2 and iBooks Author offers significant long term benefits to the company and its shareholders.
I say that this won’t affect most of us in the short term because most of us are not students. So it doesn’t (yet) change our use case for the iPad. But many of us have kids. My own kids are in JK and Grade 2 respectively. They are at the perfect age to begin using tablet technology in school.
So while I’m not a student, I am a father and I expect this trend to affect my family within a few years. As an investor in Apple, that excites me.
What Apple is doing reminds me of one successful strategy Cisco Systems used to dominate the IP routing market. Specifically, they offered free training and huge discounts on equipment to non-profit schools (including high schools). This greatly improved the chances of any tech-inspired kid to graduate from high school knowing how to operate Cisco gear. When you carry this training throughout the educational process, it’s no wonder so many IT managers end up buying Cisco gear.
Apple has just applied a healthy dose of steroids to this same concept. This isn’t about making money from textbook publishing. That’s just the gravy.
This is about programming students to use the iPad and other Apple products right from the beginning of their education.
Apple's education announcements are about creating a psychological stickiness to Apple products much earlier than might otherwise be possible. If Apple can create an amazing reason for every school-aged child to have an iPad for school books, those kids will quickly start using the devices for everything else. Getting kids hooked on Apple is great for long term shareholders.
While I’m focused on the device-side stuff in terms of how it may grow Apple’s business, I also realize that book publishers may migrate to Apple products if they want to use the iBook Author application. That’s the Apple halo effect for you. Great for shareholders too, right?
The only REAL potential competitor that comes to mind here is Amazon. Their Kindle platform could do much of what Apple is doing, perhaps minus a lot of the interactivity within a textbook. But the interactive stuff seems secondary to me. Page flipping, multi-touch zooming and panning, and note taking are probably all we really need. Then if authors want to go overboard and include interactive tables, diagrams, or other in-book applications, so be it. But that stuff doesn’t make or break the business model.
The feedback from educators, published on iMore suggests many potential issues that Apple may need to resolve. Can only rich families / schools afford iPads? Will these things get stolen? Who will be responsible for lost or broken devices?
What if Apple can figure out a way to make iPads accessible even to lower income families and poorer schools?
As an investor, I realize this whole idea of digital textbooks may drive a deeper wedge between the rich and the poor. But what if Apple can figure out a way to make or sell less expensive iPads? Then everyone wins, right?
One way to do this is build a school version of the iPad. Think stripped down components, no camera and a beefier mechanical design. Then sell it at cost, or even below cost while recouping the loss with (pretty much guaranteed) textbook sales. It’s not a no-brainer, but it seems pretty close to me.
If Apple relies on the existing $500 iPad to hit the education market, I think they may just accelerate the ownership of their products to students who were already going to own them ... kids in well-to-do families. But if they get aggressive and create a business case that makes iPads a total no brainer for schools, then I think Apple will have just locked in its next leg of growth.
But be careful Apple ... Jeff Bezos is watching and he’s gotta want this market as badly as you do.