An impressive start, but how many of those 350,000 downloads were freebies?
Apple AAPL certainly got the attention of educators and the educational publishing community with the iPad textbook initiative it announced last Thursday. And no wonder. It’s been a long time since anybody lavished that kind of attention and glitz on what has traditionally been an unglamorous — albeit highly profitable — corner of the book industry.
The first measure of interest, provided by Global Equities Research‘s independent analysis of Apple’s online store traffic, is that within three days of the event, somewhere between 350,000 and 375,000 textbook files were downloaded from the company’s iBookstore and between 90,000 and 110,000 copies of iBooks Author (a free app for creating iPad textbooks) were snapped up from the Mac App Store.
Global Equities is bullish on Apple’s initiative, despite significant hurdles: e.g. the cost of dressing up old textbooks with new interactive bells and whistles, the $14.99 price cap, Apple’s 30% cut of the revenue, and the fact that the finished products run only on a device — Apple’s iPad 2 — whose cost starts at $499.
In Global Equities’ analysis, publishers stand to make more profit creating and selling iTextbooks than they would from paper textbooks that typically go for $125. The advantages of iBooks, according to their report:
- No used book market: 35% to 50% of the textbook sales are used books for which publishers get zero revenue
- No supply chain markup: In the current model, textbooks go from the publisher to the distributor to the wholesaler to the retailer and then to the end user (i.e. student). The supply chain markup is between 8% to 15% at each step, totaling between 33% and 35%
- Zero distribution costs, thanks to the magic of the Internet
- Cheaper production: iBook production costs are estimated to be 80% less than the cost of producing a printed book
- Favorable supply/demand curves: At $14.99, publishers might sell 40% – 60% more books than they could at $125
Perhaps. But Global Equities may be reading more into those download numbers than is entirely justified. After all, the iBook Author app is free, and each of the eight textbooks currently on display in Apple’s Bookstore is either free or offers a free sample.
The real test will come when schools start assigning and students start downloading iTextbooks that they have to pay for.
UPDATE from Global Equities’ Trip Chowdhry: “The success or failure of an app on an app store is known within the first hour of launch. It is a binary logic: either you are successful or you are a failure. If an app is good, downloads start happening immediately and continue. A bad app may have strong downloads for first 15 minutes or so, but may taper off immediately after that. Our tracking system has not indicated this for Apple textbooks.”