Tag Archives: Apple

White Space Opportunities around Digital Textbooks

20 Jan

“Get NOOK Free!” reads the banner ad on the New York Times’ website. Barnes & Noble, creator of the NOOK e-reader, has partnered with the New York Times to give away its NOOK Simple Touch with a 1-year online subscription to the NYT. Why would Barnes & Noble give away a product that is already heavily discounted at $99? Simple: e-readers are not profitable products, they’re valuable service platforms.

As we’ve recently reported in Fast Company, incorporating services into traditionally product-centric “design, manufacture, market” models–or replacing the product entirely with services–allows companies to create value for their customers as well as their shareholders. In the instance of media, we’re seeing that by replacing physical products (books, CDs, DVDs) with digital equivalents, companies that create service platforms accessible via consumer electronics are able to capture revenues previously owned by retailers and publishers.

The closing of Borders and the declining sales at Barnes & Noble stores indicate that the digitzation of media isn’t a trend, but instead a shift towards a new model in which traditionally tech-centric firms (Apple) have entered the media business, and retailers (B&N) have entered the tech business.

Apple’s announcement on Wednesday that it would take on the $10 billion textbook market by turning its iTunes U app into a platform for digital textbooks further signals the attractiveness of the white space opportunities available around digital service platforms. In addition to low price points ($14.99 for textbooks), Apple plans to launch a self-publishing tool called iAuthor. E-textbooks are a palatable proposition for consumers – not only are they less expensive, but they’re also more portable, interactive and easily integrated with other products and software – and to those who sell them.

Digital textbooks are attractive to Apple, and its competitors who plan to enter the market, because of the revenue streams and unique business models that can be created around them. One can easily imagine that the $14.99 textbook sold on iTunes U could be supplemented with additional question banks, content updates, study guides and videos – high-margin add-ons that would no doubt add millions to Apple’s coffers. It will be interesting to see how these companies develop innovative partnerships with both schools and content providers, and how the role of the physical product used to access digital content will evolve.

Do you think we’ll see Apple pull a NOOK-like move, and give away iPads to university students in the near future? It does seem far-fetched, but there is no doubt that as price points for the increasingly commoditized products fall, the market will turn to the pasture where the new cash cow grazes: digital service platforms.