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Apple's Effect on Content Partners: More Good Than Bad

The unveiling of Apple's (AAPL) new tablet computer on Jan. 27 has sparked hopes the device will improve the fortunes of companies supplying content for the device. Newspaper and magazine publishers in particular are looking to the iPad to help reverse declines in their industries, while book publishers are seeking an alternative to the leading digital bookseller, Amazon.com (AMZN), that will give them more control over pricing and distribution. As The New York Times' (NYT) digital chief Martin Nisenholtz showed off his paper on the iPad at the Apple event, he called it "the best of print with the best of digital, all rolled into one."

The question is whether teaming up with Apple and Steve Jobs makes sense for content companies. It's still a subject of much debate. The music industry's experience may be the closest parallel to what's ahead for publishers. After Apple introduced the iPod and iTunes online store, it helped reshape how fans find, buy, and listen to music. In the process, Apple became the largest distributor of music in the world, surpassing Wal-Mart (WMT) in 2008.

Critics point out Jobs pushed the major record labels to make all of their songs available for the single price of 99¢, which they say contributed to a decline in more lucrative CD sales. Music sales have dropped steadily in recent years, falling 18% to $8.5 billion in 2008 (the most recent figures available), according to the Recording Industry Association of America. Yet supporters argue the industry's fate would be even worse without Apple. When the company got into the business, even law-abiding consumers had no convenient way to buy music online—and many were flocking to the Web for free, pirated music. Now millions buy tunes via paid digital downloads. "I wouldn't call them the savior. But they made the market, right?" says Kevin Arnold, founder of indie music distributor IODA, based in San Francisco. "I don't know if we'd be where we are today if iTunes hadn't come along."

A Foundation on Which to Rebuild

Industry experts say the iPad won't solve all the problems of the troubled publishing industries, but it may well provide content partners with the sturdiest platform on which to try to rebuild their businesses. The device is likely to provide opportunities for new revenue streams beyond those on the Internet, where most readers expect articles to be free. "Apple, more than any other company, has shown it can find people who are willing to pay, even in a world of so many free alternatives," says Gartner Group (IT) analyst Mike McGuire.

Jobs didn't announce the sweeping new business partnerships that many analysts had expected. (The only deals announced were with book publishers, including Hachette Book Group and Simon & Schuster, which will make some of their titles available through Apple's new iBook Store.) But Apple did detail new technology tools to help publishers and other software developers create applications, or apps, that will be richer than the Web. One possibility: The iPad might be able to update and store the latest breaking stories, so you can read them even if you lose your Net connection. With such extra features, its larger screen, and multi-touch technology, the device may make it easier for newspapers and magazines to persuade people to pay for digital subscriptions.

Regions : Asia

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