Last time I wrote about the business and technical context into which Apple would be bringing its long-rumored tablet computer, which many of us now believe will also be some form of e-reader. That column stimulated a lot of lively comments, thanks, but now I have to put up or shut up, giving my thoughts on both the still-secret Apple device and the possible content strategy behind it.
I think we’re all fairly sure at this point that Apple will shortly release such a device and that it will be nominally based on the iPhone or iPod Touch. This is key because of the App Store and iPod ecosystems it will leverage. Anything that runs on an iPod Touch will run on the tablet.
Since the tablet is also an e-reader, it has to have both a larger screen and greater battery life so users have a hope of making it all the way to the train platform scene in Anna Karenina. Readers are probably correct, then, that the new Apple will have an e-ink display or equivalent. Current players in this very limited space are e-ink, SiPix, and Kent Displays, so Apple is likely to go with one of those.
But an e-ink display and the iPod Touch (or iPhone) app and content libraries are not enough. Apple has to have unique content for the new device, which is why Cupertino has been talking to traditional publishers and those publishers have been blabbing to each other.
Publishers want to make money. They want to be paid for their content. They may also want to show ads. Most importantly, though, they want a change of platform such that they can reassert control over their intellectual property, which has been for the most part subverted by the Web. The easiest way to do this is through a new file format combined with a new category of content. A tablet edition of the New York Times, for example, would ideally not be easily readable on other devices without paying something to the Times. This is not to say it would be impossible to read the Tablet Times on your Windows PC, but not without first buying the content file. And while viewing on a Windows PC is probably inevitable, don’t expect to read that same file on a Zune, ever.
One interesting way around this problem of getting paid while still reaching for a true mass audience would be to make certain content features usable only with the e-reader. So the basic story might be readable on most any notebook or mobile phone, but to see the accompanying video would require the paid version. This is just a thought, not a prediction.
The best user experience with this new content type would be using the iTablet, which would be supremely portable, silent, power-efficient and easy to read. Bigger and with longer battery life than an iPhone or an iPod Touch, the tablet would be ideal for reading on a train or plane, in the car, during lunch — anywhere you’d read a magazine or book. Heck, hasn’t that always supposed to have been the idea behind an e-reader?
The content has to be somehow better than what can be read on a Kindle. That’s made easy almost out-of-the-box given the iPod Touch software base. Here’s the potential for content that actually does something. I think that’s key. For this device to succeed it has to have a large volume of content that simply does more than you’d generally expect on other platforms. Otherwise why buy the reader?
As I wrote last time I have no inside knowledge of Apple’s plans. But I know Apple as well as anyone and I do have one bit of insight. Two years ago, while shooting interviews at e-ink in Cambridge Massachusetts, we saw what was probably the first demonstration of an e-ink display that was in color and supported full motion video. I am absolutely convinced that display or its equivalent will be at the heart of the new Apple tablet.
Kindle is black and white. Apple is color. Kindle is static. Apple offers animation and video, along with an LED backlight to make colors pop if the lighting is right. Kindle is filled with books, magazines, and newspapers. Apple is filled with books, too, but some of them will be like books in Harry Potter, with animation built into the pages. Apple magazines and newspapers will include animation and video for a new kind of composite publishing format that will be Apple-protected and mainly for sale even if some ads are included. And the Apple device will play music, videos and movies, too. Why not?
It won’t be cheap, not at first, because it doesn’t have to be. I’d look for an introductory price in the $499-699 range for the first million or so units after which the price will start to fall. Content will definitely be available by WiFi, but there’s also the possibility of a Kindle-like cellular connection that could be used by Apple to subvert AT&T’s network exclusivity on the iPhone. This new device will be, after all, a new device, and not necessarily subject to the AT&T exclusive. If there are cellular and non-cellular versions, then the iPhone/Touch analogy is complete.
Questions that remain concern how Apple will defend its new franchise and how the company will be paid for content. Many readers have yearned for a micropayment scheme as the cure for the common newspaper. As a guy who lives by writing I yearn for that, too, but I don’t see it coming, at least not in a form dramatically different from what Apple already has working with iTunes. Sure it is attractive to make (or spend) a penny here and a penny there, but iTunes has already taken most of the friction out of purchasing content, both through one-click buying and (this is vital yet ignored by most pundits) the role of iTunes gift cards to bring online purchasing to tweens. iTunes is an enormous money machine that will be extended to cover as many new types of content as Apple can think of.
How to protect the franchise is a little more complex. Apple will look for exclusive deals wherever it can – exclusives with publishers as well as technology suppliers. The publisher deals are easy since this new content won’t generally play on other mobile devices, though I’m sure you’ll be able to read it all on any iPhone or iPod Touch so Apple can claim an ab initio installed base in the tens of millions of units. I’d expect Apple also to try for a display exclusive of some sort, possibly even acquiring e-ink, which is in the process right now of being acquired by a Taiwanese LCD vendor called PVI.
This e-ink/PVI deal is especially interesting because it was announced back in June as an all-cash deal for $215 million then revised earlier this month throwing-in 120 million preferred PVI shares for the former e-ink investors. This is a huge about-face that instantly doubles the price of the purchase while also giving the former e-ink owners a share in any upside for the business — an upside they obviously expect to enjoy or they wouldn’t have held out for it.
E-ink had, over the years, raised $150 million, so while the investors were being made whole by the original $215 million sale price, their upside wasn’t much. But then the electronic ink business, for all its apparent potential, hasn’t really been that good despite e-ink’s use in both the Sony and Amazon Kindle readers. Four months ago the e-ink investors were thrilled to just get their money back. Then something changed. They just demanded (and got) twice as much money in the form of preferred shares giving them a significant piece of any upside explosion — an explosion they clearly didn’t expect when the original cash deal was negotiated.
The something that happened I believe was Apple’s entry into this market segment. That alone may have been enough. I’m guessing Apple, like it did with Samsung and Flash RAM, made a huge commitment for most — maybe all — of e-ink’s color display production for years to come. Or maybe PVI is simply flipping e-ink to Apple. Only time will tell, but I know in my bones that there is something going on here.
Chances are that Apple’s tablet won’t revolutionize publishing, but for Cupertino it will accomplish more than enough to be a success if it extends the iPhone and iTunes user bases, crushes the AT&T exclusive, and pushes Amazon and Sony to second and third places in the e-reader category. For Steve Jobs the goal is always to change the world, but if that can’t be done then making money and beating the crap out of competitors is almost as good.