Can Apple Acquire 95% of the Digital Textbook Market?

Everyone in the world seems to think that Apple's AAPL next big announcement will be a new venture into the world of digital textbooks. It makes sense, they say, because of all the schools, as well as individual kids and teens, that have purchased iPods and iPads. Global Equities Research estimates that the digital textbook market is a $9-billion-a-year opportunity. In a recent report, the researcher said that it believed Apple is “very likely” to make a formal announcement this Thursday, January 19. “Our research indicates that Apple has a very strong following with Authors, Publishers, Faculty and Students and may capture 95% of Digital Text Book Market, while Amazon.com AMZN may only participate in the 5% of the market,” Global Equities Research wrote. “Over the next 5 years, we are estimating that Digital Text Books may contribute $4.9 Billion to iTunes revenues and $5.14 to Apples EPS.” Further in the report, Global Equities Research said that only 2% to 3% of the 17 or younger age group currently uses a Kindle – hence the researcher's belief that Apple could capture such an enormous part of the market. This speculation, however, is far from a confirmation regarding what Apple will or will not announce on Thursday. Though the company is expected to announce something within the educational realm, the Mac maker has been known to surprise consumers with announcements that contradict the initial batch of rumors. The timing of these rumors – which arrived just days before the next Apple event (scheduled for this Thursday) – does not change that fact. But while many are discussing whether or not Apple will enter the digital textbook market (and how much money Apple could make), few are asking one very important question: how long would it take for the iPad maker to make a dent within the industry? iTunes was Apple's first – and arguably the best – major venture into digital distribution. With fewer iPods on the market at launch (and no iPhone), iTunes did not soar overnight. Similarly, when Apple first started selling movies and TV shows, the former was not very successful. But even now, with so many digital options available to movie lovers, Apple has yet to become the most prominent player in film distribution. It is, however, the current leader in apps, thanks entirely to the all-inclusive App Store. Unlike the non-interactive content of iTunes, items from the App Store can only be enjoyed by those who own an Apple device. This was a smart move for Apple's bottom line in terms of hardware sales (the iPad and iPod Touch wouldn't have thrived without apps). But it opens the door for competing app stores to take the lead. With digital textbooks still playing second fiddle to the thicker, heavier, and re-sellable originals, Apple has an opportunity to fundamentally change the market. That, as we are all aware, is what Apple loves to do; if it weren't for iTunes, where would people buy their music? Google GOOG would love to provide that answer, but the company is a few years too late. Apple came to music at just the right time. While I do not believe it saved record labels, iTunes has – along with Spotify – helped reshape consumer perception about the way music should be obtained. In a world where piracy threatened to take over, that is a very good thing for the music industry. Apple has not been able to do the same for movies, mostly because those who buy films still prefer DVDs and Blu-ray (especially when they come packaged with a free digital download). Everyone else prefers Netflix NFLX and other streaming or on-demand options. This has made it hard for Apple to do the same for movies that it did for music. While $9.99 music downloads are very appealing, there is no point in paying $15 for a new movie download when you can get the same film on disc for the same price (or less) at Best Buy BBY or Amazon. With textbooks, however, Apple could offer a meaningful discount in addition to the convenience and potential efficiency of having every book loaded onto one compact device. Better still, I'm thinking that most students would appreciate a search function that allows them to quickly find a page, paragraph or some other detail they are seeking just by typing a few details into a search box. While this feature is supposed to already exist (Google has been trying to pull this off with all books), it has yet to be perfected. This could be an area where Apple could really excel. And then there's Siri. Flawed or not, consumers would go crazy for Siri-supported textbooks. Follow me @LouisBedigian