Why Apple’s iPad is shaking things up with Amazon and Google

Here’s the story I wrote for this week’s National Business Review, a round up of the interesting times we’re living in and my pick of the winners and losers ā€” so far.

When Apple launched its long-rumoured iPad tablet computer late last month, it fired a major salvo in the battle for control of media in a new digital era. In its global sights were Google and Amazon who, along with Apple, are the companies driving this seismic shift in media.

All three companies are jockeying to be gatekeepers between content providers and consumers. So far, many of these battles have been playing out overseas but in 2010, New Zealanders will get to join in.

It’s the ability to get consumers to pay for digital content and reduce its reliance on a broken online advertising model that is at the heart of the media’s excitement. So it’s not surprising that a lot of the early jostling is for control of the one major medium that’s largely ad-free, books.

With business models that link online stores to specialised gadgets, companies like Apple and Amazon are proving that consumers will pay for music downloads, ebooks and even online newspaper subscriptions if you make it easy and attractive enough.

In this new world, the PC is no longer centre stage. Increasingly, what we’re spending our time doing is communicating, surfing the internet and consuming media online, not running applications like Microsoft Office. To do this, people want inexpensive gadgets that are highly portable, comfortable for lengthy reading or watching videos, simple to use, with long battery life, and always connected to the web.

It’s a wish-list that’s been tough to fill, until now. At last month’s Consumer Electronics Show (CES) in Las Vegas, a slew of new ebook readers and so-called tablet computers were announced that, to varying degrees, will fill these needs.

Many will be in New Zealand by the second half of this year by which time Kiwis will also have access to content from local e-bookstores including Kobo from the Whitcoulls/Borders group, a host of New Zealand ebooks and perhaps some magazines from local publishers, and Amazon’s Kindle should finally be here.

The excitement of CES had barely subsided when Apple, with impeccable timing, announced on 27 January the much-hyped but impressive iPad.

For book publishers and the wider media industry, the iPad and its competitors can’t come soon enough. The iPad is a thin, light tablet the size of an A5 notepad. It will surf the web and do your email (it has an almost-full-size touch keypad and a real keyboard can be attached as an option). But importantly it also lets you comfortably read books, magazines and newspapers or watch videos over its wireless internet. It’s a very different experience from a PC but a very familiar one for millions of iPhone and iPod Touch users. The iPad looks just like a grown-up iPhone.

Its unexpectedly low US$499 entry level price point will make things much tougher for the numerous companies that announced entry into this market. They’re going to have to compete more on features and specialisation, making it much harder to get a foothold.

One area is screen technology where a lot of innovation has happened. Apple chose to stick with its proven LED technology which provides crisp colour images and quick performance but is hard on batteries, difficult to read in sunlight and can cause eye strain from prolonged reading. A new breed of electronic papers solves most of these problems and many of the new devices coming out this year will use them. Some of them are targeting business rather than consumers, hoping to finally bring about the paperless office.

To show off its print media credentials at the iPad launch, Apple CEO Steve Jobs demonstrated a special edition of the New York Times newspaper and a new application, iBooks, that lets you read ebooks ā€“ not just the black and white text editions that Amazon’s Kindle restricts you to but full colour, rich media versions that will make magazines and newspapers viable too. And from its associated iTunes-like iBook store, you can buy them right from within your iPad.

The deals Apple has struck with major book publishers are rumoured to give publishers a bigger margin and better control over pricing than Amazon gives them, two areas where Amazon has got offside. Watch for iPad deals with magazines and newspapers to follow.

In this battle to win the hearts and wallets of consumers and the media Apple, with its power to popularise gadgets, has a distinct edge over Amazon and Google.

Google’s strategy is to provide its Android and Chrome operating system platforms free to any manufacturer for this new generation of media-centric devices such as smartphones, tablet computers, and ebook readers. Dozens have already jumped on board and many of the direct competitors for Apple’s iPhone and iPad will be built using Google’s systems.

In mid 2010, Google will begin selling content through its own online bookstore, Google Editions, going head to head with Amazon’s Kindle and Apple’s iBook store. But Google plans to sell to intermediaries such as online booksellers and libraries as well as to the end consumer, potentially creating a more diverse industry. Google’s technology, reach and openness to partnerships is likely to make it a major contender. But Google is new to building system software and so far Apple still has the edge, something it’s likely to take advantage of as it wins over early adopters. And Google got offside with the publishing industry, governments and much of the public with its controversial Google Books programme, something that might come back to bite it as competition heats up.

Amazon, as an online retailer, is new to the hardware game. While it’s done a credible job with the Kindle getting consumers excited about ebooks, the Kindle is a very simple device and it’s by no means clear that Amazon can scale up its hardware operation to compete with the much more sophisticated devices consumers will be demanding.

An interesting, but little-noticed part of Apple’s announcement is likely to make Amazon’s job even tougher. Apple, like Google, is throwing its weight behind an industry-sponsored open ebook format called ePub. This might finally end the ebook ‘format wars’, tipping the balance in favour of a single format, ePub, and forcing Amazon to rethink its own proprietary Kindle format. Losing control of both the device and the format will make it tougher for Amazon to control the distribution of digital content. There are signs its market control is already weakening.

Other companies are in the picture, including Microsoft, and it’s too early to rule out a dark horse emerging. But so far, it’s looking like a three horse race to rule over the global distribution of digital content. Following Apple’s latest move, I’d say it’s Apple in front by a nose.

– Martin Taylor

Comments (2)

  1. Mauricio Longo

    Apple is the company that stands to win more in all of this as it’s sales of devices are highly profitable, regardless of the content that is sold.

    The iTunes store doesn’t sell music in Brazil, up to this day an age, however the stores are full of iPods and they sell like hot cakes.

    Google made a poor choice in trying to be follow in Microsoft’s footsteps and provide a software that will run on whatever device people want to run it. This leads to severe fragmentation of the market as what works on one device won’t work on another.

    Amazon, while having gotten off to a good start with the Kindle, has an incredibly difficult uphill battle if it means to try to counter the iPad with a device of its own.

  2. Pingback: A three horse race to rule over the global distribution of digital content … Apple in front by a nose. @ The Paepae

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