Bloomberg News

Apple Unveils IBooks 2 to Help Boost IPad Usage in Schools

January 20, 2012

(Updates with closing share price.)

Jan. 19 (Bloomberg) -- Apple Inc. introduced a service to make digital versions of textbooks available on the iPad and beef up the education content for the tablet computer as it gains popularity in classrooms.

The service, called iBooks 2, will help make textbooks more interactive with videos, animations and search features, Phil Schiller, Apple’s senior vice president of product marketing, said today at an event in New York. More than 1.5 million iPads are being used for educational purposes, he said.

With students, school districts and universities snapping up iPads, Apple teamed up with publishers, including McGraw-Hill Cos., to build interactive schoolbooks so the tablet can replace heavy tomes that have long weighed down backpacks. The new service, built with involvement from Apple’s co-founder Steve Jobs before his death, is designed to kick-start the nascent electronic-textbook business so a broad range of authors can get material to students in a digital format.

“Technology has a place in improving education,” Schiller said at the event held at New York’s Guggenheim Museum.

The e-textbooks demonstrated by Cupertino, California-based Apple have video, interactive pictures and features for highlighting texts and creating flash cards. Publishing partners include Pearson Plc and Houghton Mifflin Harcourt, which, along with McGraw-Hill, account for 90 percent of textbook sales, Apple said.

Jobs Secured Deals

Jobs, who died in October, took a personal role in securing the publishing deals. He met with Terry McGraw, McGraw-Hill’s chairman and CEO, last year to gain the publisher’s cooperation in the project, according to Vineet Madan, senior vice president of new ventures and strategic services for McGraw-Hill Education in New York.

“In that meeting they agreed on a similar approach and it made sense for us to try and work with them,” Madan said. “We’ve been trying to push digitalized learning for years now, so Apple stepping into it more directly will create more awareness about what’s possible with technology and learning.”

The titles announced by the publishers focus on kindergarten through 12th grade students, with most priced at $14.99 or less. Apple is collecting 30 percent from each sale, according to Genevieve Shore, London-based Pearson’s chief information officer.

Publishers can sell the digital textbooks at a lower price because rather than selling a print copy that’s used for four or five years, digital versions are sold on an annual basis to each new batch of students, Madan said. A print book costs $65 to $85 each, Madan said.

Tight School Budgets

School districts in California, Nevada, New York, New Jersey and Texas are among those that have allocated funds to use the iPad in classrooms. Advocates of student use of the iPad say its interactive features, such as games and quizzes, are more engaging than textbooks for modern students.

One challenge is many school districts are strapped for money to buy the iPads needed for the content, Sarah Rotman Epps, an analyst at Forrester Research.

“Some teachers that didn’t get a raise last year or saw their colleagues laid off are going to question the priorities of purchasing iPads,” Epps said.

As part of its new program, Apple introduced software tools called iBooks Author to create e-textbooks with videos and text imported from other document files. IBooks Author will be free.

ITunes U

Apple also announced new features for teachers to publish curriculum for free, an extension of its iTunes U program that the company said has been used by 1,000 colleges and universities. The material lets teachers create complete online courses, with syllabuses, e-textbooks, teacher notes or videos.

“These enable anyone, anytime to take courses for free,” Schiller said.

Education is one piece of how the iPad became the fastest- selling consumer-electronics product in history. As of September, Apple had sold about 40 million iPads, generating $25.3 billion in sales. The iPad is Apple’s second-best selling product, behind the iPhone and ahead of Mac personal computers and iPod music players.

E-textbooks today haven’t taken off because most of the material is replicas of print versions, said Forrester’s Epps. By adding new tools so the material will be more interactive and customized for the tablet, Apple can help jump-start adoption, she said.

Quality Content Needed

“For Apple, the end goal is to sell more devices,” she said. “Sales will only go up as the amount of quality content increases.”

Still, today’s announcement isn’t expected to have any material impact on Apple’s share price, even if it will aid sales of the iPad to educators, according to Gene Munster, an analyst with Piper Jaffray Cos. Apple fell less than 1 percent to $427.75 at the close in New York.

Not all education companies agreed to join Apple’s effort. Discovery Communications Inc.’s education division decided against making its material available through Apple after being approached by the company last year, said Bill Goodwyn, the head of Discovery’s education unit. Apple’s model would harm Discovery’s relationship with school districts, which pay the media company for training and support services to implement digital learning tools, he said.

“I don’t just want to sell a book and move on to the next school district,” Goodwyn said. “With every digital textbook there is huge professional implementation that goes along with it. The implementation part is critical.”

Another hindrance is that the digital material would only be available on Apple’s iPad and not other technology that schools may be using, Goodwyn said.

Small Market

The textbook-publishing market is valued at $10 billion by the Association of American Publishing. Inkling Systems Inc. and Kno Inc. produce software to make textbooks more interactive and appealing with features such as videos, audio, 3-D pictures and quizzes. Chegg Inc., a popular textbook-rental service, announced a new e-textbook offering yesterday.

The e-textbook market is still small. On college campuses, even as the latest best-sellers have become popular for devices such as Amazon.com Inc.’s Kindle reader, digital textbooks were just 2.8 percent of total textbook sales in 2010, according to the National Association of College Stores.

“If you look at what iTunes has done for music, if iBooks 2 and iBooks Author can do that for publishing it’s a big deal,” said Forrester’s Epps.

--With assistance from Erin Zlomek in New York and Doug MacMillan and Peter Burrows in San Francisco. Editors: Jillian Ward, Cecile Daurat

To contact the reporters on this story: Edmund Lee in New York at elee310@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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