Market Overview

Will Apple Delete Your Textbooks?


Licenses can be revoked. Access can be denied. But would Apple go so low as to take a textbook from a legitimate buyer?

This is one of the controversial questions people are avoiding in their effort to report on the presumed sales of iBooks Textbooks and the confirmed downloads of iBooks Author, which has moved more than 600,000 downloads as writers flock to Apple's (NASDAQ: AAPL) first free authoring tool.

“More than 600,000 copies of iBooks Author [have been] downloaded, much more than what our tracking system indicated, which was between 90,000 [and] 110,000 downloads,” Trip Chowdhry, Managing Director of Equity Research at Global Equities Research, said in an e-mail update. “This is the leading indicator of the strength of Apple's entry into the $9 billion per year textbook market.”

Logic assumes that more iBooks Author downloads will lead to more iBooks creations, which will then lead to more books for the iBookstore, and thus more revenue for Apple, Chowdhry said.

In a previous update, Chowdhry explained why he believes that, after just three days of data, Apple's textbook venture will be extremely successful:

  • “The success or failure of an app on an App Store is known within the first hour of launch. There is no ‘try and try again till you get it right.' There is no, ‘let's put marketing $$ behind it.' There is no, ‘let's wait and see.' It is a binary logic, ‘either you are successful or you are a failure,' and that is defined in the very first hour of the launch.
  • “Timing of app launch is also very important. Thursdays are the best day to launch a new app.
  • “If an app is good, downloads start happing immediately and continue. A bad app may have strong downloads for [the] first 15 minutes or so, but may taper off immediately after that. Our tracking system has not indicated this for Apple textbooks.
  • “Based on the insights we have gained over the last two years by talking and interacting with more than 1,000 mobile developers, we feel almost certain that Apple's textbook initiative will be very successful. However, please do your own check, too.”

Following Apple's massive quarterly results, it's easy to forget about the controversy surrounding the licensing agreement for iBooks Author, in which users must share their profits with Apple (among other restrictions). But that's an issue that only authors will have to deal with; consequently, the average reader is not going to care. But readers should care about the future of their digital items.

Thus far, apps, video games, music and movies have been safe across most digital channels. When Microsoft (NASDAQ: MSFT) decided to oust a few games from Xbox Live Arcade, those who had previously downloaded the deleted games were allowed to keep them. This is the way it should be, though it could also be argued that digital items should never disappear from an online store, no matter the reason. If Carl Consumer and Sally Shopper can buy an old copy of Ultimate Mortal Kombat 3 from GameStop (NYSE: GME), why should the digital version be any different? Tech companies are constantly telling us how important it is to go digital because, unlike other mediums, digital is forever. But “forever” is an undefined term.

Three years ago, the New York Times reported on a case in which Amazon (NASDAQ: AMZN) digitally removed two George Orwell books, “1984” and “Animal Farm,” from the Kindles of users who had already purchased them. According to the New York Times, Amazon claimed that the books were added to the Kindle store by a company that did not have the rights to them. Consumers didn't know this, however; they simply purchased the books, thinking that they were getting a legitimate item. But if they had pirated the books on a cracked e-reader, Amazon wouldn't have been able to do a darn thing about it. Ironic, no?

This is one of the reasons why consumers choose to pirate digital items: because it's less of a hassle than being an honest (paying) customer. If the pirated item has no DRM, no connection to Amazon (or any seller or rights holder), and cannot be deleted without users' permission, why wouldn't consumers pirate? That's the biggest challenge textbook publishers are about to face as Apple attempts to fully digitize their world.

Thus far, Apple has not taken away any digital items from anyone. But it has come to light that if a user leaves the country, his or her license will be revoked, and the user will be required to buy the lost items all over again. While some have argued that DVDs have a region lockout that creates a similar problem, there are legitimate ways around this issue. Further, music CDs do not have a lockout at all. But the same cannot be said for music downloads.

For the time being, Apple isn't going to remove any digital items from anyone's account. Apple has done a much better job of ensuring the legitimacy of its license holders, so it isn't likely to repeat Amazon's mistake. And when items are removed from the App Store (or anywhere else), those who downloaded the items are able to keep them. But that doesn't mean users aren't still going to get screwed.

Let's suppose that a student buys a stack of textbooks, throws them into his luggage, and hops on a plane to Europe. No one will care. But if Apple's licensing agreement is the same for textbooks as it is for everything else, students will not have the luxury of studying abroad without losing the rights to the digital books they were told they could keep forever.

Follow me @LouisBedigian

Posted-In: Amazon Apple Global Equities Research iBooks iBooks AuthorNews Rumors Tech Best of Benzinga


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