May my spinning hard drive one day be a thing of the past. From Fortune:
According to Reuters, Apple (AAPL) has sealed the deal that was rumored last week to buy Anobit, the Israeli company that makes the flash memory technology used in Apple’s iPhones, iPads and MacBook Airs.
For Apple, this is a big acquisition, both in dollar terms and in technology. The price — a reported $500 million — is larger than the $472 million it paid for NeXT, once 14 years of inflation is taken into account.
The acquisition also reinforces Apple’s growing commitment to flash memory, which is gradually replacing the hard drives the company has been using for mass storage since the mid 1980s. Apple is now the world’s largest consumer of flash, thanks to sales of its iPods, iPads and iPhones.
The MacBook Air also relies on solid state (rather than mechanical disk) memory, and flash is now an option on the company’s MacBook Pros as well.
paidContent has a good primer on the European Commission and Justice Department investigations into the e-Book industry.
Before Congress today, the head of the Justice Department’s antitrust division reportedly confirmed months of rumors by stating that the federal government and state attorneys general are investigating the electronic book industry. Earlier this week, the European Commission said it has begun formal investigations to follow up on raids of publishers’ offices that took place in March.What is the Conspiracy?
The case turns on “agency pricing,” a scheme under which the publishers set the price for e-books on the iPad. In return, Apple (NSDQ: AAPL) collects a commission.
What is the Point Of Agency Pricing?
Publishers watched in horror as Amazon (NSDQ: AMZN) decided to build up its market share in e-books by selling prized titles for less than $10. Amazon sometimes sold at a loss. This set a low floor for e-book prices and also threatened the sale of more expensive hard cover books. The agency model lets publishers set higher prices and ensure customers don’t become used to cheap e-books.
What’s the Problem with Agency Pricing?
The class action suits complain that agency pricing is an illegal cartel. Here is how one complaint describes it: “As a direct result of this anti-competitive conduct as intended by the conspiracy, the price of e-books has soared. The price of new best-selling e-books increased to an average of $12 - $15—an increase of 30 to 50 percent.”Is Agency Pricing Against the Law?
For decades, it was illegal for manufacturers to impose prices on retailers. That’s why you used to see “Manufacturers Suggested Retail Price” on many items—companies could suggest a price but not impose one. This changed after a 2007 case called Leegin in which the Supreme Court said it wasn’t illegal for a handbag maker to control prices. Now, the analysis is done on a case-by-case basis to see if pricing is fair. In this case, the publishers are the manufacturers and Apple is the retailer.
Mark Coker of SmashWords, which works with Indie authors to get their titles on e-Books, adds some insight from the small guy perspective in support of Apple, Amazon and the large publishers:
It would be a sad day for authors, publishers, readers and online bookstores if agency pricing was overturned, because it could allow one or two well-funded companies to sell books at below cost and effectively drive every other ebook retailer out of business. That would lead to *less* competition in the ebook retailing market, not more, would prevent the development of indie ebook retailers in smaller markets, and would ultimately lead to less competition and higher prices.
What critics of agency pricing forget is that these large traditional publishers are becoming less and less relevant each year as more authors independently publish and distribute their own books. At Smashwords, we distribute over 90,000 of such indie ebooks, and we let our authors and publishers set their own prices. We only distribute to agency retailers. These indie authors benefit from the higher royalty rates enabled by agency pricing, and they set the average price of their book under $5.00. Why do they price low when they have the power to price high? Because they know they can sell more copies at a lower price, and since they’re earning 60-70% of the retail price under agency vs. 42-50% under wholesale, the author can still earn more at a lower price to the consumer.
If an author wants to earn $2.00 for each book they sell, they’d set the price to customer at $2.86 under Agency and $4.00 under wholesale. In this new world of indie publishing, Agency facilitates lower prices.
The book market is extremely competitive, and that’s a good thing. If publishers make the mistake of pricing their books too high, readers now have 90,000+ lower cost alternatives.
Out of all U.S. adults who read magazines, 11 percent do so exclusively via digital platforms, new data from GfK MRI says. But with newsstands available on more devices, that number should increase.
Between May and October 2011, GfK MRI estimates that 1.58 billion U.S. adults read magazines. Of those, the company pegs the print + digital audience at 135 million people, and digital-only at 166 million people. That digital-only group is made primarily of men (63 percent), and they’re more likely to be young, affluent and well-educated. The sample size for this survey was 12,546 people, and GfK MRI extrapolates its results to the entire U.S. adult population.
Digital magazine reading is likely to increase as digital newsstands become available on more devices. The Apple (NSDQ: AAPL) Newsstand, launched in October, has broughtsome magazine publishers a significant number of new readers. Conde Nast, for example, reported subscription sales across nine titles up 268 percent in the two weeks following the Newsstand’s launch.
Early indications are that Apple’s new iOS features for publishers have had an immediate beneficial impact.
- Exact Editions, which says it made about 10 percent of the Newsstand app titles on iTunes Store, says downloads of freemium sample editions jumped by 14x in just a few days, whilst some titles’ actual sales have more than doubled.
- Consumer magazine publisher Future says free container apps for its titles were downloaded two million times in three days and reports “consumer spending well in excess of normal monthly revenues”. “Future has sold more digital editions in the past four days through Apple’s Newsstand than in a normal month,” says UK CEO Mark Wood.
Digiday interviewed former New York Times design director Khoi Vinh, who has been critical of publishers’ approaches to the iPad.
How important is the emergence of HTML5 for tablet publishers? Can you see them gravitating towards browser-based experiences over apps as that technology becomes more robust?
There are two strains here. On the tech side, HTML5 is the way of the future. It’s too expensive to publish native apps for iOS, Android and all the different platforms. HTML5 is a much better delivery mechanism for this stuff than a native app. It’s much more affordable and much more portable. On the other side, though, it’s not just about the tech. I had underestimated how effective Apple’s AppStore would be in terms of distributing applications. You can’t beat that, so publishers will have to stay with apps for at least the immediate future.
To date, publishers seem to have focused on simply updating or transposing their print products for use on the device, but are they missing an opportunity in doing so? Should they be rethinking the way they deliver content from the ground up?
Absolutely. I just can’t see the end-to-end magazine format surviving. The Internet lets people consume media in a-la-carte form. To force a package of content on folks is unnatural. Some folks will continue to like the magazine format, but as social distribution becomes the way we discover and receive more of our content, it won’t make sense to sell it in these virtual boxes any more.
What possibilities should publishers be exploring, then?
One glaring omission in the way we package content for tablets is really relevance. Much like when you go to Amazon, they display similar products other people have bought; we don’t have anything nearly as good in realm of publishing. It’s not just recommendations, though. It’s about understanding true relevance. If you look at an app like Flipboard, that’s the one major thing it’s missing. The tech startup that can solve that problem will push forward this area of digital publishing in a big way.
Weigh in with your thoughts on publishers and their tablet strategies.