Demand for digital book applications on Apple devices gives developers and publishers fresh ways to make money—a mixed blessing for Amazon
Michel Kripalani started making e-books when e-books weren't cool. A veteran creator of video games, Kripalani began developing downloadable digital books about a year ago. At the time, Apple's App Store (AAPL), an online software application marketplace, boasted thousands of game apps and merely 700 book-related titles. "If everyone is growing corn, maybe it's time to grow soy," he figured. Kripalani is glad he switched. E-books are booming now, with book-related apps outnumbering those dedicated to games. His company, Oceanhouse Media, sells three of the 10 best-selling book apps in the App Store. In February 2010, users downloaded one e-book for every four mobile games, compared with one for every six games in October, according to Mobclix, which analyzes iPhone application use. Indeed, electronic books are now the largest content category at the App Store, which features apps for the iPhone, iPod touch, and forthcoming iPad, a tablet-style computer due to go on sale Apr. 3. The store boasts 26,976 e-books, compared with 25,330 games, Mobclix says. The surge in popularity is a boon for book publishers as well as software developers such as Oceanhouse. It also demonstrates the potential for Apple products to serve as alternatives to dedicated e-book reading devices such as the Amazon (AMZN) Kindle and Sony (SNE) Reader. "We are going to stand on [Amazon's] shoulders and go further," Apple Chief Executive Steve Jobs said in January, when he introduced the iPad, which will emphasize book reading. Apple spokesman Tom Neumayr declined to comment further on the company's iPad plans. Amazon representatives didn't respond to requests for comment. iBooks app for the iPad bookstore
Book-related apps come in a variety of forms and prices. Some include a single title, while others feature multiple books. Oceanhouse's best seller is Dr. Seuss's ABC, a 99¢ title that helps children learn to read. Also for 99¢, Spreadsong sells an app that features 23,469 classic titles, including Bram Stoker's Dracula and Daniel Defoe's Robinson Crusoe. In the past nine months, the app has been downloaded more than 100,000 times, says Spreadsong CEO Colin Plamondon. Apple keeps 30% of the sales generated by apps; the app vendors keep the rest. When the iPad goes on sale, Apple plans to introduce an iBooks application that will provide access to an iPad bookstore offering titles from major publishers such as Simon & Schuster, Penguin, and HarperCollins. Analysts say Apple will let publishers set higher prices for their books than they can at Amazon, which sells most books for about $10, giving publishers an incentive to bring new titles to Apple first. Lonely Planet is preparing a series of eight books that will be available for the iPad before the Kindle, says John Boris, managing director of Lonely Planet Americas. Six months ago, Mobile Roadie helped launch several apps for publisher Random House. The Santa Monica (Calif.)-based startup is now building apps for HarperCollins and is discussing book apps with Scholastic (SCHL), says Mobile Roadie CEO Michael Schneider. Using Mobile Roadie's templates, publishers can create a book app in less than 30 minutes, for a $500 fee up front and $30 a month. Other publishers share part of their app revenues with developers. Some, including Lonely Planet, create apps in-house. "a much richer platform on the iPad"
iPhone apps have been "an invaluable tool in allowing our readers to keep tabs on their favorite authors while on the go," says Matt Schwartz, director of digital marketing and strategy for the Random House Publishing Group. "We are very pleased with early response and look forward to using the Mobile Roadie platform to provide an easy way for authors and their readers to connect." The popularity of book-related apps on Apple devices may be especially disruptive for existing makers of e-readers. While sales of standalone e-readers may double to 5 million units in 2010, they may rise only 30% next year, in part because of the iPad's introduction, says Susan Kevorkian, a program director at consultant IDC. "Content providers have a much richer platform on the iPad" than on the Kindle, says Charlie Wolf, senior analyst at Needham & Co. Apple's foray into e-books isn't all bad for Amazon. The Kindle app for the iPhone is one of the most popular free apps on the App Store. The software gives users access to the more than 450,000 titles available for purchase for the Kindle. What's more, as Apple helps popularize electronic books, all makers of e-books will benefit, some analysts say. Once a person buys an e-book, there's a 50% chance that they will buy most of their books in electronic form from then on, says Kelly Gallagher, a vice-president at R.R. Bowker, which provides analysis of the publishing industry.