Mike McGuire

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Mike McGuire
Research VP
11 years at Gartner
21 years IT industry

Mike McGuire guides digital marketers on best practices for developing strategies. He specializes in how context, community, location and time — combined with a consumer’s purchase history and purchase intent — are changing the relationship between consumers and brands …Read Full Bio

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Apple iPad Offers Media Companies Hope But Not Yet a Savior

by Mike McGuire  |  January 27, 2010  |  1 Comment

Rumors being what they are, much of what Steve Jobs announced at the iPad launch event didn’t come as a surprise to the overload crowd at the Yerba Buena Center in San Francisco. The iPad is a “tweener” that fits nicely between an iPhone/iTouch and netbook computer. With a 9.7-inch screen weighing in at 1.5 pounds, sporting battery life claims of 10 hours, the iPad could be ideal as a prototypical interactive content consumption device…But a few unanswered questions challenge its viability for media companies.

For book publishers, some of whom were waiting for signs of wide-scale acceptance of the universal e-publishing standard, ePub, the iPad came through…sort of. Although the device supports ePub, Apple is believed to be planning to implement its own DRM (Fairplay) to secure the ePub files, which could presumably then be distributed only through iTunes (that is, iBooks). If that is the case, Apple’s book efforts puts it in the came category as Amazon which utilizes a proprietary DRM that ties Kindle books Amazon.com. Hence any e-book purchased from Barnes & Noble, Sony or any of the countless e-book retailers will not work on the iPad. In addition, e-books from libraries, which are powered by Overdrive who uses Adobe’s DRM, also would not work on the iPad.

For both newspapers and magazines, the iPad remains a mystery. The demo of The New York Times, which was created in a compressed timeframe, is not much indication of what potential newspapers have on the iPad. Those are questions that can only be answered by developers who are busily downloading the new SDK and attempting to devise compelling paid or ad-supported content applications. The initial focus is on paid applications (and again, there is no evidence that consumers will pay for digital newspaper content) as there was no mention of advertising support from Apple, which many were expecting following Apple’s recent acquisition of Quattro, a mobile ad network. The same goes for magazine publishers who now have the color device they have asked for but will need to experiment with varied content applications and business models, while scrambling to source enough video to do justice to consumer expectations raised in demos.

The iPad launch will create ripples throughout the publishing industry: supply chain providers who digitize and format content as well as develop applications will thrive; standalone e-reader device manufacturers will have to re-price their devices now knowing that the WiFi-only 16G iPad can function as a high-end e-reader. Plastic Logic’s Que, the Alex and Entourage Edge may be forced to revisit their announced retail prices.

For video content such as TV and movies, a similar catch was apparent. While the iPad can clearly render beautiful hi-def full screen video, its lack of support for Flash was evident in the tiny blue cubes that appeared on web pages during the demos. This means that TV-friendly web distribution platforms like Hulu are unlikely to work on the iPad. (A Hulu app for the iPhone/Touch has been rumored for some time but has yet to materialize.) Here, too, Apple appears to have reserved the distribution of TV and movies for its device for iTunes, although YouTube remains a wildcard if it should release a sound model for content owners to monetize through rentals or sell-through. Also unexplored was the possible connection between the iPad and Apple TV, which have clearly enticing possibilities.

Then there’s the mysterious absence of any mention or demonstration of the device’s advertising potential, or Apple’s apparent new found interest in participating in the business. With iTunes emerging as the sole channel for monetizing content of any kind on the iPad, advertising remains a critical source of revenue to publishers and video providers alike, and one on which Apple’s chief emerging rival, Google, is laser-focused with innovations like Google Goggles and QR barcodes readable by Android devices, and distributed to 100,000 businesses. Of course, these ideas require a camera, which the iPad lacks.

Still, Apple did not fail to push the envelope and generate enthusiasm for its latest creation. Now, with Apple setting the standard for content consumption devices, other manufacturers—most notably PC OEMs, will begin to launch their tablets and will look to Android and possibly Windows as device platform. In particular, Android will thrive with Google deploying its Google Editions and YouTube strategies to offer cloud-based delivery of all content to the universe of Android devices, with a well-proven advertising component.

And let’s not leave communications service providers out of the mix. Whether Apple’s choice of AT&T is one consumers find popular, it leaves Verizon and Sprint as ready partners for HP, Dell, and others whose tablets are in queue.

All that said, content companies of all kinds need to examine the iPad and the new version of the iPhone OS with a few things in mind. First, Steve Jobs is without peer in his ability to provide a vision of the future through the medium of the product he happens to be introducing at the time. In the case of the iPad, he described the magic of having the “…Internet in your hand.” True that, but for a lot of us, that came with the iPhone, the Touch and the AppStore. And as revolutionary as those products have proven themselves to be, the real magic has come from the integration of all those elements into a set of compelling content experiences.  Second, the iPad extends by one the form factors those kinds of experiences can be delivered through. Third, and this is really important, we’re still talking about the “Internet” as defined by Apple. The potential for game-changing killer apps to come for the iPad is not in question.  And the potential power of content experiences Apple can enable is not in question.  But the handle on that potential is being controlled by one entity.

In that regard, we remain puzzled at the continued estrangement between the iPhone OS-based product line – iPhone, Touch and now iPad – and Adobe Flash. Do the power-management issues cited by Apple as reasons for the iPhone’s persistent lack of Flash support? We think lack of Flash support still causes many, many media and content companies, and their developers, a great deal of strategic angst.

The iPad is not the iPod for publishing. Music was a ready and waiting asset that needed little “post-production” work to be suited for a portable device, and, when the iPod arrived, the industry had already been badly disrupted. Hence the iTunes store was quickly filled with both quantity and quality. But other forms of content are not so enthusiastic to commit to a closed channel platform that controls both device and distribution, and the next 60 days will be crucial as Apple hopes to load its electronic storefront with a selection of content that will encourage consumers beyond the “fanboy” crowd to be iPad lovers.

(This post was co-authored by Allen Weiner and Andrew Frank)

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