Analyst: Apple Executives Share Thoughts on e-Book Market, iPhone Profits

[MacRumors]

RBC Capital analyst Mike Abramsky published a research note today regarding a meeting with several Apple executives, including Chief Financial Officer Peter Oppenheimer, iTunes VP Eddy Cue, and Mac Marketing VP David Moody covering a number of topics related to Apple's business.

While the executives were tight-lipped as usual about the company's plans for the future, one interesting tidbit that came out of the meeting was the executives' apparent lack of enthusiasm for the "online book/newspaper market" while sharing views that video content would be the next big growth area in media. In both areas, however, licensing and other rights issues are seen as significant hurdles.

After music, video content is expected to be the next "exploding" opportunity, but requires overcoming industry rights dysfunctionality, competing with subsidies (cable box, video), and developing the right consumer "offer". Apple TV, while still a "hobby", is well positioned to benefit from evolving market dynamics. Apple was less enthusiastic about the online book/newspaper market, given unattractive industry structure.

The executives also confirmed comments made during the company's most recent earnings conference call claiming that Apple has managed to maintain its iPhone profit margins and subsidies received from carriers in markets that have transitioned from exclusive agreements to multiple-carrier models.

Despite intensifying competition (Android, RIM, etc.) Apple continues to enjoy strong global carrier interest in iPhone, given high ARPU, low churn. In markets (Canada, Europe) where distribution has expanded to multiple carriers, Apple has sustained its economics (subsidy, margins). 3GS remains popular while $99 iPhone addresses a competitive price point (free in some markets).

The news could temper concerns that Apple might be reluctant to pursue a multiple-carrier model in the United States once AT&T's exclusivity window closes for fear of sacrificing per-unit economics.

Among other topics of discussion highlighted in the report were Apple's view that the Windows 7 launch provides an opportunity for the company to attract new customers and the persistence of the integrated iPhone/iTunes/App Store model as an advantage over other up-and-coming competitors such as the Android platform.

Article Link: Analyst: Apple Executives Share Thoughts on e-Book Market, iPhone Profits

 

[iOrlando]

so they are bullish for online books/newspapers...

 

[Chaszmyr]

Three possibilities:
1. They were never interested in online books/newspapers/magazines
2. They were interested until they actually entered negotiations that didn't go to their liking
3. They are planning(or hoping) on selling these things anyway, and just don't expect it to be a big hit like music or movies

My guess is #3.

 

[Aadhil]

Three possibilities:
1. They were never interested in online books/newspapers/magazines
2. They were interested until they actually entered negotiations that didn't go to their liking
3. They are planning on selling these things anyway, and just don't expect it to be a big hit like music or movies

My guess is #3.

Or,

4. They're trying to downplay the mac tablets rumors that are floating about right now...

 

[jaw04005]

I for one will be really disappointed if the “Apple tablet” turns out to be an e-Book reader/iTunes content player.

Apple needs to reinvent the tablet market, not ship a super-sized iPhone that now does e-Books.

 

[Srai-W]

Interesting. Likely trying to keep us all guessing as to what "it" will be.

So I guess nothing before xmas then?

 

[Chintan100]

I for one will be really disappointed if the “Apple tablet” turns out to be an e-Book reader/iTunes content player.

Apple needs to reinvent the tablet market, not ship a super-sized iPhone that now does e-Books.

Of course they are going to do that!

Its all speculations and Apple would also try to diverge our attention to something else while the main features are kept secret.

No one knew how the iPhone was going to be and no one will know how the tablet is going to be until it debuts.

 

[trip1ex]

Apple is going into e-books and e-newspapers.

 

[jayducharme]

Apple was less enthusiastic about the online book/newspaper market, given unattractive industry structure.

I have no idea what this means. Are they talking about pricing structure? Distribution structure? Licensing structure? All of the above?

Initially, no apps were going to be loaded onto the iPhone. BluRay was a "bag of hurt." There was no future for video content on computers. Whenever Apple has an interest in something, it seems that they deny it until they iron out the details.

 

[JonHimself]

Apple needs to reinvent the tablet market, not ship a super-sized iPhone that now does e-Books.

I think they ARE going to re-invent the tablet market.. by NOT just putting OSX on it and pretending that it's a laptop replacement.

Over the past couple of months I've been downplaying the device to nothing more than OSX Mobile (or whatever you want to call) that will run similar to the iPhone but have background apps and expose-like window/app switching. I'm doing my best to tell myself that this is NOT a replacement for a laptop, but instead a device more portable than a laptop for consuming media (reading, watching, listening via itunes store content and the web at-large).

My best guess is that they're targetting people who want a portable solution but don't need a full computer on-the-go, just something that's a little bit more like a "real" computer than the iPhone is. Targetting people that don't need a portable computer that's meant to do heavy lifting. Maybe they'll even create versions of the iLife/iWork apps as well, but I really think it's going to be more like an iPhone than a macbook, though borrowing some elements of the full computer.

 

[thomasfxlt]

Classic misdirection play by Apple.....

 

[Stately]

I for one will be really disappointed if the “Apple tablet” turns out to be an e-Book reader/iTunes content player.

Apple needs to reinvent the tablet market, not ship a super-sized iPhone that now does e-Books.

Yup, my sentiments exactly. I'm talkin' feature packed.
http://swapnilgirase.blogspot.com/2009/09/smart-google-search-devices-mindblowing.html

 

[Stately]

I think they ARE going to re-invent the tablet market.. by NOT just putting OSX on it and pretending that it's a laptop replacement.

Over the past couple of months I've been downplaying the device to nothing more than OSX Mobile (or whatever you want to call) that will run similar to the iPhone but have background apps and expose-like window/app switching. I'm doing my best to tell myself that this is NOT a replacement for a laptop, but instead a device more portable than a laptop for consuming media (reading, watching, listening via itunes store content and the web at-large).

My best guess is that they're targetting people who want a portable solution but don't need a full computer on-the-go, just something that's a little bit more like a "real" computer than the iPhone is. Targetting people that don't need a portable computer that's meant to do heavy lifting. Maybe they'll even create versions of the iLife/iWork apps as well, but I really think it's going to be more like an iPhone than a macbook, though borrowing some elements of the full computer.

I believe so too. I think they will. I really hope they change the face of computing yet again.

 

[JonHimself]

Yup, my sentiments exactly. I'm talkin' feature packed.
http://swapnilgirase.blogspot.com/2009/09/smart-google-search-devices-mindblowing.html

That is pretty cool.

 

[JordanDavis]

Apple definitely going into eReader Market

Apple's sweet spot is anywhere mass computing isn't. It's the only way to keep up their profit margins. Apple will take over eReaders similarly to how they took the MP3 market away from iRiver and other mp3 players that where on the market before the iPod came out. Think about it: Apple's all about college level, education-level markets. If you get a H.S./College student hooked on a particular form factor/operating system/integrated experience, they'll stick with it and demand it in the marketplace. That's the strategy for MacBooks, and will be the strategy for the new eReader Apple intends to launch.

Yes, you read it right. Apple will launch, an eReader, not a Tablet. Mark my words.

http://eReaderQuestions.com

Uncluttered Todos - the new way to do iPhone Todos

 

[JonHimself]

Apple's sweet spot is anywhere mass computing isn't. It's the only way to keep up their profit margins. Apple will take over eReaders similarly to how they took the MP3 market away from iRiver and other mp3 players that where on the market before the iPod came out. Think about it: Apple's all about college level, education-level markets. If you get a H.S./College student hooked on a particular form factor/operating system/integrated experience, they'll stick with it and demand it in the marketplace. That's the strategy for MacBooks, and will be the strategy for the new eReader Apple intends to launch.

Yes, you read it right. Apple will launch, an eReader, not a Tablet. Mark my words.

http://eReaderQuestions.com

Uncluttered Todos - the new way to do iPhone Todos

In terms of internet forum reaction (which, as we all know is the most represenative group for the average computer user...) it will be bad enough if the tablet is running something aking to the iPhone OS (which I'm ok with, but I can just picture the threads now).. but imagine the reaction if the tablet ends up being an ereader! I can't see Apple releasing a dedicated device for ereading... I think it's too limiting when they can develop a tablet running full OSX and incorporate an ereader or develop a tablet running iphone OS with an ereader app.

 

[uraniumwilly]

If they release something that is just a larger version of the iphone I'll be happy -- with the larger screen for internet, games, apps and movies.

To make it a real magic box: the entire Encyclopedia Britannica and the Great Books of the Western World.

 

[colmaclean]

If they release something that is just a larger version of the iphone I'll be happy -- with the larger screen for internet, games, apps and movies.

Pretty much what I'm expecting. Hopefully it will be able to Bluetooth/wifi tether to the iPhone in my pocket when on the move!

 

[uraniumwilly]

Pretty much what I'm expecting. Hopefully it will be able to Bluetooth/wifi tether to the iPhone in my pocket when on the move!

I'm hoping, if it were to break one wouldn't be forced to buy a new one, that unlike the iphone & ipod touch it can be repaired and we can disassemble it and replace ram and hd. I'm willing to pay extra for that and for OS X.

 

[Boghog]

Actually, it doesn't need to be much more powerful than an iPhone or run full Mac OS, as long as there is a good remote access app for your Mac or PC at home - like there is for the iPhone - but with a bigger screen it will actually be useful. That way you'll have all the computing power you need. (Sure, you won't be able to play fast paced games over 3G but other than that ...)
And before some of you scream that an app on a touchscreen device needs a different UI than on a standard desktop device: I'm sure you're right. But I'm also sure that devs will pretty quickly ship their (Mac and PC) apps with optional dedicated touchscreen UIs that will allow you to take full advantage of them when you're using them from afar through your iTablet/Slate/iThingy.
My only gripe with the iPhone OS is that it will mean Apple control over the apps I install - but if I can access my home computer remotely that will become a non-issue.

 

[iphones4evry1]

The title of this article mentions the eBook, but then says nothing about it. I'm still waiting to buy an AppleTablet/eBookreader. I keep going into the Apple store with my checkbook out, ready to write my check, but they keep telling me it isn't available yet.

 

[Kovacs]

To make it a real magic box: the entire Encyclopedia Britannica and the Great Books of the Western World.

Exactly how would the EB make an ereader interesting? If it can surf the web you got what you need.

I need a Kindle without a keyboard. Give it a touchscreen and colors. Hm...like a big iPhone, in fact.

I have read ebooks for years on Palm, then iPod touch and now on the iPhone. All I need is a bigger screen to be happy.

BTW if I were Apple I'd opt to make a tablet with more features than just an ebook reader. Then they can push apps like Kindle for iTablet, eReader, Stanza etc and the user would basically have access to just about anything. they'd outgun Kindle and Nook in no time.

 

[twoodcc]

apple just needs to get that tablet out

 

[dsucher]

Bigger is different; or Jobs and Gutenberg in the same sentence?

With regard to whether a device as simple as a "super-sized iPhone" would be a big deal.

Yes indeed. And screen size 3-4 x current would do it.

A quantitative change (larger screen) creates a qualitative change --- it allows the one thing an iPhone doesn't: easy reading of long-form content i.e. books and long articles.

(And yes I have done my share of reading on an iPhone -- an entire book in fact -- and while it is not bad, it is not a game changer as might an iTablet.)

My guess is that Jobs wants his name to be linked with Gutenberg's as a major cultural figure and that is not far-fetched. A device with a screen 3-4 times larger than an Phone (but with few or any additional features) would be a profound societal game changer.

 

[JonHimself]

Actually, it doesn't need to be much more powerful than an iPhone or run full Mac OS, as long as there is a good remote access app for your Mac or PC at home - like there is for the iPhone - but with a bigger screen it will actually be useful....

Yeah that'd be ideal! It would be good if you could use bluetooth for peripherals like a keyboard, mouse, etc as well though I'm not holding out for that.