Apple's Plan to Conquer the World

This is a great deal for the publishers, of course: it means their margin on an e-book is about 90 percent. But that can't last; pretty quick someone will figure out that they can take less margin, and those great physical objects will become just for collectors, hobbyists, and fans, like vinyl records have become.

Let's back up, and start again. First principles: the real product is content, and if you want content, somebody has to pay for producing it. There are only two known ways to pay for that content: pay for it in the purchase price or pay for it with advertising.

We happily use both of these ways in publishing now: magazines and newspapers are largely paid for by advertising, while books are largely paid for by purchasers.

If we can deliver the content without the printed paper, then the printed paper is unnecessary and will eventually go away.  So if we want publishing to survive, it has to survive without the printed paper.  We have to come up with a way to make electronic publishing pay.

The usual problem people see with electronic publishing is piracy: once the electronic form is out, how can you keep people from making free copies?  Publishers, especially music publishers, have been trying two methods: legal, with the quixotic quest by the RIAA to catch file-sharers, and technical, using digital rights management. The legal methods are unpopular, and DRM is really unpopular. So unpopular that Apple iTunes no longer uses it.

iTunes no longer uses DRM, but it still makes money. We learn something interesting from this too: people are willing to pay for content as long as it's not too much, and it's easy to find the content and pay for it.

Now, a picture of what publishing will look like, post-iPad and post-Kindle, begins to take shape.

First, paper print is dead, or effectively dead. Don't even think about it, any more than vinyl records are really a major factor in music.

Second, the prices must come down, way down, below what we pay for content on paper. That doesn't mean content has to be free, although it can be nearly free.

Third, there has to be a really convenient way to get the content.

An attractive way of getting content, low prices, easy shopping, and payment. That's iTunes. We think about it for music, but data is data; it can be music, movies, video, or print.

While the publishing companies try to preserve their print-based models, Apple has dug the foundation out from under them. What we are really seeing is a coherent, long-term strategy to replace the traditional models of publishing, with everything delivered over the internet to inexpensive devices like the iPad.