Apple Adds More Utility to iPad Ecosystem

Apple Inc. unveiled two new educational opportunities, including iBooks 2 for iPad and an all new iTunes U app, at a press event in New York Thursday.

Barclays Capital believes the developments really show how Apple can drive more utility to the iPad Ecosystem.

While some are focusing on Apple taking over the $8 billion textbook market, we believe the developments really show how Apple can drive more utility for its products -- by fostering an ecosystem that can only drive more users to the iPad, said Ben Reitzes, an analyst at Barclays Capital.

The iBooks 2 app, available Thursday as a free download, features iBooks textbooks with interactive content (photos, videos, diagrams, animations, etc). In conjunction with the iBooks 2 announcement, Apple indicated that Houghton Mifflin Harcourt, McGraw-Hill and Pearson will deliver educational titles on the iBookstore with most priced at $14.99 or less.

In addition, Apple announced iBooks Author, a free authoring tool available today where anyone with a Mac can create iBooks, including textbooks, cookbooks, history books, picture books, etc., and publish them in Apple's iBookstore.

Apple-designed templates with a variety of page layouts are available and users can add their own text and images by dragging and dropping. With Multi-Touch widgets, users can add interactive photo galleries, movies, keynote presentations and 3D objects.

The iTunes U app for iPad, iPhone and iPod touch, which is available as a free download Thursday, provides access to a large catalog of free educational content, along with over 20,000 education apps and hundreds of thousands of books on the iBookstore that can be used in a school curriculum.

The iTunes U app also lets teachers create and manage courses, including lectures, assignments, books, quizzes and syllabuses and offer them to iOS users.

Free educational content is available from top universities, including Cambridge, Duke, Harvard, Oxford and Stanford and, beginning Thursday, any K-12 school district can offer full courses through the iTunes U app. iTunes U already has over 700 million downloads.

Education is particularly important in terms of market size - and its role in cultivating millions of loyal Apple users at a young age. Apple estimates that 1.5 million iPads are already in use in education institutions and that the iPad is rapidly being adopted by schools across the U.S. and around the world.

Apple's long-term goal of revolutionizing education may actually turn out to be a slower process in K-12 education given budget constraints - but Reitzes does believe this initiative could serve as another motivator for Apple to attract public funds for iPad.

The benefits from textbooks could be more immediate in colleges, where iPads are already catching on - and have more to go. Reitzes believes colleges and college students will adopt iBook textbooks and iTunes U faster given convenience and savings.

Over time, Reitzes also believes Apple's textbook solutions will be helped by improvements in the iPad line-up, including HD screens, more memory, lower prices and a more robust iCloud offering (saving all textbooks in the cloud rather than saving all on a 16-32GB iPad seems like a helpful option).

Reitzes said another side note from this announcement is that this iPad trend could accelerate the pressure on printed pages overall, especially in short-run printing given the ability to change and alter text electronically.

Reitzes said this trend could be negative for players such as Xerox, who has cited book publishing as a driver of its production publishing business.