Apple’s New Math. Or: Why a $15 E-Book Equals a $75 Paper Book

McGraw-Hill normally sells high school textbooks for $75 a pop. Now it says it will sell electronic versions of the same books, via Apple, for $15 apiece. How can the publisher make that work?

“Volume,” says McGraw-Hill CEO Terry McGraw, which is the usual answer for this kind of digital question. But there’s an important asterisk here, too. Normally, McGraw-Hill would sell its books directly to public schools, which would keep the texts for an average of five years.

Under Apple’s new textbooks plan, though, McGraw-Hill will try something different: It will sell its books directly to each student (the student could either pay out of pocket, or the school could fund the purchase via a voucher/code), who will use the book for a year, then move on. They’ll be able to keep the digital text, but won’t be able to resell it or pass it along to another student, and McGraw-Hill anticipates that another set of students will buy new books the following year.

So Terry McGraw figures that over five years he’ll generate the same total sales selling $15 e-books as he would selling $75 books. It’s not a total push, because in this model, Apple will take an undisclosed cut of sales – McGraw-Hill execs wouldn’t go into details, so let’s assume for now that it’s Apple’s standard 30 percent – but presumably McGraw-Hill can make some of that up by forgoing the costs of print and distribution.

(It’s important to note that all of this is about the high school textbook market, for now. While McGraw-Hill and other publishers sell college texts through other digital platforms, they still haven’t announced plans to do so with Apple.)

All of that assumes that the book pricing stays at $15. After Apple’s event, McGraw-Hill executives repeatedly used the phrase “pilot pricing” to describe their near-term plans. And they told me that they have the ability to change the price when and if they want.

But when I posed the same question to Apple media boss Eddy Cue just now, I got a much different response. “This isn’t pilot pricing,” he said. “All of our books will be $14.99.”


Apple Unveils All-New iTunes U App for iPad, iPhone & iPod touch

NEW YORK-January 19, 2012-Apple today announced an all-new iTunes U app, giving educators and students everything they need on their iPad , iPhone and iPod touch to teach and take entire courses. The all-new iTunes U app lets teachers create and manage courses including essential components such as lectures, assignments, books, quizzes and syllabuses and offer them to millions of iOS users around the world. The iTunes U app gives iOS users access to the world’s largest catalog of free educational content from top universities including Cambridge, Duke, Harvard, Oxford and Stanford, and starting today any K-12 school district can offer full courses through the iTunes U app. iTunes U has already become an incredibly popular learning tool for students with over 700 million downloads.

“The all-new iTunes U app enables students anywhere to tap into entire courses from the world’s most prestigious universities,” said Eddy Cue, Apple’s senior vice president of Internet Software and Services. “Never before have educators been able to offer their full courses in such an innovative way, allowing anyone who’s interested in a particular topic to learn from anywhere in the world, not just the classroom.”

Prior to iTunes U, only students in the classroom at that time had access to educational content from top universities. With the iTunes U app for iPad, iPhone and iPod touch, those barriers no longer exist. Students anywhere can take an entire course with complete access to all course materials right at their fingertips. With the iTunes U app, students are able to access new books right from within the app, and any notes taken in iBooks are consolidated for easy reviewing. In addition to reading books, viewing presentations, lectures and assignment lists, students can receive push notifications so they always have the latest class information.* The iTunes U app is available today as a free download from the App Store .

Educators can quickly and easily create, manage and share their courses, quizzes and handouts through a web-based tool and utilize content and links from the iTunes U app, the Internet, iBookstore or the App Store as part of their curriculum. They can also upload and distribute their own documents such as Keynote , Pages , Numbers or books made with iBooks Author.

*Some content is available only for iPad.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.


Gates sent dying Jobs a letter he kept bedside

Here’s just the latest reported evidence that the late Steve Jobs and Bill Gates had a strong relationship at the time of the Apple icon’s death.

Microsoft’s co-founder told The Telegraph that yes, the two had some stormy days as fierce competitors. But things changed around 2007 when Gates left Microsoft to set up his foundation and the two did an event together (presumably referring to the D Conference in 2007, pictured right). Before Jobs’ death in October, Gates said he paid him a long visit. “We spent literally hours reminiscing and talking about the future.”

And Gates told The Telegraph he later wrote Jobs a letter to tell him “how he should feel great about what he had done and the company he had built. I wrote about his kids, whom I had got to know.” After his death, Gates got a call from Jobs’ wife Laurene who said Jobs appreciated the letter and kept it by his bed. “She said; ‘Look, this biography really doesn’t paint a picture of the mutual respect you had,” Gates said.

The letter was not meant to be conciliatory, The Telegraph points out.

“There was no peace to make. We were not at war. We made great products, and competition was always a positive thing. There was no [cause for] forgiveness.”

Earlier this week, Gates reflected on his friendship with Jobs in an interview with Yahoo and ABC. “We’d talk about the other companies that have come along. We talked about our families and how lucky we’d both been in terms of the women we married. It was great relaxed conversation.”


Apple Compensates Victim of iMessage Bug for Breach of Privacy

In December, an apparent bug appeared in Apple’s iMessage service that allowed iMessages to be sent to a stolen iPhone. The messages can, apparently, continue to be sent and received from the stolen phone after a remote wipe and a SIM card deactivation. This is obviously an unintended action, and though Apple explains the solution to be “toggle iMessage on and off” in the Settings app, that is an impossible act to perform remotely on a stolen phone.

The Next Web today reports of the case of an anonymous Apple customer who had her iPhone stolen and the lengthy discussions she had with Apple afterwards.

After her iPhone was stolen, Customer K had her SIM card deactivated. However, her friends told her that iMessages they sent continued to be delivered to the stolen iPhone because she hadn’t invoked Find My iPhone’s Remote Wipe feature. Apple’s technical support personnel suggested a wide variety of solutions to prevent her messages from being sent to the other iPhone.

Suggestions to reset her Apple ID password, insert her SIM card into another iOS device, among others, made sense. One request, that she contact her friends and tell them to stop sending her iMessages, Customer K thought was completely unreasonable – not to mention impractical.

Eventually, nearly 6 weeks after her phone was initially stolen, Apple did finally figure out a unique solution:

Apple was finally able to remotely push ‘code’ out to the stolen iPhone in order to make the problem stop. This was a result of an Apple Engineering Team weighing in on how to solve the issue.

After the problem was finally solved, the customer continued to push Apple on the issue of compensation and was directed to Apple’s legal department. She informed Apple Legal that she was troubled by the length of time that it took to prevent the iMessages from going to the stolen phone and wanted compensation for the extensive breach of privacy.

Eventually, after a phone discussion with Apple legal, K was offered an iPod Touch as compensation for her trouble. Apple claimed it would give her a device with which to receive iMessages.

Apple has still not commented on the matter, but one theory is that the iMessage servers permanently link the UDID number of a particular handset to an Apple ID, so it knows what handset to deliver iMessages to. Messages continue to be sent to a stolen iPhone until iMessage is manually toggled on and off – a task that is impossible to perform on a stolen phone.


Apple knocks IBM off top of Davis brands list

Apple emerged as the top brand of 2011, according to an annual list put together by marketing strategy firm Davis Brand Capital.

The iPhone, iPad, and Mac maker topped the Davis list for the first time this year, ousting IBM, which had come in first in 2009 and 2010. Following those two are a handful of other technology companies including Microsoft, Google, and Hewlett-Packard.

“(Apple’s) rise in this year’s rankings was driven largely by its competitive performance and added brand value,” Davis said in a press release.

So how does the company come up with these rankings?

“The annual 2011 Davis Brand Capital 25 ranking evaluates companies’ abilities to manage and balance the five key intangible categories that comprise brand capital: brand value; competitive performance; innovation strength; company culture; and social impact,” the group said.

All told, technology companies made up about a third of Davis’ list, and the majority of its Top 10. Below is the full rundown of companies and their stock symbols:

2011 Davis Brand Capital 25

1. Apple (AAPL)
2. IBM (IBM)
3. Microsoft (MSFT)
4. Google (GOOG)
5. Hewlett-Packard (HPQ)
6. General Electric (GE)
7. Procter & Gamble (PG)
8. Intel (INTC)
9. Coca-Cola (KO)
10. Cisco Systems (CSCO)
11. BMW (BMW-DE)
12. PepsiCo (PEP)
13. Walt Disney Company (DIS)
14. Johnson & Johnson (JNJ)
15. Daimler (DAI-DE)
16. Citigroup (C)
17. Exxon Mobil (XOM)
18. Goldman Sachs (GS)
19. Nestle (NESM-DE)
20.Toyota Motor Corporation (TM)
21. Volkswagen (VOW-DE)
22. AT&T (T)
23. Samsung Electronics (005930-KSE)
24. Wal-Mart (WMT)
25. Wells Fargo (WFC)

According to Davis, one of the biggest movers on the list was Google, which hopped from No. 11 on the list in 2009 to fourth place this year. Meanwhile, Samsung and Wal-Mart both dropped, with Samsung going from no. 8 in 2010 to No. 23 this year, and Wal-Mart sliding to 24 in this year’s list, compared to fifth place last year.


Apple’s App Store: 25 billion downloads

Apple’s App Store has served up 25 billion downloads, the company announced today.

The iPhone and iPad maker’s main Web site was festooned with a banner trumpeting the milestone, but the 25 billionth downloader-and consequent contest winner-has not yet been announced. That lucky individual will receive a gift card for the iTunes Store, worth $10,000. (That’s a lot of Beatles ring tones.)

Last January Apple ran a similar promotion for the 10 billionth app downloaded, also awarding a $10,000 gift card. That was a follow-up to the company’s 2009 award to the person who downloaded the 1 billionth app. That first time was a bit more generous, with 13-year-old Connor Mulcahey nabbing a $10,000 iTunes gift card along with an iPod Touch, MacBook Pro, and one of Apple’s Time Capsule devices.

The acceleration in App Store downloads has been swift since the business launched in July of 2008. The store hit 1 billion downloads in its first nine months, reaching 5 billion downloads in June 2010. By January 2011, the company tallied 10 billion downloads, a number that topped 18 billion in October of the same year.

Apple has said that it pretty much breaks even running the App Store. But the point of the enterprise is not to profit from the sale of apps, but to make Apple’s devices more useful and more attractive to gadget buyers.


iPad maker Foxconn turns to X-ray inspections to cut defects

As Apple prepares for the Wednesday debut of what’s widely expected to be the iPad 3, the company’s main contract supplier is tweaking its manufacturing process with an eye toward reducing product defects – and possibly head count as well.

Foxconn Technology, which has about 1.2 million employees working at its myriad factories in China, has begun adding automated inline X-ray inspection systems to its plants, according to a source with first-hand knowledge of the change. With inline X-ray machines using software algorithms to inspect solder joints or printed circuit boards at production line speeds, a company is able to spot defects that humans might miss before the pieces get tucked into packages for resale.

The company did not respond to e-mails seeking comment.

It is not known whether Foxconn was responding to new quality concerns or simply trying to improve its production processes. Based on Foxconn’s recent history, there’s evidence to believe that its emphasis on automation may well be connected to management’s desire to combat higher labor costs. About 1.2 million people now work at Foxconn. Last summer, the Chinese news agency Xinhua reported that the company intended to introduce more than 1 million robots into its plants, presumably to replace a yet-to-be-announced number of humans.

The idea would be that more machines translates into better efficiency. When you’ve got machines pumping out lots of product, you’re less likely to wind up with boxes of junk that get past human eyeballs, said the source, who noted that implementation of that type of process control pays for itself.

“They’re buying huge quantities, unprecedented quantities,” the source said. “A big reason to do that is because you’re running into quality issues on the production line.”

Meanwhile, Foxconn also has been under increasing pressure to improve working conditions at its factories, which make products for many U.S. companies besides Apple, including Hewlett-Packard, Dell, and Microsoft. In 2010, several workers in the company’s Shenzhen factory committed suicide, and reports that followed tied their deaths to working conditions at the plants. In January of this year, hundreds of Foxconn workers staged a protest in which they threatened mass suicide unless their pay demands were met. The two sides ultimately reached an accord over wages.


Report: Foxconn is recruiting 20,000 workers for next iPhone production, facing strikes

According to reports from The China Morning News (by way of MICGadget), Foxconn is in the midst of a large hiring drive, hoping to increase numbers by 20,000 for production of the new iPhone in Taiyuan of the Shanxi Province in Northern China.

Foxconn in Tai Yuan is now constructing a new base for iPhone 5 production. The company is now in want of around 20,000 workers.

Mr. Yu, an insider at Tai Yuan Foxconn, says that the organization nonetheless has tons of openings, particularly front-line workers. “As lengthy as they meet the basic standards, (we’ll) take as numerous as feasible.”

Offered Apple’s prominent position in the business, Foxconn has made iPhone production its foremost priority in mainland China. Mr. Yu says that Foxconn gets about 85% of the total order of iPhone five, which translates into about 57 million units per year.

A single reason for heavy and probably unforecasted recruitment demand may be a strike that is at present happening at the plant. According to a separate report, workers left their machines and took to the streets more than compensation. We are not going to pretend to comprehend the complexities involved, but it would seem the workers had been promised a raise ahead of the next iPhone production and may not have received all that they asked for.

An entry-level worker at Foxconn is normally paid 1,550 yuan (US$ 245) per month, rising to to 1,800 yuan (US$ 285) per month following three months. When bonuses and overtime spend are included, a worker could typically earn amongst 2,200 and three,500 yuan (US$ 345-$ 550) a month.


Is Apple planning its own mobile voice service?

Light Reading has dug up some very interesting job postings on Apple’s website. Apple is looking for telephony software engineers to work on iOS. Judging by the list of experience requirements in the postings, Apple is looking to add voice-over-IP (VoIP) capabilities to the iPhone and iPad operating system’s ever-growing feature set.

I know what you’re thinking. Apple is finally going to shed the carrier albatross completely and launch its own voice service. But there are plenty of good reasons Apple is hiring VoIP developers that don’t spell the end of the mobile operator’s core business.

In fact, Apple is probably making these hires precisely because it plans to work closely with its carrier partners. The skill set Apple is looking for fits well with the VoIP schemes operators plan to utilize for their next-generation voice services. It’s looking for experience with a set of protocols that may seem like gobbledygook to most people but are well-known to telecom engineers: IP multimedia subsystem (IMS), session initiation protocol (SIP), and real-time transport protocol (RTP), as well as the more familiar wireless network standards GSM/UMTS and CDMA.

The one acronym to focus on is IMS, which is a key component of the One Voice initiative that many of the world’s largest operators have adopted to migrate voice from circuit-switched systems to all-IP voice networks. The U.S. in particular is gung ho about IMS. Verizon Wireless and MetroPCS already use the architecture in their LTE networks, and AT&T and Sprint are implementing IMS to power their future voice and SMS services.

Future iPhones will need SIP-based clients to communicate with those carriers’ IMS cores, so it’s only natural that Apple is hiring experts to build them. I’m sure every other handset vendor is doing the same thing.
But what if . . .

Now I will entertain some of the Apple diehards’ bigger fantasies. There’s nothing preventing Apple from building a VoIP service of its own. Given the big dent Apple had already made in SMS with iMessage and how it yanked video chat right from under the operators’ noses with FaceTime, I wouldn’t be surprised if launching a competing voice service is in Apple’s road map.

The extreme scenarios are: 1) Apple becomes a mobile virtual network operator (MVNO), buying wholesale 4G capacity from carriers, whom it would then relegate to dumb pipes, or 2) Apple buys its own spectrum and builds its own 4G networks. I find the first possibility only slightly less ridiculous than the second. Apple doesn’t want to become an operator for the same reasons Google doesn’t want to be one.

The more likely scenario is Apple launches a cross-device VoIP platform that allows customers to trade phone calls among iPhones, iPads and Macs. The beauty of VoIP is that it’s not just voice; it supports all kinds of features, from multimedia and video conferencing to instant messaging and presence that you simply can’t shove into legacy circuit networks. Apple could create an SIP-based communications platform that integrates FaceTime, iMessage and voice into a single multifaceted service, available exclusively to any member of the Apple club.

Whatever approach Apple takes, it’s probably not going to use IMS. It’s such a carrier architecture, coming with all sorts of telecom baggage. Also, Apple has no qualms with walling off its technology and it has a huge customer base to play with: It probably has no use for some stodgy telco standard. It was the IMS core responsible for all of Verizon’s recent network outages, which doesn’t recommend the standard to a company like Apple.

Apple is almost certainly looking for people with an IMS skill set so it can design future iPhones (and possibly iPads and Macs) that work with carriers’ new networks. But that doesn’t preclude it from dabbling in a little VoIP on the side.


Apple CEO Visits China, Holds Talks With Leaders

BEIJING-Apple Inc. AAPL +1.83% Chief Executive Tim Cook met Chinese government officials in Beijing Monday, a company spokeswoman said, as the consumer-electronics giant faces a legal challenge in China to the iPad trademark and as it looks to further its surging Chinese growth.

A spokeswoman said Mr. Cook- who is on his first trip to China since becoming chief executive of the Cupertino, Calif., company- “had great meetings with Chinese officials today.”

“China is very important to us and we look forward to even greater investment and growth here,” said the spokeswoman, Carolyn Wu.

She declined to identify any of the Chinese officials or give further details about the meetings.

Mr. Cook’s visit was well-noted on the Chinese Internet, where people posted photos of themselves posing with the chief executive during a visit to an Apple Store in Beijing, one of the company’s five retail stores in mainland China.

It is unclear whether Apple-which has a cash hoard of roughly $100 billion-is interested in major investments there. The company has been expanding its retail presence in the country, opening a new store in Shanghai last fall.

Any tightening of ties between Apple and Chinese officials would come at a critical time.

Apple faces a complicated legal battle over the rights to use the iPad name in China, which it says it bought in 2009 from the Taiwan affiliate of Proview International Holdings Ltd. 0334.HK 0.00%

Proview argues that its Chinese arm, based in the southern Chinese boomtown of Shenzhen, owns the trademark. The dispute is before a high court in the southern Chinese province of Guangdong.

The stakes are high. Research firm IDC estimates that Apple sold over four million iPads in China last year. Proview also has filed with Chinese customs officials to stop the import and export of iPads, though legal experts say such a move would be extremely unlikely to happen for export-dependent China.

An attorney for Proview Shenzhen said Monday the company isn’t expecting to meet with Mr. Cook during his trip. Proview Shenzhen Chairman Yang Rongshan also said he isn’t expecting to see Mr. Cook, either.

Mr. Cook’s visit also comes as Apple has been combating criticism of working conditions at its Chinese suppliers. Its own audits have found evidence of excessive working hours and underage labor at some of them. Mr. Cook has defended Apple’s efforts to address issues and the progress it is making to investors and has said he thinks Apple is a leader in trying to improve manufacturing conditions throughout its supply chain.

Mr. Cook’s last public visit to China was in June, when he was still Apple’s chief operating officer.

On the latest trip he was spotted at the Beijing office of the nation’s largest mobile operator, China Mobile Ltd. CHL +1.13% China Mobile has said it is in talks with Apple about carrying the company’s popular iPhone, which is currently offered by its two competitors, China Unicom CHU +1.70% and China Telecom CHA +2.62% .

China Mobile didn’t immediately respond to requests for information.

A public relations representative for China Telecom said he wasn’t aware of any visits from Mr. Cook. A China Unicom public relations representative said he had “no news” to release.

The company had long relied on resellers to distribute its products in China and didn’t officially release the iPhone in China until 2009, but has opened five full-service Apple Stores in the market since 2008 and now releases its newest products, including the latest iPhones and iPads, in China more quickly.

China is Apple’s second-largest market by sales after the U.S. China is the world’s largest mobile market by number of subscribers. It surpassed the U.S. last year to become the world’s largest personal-computer market as well.

At Apple’s Xidan store in Beijing on Monday, people snapped photos of a smiling Mr. Cook, also known as “Captain Cook” in Chinese, wearing a blue jacket with a Livestrong logo, for the Lance Armstrong Foundation, and posted them online.

Some fans commented on the Web that the executive’s appearance shows that Apple is paying more attention to China. Many Internet users noted that Apple’s previous CEO, the late Steve Jobs, was never known to have visited China.

“After Cook became CEO, he paid great attention to the China Market,” wrote one user called Franky Xu on microblogging site Sina Weibo, which is a Chinese equivalent to Twitter. “And on OSX and iOS operating systems, he integrated Chinese local services step by step,” the blogger said, referring to the increasing number of services localized for Chinese users offered along with Apple products.

Despite having offered the iPhone in China since 2009, for example, Apple didn’t accept payments for media or applications purchased through iTunes until last November.

“What Steve Jobs didn’t achieve, Cook did,” the Weibo user said.