Apple tablet: During launch, look for content partnerships

The Apple tablet promises to revolutionize computing and save the whales. What will actually make or break the device is the content available to it. Here's why.

Special Report: Apple Tablet

On Wednesday at San Francisco's Yerba Buena Center for the Arts, Apple is almost sure to announce a tablet device.

The device is expected to be positioned in size and price somewhere between an iPhone and a MacBook. It's expected to be touchscreen, 3G-connected and app-friendly. It's expected to save the whales, too.

But as you watch the live coverage of Apple's event -- beginning 10 a.m. PST, right here on this site -- I suggest you give a nominal amount of attention to the actual device and pay much closer attention to the content partnerships that the company is expected to announce.

An Internet-connected device that can't deliver valuable content is not sustainable. The Apple tablet will be what I call a "mega media consumption device" --a portal or window into our connected world of e-mail, Internet, photo sharing, music and movie streaming and multiplayer gaming.

What will make or break the Apple tablet is the content available to it.

TABLET TABLEAU

Up until now, the Apple tablet has been the vehicle through which fans and tech reporters have expressed -- breathlessly, I might add -- their wildest tech fantasies.

If the tablet is a sure thing, it's unclear just how much more Apple plans to announce. It could very well announce the availability of the iPhone -- its bread-and-butter product now -- on Verizon, Sprint or T-Mobile.

It could also unveil a refresh of its MacBook Pro lineup, which is already nearing the end of a typical Apple product cycle.

It may also update its iLife suite of productivity applications for 2010, perhaps with the tablet in mind.

But these are not the announcements to which you should be paying the most attention.

THE BIG SELL

According to various reports within the publishing and media industries, Apple has been shopping around the tablet concept -- but not the device itself -- to content owners in the hopes of securing their interest to use the device as a future development platform.

It's a tempting offer: a hotly-anticipated device made by a wildly successful company that promises another revenue stream for their existing content.

  • For app and game developers, that means a new platform for their apps on the iPhone and iPod touch.
  • For newspaper, magazine and book publishers, a new way to publish content.
  • For record companies, film studios and broadcast corporations, another more purpose-built device with which to distribute content.

Apple's proposed bargain: let us sell your content by our rules -- including setting prices -- and we'll make you a bundle of money. Your popular content brings us the sales, our sales bring you the eyeballs, for less cost than ever before. (Printing presses? Ha!)

The proof: Apple owns 70 percent market share in the portable media player market thanks to its iPod lineup. While the shuffle, nano and classic haven't shown much growth, the app-friendly iPod touch has shown 55 percent year-over-year growth. And despite missing Wall Street expectations this week, the iPhone is certainly a strong performer.

The bottom line: with hardware in place, the iTunes and App Store model has proven itself lucrative.

It's a valid argument whether Apple is primarily a hardware or software company, but both revenue streams are important for income and leverage. In a completed Apple ecosystem, one requires the other.

From a business perspective, the Apple tablet will be primarily a media consumption device. It is a major vehicle for publishers to offer content to you in exchange for money, with Apple taking a cut, either in the form of the profits from the device itself or as a percentage of iTunes sales.

Apple has managed to grab hold of a large portion of digital music sales already -- in 2008, one in every four songs sold came through the Cupertino, Calif. company's service.

But until now, video hasn't quite caught on. And print-only publications continue to struggle to adapt to a multi-faceted content landscape.

FORECAST: CLOUDY

Remember when Apple bought music-streaming service Lala just two months ago? Lala is known for its ability to scan a user's hard drive and transfer an existing music library to Apple's servers.

The idea: move the iTunes service to the cloud, and ensure that you always have access to your legally-licensed content. (Which happens to also make casual piracy less tempting.)

A tablet fits into this picture, but not without diplomatic pains. To date, Apple hasn't yet won over all film studios and broadcast companies (though print publications, faced with steep declines in circulation, are considerably more interested).

The problem is that all these content owners want different deals. But it is in Apple's interest to standardize rates as well as make them competitive against current physical media on the market -- much like Amazon did with e-books for its Kindle reader, a move which drew the ire of book publishers for selling such books at a loss.

Similarly, TV networks are hesitant to do things on anyone else's terms because they want to maximize revenue -- perhaps at the expense of popularity (see: Hulu.com; ZDNet corporate sibling TV.com). There also remains questions over a subscription versus à la carte model.

Film studios see the same issues: Netflix and its high-quality streaming service has proven itself great for subscribers, but not very lucrative (read: lucrative enough, compared to physical media) for content owners.

It's a major, industries-changing power struggle. Who gets to make the rules? In a consumer's perfect world, Apple does, bringing all that disparate content under one roof.

So Wednesday, I'm not looking for an Apple tablet. I'm looking for proof of partnerships showing that Apple has enough leverage among content owners to make the experience for a consumer seamless -- that is, as content agnostic as the iPhone has begun to feel.

(Is there any must-have content that the iPhone doesn't have?)

If Apple succeeds, it has positioned itself directly in front of the massive rush of money that represents the transition of media from brick-and-mortar vendors to the Web  -- for which the tablet represents the easiest way to consume all of it.

And if it doesn't? Well, I'll leave you with the words of Slate press watchdog Jack Shafer, who this week wrote about the press corps' infatuation with all things Apple -- the New York Times ran 63 stories with the word "iPod" in the headline in the last 12 months -- despite a less than flawless product record:

If the press corps possessed any institutional memory, it would recall the introduction of the Apple III+, the Lisa, the Macintosh Portable, the Mac TV, the Newton, the Apple G4 Cube, and eWorld. All were greeted with great press fanfare before falling off the edge of the world. Hell, all the press corps really needs to put Apple products in perspective is a few short-term memory neurons focused on the fanfare visited upon recent, mediocre iPod releases.

The difference? In 2010, it is the Internet-connected content, not the device, that's the true attraction.