At Apple’s event today in New York, Apple unveiled iBooks2, a new version of its iBooks software that is tailored to interactive textbooks, and iBooks Author, an app that makes it free and simple to create interactive textbooks for the iPad.

There are already thousands of digital textbooks available on the iPad, as well as on other devices like PCs and Barnes & Noble’s Nook Tablet. But as my colleague Annie Corbett and I have written, e-textbooks are a transitional product, accounting for only 2.8% of the $8 billion US higher education textbook market in 2010, according to the National Association of College Stores. The vast majority of digital textbooks are not very innovative; they’re essentially print replicas with digital extensions like highlighting, search, and annotation. The iPad — which now outsells Macs in schools, according to Apple — is capable of much more than what has previously been produced, and Apple hasn’t been satisfied with the status quo. Today, Apple demonstrated iBooks2, a new textbook experience for the iPad; these new textbooks can be created using iBooks Author. iBooks2 will solve two product strategy problems for publishers:

  • Production cost. Companies like Inkling are doing quite well helping publishers take their education apps to the next level. The problem is that publishers’ content creation and production processes are still optimized for print, not digital, so working with Inkling is expensive (in terms of publishers’ labor, not necessarily Inkling’s fees). So most publishers opt to create a small number of new apps and settle for digital replicas or “enhanced eBooks” of everything else.
  • Discoverability. When publishers do create digital products, they complain that students can’t find them. For example, on Amazon, shoppers need to scroll past the regular eBook to find the enhanced one, and it's not immediately evident that the enhanced product justifies the higher price. Apple’s iBooks2 now has a brand new textbook category and will centralize distribution of iBooks and make products more discoverable than they are today.

However, in solving these problems for publishers, Apple also solves them for everyone else. Like iTunes and the App Store before it, iBooks2 and iBooks Author democratize the publication and distribution of content — a small musician or developer now has access to the same tools and marketplace as the largest media and software companies. What this means: We’ll see an avalanche of new companies and new content for the education market — and many of the best innovations will come from these smaller companies, not the biggest publishers. Large publishers will still dominate the majority of content sales nationwide; new apps will be largely supplemental to traditional or digital textbooks. But over time, we expect more widespread sales erosion for large publishers, which will try to recoup some value by acquiring the smaller app innovators.

The lesson here for product strategists beyond the education market is that if you don’t rip off your own Band-Aid by investing in innovation now, a company like Apple will come along and do it for you — and it won’t sting any less.