Friday, January 29, 2010

Playing Chicken: Publishers, Apple, and Amazon

My post this morning raised the key question that I thought had been ignored in the first round of coverage on the iPad as e-reader: why would people pay $14.99 for an e-book in Apple's iBooks store when they can get the same title for Kindle at $9.99?  But in fact the trusty Walt Mossberg of the WSJ asked that very question of Steve Jobs at the iPad launch event--the video is now posted at All Things Digital (I found it via E-Book Newser). 

Jobs's answer has huge implications--though it's open to different interpretations. He says "the pricing will be the same." Mossberg asks, "the price will be $9.99?" Jobs: "The prices will be the same...Publishers are actually going to pull their books from Amazon because they're not happy." 

I take Jobs to mean that the prices won't be $9.99, because the higher price is what publishers have been desperately concerned to establish in the Apple deal. But obviously a $14.99 price for e-books can't be sustained if Amazon is going to keep selling the same title for less. For publishers not to undercut Apple, they would in fact have to withdraw their titles from the Kindle store. That would be a real throwdown--especially because right now, publishers are making more money on Kindle e-book sales than Amazon is. (But let's not forget that Amazon is still making loadsamoney on selling the Kindle device itself.)  It would be a significant threat to Amazon's Kindle business, and one has to wonder whether Amazon will retaliate, as they have done at other times, against publishers' print-book business. For both sides, print books are still a much larger business than e-books, so there's plenty to lose. It may be an interesting game of chicken. 

Apple iPad: Is It Actually an Amazon Trojan Horse?

As anyone on Planet Earth knows, Apple announced its new iPad device Wednesday with enormous hoopla. There's particular excitement among publishers because Apple has agreed to sell books in an iTunes-like store at prices somewhat higher than Amazon has been charging for new titles on the Kindle.

The excitement is somewhat paradoxical because although Apple is giving publishers a better split of sales proceeds (70 percent vs. Amazon's 50), these sales will actually make the publishers less money: Apple "iBooks" prices will be capped at $14.99, while right now, Amazon is paying publishers half of a list price that could be $25 to $30.

Furthermore, what no one has mentioned so far is that Amazon already has a Kindle reader app for the iPhone which allows you to buy books and read them--and supposedly all iPhone apps will work on the iPad.  So will you potentially have a choice of buying an e-book from
Apple's iBooks store for $14.99--or, buying the same title from Amazon, on the same device, just as conveniently, for $9.99?

I feel as though I must be misunderstanding something, because this seems like a setup to make iBooks completely irrelevant in a hurry.  This will be no skin off Apple, because the iPad will be just as good an e-reader with a Kindle app as it is with iBooks. So it could be a "Kindle killer" in the sense of luring potential customers of Amazon's device. But it could at the same time actually strengthen Amazon's hold over the book market--the exact opposite of what publishers hoped would happen.

In that case, our joy at the tablet will be short-lived. Not as short-lived as Adolf Hitler's, though, in this latest expression of the unquenchable internet meme: