eBook Power Struggle

Amazon has had its hands full since the announcement of Apple’s upcoming iPad tablet computer. The iPad is expected to compete strongly against Amazon’s Kindle eBook reader. Besides the many and varied applications that will run on the iPad, it will also offer a robust iBookstore that will feature titles from popular publishers that include Penguin, HarperCollins, Simon & Schuster, MacMillan, and Hachette. The deal that Apple has made with these publishers is significantly better than their deals with Amazon. Apple is allowing the publishers to set their own price for ebooks and will take 30 percent, while Amazon pays publishers a flat $15 per book and sells the ebooks at a subsidized rate of $9.99.

The publishers are using their new association with Apple’s iPad to leverage a better deal with Amazon. Last week, Amazon made the headlines for pulling all MacMillan books from its online shelves in retaliation of MacMillan’s demand for variable pricing on its ebooks. Amazon complained that MacMillan was imposing a pricing model that was bad for consumers and the ebook industry. MacMillan, which has considerable influence in the publishing world, began advertising its books as “Available at booksellers everywhere except Amazon.” The tiff didn’t last long as Amazon gave in to MacMillan’s demands within days. Shortly there after, two other publishers, Hachette and HarperCollins made the same pricing demands of Amazon. That leaves only Penguin and Simon & Schuster, who are expected to jump on board any day now.

So, it would appear the days of $9.99 ebooks are over. Best sellers are likely to sell for $14.99, while other, less popular titles will retain their $9.99 price tag. This is essentially what happened in the digital music industry in 2007 when Apple iTunes, under pressure from the music industry and Amazon’s new MP3 store, moved from a 99 cents per track model to variable pricing. Now its Amazon’s turn to buckle under pressure.

But Amazon isn’t taking its recent hardships lying down. This week Amazon acquired Touchco, a manufacturer of touchscreen displays. Meanwhile, PVI, the company that makes the Kindle’s e-ink display announced that it will soon be capable of producing color e-ink displays, and even flexible models. It’s feasible that Amazon could come back later this year with a new Super Kindel featuring a color e-ink touchscreen, and additional applications. As color e-ink displays enter the market, it will be interesting to see if consumers prefer them over the led displays of the iPad and the upcoming generation of tablets.