Fully Equipped: Why people won't pay for e-books on the iPhone

Amazon recently launched a Kindle Reader iPhone app that allows you to purchase Amazon's Kindle e-books and view them on your iPhone or iPod Touch. But here's why Amazon won't be selling too many e-books to iPhone users.

For what Houghton Mifflin is charging for the iPhone version of Philip Roth's latest book it should be called Chutzpah. ScrollMotion

I'm not sure why, but some analysts seemed a little surprised about Amazon's Wednesday announcement that it would begin offering Amazon e-books on the iPhone and iPod Touch and move beyond the confines of the Kindle.

First off, the company had effectively confirmed off-Kindle reading access in February, so it shouldn't have surprised anyone. Second, anybody who knows anything knows it's all about the razor blades (the e-books) and not the razor (the Kindle).

Like the game console world, the real profits aren't in the hardware but the software. Yes, the Kindle 2's hot now, but to reach a larger audience Amazon will eventually have to lower the price for the reader and shrink its margins. By contrast, the margins on e-books should remain pretty beefy and you can imagine all the cost savings involved when you don't have to deal with warehousing and shipping physical books. It's a great business model.

But there's just one problem. While Amazon might be able to find a market for $9.99 books on the Kindle, the iPhone/iPod Touch world is a very different place. Very few people are willing to pay that kind of money for any sort of application, let alone an e-book.

In the Apple app world, the sweet spot for selling anything seems to be less than $4.99--and more like $.99 or $1.99. Sure, you're going to get some best-selling series with almost cult-like followings (read: "Harry Potter" and "Twilight"), but the vast majority of books being "sold" on the iPhone are very cheap--and rightly so because the overall iPhone reading experience doesn't justify spending $10 (or even $5) on an e-book. (See Nicole Lee's in-depth piece on comparing the Kindle 2 reading experience with that of the iPhone's.)

Read the full column .

 

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