Is the iPad good for Amazon?

Everybody's focused on whether the iPad will be a Kindle killer. But the real story may be how Amazon benefits from the arrival of its would-be competitor.

Apple iBooks on iPad
Apple has released a new e-reader app called iBooks that will compete with Amazon's Kindle for iPad app Apple

Now that the dawn of the iPad is upon us, the inevitable comparisons between Apple's wundertablet and the Kindle--and what it all means for Amazon--have begun in earnest.

For example, in its write-up of the iPad launch, The New York Times said that Apple's new deals with five major publishers basically amounted to a declaration of war. "The announcement puts Apple on a collision course with Amazon," the Times said. And Steve Jobs, while praising Amazon for pioneering the e-book category, told the world that, "we are going to stand on their shoulders and go a little bit farther."

That may very well be true, especially when it comes to stuff like comic books, graphic novels, textbooks, and interactive children's stories, but the war we're looking at isn't the war we're used to seeing in the consumer electronics world, where one piece of gear simply is superior, sexier--and better-priced--than another.

From the get-go, as soon as rumors surfaced about an Apple tablet, many a tech pundit made his or her readers aware that such a device would make for a very strong e-reader. After all, since the iPhone and iPod Touch are already good e-readers, it was pretty easy to assume that an Apple tablet would be that much better because it had a larger screen. And no doubt it will be.

The only big caveat was price. However, with Apple announcing that its entry-level 16GB Wi-Fi-only iPad would cost a mere $499, its tablet becomes an even more direct competitor to the Kindle. The starter iPad will cost only $10 more than the Kindle DX, which has the same size screen as the iPad (9.7 inches). But the DX doesn't do color or a fraction of the things the iPad can do. Heck, it doesn't even have a touch screen. And that would lead one to believe that the Kindle DX--along with more expensive E Ink e-readers like Sony's $399 Daily Edition, the upcoming Plastic Logic Que, and the Skiff Reader--are a seriously endangered species.

On the other hand, the standard $259 6-inch Kindle, which we used to call the Kindle 2, continues to be quite viable, though Amazon would be smart to shave its price to $199 the day before the iPad officially starts shipping (Apple says buyers will have the iPad in their hands within the next 60 days).

Aside from price, the Kindle has a few things working in its favor: its nonbacklit E Ink screen helps reduce eye-strain and is also very energy-efficient, allowing you to get up to two weeks of battery life (without the wireless turned on). By contrast, Apple rates the iPad as having up to 10 hours of battery life. Having to recharge after a day of heavy use certainly isn't that big a deal, but a lot of Kindle owners like the fact that they don't have to think about recharging every day or two.

All that said, the real story here isn't the hardware, for at the end of the day, Amazon doesn't care about the hardware that much. What it wants to do is sell e-books, which don't take up warehouse space, require trucks to be delivered, or an expensive customer service team to support. And it wants to sell lots of them.

Naturally, it would like people to buy and use its Kindle e-reader, which it's invested a lot of time and money into and will continue to improve, especially now that Apple has its slick iBooks e-reader app . But its strategy has always been about getting the Kindle platform onto as many devices as possible. And in those terms, it's just fantastic that Apple has gone ahead and put out an excellent e-reader and is promoting the hell out of its e-reading capabilities.

Yes, the iPad's more open in terms of what formats it supports and will be much better at displaying PDF files than any Kindle (or any other e-reader for that matter) is. As far as Amazon's concerned, who cares? Assuming the Kindle for iPad app works the same as the existing iPhone app, Amazon's feeling pretty good. (Kindle for iPhone remains the top free download in the books category on the iPhone--and has been for a long time.)

Did Amazon tell me this? Of course not. Amazon's about as tight-lipped as Apple is when it comes to forward-looking information. When I asked Amazon spokesperson Andrew Herdener about a Kindle app for iPad and whether Apple would allow it on the device (Apple did say that all current iPhone apps would work on the iPad, so I assume it will allow it), I got a nice, prepared-statement-sounding response.

"Customers can read and sync their Kindle books on iPhones, iPod touches, PCs, and soon Blackberrys, Macs, and iPads," Herdener e-mailed me. "Kindle is purpose-built for reading. Weighing in at less than 0.64 pounds, Kindle fits comfortably in one hand for hours, has an e-ink display that is easy on the eyes even in bright daylight, two weeks of battery life, and 3G wireless with no monthly fees--all at a $259 price. Kindle editions of New York Times Bestsellers and most New Releases are only $9.99."

It doesn't take too much reading between the lines to see the little jabs. The comment about weight (the iPad, at 1.5 pounds, would be difficult to hold in one hand for long periods), the extra cost for 3G on the iPad, and the e-book pricing are all worth noting.

If you didn't already know it, Amazon is pricing e-books very aggressively. It's being so aggressive that it actually loses a couple of bucks on most new releases and bestsellers because it buys books from publishers at somewhere around a 54-percent discount off the list price of the book. So if a new hardcover costs $24.95, it's buying the book for around $12 and selling it for $9.99. It doesn't believe customers are willing to pay more than $10 for an e-book, which I agree with, but it's got publishers worried that Amazon is devaluing books to the point that people won't want to buy any books, including hardcovers, for more than $10. (Word is Amazon is able to make up its losses by selling backlist titles and assorted other books at a nice profit margin.)

Apple, meanwhile, has struck deals with the aforementioned five major publishers--Hachette, Penguin, HarperCollins, Simon & Schuster, and Macmillan--that apparently give those publishers more control over pricing their e-books and potentially give them a bigger cut of the overall sale. Though I understand publishers' concerns, pricing e-books higher isn't a recipe for selling more e-books (or hardcovers), particularly if Amazon is willing to continue with its loss-leader pricing strategy.

If book publishers and print media companies think Apple's the right company to get in bed with to improve their fortunes, they may be in for a surprise. The Apple App store is about volume and cheap prices (just ask game companies). Sticking books on there for $13.99 instead of $9.99 isn't going to work and will just play to Amazon's hand. And that may just mean a lot of folks will end up buying an Apple device to read on, but turning to Amazon for their e-books, whether they be black-and-white text-only affairs or the fancier color, interactive stuff that's certainly coming to the Kindle Store by the end of this year.

I don't know about you, but I don't mind. Let me know what you think. Is the iPad a Kindle killer? Or is it a Kindle helper?

 

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