Amazon Will Allow Higher E-Book Prices, as iPad Competition Heats Up

While the Kindle line of e-readers proved to be a substantial hit with consumers in the holiday 2009 season, the prospect of an Apple tablet PC with a robust e-reader component is enough to irrevocably alter the competitive landscape. Debuted in a high-profile event in San Francisco on Jan. 27, the iPad features a 9.7-inch LED backlit multitouch screen and runs on a 1GHz Apple A4 proprietary processor. As part of the announcement, Apple also said it would start an online e-books store, which would compete with not only Amazon.com's offering but also with those of Barnes & Noble and Google.

Analysts are currently debating what effect the iPad will have on the e-reader market and Amazon.com's fortunes in that space.

"Apple finally unveiled its much-anticipated multimedia tablet iPad, along with an e-reader app called iBooks and an online e-books store," Youssef Squali, an analyst with Jefferies & Co., wrote in a Jan. 28 research note. "We believe that the iPad will slow Kindle's growth momentum but we do not see its impact on Amazon's [2010] revenues as material. There is likely a market for a dedicated e-reader but at arguably lower prices."

Amazon.com currently markets a Kindle App for iPhone and iPod Touch that allows e-books to be downloaded from the online retailer's e-bookstore. While Squali indicated that the iPad will likely support a Kindle App, potential profits for Amazon.com from such an application may be lower due to competitive pressure from the iBook store.

In any case, Amazon.com seems to be gearing up for battle against Apple. On Jan. 21, the company revealed an SDK (software development kit) for the Kindle that would allow developers to build active content that makes use of the device's 3G wireless delivery, high-resolution electronic display and long battery life. Termed the Kindle Development Kit, the platform includes sample code, documentation and a Kindle Simulator for testing content on both the 6-inch Kindle and the 9.7-inch Kindle DX on Mac, Windows and Linux desktops.

While Amazon.com is encouraging developers to build new applications for its e-reader, however, Apple is also prompting development of programs for the iPad via the iPhone SDK 3.2 beta, which includes an iPad Programming Guide, iPad Human Interface Guidelines and iPad Sample Code. Apple is evidently hoping that developers will add to the 140,000 applications available for use on the iPad when the device launches in two months.

By then, of course, the e-reader landscape will likely have changed even further.