The Apple iPad may be two months away from its retail debut, but some of its effects are already being felt on the e-reader industry: Amazon.com found itself in a weekend dispute with Macmillan, publisher of bestsellers such as Hilary Mantel’s “Wolf Hall.” Macmillan wanted to raise the price of e-books to take into account new devices hitting the market.
“Looking to the future and to a growing digital business, we need to establish the same sort of business model, one that encourages new devices and new stores,” Macmillan CEO John Sargent wrote in a Jan. 31 statement on the company Website. “It also needs to ensure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated.”
The publishing house wanted to raise prices for most of its titles to between $12.99 and $14.99, whereas Amazon.com’s price for e-books has generally been $9.99. Amazon.com balked at the move, pulling Macmillan titles from its e-book online store.
“Macmillan, one of the ‘big six’ publishers, has clearly communicated to us that, regardless of our viewpoint, they are committed to switching to an agency model and charging $12.99 to $14.99 for e-book versions of bestsellers and most hardcover releases,” Amazon.com wrote in a Jan. 31 statement. “We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles.”
The statement went on to assure readers that, despite the suspension, Amazon.com would eventually resume sales of Macmillan e-books.
“We will have to capitulate and accept Macmillan’s terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books,” Amazon.com said. “Amazon customers will at that point decide for themselves whether they believe it’s reasonable to pay $14.99 for a bestselling e-book.”
Amazon’s Kindle team is holding out hope that independent presses and self-published authors will continue to price their e-books lower, helping exert enough competitive pressure to keep market prices low. On top of that, they wrote, “We don’t believe that all the major publishers will take the same route as Macmillan.”
Customers on the Kindle discussion forum seemed to be of many minds about the dispute, with some seeing the price increase as a natural occurrence due to increased competition in the e-reader space. One Kindle owner wrote:
““I believe $14.99 is reasonable. It’s a heckuva lot less than what I paid for new hardcovers. (And I get to read them on Kindle!) People who waited for paperbacks can wait for the cheaper eBook edition.”“
Others, of course, were irritated about the price increase.
““If they want higher prices then it is time for them to provide quality formatting. Not just quickly scanned with no effort to fix the OCR errors. The frequent formatting errors would no longer be acceptable.”“
E-Reader Battle Is Only Beginning
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  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.