How the Apple Tablet Will Help Amazon Dominate the eBook Market

After two years of non-stop rumors and wild speculation the Mythical Apple Tablet (aka the Unicorn) will apparently become a reality later this month.

Among other things, the Unicorn is expected to single handedly (hoofedly?) save newspapers, magazines, and book publishers, while simultaneously killing Amazon’s Kindle. That’s a tall order for a device that no one outside of Apple has actually seen yet. These expectations are not surprising considering the amount of wishful thinking that has been projected onto the device by print industry insiders desperate for salvation in a world that is increasingly turning digital.

I have no intention of adding to the ill-informed speculation about the Unicorn’s specifications or magickal capabilities. Instead, I’d like to take a moment to dissect the claim that an Apple tablet will somehow kill the Kindle.

The logic seems to be that Apple’s tablet will provide a superior user experience to the Kindle (a reasonable assumption), and that consumers will favor a multi-purpose device over a dedicated reading device (probably true). As a result, the tablet is expected to become the digital reading device of choice. In other words, the Kindle is toast!

Well, maybe.

This logic only holds up if Apple also announces the addition of ebooks as a supported media type in the iTunes store. And I’m not talking about the ebook apps we have today. I’m talking about a true iTunes ebook store. One that replicates the current experience of shopping for music and videos.

While it’s reasonable to expect that Apple will use the tablet launch as an opportunity to unveil App Store 2.0, it remains to be seen whether that will include an ebook store. If it does, the selection of ebooks will have to at least match Amazon, Sony, and B&N’s selection in order for Apple to be a serious player in the ebook market.

But what happens if Apple releases a tablet device and doesn’t add ebooks to the iTunes store? We’ll have a situation similar to the one we have today, but with a device that is more suitable for reading long form text. Publishers will be free to develop and market their own ebook applications for the device (or partner with companies like ScrollMotion or Amazon owned Lexcycle). While this might present some interesting new opportunities, it’s hardly a game changer for publishers struggling bring digital products to market.

An Apple tablet without a dedicated ebook store maintains the status quo for book publishers. That’s good news for Amazon.

Consider the following:

  • Analysts believe Amazon has sold at least 2.5 million Kindle devices.
  • The free Kindle reading application has been at, or near, the top of the Books category in the iTunes App Store since it was released.
  • For many consumers, the Kindle name has become synonymous with ebooks. Over the holiday season I got plenty of questions from friends and family about ebooks. Without exception, everyone was asking about the Kindle. There is some awareness of the Sony Reader and almost no awareness of the Nook. For most consumers Kindle is THE ebook reading machine.

Without an iTunes ebook store consumers who buy a shiny new Apple tablet will likely do what they do when they buy an iPhone or an iPod touch — download a free copy of the Kindle reading application and buy ebooks directly from Amazon.

For those who believe that this somehow weakens Amazon’s position by diluting the demand for Kindle reading devices, consider this quote from Jeff Bezos in a recent Newsweek interview:

So an Apple tablet would be a companion to the Kindle?
Absolutely. We’ve got Kindle for PC. And we’re working on Kindle for the Mac. Our vision is that we want you to be able to read Kindle books wherever you want to read your Kindle books.

It’s clear that Amazon is more interested in controlling the format and the marketplace for ebooks than it is in selling reading devices.

Apple’s Unicorn may just turn out to be the perfect Kindle reading device.

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13 Responses to “How the Apple Tablet Will Help Amazon Dominate the eBook Market”

  1. I think that Amazon is positioning the Kindle software (content) far above the Kindle hardware (device). In other words, I don’t think Amazon cares much about revenues for the Kindle hardware, so long as it is moving the sales of Kindle content.

    However, you raise an interesting question: whether Apple is going to introduce ebooks to the iTunes store. Without this, the alternative is to use ebook applications with the ‘unicorn’. As a consumer, I’m not sure which I prefer.

    The interesting question will be the price point of the ‘unicorn’. Unless it requires a data subscription, it will cost 2-3x what an iPod Touch costs. That is also 2-3x what the Kindle costs, and is comparable in price to an average laptop. It is also close in price to an entry-level MacBook. The pricing of the Apple ‘unicorn’ is going to be an interesting variable in this equation. Fortunately, we only have 3 weeks to wait.

  2. adam says:

    Amazon already have a client for the iPhone and that will surely work. But will AMZN want to take their books individually into the App Store? If they do they will sacrifice big margin to Apple, if they dont they will miss out on the action in the App store. That is going to have a lot of momentum with other media content and so customer mind share. Somehow I can not see either side of that dilemma working well for Amazon. Google much more likely to knuckle under for Apple’s 30% and sell Google Editions through the App store as well as on their own Android App store. Tablet will not be good for Kindle as hardware, not very good for softKindle either….

  3. @Adam – I don’t think the logistics of the current App store structure would facilitate Amazon selling Kindle books directly through the app. As it stands, each in-app purchase is fulfilled through Apple (unless it’s a subscription to web-based content). I can’t see anyone using an App as a storefront for a retail experience with several hundred thousand digital products.

    If anyone can turn this to their advantage, it’s Amazon. They already have the customer relationships, credit card numbers on file, and brand recognition. I don’t think it’s that much of a stretch to expect consumers to buy a Kindle book through Amazon for reading on a tablet or other non-Kindle device. We are, after all, shopping at Amazon all the time for all manner of non-book items. The tablet won’t change that.

  4. Lisa says:

    Is Apple hoping consumers replace iPhones with Unicorns?

    What about the phone application on Unicorn? Is there one? What’s that going to be like? Am I going to have to hold a 5×7 device up to my head to make a call? Or wear badly designed ear buds or an obnoxious headset 24/7? Does it fold to fit in my pocket?

    The beauty of the iPhone is, of course, its multi-functionality which includes the essential functions of phone, internet, email, camera, GPS but also its size……the phone being central to it all, for me and many working moms, as my daughter’s school doesn’t text me when she’s in the nurse’s office, they call.

    I’ll keep my iPhone for all of the above and buy a Kindle for book reading.

  5. @Lisa – You make some excellent points. We won’t know the details about the Unicorn until it’s released. I suspect, at minimum, it will include wifi, 3G data, and bluetooth, meaning you’ll at least be able to use Skype to make calls. I don’t believe the tablet is meant to replace the iPhone.

    You’ve touched on another issue where I think many are misguide — the belief that a multi-purpose device automatically beats a single purpose device. Using that same logic there would be no room for a tablet. After all, how many multi-use devices can a single consumer carry around?

    I suspect dedicated reading devices like the Kindle will surprise tech pundits with their longevity. Especially as the price drops. The printed book is the ultimate single use device (it’s only ever one single book). We’ve been carrying books around for a very long time and you don’t hear people complaining about their limited functionality.

  6. adam says:

    I am sure that individual books will be ‘Apps’ in the new Tablet with its somewhat different (but evolved) App Store — a new O/S for the iPhone is scheduled for the summer and we will probably get a glimpse of that. In which case AMZN will face an unappetising choice. Keep Kindle-kith as a non App ebook system which can ‘play’ in the Apple terrain (but without the bells and whistle) or offer Tablet-ready style Apps and surrender 30% margin (and control of the customer and the credit cards to Apple). Apple will be calling the shots in its e-commerce environment (see how pernickety it has been already) and Apple will almost certainly be adding Tablet-specific functionality for books/magazine Apps which customers will expect to see in their purchases. But this is just my guess-work we will see in less than 3 weeks

  7. Tyson says:

    Having played around with a Kindle for the first time at a recent New Year’s Eve party, I would say that the iSlate has a pretty low bar to hurdle in terms of improved functionality/user experience. The Kindle feels like it was designed by Oleg Tarlev’s only slightly less neurotic brother. Right now Amazon is taking a bigger percentage of the profit from book sales than Apple is with App store sales (50% vs. 30%). If Apple keeps this ratio I would think publishers would prefer working with them over Amazon. Also, what happens if you accidently drop your Kindle in the toilet and the hardware gets err, spoiled?

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