Check out this quote:
"One goal for publishers is to dilute Amazon's power. Hachette is selling e-books through more than a dozen partners, including Sony (SNE), Apple, and small retailers such as Fictionwise. By partnering with multiple outlets, publishers hope to regain control over pricing and gather purchasing data that could fuel future sales. They're unhappy Amazon has dropped the price of some new digital best-sellers to as little as $7.99, compared with $35 for hardcovers. Hachette and Simon & Schuster plan to delay the release of certain digital books for several months to avoid undercutting the sale of best-sellers."
So Amazon decides the price of a book (and therefore also how much the publisher makes). This is what's wrong with their model. Will Hachette be able to get consumers to pay $35 for these best sellers online. Heck no! But that's for the publisher to discover. Again, compare that to Apple's model where they will let a company selling an App (which can be a book -- albeit one that is hard to read) set the price and keep 70% of that figure. Apple takes a flat 30% for billing, handling international payments, storage, distribution -- those are terms that a publisher / software company can live with.
Considering how great Amazon is at the other services it provides that they are getting this so wrong is hard to fathom.
Here is another great quote from that article:
"O'Reilly and other publishers are cultivating Apple as an alternative to Amazon. One reason: More than 50 million people have the company's iPhone or iPod Touch, which can be used to read digital books, compared with just four million who have electronic book readers. O'Reilly says his company is generating far more sales from Apple customers than Kindle users. O'Reilly currently offers 500 books on the iPhone, compared with 350 Kindle titles. Another 500 iPhone titles are in the works."
That's Tim O'Reilly of O'Reilly & Associates one of the top technical publishing firms in the world and a true innovator in terms of selling content online. Since Business Week mentions the iPod Touch it's worthwhile pointing out that Apple is causing great grief not just in the e-book category but is also causing problems right now for Nintendo and Sony in the portable games device category for the same reason. Publishers/Software companies have massive incentives to create content that's sold through iTunes because they choose the price and have a simple system for selling/distribution via the iTunes music store.
It didn't matter that when the iPhone / IPod Touch launched that there where hardly any games unlike for Nintendo or Sony's devices which had plenty. There were lots of incentives for small publishers to create those games.
Tapulous a company that didn't exist until the App Store now generates over $1,000,000 per month selling Games on the App Store. What Apple was lacking in quality they made up for quickly in numbers and the numbers eventually brought them quality titles like Tap Tap Revenge.
It's going to be the same issue when it comes to publishing. That Apple has such a gigantic installed based of people with iPhones and iPods should make it clear to Amazon that they are the underdog here and that they are going to loose this market in internet time. And that would be a shame considering the device and the model they pioneered for wireless delivery of books is really cool.
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