Electronic books are expected to be a major selling point for Apple Inc.'s iPad, which goes on sale Saturday. But competitors, particularly Amazon.com Inc., could end up as major e-book providers for the new device.
One reason is that Apple won't start with the same leg up over competing content providers that it has had with the iPhone and its iPod media players, which have built-in connections to the company's iTunes music and video store.
The company's book-reading software, iBooks, won't come preinstalled with the iPad. That means users will pick which free software to download and install, and could just as easily choose Amazon's Kindle app for iPad as Apple's iBooks.
A person familiar with the matter said that the iBooks app wasn't preinstalled because it wasn't finished when iPad manufacturing began. Apple said the software will be available to download Saturday.
That level playing field in software could help competing media stores open beachheads on the new platform. Those rivals, have a head start in operating e-bookstores, which could be a key factor in the competition, analysts say.
Amazon says it will produce an iPad app that will let users read their Kindle e-book purchases on the device and buy new ones through a Web browser. It's not clear when the Kindle iPad app will be available, though, and as of Thursday afternoon it wasn't on a list of available apps.
Still, Amazon already dominates the market for electronic books, following the introduction of its Kindle e-book reader in 2007. Amazon, which is promoting its iPad Kindle app on its Web site, holds 80% of the market for e-books in the U.S, according to Forrester Research.
Amazon has tussled with publishers in recent weeks over e-book prices, but a new pricing model that is emerging could improve Amazon's profit margin on e-books for any devices. Publishers will set prices for many e-books, with retailers such as Amazon and Apple taking 30% of the revenue. This guarantees a profit on every sale. Amazon's previous policy of discounting new e-book best sellers at $9.99 typically resulted in losses, since it paid more than $9.99 for those books.
What's more, Amazon is years ahead of Apple in building relations with the publishing industry, being one of the biggest print-book retailers in the nation. Amazon now offers more than 450,000 e-books, and has access to more than 1.8 million free out-of-copyright titles. Apple has said it will start with 60,000 titles from five of the largest publishing houses.
For iPad's first year, at least, "it is likely that people will buy more books from the Kindle store than they will from Apple iBookstore," predicts James McQuivey, a Forrester analyst. "If you're an iPad buyer, chances are about 90% that you're also a book buyer on Amazon. Amazon has your credit card on file, they know what you like."
Not that Apple won't have advantages of its own. Apple has an impressive track record in selling music through iTunes, as well as games and other software via its App Store. The iPad, which starts at $499, handles color images, video and animation, allowing publishers to offer content that has no place on the grayscale Kindle. Apple Chief Executive Steve Jobs, when unveiling the iPad in January, praised Amazon's e-book success but promised to do more. "We are going to stand on their shoulders and go a little bit further," he said.
Apple could give iBooks a home-field advantage in the App Store, or begin preinstalling it on future iPads. Apple didn't respond to requests for comment.
Apple and Amazon approach the market differently. Apple, though a major player in content, gets far more profit from hardware. Amazon seems determined to make money from e-books as well as reading devices.
"We want to make Kindle books available on a broad range of devices," an Amazon spokesman said. When Amazon introduced the Kindle app for Apple's iPhone in March 2009, Amazon's vice president in charge of Kindle said he was "not at all concerned" that making e-books available on other devices would cannibalize Kindle sales. He predicted it would increase sales of digital books as well as the Kindle reader, which has one model for $259 and one for $489.
Charlene Anderson, a 52-year-old artist and writer in Jackson Hole, Wyo., who has had a Kindle since the device first came out, is thinking about swapping it with the iPad as an e-reader. "The color screen opens up a whole new kind of book that will be readable," she says.
Still, she reckons Amazon will have the best bookstore.Printed in The Wall Street Journal, page B1
An interesting opening for Amazon, B&N and other book distributors - the iPad won't be preset to ITunes for books. My question is whether all the free books will also be accessible on there - Google Books, etc.