If I'm right, the big question is whether prices will settle closer to the hardback or the paperback level. I'd guess much closer to paperback--in fact, the "excess" profit may disappear entirely. On the other hand, publishers have considerable pricing power, so that remains to be seen.
Many people will be surprised to learn from Amazon's release that the iPad has not yet killed the Kindle. It may have killed the Kindle's profit margin, but the product itself is going strong:
I now have an iPad and a Kindle, and while I think the Kindle reader for iPad is terrific, the device itself is too fragile for many uses, and the shinyness of the screen is a serious problem, because I can't easily use it outside, or even in front of a big window. I wouldn't want to have just one or the other.
In a statement Monday, Amazon's chief executive, Jeff Bezos, also countered the perception that sales of the company's Kindle e-reading device had suffered due to competition from other devices, such as Apple Inc.'s iPad.Access thousands of business sources not available on the free web.
He said the growth rate of Kindle device sales had "reached a tipping point," having tripled since the company lowered its price to $189 from $259 last month, following a similar move by competitor Barnes & Noble Inc. to cut the price on its Nook e-reader.
Amazon said Kindle device sales accelerated each month in the second quarter--both on a sequential month-over-month basis and on a year-over-year basis. But the statistics that Amazon shared were all relative--it didn't share actual sales figures. The company has never said how many Kindle devices or e-books it has sold.
Barnes & Noble, the nation's largest bookstore chain retailer, also has "seen a big uptick" since it cut the price of its Nook e-reader, a spokeswoman said.
And ultimately, I'm not sure how much Amazon cares how much profit it makes on the Kindle--the machine is a way to sell more content, not a profit center on its own. So far, Apple is trying to pull all of its profit out of the device, not the content stream, but I wonder if that will last. The more powerful Apple gets, the more disenchanted the hard-core tech fans become. Meanwhile, they're getting stronger and stronger competition from devices like the Droid, which may push their margins down the way they pummeled the margins on the Kindle.
If Apple needs to pull more revenue out of its content stream, it will be interesting to watch. They haven't positioned themselves as the low-cost or the high-performance provider in that space; everyone I've talked to with an iPad reads their books on the Kindle reader, not iBooks.
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