iPad - missing the point

All the reviews for the Apple iPad seem to be positioning it as a Kindle competitor.

This is rather silly as the point of kindling is that you use it to start the fire. It is the first fuel to be consumed.

To understand where Amazon is going with Kindle people should look to the fact that there is already a Kindle viewer for the iPhone which according to the Apple site should work on the iPad unless Apple is silly enough to attempt to block it. There is also a Kindle reader for the PC and a reader for Mac is promised.

The point of the Kindle was to allow Amazon to build an early lead in the eBook market and to prevent Apple from dislodging it in the way that Apple has managed to dismantle the power of the record labels. Kindle has clearly met that objective.

The iPad is simply a logical extension of the Kindle concept that is optimized for video, games and pictures rather than a dedicate book reader.

Rather too much is also being made of Amazon's recent 'change' in their pricing policy. Under the old pricing policy the publisher got 30% of the recommended retail price which Amazon routinely discounted by a third. So the publisher would recommend a price of $15 which Amazon would discount to $10 and receive $4.50 per copy. Under the new scheme the publisher gets 70% of the sales price provided they agree to a recommended price of $2.99 to $9.99 that is at least 20% lower than the hardcover price and agrees to enable text-to-speech. So the royalty rates are actually rising from 45% to 70% and only if the publisher is also willing to take a considerable price cut. The net result is that it makes little sense for a publisher to charge more than $9.99 for a Kindle book unless they are going to charge a minimum of $23.33.

Amazon is still making a nice profit from Kindle sales, but their cost of sales is no longer negligible. Associate fees are 10% of Kindle sales and the costs associated with payment processing and running the Amazon site and brand are likely to take up another 10%. Kindle royalties might rise a little further in the future, but any rise is going to significantly cut into Amazon's profit.