Welcome to The CITE -- a blog on Course materials, Innovation, and Technology in Education, created by Mark Nelson and now part of the Publications Department of the National Association of College Stores. CITE is a pun with multiple meanings - referring to cite as in citation, something people reference; site as in location, website, or place people go to; and sight as in foresight or looking ahead to what is coming. Comments, discussion, feedback and ideas are welcome.

Thursday, July 9, 2009

Amazon vs Apple for control of the e-book market

There is a great article in this month’s edition of Fast Company entitled, “Amazon Taps Its Inner Apple,” that takes a look at the past, present, and future for Amazon and the effect that Apple could have on the company’s plans to control the e-book market. The article notes that Jeff Bezos’ initial strategy seems to be working. Bezos watched Apple establish a virtual monopoly over online music and is emulating those tactics to gain control over digital content distribution. By introducing the Kindle, Bezos “propelled the e-book concept from mere curiosity to full-fledged consumer item” and to control digital distribution Amazon is losing money on many titles in an effort to entice readers. Recently, Barnes & Noble introduced a new pricing structure to compete with Amazon proving that Amazon is in fact defining the cost of e-books just as Apple defined the price for digital music. However, Amazon does have some weaknesses because the Kindle is not a stand-alone device and the company does not have experience in building electronics. In comparison, Apple has the experience and ability to design devices that people love and are eager to purchase. In addition, Apple has filed patents to add e-books to the iTunes store and for multi-touch e-book technology, proving that the company has plans to move into e-books. Apple’s experience in building electronics could be what it needs to overtake Amazon. The article notes:

“Nonetheless, this is how Steve Jobs could perform a jujitsu move on Jeff Bezos. After Amazon went through the trouble and expense of seeding the landscape, implanting the concept of the e-book in people's minds, creating a market where there wasn't one before, and moving to control the distribution system, Apple could muscle its way in with a full-color multitouch-screen media tablet that not only reads books but also offers video, music, Web surfing, email, and the combined power of the iTunes and Apple App Store. The device might even load into a desktop dock that accommodates a full-size keyboard. Books would only be a small part of what it offers, making it appeal to a vastly larger audience than the Kindle's.

It's critical to remember that Apple is first and foremost a hardware company that cares little about making money on content as long as it can sell iPods -- or media tablets. Bezos, meanwhile, is stuck peddling a fairly primitive piece of technology. For his strategy to pay off, he needs either the Kindle to win the hardware arms race, or to find a way to make money on Kindle titles, or both. He's not afraid to lose money while he moves into a new niche -- the first five years of Amazon's existence were spent in the red -- but it can't go on forever.

Unfortunately for Bezos, not only is Apple far more skilled at designing beautiful products people are eager to buy, but it may also be a more desirable partner for publishers than is Amazon. While Apple drives a hard bargain and might be eager to grind publishers into pulp on price, unlike Amazon, it has little desire -- or history -- of attempting to usurp the publishers' role or to control content. Suddenly, the hunter becomes the hunted, and if e-books take off, Amazon could find itself the odd man out.”

There is a lot more interesting information in this article and it is well worth a read.

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