Off-the-Cuff: Apple vs. Amazon

I didn’t think they’d do it, but I was wrong. Apple is putting the screws to Amazon and other companies, who have used former loopholes to get around Apple’s onerous demand for a 30% commission on “in-app” purchases, for iPad applications. A lot of people have been asking variations on the same question, what does it mean to Amazon and the Kindle app?

That’s the wrong question. The real question is, how many people use an iPad (or iPhone) as their primary eBook reader? As someone who has both a Kindle and an iPad, the only times I have used the iPad to read a book were: 1) When the Kindle screen went Tango Uniform and I was waiting for the replacement; 2) To check the ePub version of my White Pickups draft.

Yes, part of that is because the iPad gets passed around from hand to hand pretty much all day long — if M.A.E.’s not using it to check Facebook or play Angry Birds, it’s Lobster doing the same thing, or it’s Mrs. Fetched playing Mahjongg solitaire. Once in a while, I’ll use it to check Twitter or blogs, or play a round of Angry Birds or solitaire, but I don’t do much reading on it. The Kindle is so much better for that — the screen is easier on the eyes, it’s lighter, and the battery life is better (even though the iPad is no slouch in the battery department itself). In the iPad’s favor, it’s largely format-agnostic, able to read Kindle, Nook, and pretty much everyone else’s eBooks.

I remember all the pronouncements about how the iPad was going to destroy the eBook reader market, but it hasn’t quite turned out that way. Kindle hardware sales are thriving, with B&N’s Nook line running a distant but respectable second, and Sony and Kobo fighting over who will challenge Nook for the #2 spot later on. Apple’s iBookstore is there, but it’s far behind the Kindle Store in sales and probably brings up the rear behind B&N.com and Smashwords. And I don’t think Apple cares all that much. If they did, they’d talk up the eBook reading aspect a lot more in their advertising.

So why is Apple demanding a 30% cut of everything? I can see it for apps — Apple maintains the App Store, paying for the server farms that run it, dealing with payments, and keeping the front end (i.e. the web site) running smoothly. But when we’re talking about buying eBooks through the Kindle and Nook apps, Apple isn’t out of pocket for any of that. There’s something else going on here.

Personally, I think it’s a negotiating position. There’s a popular school of thought that says to ask for the moon in the initial round of negotiations, so you can “compromise” a lot and still get what you really wanted to begin with. Google responded with OnePass, which takes “only” a 10% cut, and I expect that Apple will match it or even undercut it by their self-imposed June 30 deadline for app providers. Credit card companies take 2.5%, so I expect that everyone will head that way sooner or later. Competition or antitrust action, either way things will improve.