Why E-books Won’t Stay Fixed At $9.99 On Amazon's Kindle

Publishers are wary about Amazon’s $9.99 price point for Kindle e-books, and wonder how the inventive brand plans to profit from such a pricing model – and who stands to benefit in the long run.

Before Kindle, Amazon never belonged in the gadget business. It sold gadgets, but that was distribution. It also sold music – both physical and digital – but it never went up against the iPod (Microsoft’s lamentable Zune being enough already).

Eventually, Amazon launched the Kindle because its brand is synonymous with books and because nobody else was doing it – there was an opportunity to open up an ancillary market. The decision heralded a bold move for Amazon, of course, with no guarantees. Yet innovation is part of Amazon’s brand, and risk-adverse publishers that stand to gain immeasurably from such pioneering should look at their own efforts to do so much as develop a Blackberry app before complaining about Amazon’s tactics.

Will consumers stop buying physical books because of e-books, or end up buying more of both? No one knows, which underlines what a tricky business it is taking these innovations to market. Thankfully, there are precedents – in this case, a big one: iTunes.

Apple set the cost of an mp3 at 99 cents because it was competing against free, albeit illegal, digital music providers. The gamble worked and the paid-for, digital music market was born. Since then, Apple has evolved variable pricing models for iTunes and the iBookstore, which is a sure sign of how this is going to play out.

While it could be said that Apple was happy to break even on distributing content in order to sell its hardware at the record industry’s expense, for Amazon it’s been more of a case of keeping it simple while customers acclimate to the practice of reading a battery-powered book. Most people don’t read pirated pdf novels, so this is a further leap than a legitimized Napster was back in 2002.

So far, Amazon has been successful, but this won’t last long. There is a finite demand for handsets but consumption of content is limitless. While Amazon is a world leader in variable pricing, with the advent of the iPad, HP’s newbie, and Barnes & Noble’s Nook, it will soon be looking to distribute to them as well.

Publishers might even consider helping their big retail partner by developing new formats like the start-up vook.com, which promises to take the reading experience to a new level. Or they might look at their bins of $2 remainders and think, “Be careful what you wish for.”