iPad Rattles the e-Bookshelves

But Amazon's e-book dominance may be hard to change.

Over the weekend, a massive disappearing act took place on the virtual shelves of Amazon.com. In a dispute over e-book pricing, the online retailer blocked customers from buying titles--e-book or print--from Macmillan, a publisher whose imprints include Nature Publishing Group, the literary line of Farrar, Straus, and Giroux, and the science fiction and fantasy line Tor.

Bestseller: The iPad features iBook, an application for buying and reading books. Credit: Apple

Amazon's extreme reaction to Macmillan's pricing demands reflects, in part, the seriousness with which it views Apple's impending move into the e-book business. By launching the iPad and a new application for buying and reading books, called iBook, Apple is offering publishers an attractive new way to sell and deliver their titles online. Shortly before the launch of the iPad last week, Apple's CEO, Steve Jobs, also cut a deal with several major publishers--including Macmillan--to give them far greater say in e-books pricing than Amazon offers.

On Sunday, Amazon agreed to accept Macmillan's new pricing model and said it would once again make the publisher's titles available through its site. However, some analysts believe that it will ultimately be difficult for Apple, or anyone else, to challenge Amazon's long-term dominance of the e-book market.

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With every major Kindle release, Amazon CEO Jeff Bezos has emphasized that bestsellers are available on the device for $9.99. Under its existing model, Amazon buys books from publishers for a set fee in bulk. It reportedly often pays publishers more than $9.99 for some books, selling them at a discount in order to drive up adoption of the Kindle. But many publishers worry that this loss-leading strategy will make e-books less profitable for them in the long run.

Apple has negotiated a different deal with publishers, called the "agency model." For its e-book store, publishers can set their own prices, giving Apple a percentage. According to a statement by Macmillan CEO John Sargent, the dispute began when the publisher asked Amazon to adopt the same model. "The agency model would allow Amazon to make more money selling our books, not less," Sargent said, noting that Macmillan would also make slightly less. "Our disagreement is not about short-term profitability but rather about the long-term viability and stability of the digital book market."