Apple's in-app purchasing rules prevent e-book sellers from offering stores in their native apps (without giving Apple a 30% cut). The route around that was to include a link to the Web store inside the native reader app. Last July, Apple forced Amazon and other e-reader apps to remove this link, so users of e-book platforms other than Apple's iBooks must buy their books in the browser, in a separate place from where they read.

Amazon's first strike against this rule was to launch the Web-based Kindle Cloud Reader, so that users could read and buy books from the browser on any device, not just the iPad. It's a nice experience, but the native Kindle app's performs better and is more useful offline, even though it doesn't offer direct access to the bookstore.

In December, Amazon brought the Kindle Fire Newsstand to the iOS app, so iPad users could receive subscription publications from Amazon in the Kindle app, in competition with Apple's own Newsstand. After beefing up the Kindle app, the new standalone Kindle Store Web app better serves Kindle users who want to use the native reader instead of the browser-based one.

Apple and Amazon come at each other head-on in this market. Their approaches are basically opposite. Apple wants controls over the media available on its devices, because content is an inclusive service it provides to make its profitable devices more attractive. Apple breaks even on content, but it wants to lock users into its devices with the convenience of that service.

Amazon's business is selling content on razor-thin margins. Its Kindle devices are the service, while the content is the product. That's why Amazon offers so much support for iOS devices, even though it just launched its own Kindle Fire tablet. Amazon loses $2.70 on each Kindle Fire, but it's sure to make up the loss in media purchases. Sales to iOS users are pure profit for Amazon. The new iPad Kindle Store is its best possible solution for its customers allowed on Apple's devices.

Do you read e-books? What's your set-up?

Based on this interview, we can't help but think that Nourry doesn't quite get the opportunities (and cost-savings) that electronic books will bring, though there can be no doubt that Amazon has now established $9.99 as the price for bestsellers in the US and all of its competitors like Barnes & Noble and Sony have followed suit (though it is not clear if Amazon's competitors are also currently subsidizing their eBooks).

Publishers obviously incur costs when producing a book and only a small number of bestsellers make up the majority of most publishers' revenue. In the eBook marketplace, however, where distribution costs are negligible and publishers could even cut out middle-men like Amazon and Sony if they wanted to, the profit margins for most publishing houses are more likely to go up than down, even if they have to price the majority of their books between $0.01 and $9.99.

Maybe We Won't Need Traditional Publishing Houses in the Future?

When we talked to Mark Coker from self-publishing house Smashwords last week, he argued that as traditional publishing houses start to reign in cost as the traditional business model in the industry starts to collapse, publishers will start to offload some of their costs to authors (copy-editing, design, etc.). Coker also thinks that publishers will start to look at self-published authors as a sort of farm-league for their big imprints. That could very well be true, and if this happens, then publishers will see even higher profit margins than today.

Or Maybe Books Will Just Hang On For a While Longer?

Of course, there is also still a chance that readers will just hang on to their regular books - after all, they have served us well for hundreds of years now. As GigaOm's Jordan Golson puts it, "There's nothing quite like going into a bookstore and browsing the shelves looking for your next great read, so the electronic revolution won't affect books as much as it has music and movies." There is some truth in this, of course, but every eBook vendor offers free first chapters of almost every book and the same argument was probably made by music aficionados whenever another local record store closed in the last few years.

For ReadWriteWeb's in-depth analysis of the changing face of publishing, read Bernard Lunn's series: Bits Of Destruction Hit the Book Publishing Business.

Sony Gets a Wireless Reader, Too

As for the hardware devices, Sony's new Reader Daily Edition is obviously aimed at Amazon's Kindle and Kindle DX. It will be able to display 16 levels of grayscale and will be housed in an aluminum body with an integrated cover. Users will be able to read books, newspapers, and magazines in portrait and landscape orientation.

The wireless connectivity, courtesy of AT&T's 3G network, is the most exciting news here, though. Both Sony and B&N are following Amazon's lead, of course, but Amazon's success with the Kindle has also clearly shown that a lot of consumers now expect this kind of functionality at the high-end of the eReader market.

What's even more exciting, though, is that by the time the holiday season comes around this year, users will be able to choose between far more eReaders and eBook vendors than ever before, without having to compromise on the number of available books.

With its five-inch $199 Reader Pocket Edition, Sony will be able to offer the cheapest device on the market, while the seven-inch Reader Daily Edition at $399 is priced to fall between the cost of a Kindle ($299) and Kindle DX ($489).

DRM and Defective By Design

The petition states, "We believe in a way of life based on the free exchange of ideas, in which books have and will continue to play a central role. Devices like Amazon's are trying to determine how people will interact with books, but Amazon's use of DRM to control and monitor users and their books constitutes a clear threat to the free exchange of ideas."

To add your name to the petition visit the Defective By Design site.

Turf War and the Future of E-Readers

The current nature of the eReader market has many of us convinced that books and ideas lose their value simply because they've been shared, and the truth cannot be further from that. It will be interesting to see if Defective By Design can gain the momentum to keep digital books from following the familiar path of content lock down.

While Sony has always offered very attractive eReaders, the prices in Sony's eBook store were a deal-breaker for many who had been considering buying a Sony eBook reader. Amazon generally charges $9.99 for an eBook, but until today, Sony often asked for $11.99 or more.

At $199, the Pocket Reader is now a very attractive option for more cost-conscious users (Amazon's cheapest Kindle costs $299, though it comes with a slightly larger screen). It is also important to note that none of Sony's devices currently offer the convenience of Amazon's wireless transfer anywhere within the U.S., but Sony is committed to delivering a wireless device in future.

In contrast to Amazon's Kindle, however, the Sony devices can read files in the open EPUB format and Sony now also offers over 1 million free public domain books through Google Books. The new Sony eBook Library software (available for Macs and PCs) also makes it easy to convert PDF and Word documents and transfer them to Sony's eReaders.

The Default Price of eBooks: $9.99

The new price of $9.99 per book in the Sony eBook store is quite interesting. As David Rothman points out on the Teleread blog, Amazon is actually subsidizing its eBooks to keep the price at $9.99. The question then is whether Sony got a better deal from the publishers it is working with or whether Sony is also subsidizing the price of the books in its store?

Publishers will probably be happy to see more competition for Amazon, which, at $9.99, is holding the price for eBooks artificially low by subsidizing the price. Amazon also uses the cheap price of books as a way to sell more of its Kindle eBook readers. With its Kindle, Amazon also makes the most popular dedicated hardware eBook reader, with Sony's eReader a distant second. According to the Times, Google would allow publishers to charge whatever price they prefer.

Can Google Offer a Compelling User Experience?

As long as Amazon charges less than the publishers, and as long as the company offers a superior end-to-end experience for users, even a company like Google will have a hard time breaking into this market. As more and more hardware eBook readers enter the market, it will be interesting to see if Amazon will be able to hold on to its position as a market leader, and if Google will be able to create a compelling user experience.

Judging from the report in the Times, users would use their browser to access and read books. Given Google's emphasis on producing compelling products using HTML5, this would make sense, but most users would probably prefer a dedicated reader over a cached version of a book in their browsers (Google already offers browser-based versions of Google Books for iPhone and Android users). It is also not clear if Google will support any open eBook standards like ePub, or if it will implement its own format.

Context: Google Books

Google's desire to enter this market has to be seen in the context of Google Books and the Google Books settlement. Depending on the company's arrangement with the publisher, Google can already display up to 20% of the content of an in-print book, but when a consumer actually goes ahead and buys the book after browsing it on Google, the company only gets a small referral free. If Google could sell eBooks directly, it would stand to make a far larger profit.

On the one hand, it would be good to see some stronger competition in the eBook market for Amazon, which already acquired Lexcycle, the #2 eBook player on the iPhone this April. On the other hand, it is also important to note that with Google Books, Google also holds its own kind of monopoly for books on the Internet. After all, Google Books already makes 1.5 million out-of-copyright books available for free.

Conflict with Apple?

A lot of the discussion around the new iPhone optimized Kindle store currently focuses on the fact that Apple, with the upcoming iPhone 3.0 OS update, will make it easy for developers to charge for transactions from within a specific app. Obviously, eBooks would be one of the many areas where developers could not only make good use of this capability, but where Apple could also get a nice 30% cut from every transaction. By going through the web, Amazon can bypass Apple completely.

What About Stanza?

What will be more interesting to see, though, is if Amazon will also start to integrate some of the technology it acquired when it bought Stanza last month. Stanza already featured the ability to browse books without ever having to leave the app, though the final transactions were also handled on the sellers' websites. Before the acquisition, Stanza had also been working with Adobe to create a standard for online book catalogs, based on Stanza's own specifications, and we hope that the Stanza team will continue this work under Amazon and maybe the next version of the Kindle app will integrate some of this work.