Products as Weapons

Update: Marco added a clarification stating that he didn’t mean to imply that Amazon would actually hold back their tablet’s release to keep their iOS app available, thus making this entire article rather redundant. Oh well, it was still fun to write… and fun to read, hopefully.

Marco Arment is speculating that Amazon may have a tablet waiting in the wings, but also that it’s more interested in using it as leverage against Apple:

And it would explain why Amazon’s seemingly ignoring the in-app-purchase requirement for the iOS Kindle app. I bet they’re in a real or implied game of chicken with Apple:

Apple: “Bend over for our IAP rules in the Kindle app.”

Amazon: “No. Pull it from the Store, we dare you.”

Now, my first thought was “Amazon’s going to make a huge investment and go toe-to-toe with Apple just to keep their app on the store? Riiiiiiight.” Then, I thought about it for a bit. Amazon’s strategy has always been to get the prices of physical products down to the absolute minimum, and then it makes a bundle on the software. Amazon’s costs for its Kindle iOS app are very small compared to the amount of income they get out of it - even if every user only bought one book, that would probably make the Kindle the most profitable application on the App Store. If Amazon has to get people to buy devices for their ebooks, that cuts their software revenues significantly.

So, in that context, it’s probably more profitable for Kindle to live as an iOS app than it is to live on Amazon’s own hardware - at least until Amazon decides to place a healthy markup on the hardware, which seems to be the most un-Amazon thing they could do, given their obsession with having the lowest prices for every physical object they sell.

Still, it’s unfathomable to me that Amazon would hold back on such a project. Marco’s scenario reads as this: Apple takes out the iOS app. Amazon declares “Of course you realize that this means WAR!” and starts posting the launch orders to its attack designers for Operation Touchscreen Kindle. All hell breaks loose.

The problem I see with this is that there are few benefits to peace in the corporate world - everyone is already at war. Apple is already a threat to Amazon because of iBooks and iTunes, and iOS in general thanks to Amazon’s new Android app store. Why play nice when they should be shooting back with everything they have?

I think it actually makes more sense if Apple is the one threatening Amazon. See, Amazon doesn’t have anything to really fight the iPad or other iOS devices with yet. Apple killing the Kindle application would choke off a large amount of cash flow to Amazon and immediately threaten the Kindle platform with iBooks, and that is probably the worst thing that could happen to Amazon right now. If Amazon is actually ready with the device now then it’s a more complicated decision, but if they’re already ready with it then they’re either committed to a war with Apple or they have lots of money and resources to throw away.

Finally, one more wrinkle: Apple has a near monopoly in the tablet market right now. Apple using their massive marketshare to kick Amazon out of the ebook game might well cause the federal authorities to scream bloody murder and sue Apple for abusing their monopoly. Then again, they haven’t done this with iTunes, or the App Store, so they might just not care either.

Bottom line: an iPad competitor being used as a negotiation tool still doesn’t make much sense to me.