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Amazon (AMZN)
Amazon looks to show Google how things should be done
Amazon is in the initial stages of launching the text version of iTunes with a service that would allow users to buy specific pages or chapters of a book for the purposes of online reading. At first glance, it is akin to Apple's (AAPL: Charts, News, Offers) business model of allowing users to purchase a song instead of having to buy the entire album but more importantly, it is an alternative vision of the digital book business than the one shared by their counterparts at a company that seems to have the Midas touch these days- Google (GOOG: Charts, News, Offers). The search engine giant has gotten most things right until now but can Amazon prove that they missed the ball on this one?
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Amazon announced yesterday that it will introduce two different initiatives next year. The first one would involve selling online access to books, an idea that has been around for a while and manifested itself in the form of e-books. But, where Amazon differs is that they would allow a customer to buy certain parts (i.e. pages or chapters of a book) for a fee. The exact pricing schedule is not final yet but 4 cents a page is something that has been floated around. 25 pages for 99 cents might also be a direction to go in since Apple has made that price point ubiquitous. Since Random House, the publishing arm of Bertelsmann AG, in talks to participate and they reportedly favor charging different prices for different pages based on content, multiple pricing structures could be a distinct possibility too.
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Amazon's second initiative involves giving customers online access to a book for an incremental price (e.g. $1.99) if they buy the hard copy of the book from Amazon too, at the regular price. This might be a harder idea to sell to publishers since the margins involved would be smaller. These ventures are improvements over Amazon's current program which allows a reader to view some pages like the table of contents and index online. That was introduced about 2 years ago. Microsoft (MSFT: Charts, News, Offers) is another company that has jumped into this sector by agreeing to pay the British Library about $2.5 million in exchange for access to its 25 million pages of text which the software giant will scan and make available through its MSN search service.
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While Microsoft plans to offer the service to the end user free of any cost, Amazon plans to charge for it and in turn pay the publishers, in direct contrast to Google's venture which was released yesterday (but is still in beta), which involves scanning parts of copyrighted books and making them available online. Google does not plan to compensate publishers, something which has already resulted in it being sued by Association of American Publishers and the Authors Guild. Amazon obviously has a smaller audience than Google but they may have found a way to keep everyone happy without having their project mired in lawsuits.
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