In this video, Fool.com analyst Eric Bleeker talks about the continuing battle between Apple's
Specifically, he's afraid of companies that become reliant on other platforms, where the owner can change the rules at any time. In this case, Amazon is captive to whatever direction Apple takes the iPad.
While Apple didn't initially ship iPads with Apple's iBooks pre-installed, there's little doubt it'll be the default book reading program going forward. That's the large concern for Amazon. Whenever users are required to take a separate action (download Amazon's book application), a large number of those users will take the path that requires no action and use a pre-installed program. As the platform owner, Apple can promote its own bookstore in whatever format it desires.
A different example of this phenomenon is Zynga. The social gaming network relies on Facebook as the platform for its games. However, Facebook tried changing the rules of the game by forcing Zynga to use Facebook's "credits" system, of which Facebook collects a 30% cut. The two eventually resolved their differences, but realizing how captive to Facebook it is, Zynga is now exploring other ways to distribute its games through a partnership with partial-owner Google
To be sure, Amazon will continue profiting from the success of its applications on the iPad. However, aggressively cutting the cost of Kindles down to $139 was the right move for Amazon. That creates a differentiated price point where users can purchase both a tablet and an e-reader, and also makes e-readers a much more attractive entry-level product. Once Amazon has users buying digital books on Kindles, even if they upgrade to an iPad in the future, they'll be much more likely to use Amazon's application instead of Apple's default reader.
Amazon does see profits in either case, but aggressive Kindle pricing and promotion will produce long-term benefits for the retailing giant. It'll give Amazon the strongest digital distribution hand possible, and with sales going digital, Amazon needs every advantage it can get.
To see Bleeker's full thoughts, watch the video below:
Eric Bleeker owns shares of no companies listed above. Google is a Motley Fool Rule Breakers pick. Apple and Amazon.com are Motley Fool Stock Advisor recommendations. The Fool owns shares of Google. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.