Amazon Kindle 70 Percent Royalty Plan A Defensive Maneuver

Even if Amazon's new arrangement comes with a catch or two, it proves Amazon isn't taking newfound e-reader competition from the likes of Sony and Barnes & Noble lightly. The move also shows Amazon is looking down the road to Apple, which is allegedly preparing release of a tablet will probably pack potent e-reading power of its own.

Amazon won't confirm exact Kindle sales, but by all accounts the e-reader has been a success, with Amazon reportedly having sold more e-books during the Christmas shopping season than it did physical books. If Amazon won't be forthcoming about the details, it's still safe to say that it rules the e-reader roost. Most analyst estimates, including Forrester Research, had Amazon exiting 2009 with a 60 percent market share of e-readers in North America.

Holiday sales stumbles by Barnes & Noble and Sony -- which couldn't meet inventory demand for their respective Nook and Daily Edition readers -- didn't exactly hurt Amazon, either.

Now comes the royalty pot-sweetener, which takes effect June 30 and doubles the 35 percent royalties authors and publishers could expect from most Amazon-sold e-books in the past. There is a catch or two: Only "discount" books in the $2.99 to $9.99 range are eligible for the new program, and the e-book's list price has to be at least 20 percent lower than the lowest listed price for its physical book counterpart.

Those reservations pale in comparison to what Amazon's saying about the bigger picture for e-readers, however. First, Amazon is responding to one of the biggest complaints about Kindle: that is, that authors and publishers are left scraps while the lion's share of e-reading profits go to Amazon.

But perhaps more likely is that Amazon is mounting a pre-emptive strike against Apple, whose alleged tablet -- supposedly unveiling early next week -- will probably pack enough e-reading power to be a Kindle killer. If Apple's tablet is all it's cracked up to be, than Amazon's olive branch to authors, publishers and other content providers will be crucial to how it competes with Kindle going forward.

"Today, authors often receive royalties in the range of 7 to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books," said Russ Grandinetti, Amazon's vice president of Kindle Content, in a statement. "We're excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books."

Is Amazon feeling the heat? Well, consider what Amazon's e-book and e-reader competition looked like a little less than a year ago, when the debut of its Kindle 2 effectively thrust e-reading into the mainstream. That was before Sony got smart about e-readers, before Barnes & Noble decided it wouldn't sit on the sidelines any longer, before Google announced plans for a digital ecosystem, and before the Apple tablet was a rumor with daily buzz.

A recent look at e-readers from the Consumer Electronics Show this month reveals that excitement over the devices isn't exactly dying down, either.

It's clear that Amazon will be challenged to hold on to that 60 percent market share. By allying itself with the content providers -- an appeal to a piece of the e-book ecosystem often given short shrift in matters of business, in other words -- it's circling its Kindle wagons.