Editor's note: This was originally published at RealMoney.com on Jan. 21, 2010.Amazon's ( AMZN) brilliant and aggressive strategy with its Kindle shows why the company continues to be an investor favorite. Its latest move, at once a strike at the jugular of the publishing industry and a pre-emptive move against Apple ( AAPL), highlights the company's business instinct.
Yesterday, Amazon announced that the company will give authors and publishers 70% of the sales from their Kindle books, minus delivery costs of about 6 cents. Though there are some stipulations and the move seems aimed at smaller and independent publishers, the industry needs to be worried because of the rising popularity of e-books. An L.E.K. Media Consumption Survey shows that e-reader owners are reading 18.2 hours per week. This implies that users are heavy readers and many are shifting consumption from physical to digital products, in addition to consuming more overall. With Apple set to launch a tablet computer that is rumored to have e-reader capabilities, the number of users may surge as Apple draws its fan base into the e-book market. I also expect that if the rumored functions are true, Apple will also move in on Amazon's market and try to do for e-books what the company did for digital music. Since Amazon has established itself in books and has launched an e-reader, however, I believe that it is well positioned to battle Apple in a way that music sellers were not. During the holiday season, I said that the fight between Amazon and Wal-Mart ( WMT) was bad news for their competitors. The same can be said of Amazon and Apple, as they will likely create far more collateral damage to competitors than direct damage to each other, and a direct battle may even be a win-win if it boosts sales of their products.