Amazon has announced its long-anticipated entry into the tablet market with the US$199 Kindle Fire, due to go on sale 15 November and US-only for now.

While some were anticipating an iPad Killer and several commentators are disappointed that it’s not, taking Apple head-on today was never going to be Amazon’s strategy. Following Apple’s playbook (no pun intended)—where it launched the low risk iPod Touch before the iPhone, then the iPad—Amazon was always going to take the long route to competing with Apple in the tablet market.

It’s started on this route with the Kindle Fire, producing the gadget for the rest of them, at a price point for the rest of them. It’s half the iPad’s starting price of US$499. And it’s a techie-free zone in a form factor that’s familiar to millions of Kindle users as well as users of the popular Barnes and Noble Nook Color: lightweight, book-sized, 7 inch (18cm) screen with widescreen viewing rather than the larger (and heavier) 10-inch/25cm form of the iPad. The initial unit is WiFi only with no 3G option yet.

Steve Jobs may be right about the superior general-purpose usability of the larger iPad, but Amazon can afford to optimise its smaller gadget for a more targeted reading audience while still selling millions. And colour means it can start to open up to magazines and video, quietly growing its content catalogue and licensing deals. It cleverly sidesteps direct competition with the iPad for now, while building the foundations for full-scale battle later. Expect the bigger screen version by Christmas 2012 at the earliest.

And by the way, it’s Android-powered. You wouldn’t know it from Amazon’s marketing which is aimed at a decidedly less geekish crowd than Google’s other partners will be attracting to early Android efforts. Amazon launched its low-key Android appstore a few months ago and has built a solid, curated collection of apps already. Expect many more now that Amazon has a platform for games and other hot-selling app categories.

As part of its launch, Amazon also announced a new web browser called Silk. While you might think the world doesn’t need another web browser, more than likely when we look back, Silk will be the more important announcement in the Kindle Fire’s launch.

What’s different about Silk from most other web browsers is that it off-loads to Amazon’s huge servers in the cloud a lot of the heavy lifting associated with downloading web pages. Instead of all the work happening on the user’s local device, Silk splits requests so that some or all of the files in a web page request can be optimised and downloaded from cached copies on Amazon’s servers. This could reduce the time for a page to appear by 10- or 20-fold and reduce file sizes to limit data usage.

For mobile users on slower and more expensive connections, this will be a major boost. And when you think about where media is headed (yes, to the cloud—including books), this is going to be a key competitive driver for Amazon. For US users, the Kindle Fire will come bundled with a free 30-day subscription to its Amazon Prime video and TV streaming service.

[As an aside, it should highlight the misguided net neutrality debate. Amazon's potential advantage from Silk provides another reason why extreme adherence to net neutrality will end up reducing, not improving, competition and access. Any ISP should be able to offer a premium web-browsing service for customers who want to pay for it. If not, those customers will migrate to a small number of powerful, vertically-integrated technology/content players like Amazon, reducing the number of viable channels for content providers.]

While the Kindle Fire stole the limelight, Amazon also updated its black and white Kindle family. There’s now a touchscreen version which benefits from a slightly bigger screen within the same form factor. The entry level Kindle, just called “Kindle” and using a simple 5-way controller for navigation, now starts at US$79 in the US (US$109 in international markets which currently aren’t offered Amazon’s cheaper-in-return-for-viewing-ads option). The original Kindle is now called the Kindle Keyboard and starts at US$99 (US$139 without ads), as does the new Kindle Touch.

New Zealand and Australia, like other international markets, will just have to wait for the new Kindle Fire with no announcement yet on likely availability. Given Amazon’s mid-November US shipment date, it’s unlikely we’ll see wide international distribution until after Christmas, unless Amazon finds itself stoking a less-than-hot Fire in the pre-Christmas run-up. Don’t hold your breath.

Are publishers making windfall profits from ebooks? The recent round of financial results coming from major book publishers suggests they are but they are staying tight-lipped.

A recent case was Random House which posted a solid result in the face of tough trading conditions. Its parent company Bertelsman was clearly pleased with its book division saying, “at Random House the U.S. business and the digital operations performed especially well.” No more detail was given but this result comes as the company’s core US trade book market has seen upheaval and double digit declines in the reporting period.

Random House is following a trend here among major publishers who seem to be weathering the storm in the US book trade with few visible signs of pain. The expected pain—lay-offs, closures, major reorganisations—will be familiar to anyone who has lived through the wrenching changes that happen when companies with high fixed costs have to adjust to sudden, large and long term decline in their core business.

But with book publishers we’re not seeing this happen, at least publicly. My guess is that the companies have a profit buffer from very healthy ebook margins on what has become a big chunk of revenue, especially in the US market. This is buying time for a more gentle reorganisation of their businesses.

We’re probably seeing a situation today where a lot of income is being earned from backlist titles which will be very profitable once their modest digital conversion costs are recovered. And with frontlist, we might be seeing high ebook profit margins offsetting a lot of the impact of lower p-book sales as ebooks are bought in their place.

This points to the possibility book publishers might have a “softer landing” than their media peers as their market shifts to digital. So far, they’ve maintained relatively high ebook prices and relatively low losses to piracy compared to the situation that faced music or the challenges that still confront the advertising-driven newspaper and magazine sectors.

Authors will no doubt wonder to what extent they are funding publishers through the standard 20-25% royalty deals. Sensitivity to this issue probably explains why publishers are being so tight-lipped about their impressive success. There are real risks and upfront costs that make this royalty level justifiable for new titles—including cross-subsidies for increasingly marginal, but still important, print editions. But authors will justifiably want publishers to get more efficient and pass on some digital gains to the content creators.

Another key place for these profits to be invested is in promotional support. Not just the free sort which publishers tap so well with their sophisticated publicity operations, but paid advertising. Publishers have to start replacing a lot of the exposure that bricks and mortar booksellers delivered by upping their advertising and promotion budgets considerably. This will also help publishers maintain higher price points in the face of increasing competition from the 99 cent self-publishers that are beginning to dominate bestseller charts.

Hopefully, despite the financial buffer from ebook profits, publishers are quietly and determinedly beginning to restructure for a leaner future rather than using this short term windfall to delay making changes. Keeping those fat profits will provide the opening for new digital-only players, something that will ultimately cost the traditional publishers dearly.

When Apple took its heavy-handed action against retailers last month, stopping them selling from within iPad and iPhone apps, those retailers were inevitably going to search for ways to avoid this happening in future. Any business would want to know that its very existence wasn’t subject to the changing whims of Apple management.

It turns out that Amazon wasn’t just thinking about its vulnerability, it was well on its way to removing it. We’ve seen a first shot today with its launch of the Kindle Cloud Reader, a so-called web app for ebook reading.

Web apps can circumvent Apple’s App Store rules since they are actually applications that run on the internet (often with offline operation too) and are built using open internet technologies. They bypass both Apple’s proprietary programs and its App Store.

Kobo was quick to announce last month it planned to take this route albeit with an unspecified delivery date. This is understandable since it’s not a trivial development task to build an app with the level of usability demanded of an ebook reading app. The problem is that key technologies, especially the new HTML5, are still in their infancy and don’t yet match native apps for performance and usability.

Even Google fell at the last hurdle, releasing native ebook reading apps for Apple and Android platforms last year rather than HTML5 web apps for its Google Ebooks system. Google had been a vocal proponent of the web app and cloud reading approach in its build-up to the launch of Google Editions/Ebooks so their absence was a surprise and pointed to how technically challenging this route remains as these technologies still mature.

All of which makes what Amazon has just done especially impressive.

The Kindle Cloud Reader is an ebook reader app built using HTML5 and web technologies that looks and works just like the native ebook reading apps. And, of course, inside it is a link to the Kindle store so you can shop from within the app. The reader works both online and offline when there’s no internet connection available.

I’ve been playing with it this morning and it’s impressive. It’s hard to know exactly how impressive until I have time to curl up with a book or three and read for lengthy periods but my guess is that it’s going to be at least 95% as good as the current Kindle app, the benchmark for ebook reading apps in my opinion.

Most of the obvious differences from the native Kindle app relate to the slightly slower speed initially downloading an ebook and occasional pauses of a second or so in page turning. But most of the time, it’s quick, it’s very responsive, and it preserves the senstivity that the Kindle app has which makes a light tap or tiny swipe all you need to instantly turn pages. And it emulates the bookmarking, fonts, page sync and many other features of the native iPad app.

One missing feature is the way the Kindle reader switches from a single page view to a two facing pages when you switch to  landscape mode. I couldn’t see this feature and, while nice, it’s not a deal breaker and will no doubt be added to a future version, as will search capability hopefully.

In its first release, you’ll need either a Google Chrome browser or the Safari browser on a PC/Mac, or an iPad’s Safari browser (all of these broswers use the WebKit engine). No iPhone version is available yet and future support for other broswers, such as Firefox and Internet Explorer, is promised.

By putting out a first class web app, Amazon is almost certain to energise the whole move to this approach and away from native apps. While essential for some applications, native apps are an expensive route to take and become even more challenging with the demand to support multiple platforms. Developers like web apps because they promise a single app (with minor variations) that covers all platforms — as well as release from the tyranny and whim of Apple.

In the last couple of weeks, we’ve seen New Zealand public libraries announcing plans for the imminent launch of ebook lending services.

What’s great to see is that there will be two initiatives, each with a different approach.  Between them, they will let libraries, their patrons, and the publisher and author rights holders try out different models and approaches to ebook borrowing.

The two initiatives are:

1. About 40 library regions have signed up with OverDrive, the US service provider that currently leads the market in public library lending. Their service is scheduled to roll out in September.  In addition to these regional consortia, OverDrive has deals with the major metropolitan libraries in Auckland, Wellington and Christchurch.

2. A local initiative developed by library and educational book supplier Wheelers launches a trial next month of its homegrown ebook lending service with Tauranga and Hamilton library districts.

One of the key differences between the two services will be whether patrons pay to borrow some of the titles or borrow all titles for free. Currently, OverDrive doesn’t support the option of charging rentals for some titles while the Wheelers’ service does.

Regular readers of this blog will know that I’m a big fan of offering a choice of lending models with both free and paid access.  This has the potential to get the widest range of ebooks available to libraries’ patrons and to help libraries to provide a high quality ebook service without the money having to come from other needed services. And it gives publishers and authors more options to accommodate ebook lending in the wider ebook eco-system.

Wheelers service will offer this from the start and its libraries are expecting to have an advantage over the OverDrive service by offering popular new titles that are usually withheld by publishers from the free OverDrive service or offered under terms that many libraries see as unacceptable. (I’m not so sure, however, about the other expected benefit to libraries from the Wheelers model, namely that they should own the ebook files in perpetuity rather than licensing them: I think there will be resistance from many publishers and authors to this proposed term).

Read this informative post from Sally Pewhairangi’s Finding Heroes blog in which she interviews Paul Nielsen from Hauraki District about the OverDrive service, and the innovative Jill Best from Tauranga about the forthcoming Wheelers system.

When the mightiest online retailer in the world, Amazon, has to bow to Apple’s demands and cut ties to its ebookstore in the Kindle app, we know we’re facing a big problem. Retailers have lost an important battle to stop Apple turning its hardware dominance into control over content sales. It’s now time for publishers to step in and challenge Apple for the sake of the long term health of the market for ebooks and reading. There’s an easy way to do it.

Apple’s demand—that it get a 30% commission on all sales made through in-app purchases—was clearly a non-starter for retailers who could never meet it and Apple knew this.  The only ones who can pay that sort of cut are the publishers and Apple will deal directly with them. So Apple and its iBookStore now enjoys a major advantage over other retailers: it offers the simplest, most convenient shopping experience of any ebookstore on the dominant iOS platform.

This might seem like a small detail. But small irritations from things that don’t quite work turn consumers off. Apple built the world’s biggest tech company by understanding this critical point: good enough just isn’t good enough. So by forcing its competitors’ customers through a more complicated route to purchase, Apple and its iBookStore could be heading for a similar dominance in ebooks that it enjoys in music downloads.

There’s a lesson here for the book industry. The music industry found out last decade how making it easy for consumers to buy can lead to a big share of the paid digital market. In fact, Apple was so good that it even convinced consumers to buy music instead of taking it for free. Now it has a 65% share of the entire market for paid music downloads making it too big for music publishers to argue with.

But there’s also an important difference that book publishers should take note of: unlike iTunes and digital music, Apple’s iBookStore is a disappointment so far. It hasn’t measured up to early expectations. By most estimates, Apple’s share of the ebook market is still in single digits.

So now is the ideal time for publishers to confront Apple. Apple’s ebook sales are not critical to publishers yet Apple can potentially do huge damage to the industry long term if its current course continues.

The way to stop Apple doing more harm is simple: refuse to supply it with the key titles its iBookstore needs to present a credible offering.

Doing this will help level the playing field between Apple and its competitors by giving consumers a real choice:  an easy purchase experience or a great selection of ebooks. The score for Apple vs Competition will be more like one-all instead of the one-nil that Apple’s tilted playing field created this week.

It can be done. Publishers set a precedent for collective action a year ago when they threatened Amazon and other ebook retailers with non-supply if they didn’t buckle under and accept the agency pricing model, ironically a move initiated to smooth Apple’s entry into the market.

Publishers might worry about potential anti-trust actions from such a strategy but they probably shouldn’t. Think about how tough it will be for the US Department of Justice to figure out which of the protagonists, Apple or the publishers, is abusing its market dominance more.

When we look at how much Amazon, Kobo (especially in international markets), Barnes and Noble and others have done to grow the market for ebooks and compare it to what Apple has done—almost nothing specifically for the book market—it’s clear what will best serve the long term interests of books and reading.

Apple is just a market share player in this industry and books are a minor product line for it. If it’s allowed to proceed along the track it’s on, it will grab a big share of a market that ultimately becomes much smaller than it should have been. We need more Kobos and Amazons who commit resources to opening up digital reading to new customers and encourage them to buy and read more.

So book publishers, especially the Big Six US publishers, take a cue from your music industry counterparts who must regret the last decade’s lost opportunities when a more diverse marketplace for digital music could have taken hold and multiplied. Stand up to Apple now. You’re in the best position to do it and readers, authors and channel partners alike will thank you for it.