Apple, Amazon in Last-Minute Wrangling Ahead of iPad’s Launch

As the iPad launch looms, Apple is in last-minute negotiations release with media companies regarding its price cut for TV shows but has temporarily set aside digital distribution deals with newspapers, magazines, and textbook publishers, according to sources cited by the Wall Street Journal.

The Journal noted: “But nailing down the content has proven difficult as some potential collaborators weigh the advantages of working with Apple against the potential threats to their current sources of revenue, these people add.” Apple, of course, declined to comment.

The Journal’s anonymous sources also revealed iPad pre-orders in the range of “hundreds of thousands,” and one said that the iPad could outsell the iPhone when comparing the first three months of availability.

Meanwhile, Amazon is telling some publishers that they’ll stop selling their books unless they agree to various concessions covering the sale of e-books, the New York Times reported, citing “two industry executives with direct knowledge of the discussions.” The move is seen as a response to Apple’s deals with five major publishers that allow them to set prices for their books and give Apple a 30 percent cut, as it does with the App Store. It’s a structure known as the agency model.

According to the New York Times’ sources, Amazon may let the major publishers set prices in the Kindle store too, rather than keep the standard US$9.99 pricing originally set by Amazon, but it wants three-year contracts and guarantees that the publishers won’t sell e-books for less elsewhere or give other online stores better terms. Apple is also requiring publishers to not sell their e-books for less then they’ll sell for at the tech company’s iBookstore.

If Amazon moves to an agency model with big publishers, the Times said it will likely try to enforce its wholesale pricing model with smaller publishers. Apple is treating all publishers the same, which means they all have to treat Apple equally too – as the Times noted: “Amazon may believe that if it can keep those publishers from moving to an agency model, Apple will choose not to sell their e-books, and Amazon will be seen as having a broader selection.”

Evan Schnittman, a vice-president at Oxford University press, said that if Amazon is successful in splitting the book industry like that, it “would leave 50 to 60 percent of the content out there subject to the standard distribution terms, enabling Amazon to promote and price as it does today, and forcing Apple to have to compete with Amazon’s strength.”