While Amazon clearly controls the e-reader space, Barnes & Noble continues to beat them to the punch on key technologies. First, it was an Android-based color tablet. Then it was the front-lit e-ink reader.

Amazon has to react, probably faster than they’d like — they’re pushing out a new Kindle not even a year after the last one was released.

Update: As Soroush Khanlou points out, B&N did the touch e-ink reader first as well.

The weirdest thing about Amazon getting into high fashion is this, as reported by Stephanie Clifford:

Amazon’s decision to go after high fashion is about plain economics. Because Amazon’s costs are about the same whether it is shipping a $10 book or a $1,000 skirt, “gross profit dollars per unit will be much higher on a fashion item,” Mr. Bezos said, and it already makes money on fashion.

That’s the opposite of Amazon’s model for everything else. All we hear about is how Amazon doesn’t care about profit margins — all they care about is revenue and getting to a Walmart-like scale where profit margins actually don’t matter. But this is Jeff Bezos directly contradicting that line of thinking. He’s touting the margin of this business.

Maybe Amazon is tired and/or a bit worried after watching their profit plunge quarter to quarter, even as revenues rise. That’s what trying to break into the hardware business will do. Maybe this is a way to offset those losses.

Or maybe this is part of Amazon’s plan to sell everything. It does seem likely that there’s no way they could sell designer fashion the way they sell other things (at a deep discount), no designer/brand would go for that. So this is the only way to break into the market.

But again, the article directly states that Amazon’s decision here is about “plain economics” and the Bezos’ direct quote also suggests that. 

So much for the Walmart plan. I guess Amazon will now try to be both a high margin and low margin business? Next up: a core focus on razor blades, ink cartridges, and mixed drinks. 

Speaking of Amazon and Kindle sales, the latest comScore numbers say that the Kindle Fire now controls 54% of the Android tablet market. Far more than any Google-branded tablet.

That’s a big win for Amazon, so it must finally be time to announce actual sales of the device, right? 

Wrong.

Amazon:

Kindle Fire remains the #1 bestselling, most gifted, and most wished for product across the millions of items available on Amazon.com since launch.

Got it.

I can’t think of another example of a company seeing revenue rise that much while seeing profit fall almost the exact same percentage. 

The race is on for Amazon to get to Walmart scale, where margins do not matter. But it’s getting to be a bumpy ride because of things like Amazon’s adventures into hardware.

The company made $13.18 billion in revenue for the quarter, but only $130 million in profit. That’s less than the right side of the revenue decimal point. And the profit continues to go the wrong way.

On the bright side, at least they didn’t actually lose money (as they keep warning they might). Next quarter, they’re projecting anywhere from $40 million in profit to $260 million in loses. Even if they beat the range (which they should), they’ll still be inching closer to $0.

And what happens if Google is actually able to undercut the Kindle Fire in price with their Nexus tablet?

Scale fast. Scale fast. Scale fast.

Everything Charlie Stross says here is easy to follow and makes a lot of sense. 

Key takeaway:

Amazon has the potential to be like that predatory big box retailer on a global scale. And it’s well on the way to doing so in the ebook sector.

Good article by David Carr on the weirdness of the situation that is the DOJ suing the major book publishers and Apple — which helps Amazon, the once (and likely future) domineering player in the space.

Carr’s key line:

That’s the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ’N’ Groceries on Route 19 instead.

See also: the Branch on the topic.

Report Declan McCullagh and Greg Sandoval:

The U.S. Justice Department’s legal pursuit of Apple for alleged e-book price fixing stretches the boundaries of antitrust law and is likely to end in defeat.

To be clear, that’s just the case against Apple. McCullagh and Sandoval note that the case against the publishers themselves seems much stronger. Given the evidence laid out right now, they’ll simply have a hard time proving that Apple was colluding in this from the beginning. 

The fact remains that what this really is about is Amazon versus the publishing industry. We’ll see how this plays out but Apple appears to be more of a (albeit willing) pawn. 

Good rundown by Nilay Patel of the Department of Justice’s antitrust complaint against Apple and seven of the major book publishers.

The high-level idea, that the publishers wanted to move to the agency model (where they could set prices that retailers charge for their books) and that Apple was willing to give them this model shouldn’t be surprising. The question is if they colluded to do this — and Apple’s supposed “most favored nation” clause certainly doesn’t look good. 

This case is actually pretty fascinating because had Apple not accepted the agency model to gain some traction in e-books, we’d probably be hearing the publishers complaining to the DoJ that Amazon was using their monopoly in e-books to destroy their businesses. 

Instead, Amazon (seemingly) got screwed and was forced accept the agency model as well. The DoJ doesn’t care about that as much as they care about what that means for consumers — higher prices.

Also interesting is that a bunch of the publishers settled right away to get out of this mess. But as Macmillan CEO John Sargent clearly implies in his open letter, that doesn’t necessarily mean that anyone was doing anything wrong, just that the other publishers did not want to bogged down in legal proceedings for months (or years) and pay all the fees associated with fighting the government. 

Macmillan will fight this. As will Apple. And a few others.

Amazon is obviously thrilled about all of this. They want to go back to $9.99 e-books.

I’d love that too — all consumers would. But the issue is really the publishers versus Amazon here. They’re (probably rightfully) worried that if Amazon can go back to completely owning the market, there will be no stopping them from say, replacing the publishers outright one day (which they’re already trying to do).

This really seems to be a two-headed coin. Both sides potentially point to antitrust concerns. It’s about figuring out the lesser of two evils. And depending on your vantage point, that changes.

Though that obviously doesn’t excuse collusion, if it happened.

Amazon has been testing in-app purchases for a bit, but Kim-Mai Cutler picked up on the most interesting aspect of this — developers getting full price control:

So why do in-app purchases get a special exception?

Because in-game economies are very painstakingly designed and calibrated to make sure there is an even balance between currency sources and sinks. Developers have to make sure a user’s progression through a game seems natural and addictive at the same time.

Amazon’s commandeering of Android for their own with the Kindle Fire has gone very well except for their bad choice to insist on the option to set app prices. I get it — Amazon has thrived by undercutting prices, why should this be different? — but all it has really done is piss off developers. 

With the in-app aspect, it looks like Amazon is wising up. 

After nearly two years off the air, Mad Men starts up again on Sunday. Can’t wait.

Obviously, I’ve been bitching a lot about the new season of Game of Thrones because I can’t watch it (legally) for a year since I don’t have cable. But the same isn’t true of Mad Men — I already bought the season pass through iTunes. I have to wait a day longer than those with cable (well, technically until midnight most of the time), but I’m fine with that.

Amazon also emailed this morning to say they have a season pass option for the new season of Mad Men through Amazon Instant Video. Also cool. One problem: I can’t for the life of me find a price anywhere. And there are about 17 possible buttons to click. This entire design really needs to be re-thought. 

Anyway, good on AMC for giving me options to give them money for their great content.

Kevin C. Tofel of GigaOm:

Priced at $199 to $299, the Kindle and Nook don’t likely compete against the iPad when it comes to a purchase decision. Meaning: sales of these aren’t hurting the iPad much, if at all. The same can’t be said of the true Android tablets, which are still struggling to find an audience.

You don’t say…

John Gruber on the ridiculous assertions that Apple should be worried about Microsoft’s upcoming Windows 8 strategy for tablets and Amazon’s strategy for the Kindle Fire:

This is a recurring theme. Someone does something different than Apple, has some success with it, and pundits like Kingsley-Hughes start arguing that Apple needs to change course and do what the other guys are doing. Exhibit A: the Kindle Fire. It’s selling well — nowhere near as well as the iPad, mind you, but it’s not collecting dust in warehouses like most other tablets are — prompting some to argue that Apple “must” release a $250 7-inch tablet too.

See also: netbooks. Remember, Apple absolutely had to make a netbook or they would be toast.

Apple didn’t, the market for netbooks collapsed, and Apple looked like geniuses for not doing what the pundits said they needed to do just months earlier.