Book publishers embrace -- and detest -- Kindle

Since Amazon debuted its first Kindle e-book reader late in 2007, the reaction within the book industry has been a mix of welcome and scorn.

Welcome because of the potential to tap an entirely new market -- before a wave of digital piracy similar to the one that decimated the music business. Scorn because of fears that the online retail giant, which already has a commanding share of the market for printed books, might use its leverage to seize control of the new market and push down prices even further. Publishers have been fighting back and seemed to score an important victory recently, with Amazon reportedly agreeing to a model that would let publishers set higher prices for e-books sold for the Kindle. Analysts say a truce is likely but won't do much harm to Amazon even if the company raises the prices of e-books from $9.99, which has helped make the Kindle a major hit. The Seattle company discloses little data about its Kindle business, but it is widely estimated that Amazon loses money on most e-books that it sells for that price. Higher prices would mean a better margin for the business even if the sales volume takes a small hit, experts say. But concerns persist about whether publishers will give any ground on e-book prices.

In theory, the companies should still make good profits on e-books at lower prices, because they are saving on printing, binding and distribution, costs that make up an estimated 10% to 12% of a hardcover book's price. Ironically, the company that has thrown the biggest wrench into Amazon's plans is the very company that Amazon was trying to emulate -- Apple.