TechFlash: Seattle's Technology News

Amazon.com has been battling with publishers over its $9.99 price for electronic books. Now the online retailer is caving to publisher demands to go higher — signaling it will raise the price of some e-books to between $12.99 and $14.99.

Amazon's concession capped a remarkable showdown with Macmillan, one of the big six publishing houses. Amazon on Friday removed all books — digital and physical — published by Macmillan from its website, after the publisher made clear it was moving to a higher-price model on e-books.

But today, Amazon in a message to customers, backed down, saying "we will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books."

It was a huge week in the technology industry. Amazon.com and Microsoft posted strong earnings. Apple released its highly-touted iPad. And, to top things off, there was even a sex scandal involving the co-founder of Bellevue's Intelius. Here's a look at the past week through the eyes of reader comments.

After Apple unveiled the iPad, many dubbed the device a Kindle killer. Reader Darren Erik Vengroff said he probably wouldn't buy an iPad, but he saw trouble ahead for Amazon's electronic reader: "When Amazon ports the Kindle iPhone app to the larger screen size it's over for the DX."

But Madrona Venture Group's Scott Jacobson -- an Apple customer who previously worked at Amazon -- wasn't so sure. He offered five reasons why the Kindle would survive, which prompted Wetpaint CEO Ben Elowitz -- who had previously written a post on TechCrunch citing 10 reasons why it would die -- to note: "Kindle may have a niche - but it's a specialty device for a specialty audience, while Apple is going after changing consumers' behaviors and lives."

Technology executive John Arnold allegedly lied to a grand jury about having sex with dancers at a Seattle strip club, which prompted several readers to refer to the past legal troubles at the Bellevue company he co-founded. Reader Web 3.0 wrote: "Here is a clue, don't lie to a grand Jury or bad things happen." But some readers also noted that the government shouldn't meddle in these types of activities. Nonamesnomas wrote: "Just because he broke the law, doesn't mean he did anything morally wrong. What right does a government in a free society have to ask, even in a court of law, about what a person does privately?"

Our story -- "Old-school Classmates.com forced to face up to Facebook" -- led to comments from people who had abandoned Classmates and others who found the company's mission misguided. Wrote George Anderson: "Classmates has never realized that people resent being forced to pay for information that they themselves entered. Social media must be free because the content is generated by the users, not the companies that control the website."

The appearance of Bill Gates on The Daily Show this past week prompted one reader to suggest that the world's richest man needed a wardrobe overhaul. (Perhaps someone should nominate him for "What not to Wear"). Janet remarked: "I liked how relaxed Mr. Gates appeared to be and totally admire the work his foundation is doing. However, can we take a moment to talk about his clothing? He was wearing a shirt that was at least two sizes too big. I'm all for frugality, but he can surely afford one tailored shirt."

Is Amazon.com's clash with publishers over its discount pricing of electronic books entering a new, more high-stakes phase? As VentureBeat reports, books from publishing house Macmillan have gone missing from Amazon's website.

Macmillan is part of a group of major publishers providing digital titles for Apple's new iPad tablet computer. Apple is reportedly letting publishers set higher prices on Kindle e-books ($12.99 and $14.99). Amazon has set a standard of $9.99 for new release e-books — a price that many publishers fear will eat into hardcover sales and lower the value of books in the minds of consumers.

Source: Amazon.com SEC filings

Amazon.com's overall employee count continues to grow, according to the company's annual 10K filing. The online retailer reported 24,300 full-time and part-time employees at the end of 2009, up from 20,700 the previous year. The company, which just reported a sharp jump in fourth-quarter revenue and profit, has been steadily increasing its headcount since 2003, even through the current economic turmoil.

Rumors that Amazon wants to acquire Netflix have cropped up a couple times over the past year. Now they're making the rounds again, after the Wall Street Journal's Deal Journal wrote that "Netflix is becoming a lot more attractive to Amazon." The reason? Netflix's success with building its streaming video business. The DVD-rental company recently said 48 percent of its customers watched more than 15 minutes of a streaming TV episode or movie in the fourth quarter, up from 28 percent in the same period a year ago.

William Lansing is president, CEO and board member at InfoSpace Inc., the Bellevue internet search company. A former NBC internet executive with an e-commerce background, he joined InfoSpace in February 2009. He spoke to the TechFlash about the company’s plans for acquisitions, working with Jack Welch at GE, and the great outdoors.

Dawn Lepore, CEO, drugstore.com

Drugstore.com is launching three new websites, as it seeks to extend the reach of its e-commerce business amid growing competition in the online health and beauty markets.

The Bellevue-based company recently launched a men's health and grooming site called At His Best and another one called The Natural Store selling "natural" health and beauty products and household cleaners . Spokeswoman Anne Marshall said a third site is coming soon that will be a “medicine cabinet” for a specific, unidentified medical condition.

Drugstore.com has been increasing its use of so-called “micro sites” around specific product categories to drive sales. Such websites use the company’s existing product selection, e-commerce technology and shipping infrastructure, and thus are relatively inexpensive to launch. The main cost is marketing the new websites to consumers.

Jacobson

Scott Jacobson: First, I’ll apologize for using a list format for this blog post. It is an obvious attempt to cover up my inadequacies as a writer…but those will become abundantly clear momentarily. Second, let me disclaim that mine is a household with two Kindles, four iPhones/iPod Touches, and two iMacs.

And I am a shareholder in both Amazon and Apple. And I worked on the launch of the original Kindle at Amazon. And I plan to buy an iPad. So I’m all sorts of biased. All of that said, here are a few reasons I don’t think iPad is a Kindle killer.

Amazon.com flexed its muscle during the recent holiday shopping season. The online retail giant said fourth-quarter sales were up 42 percent to $9.52 billion, and profit for the quarter jumped 71 percent to $384 million, or 85 cents per diluted share.

The results handily beat Wall Street estimates. Analysts polled by Thomson Reuters had been expecting sales of $9.04 billion in revenue and earnings of 72 cents a share.

Amazon is extending its reach over the growing ecommerce market, said Dan Geiman, an analyst covering the company for Seattle brokerage McAdams Wright Ragen.

"Online took share from brick-and-mortar during the holidays, and Amazon took share from the rest of online retail during the quarter," Geiman said. "It was a hugely successful quarter for them. They're definitely on a roll right now."

Amazon.com this morning is likely mulling over the competitive threat posed by Apple's iPad, dubbed by many as the ultimate Kindle Killer. While there were plenty of "Kindle is Toast" pronouncements yesterday, the reality may be a bit more nuanced. So in much the same way that my colleague Todd Bishop just broke down what the iPad means for Microsoft, here's my take on why Amazon should fear Apple's new tablet, and why it shouldn't. Read on for the full list.

Amazon.com's Kindle electronic book reader may be on a collision course with Apple's newly-released iPad. But on a day that Apple grabbed headlines, Amazon.com won over Wall Street.

As you can see in the chart above, the two stocks were neck and neck for much of the day. But Amazon.com gained 2.74 percent to close at $122.75. Apple shares -- which initially sank after the iPad announcement, then surged after pricing details were released -- also were up nearly one percent on the day to close at $207.98.

There's been a lot of talk about how Apple's iPad could wipe out Kindle as a device. But a big part of Amazon's Kindle business is the e-book store, which includes some 400,000-plus digital titles. Amazon has pursued a strategy of making Kindle books available across multiple devices, and today the online retailer made clear it will sell books via the iPad as well.

Shortly after Steve Jobs took the stage in San Francisco this morning to announce the new iPad, the Twittersphere started filling up with thousands of messages proclaiming that Amazon.com's electronic book reader, the Kindle, was toast.

"RIP Amazon Kindle 2007-2010. Cause of death. The iPad," wrote one Twitter user. But does Apple's release of the iPad -- a touchscreen tablet computer-- really portend the demise of Amazon.com's highly-touted electronic book reader? Possibly, since Jobs himself reportedly referenced the Kindle on stage by saying "we are going to stand on their shoulders and go a bit farther."

Of course, the iPad is a multi-purpose computing device, and the Kindle is a reading device. Nonetheless, we'll be interested to hear what you think after taking a look at the technical specs below.

Apple took the wraps off its "latest creation" today. The new tablet computer, called the iPad, looks pretty slick, based on the images coming out of the company's event. Apple CEO Steve Jobs walked the assembled media crowd through its features, which include email, web browsing, photos, iTunes, video, games, and digital books.

The iPad has a very iPhone-like look and interface. It's touchscreen and can run all the apps from the Apple App Store, according to Apple. And as expected, the tablet is designed for reading electronic books. It comes equipped with an iBook app and bookstore, and Apple is working with big publishing houses including Penguin and Simon & Schuster to make titles available for the device.

The multi-function Apple tablet clearly represents a big competitive threat to Amazon's Kindle and other dedicated electronic book readers. Many are calling it the ultimate "Kindle Killer." Jobs at the event is quoted as saying that "Amazon did a great job with their reader and we’re standing on their shoulders here.”

McGraw-Hill CEO Terry McGraw in a CNBC interview confirmed that an Apple tablet announcement is scheduled for tomorrow and said the device will be based on the iPhone operating system. Was it a slip of the tongue or a "masterful" P.R. leak, as some are saying? You be the judge. One thing is for certain: McGraw is ready to put academic textbooks on the device. The part about the tablet is 2:55 in.