Amazon Quietly Scrambles for Tablet Content as it Preps for iPad Battle

While Amazon (NASDAQ:AMZN) still keeps its lips sealed over their much-hyped tablet, it seems the e-commerce giant is busy negotiating on subscription terms with publishers for providing quality content such as newspapers, magazines and e-books. With many speculating that Amazon’s tablet will fetch around $250, it is important for Amazon to secure good margins on its content as it would likely sell the hardware at a loss. Previously, many companies have tried to enter the tablet market to counter Apple’s (NASDAQ:AAPL) iPad, including HP (NYSE:HPQ), Research in Motion (NASDAQ:RIMM) and Motorola Mobility (NYSE:MMI).

We currently have a price estimate of $240 for Amazon’s stock, which is about 15% above the current market price.

Amazon Seeks to be in Publishers’ Good Books

While the iPad is still the king of the the tablet jungle, Apple’s terms are not too favorable among publishers. Apple demands a 30% share of every individual sale and subscription sold on iTunes while also imposing restrictions on publishers selling content on iPads if they do not use Apple’s e-commerce system. ^[1]

At the moment, Amazon is seeking to find a win-win solution for both itself and publishers.

The company is also considering launching a Netflix (NASDAQ:NFLX) like digital book library where customers pay an annual subscription fee to access a number of e-books. ^[2] While these plans are still in the early stages, publishers are taking notice of the high top-line expectations from Amazon’s tablet. The big question is whether or not Amazon can give publishers enough to tempt them to turn down Apple, thereby increasing its market share in the e-content space.

See Our Full Analysis for Amazon’s Stock

1. Wall Street Journal: Amazon Seeks Tablet Content [↩]
2. The Economic Times: Amazon in Talks to Launch Netflix-like Digital Book Library [↩]