Given the large subsidy AT&T is paying for the iPhones, Apple's going to do very well inspite of the loss of the revenue sharing agreement they had with AT&T.  It's probably a better deal instead though as they get that money front-loaded instead of on the back end.  I think Apple makes a lot of questionable business decisions, but they've done very well in spite of those questionable decisions, so they're still sitting pretty, especially as compared to the previously constant expectations that they would fail, in the late 80s and 90s.

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I wanted a Kindle. I was ready to buy a Kindle. The iPhone spoiled everything.

I'm an avid reader of digital books and for months I had my eye on the Kindle, the digital reader from Amazon, with its high-contrast screen and PC-less book downloads. Then Apple announced that the iPhone 3G goes on sale July 11.

I'm now in second-guess hell.

I know Apple has said nothing about offering an e-reading application for the new iPhone. But what happens if Steve Jobs later surprises us or some developer turns the iPhone into a whiz-bang electronic reader? I'll tell you what happens, my Kindle ends up on eBay.

I can imagine a slick iTunes bookstore, stocked full of titles that are easy to buy and download--sort of like Amazon.com. Even if Apple decides against getting into book sales, the upgraded iPhone will be open to developers. I'm betting one has already written an e-reader application.

There's a huge opportunity here for some enterprising developer. The person could write a reader application for the iPhone and then sign licensing deals with top publishers. The developer could sell digital books out of their own Web store. The pitch to the publishers would be: "I have the best way for you to get on the iPhone."

Of course, if Apple, which possesses complete control over the iPhone application development program, is planning something similar down the line, then a third-party e-reader application might not pass. Last January, Jobs voiced skepticism about e-readers, telling The New York Times that people "don't read anymore."

This to some is a good indication that he's interested.

Later, he goes into how the Kindle is a specialty device that is destined to shoot itself in the foot.  I actually agree with that part.  It's a low-quality MID with wireless access built-in.  While I'm sure it's fine for reading books, so many other devices out there have that exact same capability.  Why would you buy a specialized device to do a relatively generic function.  I started reading ebooks back in 2003 on my HP iPaq.  There are a variety of different reader programs available for Windows CE and Windows Mobile devices, so why buy an extra, dedicated device for that, when you can simply use your phone or PDA?  As smartphones penetrate the market, there will be much less space for these dedicated reading devices.   You'll take your phone / PDA places you wouldn't lug this larger, heavier device around.  Seth Godin thinks the Kindle will be a success, and maybe it will be, but at least among the tech-savvy I'd be kind of surprised.

Now, back to the beginning of the article.  Boy, wouldn't it be great to have an ebook reader program for the iPhone!  Well, a search for "iphone ebook reader" leads you to 6-7 just on page 1 of Google, at least one of which is on Apple's Web Apps list.  Oops!  I was kind of non-plussed from the start of the article, because of this simple basic fact.

Now, had he focused on the great opportunity for being an Apple partner with something akin to iTunes for books and how the ebook market is about to explode, then it'd have been a great article.  Success is all about positioning and branding.  Even the iPhone itself is not a revolutionary concept, but Apple has turned it into a great success with their marketing and name.  There's a potful of gold to be made and there is no doubt a successful ebook store, whether Apple chooses to do so or not, will be a great opportunity for that.  But I think the article writer, the two contributors, and the editor could have done 100% better by not being so sloppy and ill-informed of the topic they were writing about.

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Apple does have a tendency to do strange things in their hardware cycles.  I think we all remember the near-immediate price drop fiasco when the iPhone first came out and dropped in price by $200 a mere 68 days later.  There was much outrage, wailing, and gnashing of teeth.   It was definitely a business decision espousing the vision of "Think Different."

What I think will happen will be an upsurge of searches for "iPhone unlock" as people prepare to buy and sell their old iPhones on eBay.  AT&T has said they will be resetting contracts to the 2 years term on purchase of the new iPhone 3G, so you'll be able to put it to the side and let someone else use it with their own SIM card, or make some money on the net:

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AT&T is taking the bigger gamble here because they expect the new iPhone to drive new subscribers to them, making up the initial loss on the long term contracts instead.   I think that's a pretty smart move on their part.  AT&T is also paying Apple an extra $100 for customers signed up in Apple Store, so expect to see things busier on that front.  This dovetails well with the expectation that we won't see too many iPhone 3G models in the secondary markets like the first generation that could be activated at home (or sold on eBay!).

Head on over to Barrons for the original article and some discussion of stock implications.

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