Here is what the NYT has to say about how that turned out:
This, obviously, occurred in the wake of the iPad announcement. I'm going to attempt to sketch out my understanding of the sequence of events, to make a point that is not particularly subtle, but that is apparently being missed.
Palm's Note format is expanded from its pathetically tiny limitation; people start publishing books in this format and other people buy them. Dedicated readers and e-bookstores are spawned in the wake of this development, some of which use a variant on the Palm note format that supports DRM.
Sony offers for sale an e-ink reader that costs like $500. To buy books for it, you have to download software which only runs on PCs. The books you buy for it are full-price/undiscounted with respect to their paper equivalents. Some people buy it and love it; the screen is not exhausting and they can carry around many books at a time. The books themselves are DRMed.
A variety of publishers start selling their books from their own websites (full price, many formats, most of those formats -- but not all -- DRMed) for reading on a variety of devices.
Amazon releases an e-ink reader that costs around $300. It includes a cellular connection at no cost to the owner of the device. You can shop using the device or on any computer that will run a browser and give you access to Amazon.com. The books are advertised as usually costing $9.99, with books available in paperback for less costing less, and some books costing substantially more. The books are in yet another variation of the Palm Note format and are DRMed. Until the iPhone/iTouch apps for ereading become popular, you have to buy a kindle to read the ebooks sold on Amazon (ignoring the ebooks they sold prior to developing the kindle); once the apps take off, Amazon releases a kindle app and supports maintaining last-place-synced across multiple devices.
Sony drops the price of its reader. It becomes available in places like Target. Its software now runs on Macs as well as PCs.
A host of other e-ink readers are released at the electronics expo. At least one of them has an associated e-bookstore with discounting and multiple formats.
The iPad is announced after about a year's worth of rumors. Customers are expecting a device that will free them from the evil DRM of Amazon. Publishers are expecting to finally break Amazon's domination of ebook pricing. Details appear in the days leading up to and following the announcement, and Amazon responds to some of these by adjusting their percentage paid to self-pubs. It develops that Jobs has negotiated with most of the big publishing houses to sell ebooks for a price determined by the publishers which is greater than 9.99 but less than list price, in exchange for getting ebooks about the same time the hardcovers are released, and a 30% cut.
Someone calls that the "agency model", and Amazon resists. In negotiations with one of the big houses (Macmillan), Amazon does what commenters in an ars technica thread about ebooks back in February 2009 said bricks-and-mortar retailers would do in the event publishers started pushing ebooks: refuse the carry the publishers book(s). For the duration of a weekend, you couldn't buy anything, paper or electronic, published by Macmillan and fulfilled by Amazon (you could buy used and other third party fulfilled items).
The commenters in the ars technica thread presumed that publishers would cave if bricks-and-mortar retailers did this to publishers. In practice, Sunday night, Amazon started selling Macmillan stuff again, and to adopt (for at least that house) the agency model.
What does this mean for publishers? Well, if publishers go the route Macmillan did, they'll have established a higher-than-9.99 price point for new trade books. They'll get less per item sold from Amazon. Anyone complaining that ebooks are too expensive will be redirected by Amazon to the publisher who will not plausibly be able to point back at the retailer. Anyone complaining about price-fixing will be redirected to the publisher, rather than the retailer. In some ways, this is the model of retailing that held until shortly after WW2 -- when it was MRP, not MSRP. Amazon has laid some groundwork for this, describing Macmillan has having a monopoly on its titles.
What does this mean for people running ebookstores? Well, it means they can make money, and they won't have to meet a 9.99 price point. In practice, that means anyone selling at full hardcover list is probably going to be reducing their price. Anyone discounting to something above 9.99 will no longer look a lot more tempting to customers (especially if they are offering multiple formats). People selling paper books will have some of the pressure taken off them, at least for a while.
What does this mean for people selling readers, dedicated or otherwise? Price stability across multiple formats and multiple stores will probably shift some focus off content-pricing and onto reader-features.
What does this mean for customers? This should reduce some of the uncertainty about what future pricing will look like. With a lot of players committed to this new pricing scheme (Jobs, the big houses, and Amazon, perhaps grudgingly, altho more on that in a moment), it's easier to determine at what point it makes economic sense to switch from reading paper books to reading ebooks. It is not unreasonable to assume that all of us earlier adopters who liked the low kindle prices will be a little disappointed to be paying 30-50% more for titles than we had been.
Did we just see a little Briar Patch action? We might have. Amazon has never had the ambition of being the lowest price alternative -- they just wanted to have low enough across the board that their regular customers wouldn't even think about it any more. $9.99 for a hardcover title was pretty fucking awesome -- you could not beat that anywhere (well, until this last fall/winter price war, which was just nuts), unless you were prepared to wait and buy used hardcover, or wait longer for paper. Nobody discounted a wide range of hardcover titles more than 50%. Nobody. When they released the kindle, they forced Sony's reader to come down, but they did not successfully force Sony's ebooks pricing to come down, in part because it was a faster road to hell to meet Amazon's price, when everyone was paying the hardcover cut to the publisher -- Amazon was losing money on at least some of those titles.
The net effect of this last weekend is, thus: stability, predictability and a discount to hardcover competitive with any other hardcover discounting system over a wide range of titles. It's a Big Fat No-Op for DRM; all the indications are that what is sold through the iPad bookstore will have DRM. Going forward, any retailer, on- or off-line contemplating threatening a publisher by refusing to sell their books is going to have this precedent and its outcome to contemplate. If Amazon can't coerce Macmillan, I doubt B&N or Borders will be able to do so, and the big houses now know that for a fact. Competition between e-stores will not be based on price going forward, but on features. None of the big (or potentially big) players are offering non-DRM (sorry, fans of Baen books and/or public domain options, but you should know by now that you aren't the market for new-in-hardcover and if you don't know that yet, well, I'm sorry to break it to you) and Amazon's store is accessible to everyone, whether they own a reader or not, and Amazon has shown a willingness to put software on other platforms so their customers can read their books on them (the iPhone app). Looks suspiciously like a Briar Patch to me.
Am I saying that Apple or the big houses lost in this exchange? Not really. The iPad is more expensive, and it has an emissive screen, but it is multi-purpose. The publishers are going to be selling their eWarez to a slice of the population that isn't so crazy they feel compelled to stick with a format that will outlive them and they have total control over, but is also annoyed by having to deal with format changes that isolate content every few years -- and is really annoyed when they discover that they can no longer buy new content for their player, or the price changed dramatically or whatever. It is not unreasonable to think that the publishers are going to get hammered by that new crop of customers that Is Not Amused by the craptisticness that is the average ebook today. The authors will continue to be poor, but continue to be paid their pittance.
I think the next phase is going to be cross-compatibility and feature shakeout. Depending on how that is handled, we might stabilize on One Platform, but I doubt it. I think we'll see some long-term variability in what is out there and what it does.