Kindle 2 embroiled in a battle royale with Apple’s tablet

Amazon’s Kindle has long held the title of the most popular e-reader against big competitors like Sony. Apple’s looming tablet launch has Amazon shaking in their boots and changing course. What are their plans for holding onto their market share against Apple and their PR juggernaut? Copy them, naturally.

One of the flaws of the Kindle is its lack of functionality outside of being an e-reader. That’s why Amazon's new Kindle Developers Kit (KDK) wasn’t that shocking. The KDK is set for limited beta access next month to help developers create what Amazon calls “active content.” Developers will get sample code, documentation, and a Kindle simulator for multiple platforms.

The KDK led to Amazon to start plans for an app store that mirrors Apple’s revenue structure as well. Developers will pocket 70% of the purchase minus a delivery fee of fifteen cents per MB for each download. Amazon says the fee is needed since the Kindle doesn’t rely on a wireless contract. So far, game giant Electronic Arts has expressed interest and Zagat promises to provide city specific guides for foodies.

Amazon used a similar plan to overhaul its royalty structure for authors and publishers. Starting in June, those using the Kindle Digital Text Platform can get up to 70% of the purchase price of each book sold minus delivery costs. Under the old numbers authors got 7% to 15% of the sale price for an actual book. Those selling digital copies of their books got 25%.

This massive increase does come with a few rules. Each digital book has to be priced around three to ten dollars and be 20% lower than the price of the paper based book. Publishers must also include Kindle hallmarks like text to speech. There’s no word yet if this updated revenue structure will be applied to newspaper subscriptions, a sore spot with many publishers.

The announcement of the KDK and apps have gotten some buzz but it can’t cure all of the flaws of the Kindle. Amazon has stuck with a grayscale display in an age when pop and design matter to consumers. Put the Kindle next to Apple’s tablet or Barnes & Noble’s Nook and it looks more like a late 1980’s Game Boy than an upscale gadget.

Amazon may be able to offer compelling content but the Kindle is bound to be declared bland if all of the Apple tablet rumors are true. Then again, they may have picked up another Apple strategy and have a multimedia Kindle in secret development.