Since the iPad announcement many people have suggested that it signals the end of Amazon’s reign as the vendor of the #1 e-book reader.

Others have said that as an e-book reader the iPad just doesn’t cut the mustard (and some with even more vitriol suggest it’s not much cop at anything else either!)

I quite liked Kevin Rose’s comparison.

But all this argument back and forth misses the bigger picture I think. Amazon and Apple are smarter than most people are giving them credit for.

Clearly Amazon saw the future of books would be electronic, especially when no one else was interested. And the best way to monetize a non-existent market is to create it.

I think the kindle was essentially a loss leader. A flawed and expensive but ultimately desirable (probably as a result of the price and scarcity) device. It didn’t matter to Amazon that they couldn’t generate the demand to reduce the price via economies of scale. They were setting up the market for someone else to create a cheaper, slicker, more fashionable device. And guess who would be selling the e-books?

OK at the moment Apple has their own e-book store, but how long will it be before they do a deal with Amazon who must surely have access to the largest library of titles. Plus I am sure there will be a way to get Amazon e-books onto the iPad without a deal being done, never mind all the me-too devices that will be coming out which will work with Amazon’s store.

I wouldn’t exactly call it a zero-sum game.