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Amazon’s (s amzn) recent announcement of the Kindle Fire — its color tablet that may or may not become a competitor to the Apple iPad (s aapl) — was what got the most attention last week, but the online retailer also made some other announcements at the same time, including a drop in price for the original Kindle to $79. Based on the consistent and gradual declines in Kindle prices, some have speculated that Amazon could soon offer them for free, sponsored by advertising or other similar deals. Which raises an interesting question: What would free e-book readers do to the book industry?

As we’ve pointed out before, Amazon’s rationale in offering a tablet or other hardware (some think a phone is also a possibility) is the exact opposite of Apple’s. Apple makes most of its profits from selling hardware like the iPhone and iPad, and uses content — books, magazines, music, etc. — as a way of fueling demand for that hardware, while Amazon’s primary business is content, and it uses hardware as a conduit for getting that content to as many people as possible. So the original Kindle, for example, is simply a pipeline for getting books to people, and Amazon has continually expanded the types of content that Kindles can deliver, through programs such as Kindle Singles.

These not-quite-books can be written and uploaded by anyone, and offered at whatever price point an author decides: as little as 99 cents, or even free. Offering a free — or ad-supported — Kindle would presumably just provide even more of an avenue for these kinds of books to reach readers, and that in turn could (theoretically at least) make it possible for more writers to make a living from their writing.

New possibilities for e-book authors

You might not think authors — or Amazon, for that matter — would be able to generate much from 99 cent books, but you would be wrong. Young-adult author Amanda Hocking has become famous for making millions of dollars from her Kindle books in less than a year, without the help of an agent or a publisher (although she has since signed a publishing contract). Other self-published authors such as John Locke have sold millions of copies of their books. Some authors, such as J.A. Konrath, have noted that when they lowered the price of their books to 99 cents, they sold orders of magnitude more copies.

This message hasn’t gotten through to traditional publishers, who want to maintain the pricing structure that worked with physical books, and pushed through the “agency model” with Apple’s (s aapl) help (a move that’s currently the subject of a class-action lawsuit) in order to do so. As a result, Amazon has taken to doing an end-around publishers by signing up popular authors like Tim Ferriss. How long until it’s Amazon signing deals with self-publishers like Amanda Hocking, rather than a traditional agency?

Not everyone is happy about this state of affairs, obviously. Author Sam Harris wrote an eloquent blog post recently about the disruption of the market for books and other content, and how that is affecting writers like him:

Where publishing is concerned, the Internet is both midwife and executioner. It has never been easier to reach large numbers of readers, but these readers have never felt more entitled to be informed and entertained for free… there are reasons to fear for the life of the printed book.

But Harris himself is also an example of how to deal with this evolution: he says he has been publishing short e-books for $1.99 as well as writing traditional printed books and publishing on his blog. And while he notes that some readers have complained his books are too short for the price he charges, his latest e-book still hit number 9 on the top Kindle content list, and may well have generated interest in his other novels.

E-books don’t want to be free — just cheap

What I think Harris is struggling with is the fact that books don’t want to be free; they just want to be a whole lot cheaper than they are. And when you make books (not all books, but some) $4.99 or $1.99 or even 99 cents, people will buy more of them. Even Harris himself admits he has grown tired of paying full prices for 600-page books, because many of them just don’t seem to be worth the time or money. But he and plenty of other people would probably pay $1.99 or $4.99 for a pleasant read that didn’t take too long, as Amanda Hocking and J.A. Konrath have shown.

There’s even the possibility that books could be free and still make money: Amazon has an ad-supported Kindle, so why not extend that model to the books themselves? Magazine writers publish their content in an ad-supported medium, so why not books? Authors such as Charles Dickens and Arthur Conan Doyle wrote many of their novels on a monthly basis as magazine supplements. And Amazon apparently already has a patent that covers advertising-supported e-books.

As we’ve pointed out before, the book is evolving as it becomes digital — there are Kindle Singles that aren’t much longer than a magazine-length feature, and some magazines and newspapers are packaging features in just that format, as well as newer services like Byliner that have been commissioning custom content. A free Kindle could be just the beginning of an explosion of book-like content from Amazon and others: The company is already talking about a “Netflix for books” (s nflx) that would offer content for a monthly fee.

Why not offer a subscription to an author, so I can automatically get whatever he or she writes, regardless of length or format? This would blend the worlds of blogging, Kindle Singles, magazine-length features and novels into one stream of content, and I’d be willing to bet more people would read more as a result. The printed book, as Seth Godin wrote recently, is a fetish of sorts, like an expensive watch: something we buy because we like to look at it, but something that is no longer really functional or necessary. In the end, that’s likely to be a good thing, not a bad one.

Post and thumbnail photos courtesy of Flickr users Marcus Hansson and Mike Licht