Offering bestsellers at $9.99 helped Amazon.com dominate the growing e-book business. But on Sunday, that sales tactic fell by the wayside after a pricing dispute with Macmillan publishers. Unfortunately for Amazon, the PR headache comes at a terrible time--just as Apple prepares to plunge into the e-book market with the iPad.

The short version: negotiations broke down when Macmillan executives balked at selling e-books at $9.99. Amazon replied by yanking paper and digital copies of Macmillan books from its Web site Friday. Macmillan yowled in an ad in Publishers Marketplace. In the end, Amazon conceded and is expected to sell digital copies of books for $12.99 or $14.99. No harm no foul?

Apparently not. Many bloggers think Amazon's recent stunt irreparably damaged its reputation. One of the loudest voices is John Scalzi who says Amazon's Macmillan-banning stunt offended nearly everyone--publishers, authors and online users.
You want to know how to piss off an author? It's easy: Keep people from buying their books. You want to know how to really piss them off? Keep people from buying their books for reasons that have nothing to do with them.
As predicted, authors vented their anger on blogs, Facebook and Twitter, riling up fans. Scalzi concludes that the maladroit moves made people "want an iPad even more."

But that's not the only way Apple benefits from this. According to Motoko Rich and Brad Stone in The New York Times, Amazon's decision to drop the flat-rate strips away its incumbent advantage over Apple. Now Amazon will be using the same pricing system that Apple already introduced:
Amazon's decision is... a victory for Apple's chief executive, Steven P. Jobs, who first pitched the idea of selling e-books under the agency model to book publishers earlier this year. Now Apple, whose iPad tablet is due in March, can compete on fairly equal footing with Amazon.
Is this the beginning of the iPad's takeover of the Kindle?