The iPad is not a serious contender yet, after all it isn't an actual eBook reader, just a really blown up iTouch, but Amazon and the publishers it depend on are treating it like one. The Macmillan battle showed Amazon how seriously it has to take the iPad. But Amazon is really ramping up the desperation with plans like giving away the Kindle to Amazon Prime customers. This is what we call real Escalation of Commitment issues on Amazon's part, mainly because Amazon is trying to protect the bad business decision it made by getting into the Kindle business in the first place.

The Kindle was very obviously inspired by Apple's iTunes business model, but where Apple was trying to sell hardware with a business model that made music content more accessible, Amazon is already in the selling content business, which made the Kindle a bad idea. It's possible that Jeff Bezos had already foreseen Apple launching something like the iPad and taking away the book business from Amazon, but even so the Kindle was a poor response to it.

From the bottom up, the Kindle was poorly designed and not all that appealing a device. Where the iPod filled a niche that people needed in the digital era, the Kindle was a device most people never needed at all. And if Amazon should really be worried, it's not about the iPod, which has the appeal of a 500 dollar dead fish, but about Barnes and Nobles' Nook, which is cheaper and more stylish than the Kindle.