–by Elisabeth Oppenheimer

The iPhone App Store is selling e-books, and (surprise!) has upset authors and developers by rejecting books with “objectionable content.” As usual, we don’t really know how the App Store rejection process works. But they seem to be searching books for the f-word and rejecting those that use it. Author Moriah Jovan had a book rejected last month on that basis (although the rejection didn’t mention the book’s more creative obscenities). CNET editor David Carnoy also had his thriller rejected, but decided to edit out the profanity and got the book into the App Store.

It’s important to realize, though, that the situation with e-books isn’t exactly like the situation with other apps. If you develop an iPhone app that makes farting sounds, and Apple rejects it, that’s it: you’re off the phone. (Good news on that front, though: Apple has caved to pressure and allowed iFart back on the phone, although it’s labeled “mature” content. Really, “mature”?) But there are two ways to get e-books onto an iPhone, and right now, most e-books aren’t sold directly through the Store the way other apps are. Instead, readers download a (free) app like Stanza or eBook Reader. They can then buy a wide variety of books—un-reviewed by Apple—at stores linked to those apps, or they can convert Kindle or other e-book files for use on the iPhone.

Alternatively, readers can buy an “application” that is actually a book wrapped with its own built in reader. So one application is one book, not a gateway to many books. These “apps” can be bought directly from the App Store instead of through a third party. That’s how Jovan and Carmony wanted to submit their books, and that’s where Apple exercises control. Right now, however, only a minority of books sold for iPhones are sold through the store as apps. Most people go through a program like Stanza or e-Book Reader.

So how upset should we be about Apple’s choice? “Censoring books” is rarely a good PR move. It’s easy to take Apple to task for being inconsistent in how they apply their “obscene content” standard, and inconsistency scares off developers. Frankly, I’m not sure I understand how this is good business for Apple—I’d think they’d want the book market, even if they have to label some books as “explicit” the way music is labeled in iTunes, or institute a rating system like they do for movies. (Apple doesn’t sell NC-17 movies for the iPhone either.) And bouncing every book that uses four-letter words cuts the book market significantly.

But, looking at it from the perspective of a reader or an author, it’s still possible to get a given book on the iPhone without going through the App Store. The system actually looks something like what happens on Android: Google can exercise control over what’s in the Android Market, but it doesn’t block alternative distribution systems. Right now, the e-book ecosystem for the iPhone is such that selling books via sites linked to Stanza or e-Book reader is probably as profitable as selling through the iPhone. However, authors might prefer to package their books as applications (say, so that they could build a reader with interesting features, or because they like the revenue model better). If so, they’ll have to face Apple’s literary decisions.

This actually strikes me as less pernicious than Apple’s judgments about non-book applications, because there is a viable—if not perfect—alternative distribution method for e-books. I’ll be interested to see how the two markets for e-books develop. But what do you guys think? Is this worse than blocking Podcaster for duplicating iTunes functionality, or I Am Rich for doing nothing?