[A]ccording to at least three people with knowledge of the discussions, who spoke anonymously because of the confidentiality of the talks, Apple inserted provisions requiring publishers to discount e-book prices on best sellers -- so that $12.99-to-$14.99 range was merely a ceiling; prices for some titles could be lower, even as low as Amazon’s $9.99. Essentially, Apple wants the flexibility to offer lower prices for the hottest books, those on one of the New York Times best-seller lists, which are heavily discounted in bookstores and on rival retail sites. So, for example, a book that started at $14.99 would drop to $12.99 or less once it hit the best-seller lists.

Moreover, for books where publishers offer comparable hardcover editions at a price below the typical $26, Apple wanted e-book prices to reflect the cheaper hardcover prices. These books might be priced much lower than $12.99, even if they did not hit the best-seller list.

The Kindle Development Kit (KDK) will be available in limited beta form next month and the new software and other content from the initiative is expected to be in the Kindle Store later this year, Amazon said in a statement.

Examples of what kind of content people can expect for their Kindles include travel books with real-time weather updates and current events, cookbooks that recommend menus for people with allergies or different kinds of parties, and the inclusion of word games and puzzles for the Kindle.

The KDK gives software developers access to programming interfaces, sample code, tools and documentation to build content for Kindle's high-resolution electronic paper and to use its 3G capability and other functions.

Starting on June 30, Amazon says that for each Kindle book sold, authors and publishers who select the new 70 percent royalty option will receive 70 percent of the list price, minus delivery costs. This new option will be in addition to and will not replace the existing DTP standard royalty option, which is set at a 65-35 split, with 65 percent going to Amazon.

Amazon didn't have any comment about whether the new pricing was a response to Apple's royalty program for its App Store, which offers thousands of e-books as self-contained apps along with e-reader apps from Amazon (Kindle Reader, Stanza), Barnes & Noble, and other e-book stores. But it did say that delivery costs will be based on file size and pricing will be 15 cents per megabyte.

"At today's median DTP file size of 368KB, delivery costs would be less than $0.06 per unit sold," the news release notes. "This new program can thus enable authors and publishers to make more money on every sale. For example, on an $8.99 book an author would make $3.15 with the standard option, and $6.25 with the new 70 percent option."

TUAW has learned that Apple has begun rejecting all e-book submissions because "this category of applications is often used for the purpose of infringing upon third party rights. We have chosen to not publish this type of application to the App Store." At first glance, this policy seems in line with Apple's approach to applications that promise charitable contributions. Apple cannot police the developers and will not allow possibly fraudulent postings on their store. Apple does not want to be in the position of vetting rights claims.

At the same time, Apple has been rejecting applications from content providers who do in fact own the rights to their materials and can prove those rights. A colleague who spoke on the condition of anonymity related that a project he developed for a national content syndicate was rejected without recourse. He still got paid for his work but the application languishes without an outlet.

Apple isn't stopping with content source providers. They're also targeting those who provide media browsing tools. Another developer who built an e-book reader received a recent rejection along the same lines. The application might be used to read copyright infringing books, so Apple will not let it in App Store. In an e-mail, he wrote, "Leaving aside the presumption of innocence, [what] about iTunes and iPod; shouldn't they be banned too? After all many users indeed are using them to listen to the music that is not always legally obtained."