Earlier this week, Amazon bought Lexcycle, developer of the popular eBook Stanza. Although the acquisition caught most people off guard, in retrospect, it makes a lot of sense. Between Lexcycle’s Stanza and Amazon’s Kindle for iPhone, Amazon now has a lock on the eBook business in the App Store.

Books is the fastest-growing category in the App Store, according to O’Reilly, a book publisher. About 6 out 10 books in the App Store sell for 99 cents or less, and 1 in 20 are free. The number of premium-priced ($10 or more) has grown from about 1 in 50 books to 1 in 10 in recent months.

Lexcycle’s Stanza is a long-time best-seller and one of the more capable  eBook readers in the App Store. AppCraver gave it high marks in “Stanza eReader Opens New Chapter for Reading on iPhone,” when we did a review of it last January.

Stanza supports a wide variety of eBook formats: including DRM-free Amazon Kindle, Mobipocket, Microsoft LIT, PalmDoc, Word, RTF, HTML, PDF and others. Stanza iPhone/iPod touch also supports e-Reader with or without DRM and ePub without DRM.

In March, Amazon jumped into the App Store with Kindle for iPhone, a free app we glowingly reviewed in “Kindle for iPhone a Reader’s Delight.”

Unlike Stanza, Amazon’s Kindle device doesn’t currently support ePub file and its Kindle for iPhone app does not permit users to download content from within the application. The ePub format is an open standard supported by the International Digital Publishing Forum.

Lexcycle says on its Web site, that it’s not “planning any changes in the Stanza application or user experience as a result of the acquisition. Customers will still be able to browse, buy, and read eBooks from our many content partners. We look forward to offering future products and services that we hope will resonate with our passionate readers.”

Lexcycle also offers Stanza in Mac and PC versions that enable you to transfer your eBooks from desktop to handheld. If Apple introduces the tablet computer it is rumored to be developing for release this year, Amazon will solidify its position in the eBook market even more.

Just how much Amazon paid for Lexcycle, neither company is saying.

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app category: Breaking News