Apple execs and some media pundits seem to be confusing digital music circa 2002 with digital books in 2011. But in the digital arena, who’s on top shifts as quickly as the most popular gadgets do. A lot of people buy iPads, but they’re buying them for purposes other than reading, and those who do read on their iPads are most likely to opt for Amazon’s Kindle app and store.

The reason is obvious. As a writer, I’m no more a fan of Amazon’s bullying tactics than I am of Apple’s. But in the digital book arena Amazon is beating the socks off Apple in selection and features. The improvements are coming so fast, that there’s little or no chance of Apple catching up anytime soon. For why, you need only look at the CEOs. Steve Bezos wants to win and win big. Steve Jobs doesn’t.

Of course, Apple still has a mystique that anything they touch turns to gold–much like Microsoft had in the mid-90s. But in the long run, staying on top requires thought and hard work more than image and bullying. Apple is simply repeating the mistakes AT&T, IBM, and Microsoft made between the 1960s and the 1990s. They’re attempting to use market dominance to crush their competition.

The sad thing is that those other corporations really did dominate their respective markets. When the FCC ruled in Carterfone’s favor in 1968, almost everything connected to phones lines was made by AT&T affiliate Western Electric. In the 1970s, when IBM demanded that only their accessories could be attached to their computers, they really did own the mainframe market.

But Apple is attempting to dictate rules in two markets it does not control. Running third in ebooks and just entering the subscription market, Apple is acting like it owns both simply because it sells a lot of something else, iPads and iPhones. That’s the foolish pride that goes before a fall.

It’s also why I attach a different meaning to Apple’s recent ban on the Sony ereader app and on what looks like attempts to make it impossible for Amazon and B&N to stay on Apple devices by demanding 30% of retail for products that typically have only a 30% markup.

Apple moves are born more of desperation than good business sense. The iPods (music sales) and the iPhone (cellular subsidies) conditioned Apple to think that dominating with a device automatically meant dominating aftermarket sales of what went on that device. That clearly isn’t so with digital readers. Amazon has been able to neutralize Apple’s market share by creating its own speciality device (at one-third the cost) and by creating free apps that run on Apple devices and most computing platforms. Amazon’s potential ebook customer base is far larger than Apple’s.

Apple could try competing openly and fairly in what is clearly an uphill battle for them, but it seems to opting for rules, restrictions and bullying tactics that are likely to result in consumer anger, federal intervention, and perhaps most costly of all, civil lawsuits. The last would come when iPad and iPhone owners can no longer read the ebooks they bought from Amazon.

Perhaps Apple will turn back from this abyss. What they’ve been saying has been muddled enough that there may still be a debate within Apple about the best path to take. We can only hope that they choose to compete rather than to bully.