The US Justice Department interceded in the business affairs of Apple and Amazon lately, ruling on the side of lower-priced e-books. The Department posed an antitrust suit on Apple and five other large book publishers. The government felt the group of publishers was strategically attempting to raise the prices on e-books, prices which Amazon has lowered to $9.99 for new and popular books.
Obviously there must be some limits to how brands treat consumer wallets. As the Times article highlights, the economically-priced e-books of the Amazon brand is fueled by its interest in selling its own e-reader, the Kindle.
Publishers, who want more money for books from suppliers, looked to Apple to charge more money. Kindle is able to ‘take a loss’ on book sales to leverage the market, a market it controls 60% of at present. When Amazon fields enough leverage, it can then dictate ‘its own terms.’ Publishers are looking to recruit more money from e-book sales due to the waning sales of physical books. Publishers fear if Amazon widens the price gap between physical and e-books, the former group will lose even more of a hold on the physical book market as they also get defeated regarding e-book sales.
When Apple came out with the first iPad, it seemed publishers had another vehicle. As the government suit reflects, it seems publishers were resentful toward the evolution of relations with Amazon. The suit quotes David Shanks: “I am now more convinced that we need a viable alternative to Amazon or this nonsense will continue and get much worse.”
As the article relates, the government’s decision will aid consumers at present. A publishing consultant sees a different dynamic. “But in the longer term, competition erodes as the spread between e-books and physical books grows greater. There will be fewer retail stores.”
Book retailers fear for their livelihood and the fate of major publishers. “My fear is that the major publishers won’t be able to stay in business just selling e-books. You can’t bring in enough money to support the infrastructure. If that happens there goes the marketing, the editorial, the author tours, the expertise of the book industry,” says one bookstore owner.
The plaintiffs are the consumers who were suddenly charged $14.99 rather than $9.99. Hagen Berman, the firm representing the plaintiff is housed in a Seattle office space, one also housing Amazon, though the former party denies any affiliation or connection.
Publishers, at present, are keeping a firm stand, not wanting to be bullied by Amazon and falling prices of e-books. Curt Matthews of IPG asks, “Why should publishers cede all of their power to this new player in the book business?”