Cheaper e-books: Where's the downside?

Amazon is dropping prices to as little as $9.99, raising concerns that the discounts could hurt the rest of the publishing industry.

By TheWeek.com Apr 16, 2012 1:17PM

The Department of Justice last week sued Apple (AAPL) and a cabal of book publishers for fixing higher prices for e-books. The government sided with Amazon, the maker of the Kindle e-reader, in concluding that Apple's deal unfairly drove up prices for customers. Amazon (AMZN) immediately announced that it would lower its e-book prices to as little as $9.99, from the previous basement of $14.99, ostensibly a huge victory for readers everywhere.


But booksellers and publishers are warning that the bargain will have ugly consequences. Could cheaper e-books actually be a bad thing?


It could give Amazon a monopoly over e-books. "Amazon, already the dominant force in the industry, will hold all the cards," says David Streitfeld at the New York Times. Amazon is willing to "take a loss on every book it sells to gain market share for Kindle devices," a luxury unavailable to publishers and booksellers. Amazon's low prices will push prices down across the industry, while making physical books all the more unattractive price-wise. That could spell financial ruin for brick-and-mortar stores, including Barnes & Noble (BKS). The "ultimate effect" of the Department of Justice's suit "will be to exchange a perceived monopoly for a real one." 


Publishers have only themselves to blame. Lower e-book prices will be a "boon to smaller publishers, authors, and -- most importantly of all -- readers," says Will Entrekin at the Huffington Post. Amazon rose to dominance by "innovating, advancing, and refining its business model to better serve its customers," while corporate publishers "clung to a business model despite innovations that could have helped lower their costs." Why didn't any of the publishers design their own e-readers or enhance their websites? It's their own fault if they didn't take advantage of new technologies. 


Apple's price fixing actually helped fight monopoly. Apple is saying its deal with the publishers was necessary to break up Amazon's "monopolistic grip" on the industry, says Melissa Daniels at Mobiledia. Amazon's market share of the e-book industry used to be 90%, and has since fallen to 60%, which is evidence that Apple's price-fixing arrangement encourages more competition. "If Apple wins the case, it could mean such arrangements aren't considered a violation of antitrust laws but serve as a vehicle to keep one competitor from cornering the market."


Sources: New York Times, Huffington Post, Mobiledia


More from The Week

8Comments
Apr 16, 2012 1:41PM
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So Apple owns the music industry, now they want to own the e-book industry.   I'm cheering for AMZN so it's one less thing Apple can own.   
Apr 16, 2012 3:29PM
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Lower prices for books?  Why not?  Let the other booksellers lower their prices too...  It's called FREE MARKET COMPETITION!!!
Oct 15, 2012 7:31PM
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 LOL Kart.  This story is about price fixing which Apple have been attempting to do for years at their customers expense!  Apple is all about keeping their prices artificially high to maximize profit and doesn't give a damn for the consumer.

 Yes Amazon tried the same and then got caught out, but if Apple's corporate strategy was fully investigated under the same law they would end up paying out more than they earn in several years lol.
Apr 16, 2012 3:55PM
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For those that need to buy the first mass printing ie: hardcover books I have no problem with the standard prices that useually come out, I still wait for the "paperback" price to come out before considering bying an E-book. Also one publisher I visit are on average 2-3 dollars cheaper than most E-book stores.
Apr 16, 2012 4:57PM
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Horribly biased article.   To imply Amazon would have a monopoly on ebooks because of the kindle is pure hype. My family reads all our ebooks on Ipads. 

 Amazon's market share of the e-book industry used to be 90%, and has since fallen to 60%, which is evidence that Apple's price-fixing arrangement encourages more competition.

  What idiot are they trying to convince that price fixing encourages competition? Is there anyone else beside me that doesn't know that price fixing is a method to eliminate competition so that all the sellers make more money, not just the one with the lowest price?

 

Apr 16, 2012 3:27PM
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Beware when the government says they are here to help. They will end up killing the publishing industry and kids in school will be forced to pay $150.00 per book year after year from niche publishers.
Oct 16, 2012 2:46PM
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I don't get why they charge more or the same for ebooks when they are cheaper to distribute. You don't have to print them, ship them or shelve them. It seemed completely stupid to charge more. Even magazines are more. Why? It just irks me all the time. It is more efficient and even better for the environment to go digital. Grr, still I will buy papebacks (from Amazon) because they cost less. It is stupid to me but I'm not going to pay more for a digital copy. Plus I guess I can still share my paperback with friends or sell it second hand or donate... 
Apr 16, 2012 1:37PM
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Have Apple credit the $4.00 back to everyone that has bought one of the offending e-books, have them pay a big fine and move on. I get that we want to have good over watch on matters of this sort, but it's a news point and has minimal impact on the company as a whole. Apple might make the fine up in one day in profits. It's a speed bump. Now, Apple might counter sue for defimation and ask for a retraction of the story. Black eye to the Gov't and again Apple makes up the legal costs in a day.  

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