[LINK] "How Apple and Big Publishers Pushed E-Books Toward Failure"
Bloomberg's Joshua Brustein notes how Apple and big publishers helped undermine e-books--at least their e-book markets--with their pricing strategies.
Apple suffered a final defeat in its legal fight with the Justice Department over e-books Monday, when the Supreme Court refused to hear the company’s appeal. When the case was filed in April 2012 it was seen as a fight over the future of the digital book industry, with Apple Inc. and the five biggest publishers aligned against Amazon.com Inc. While Apple and its allies lost in court, their vision for the industry won out. It hasn’t been good for e-books.
The Apple case centered on whether publishers or online retailers would determine the prices for e-books. At the time, Amazon was selling e-books at a loss, buying a book for, say, $14.99 but then charging Kindle users just $9.99. Publishers worried that tactic would train customers to expect books to come cheap forever. Apple came along and offered to let publishers set their own prices. But the Justice Department thought the cooperation between Apple and the publishers to drive up the price of e-books was anti-competitive. The courts agreed.
While Apple fought through the courts, the publishers all settled with the Justice Department. Meanwhile, Amazon decided that letting publishers set their own prices wasn't such a bad idea, after all. Its newest deals with the big publishers allow them to do so. If Apple hoped to gain an advantage over a rival, it failed. Amazon controls about three-quarters of the U.S. e-book market, according to Good e-Reader, a website that follows the industry. In 2010 it made up 54 percent of the market.
Once Amazon gave up on its goal of setting a $10 standard price for e-books, the prices began to rise. Today, three of the top five best-selling books on the New York Times list for fiction cost at least $12. It’s not unusual to be able to buy a paperback book for less than the cost of the digital version.
There’s a widespread assumption that digital media always wins out over physical media. But even the Internet isn’t immune to the basic laws of economics. E-book sales declined 12.3 percent over the first 10 months of 2015, compared with the previous year, according to the American Association of Publishers, which compiles data from 1,200 companies.
Apple suffered a final defeat in its legal fight with the Justice Department over e-books Monday, when the Supreme Court refused to hear the company’s appeal. When the case was filed in April 2012 it was seen as a fight over the future of the digital book industry, with Apple Inc. and the five biggest publishers aligned against Amazon.com Inc. While Apple and its allies lost in court, their vision for the industry won out. It hasn’t been good for e-books.
The Apple case centered on whether publishers or online retailers would determine the prices for e-books. At the time, Amazon was selling e-books at a loss, buying a book for, say, $14.99 but then charging Kindle users just $9.99. Publishers worried that tactic would train customers to expect books to come cheap forever. Apple came along and offered to let publishers set their own prices. But the Justice Department thought the cooperation between Apple and the publishers to drive up the price of e-books was anti-competitive. The courts agreed.
While Apple fought through the courts, the publishers all settled with the Justice Department. Meanwhile, Amazon decided that letting publishers set their own prices wasn't such a bad idea, after all. Its newest deals with the big publishers allow them to do so. If Apple hoped to gain an advantage over a rival, it failed. Amazon controls about three-quarters of the U.S. e-book market, according to Good e-Reader, a website that follows the industry. In 2010 it made up 54 percent of the market.
Once Amazon gave up on its goal of setting a $10 standard price for e-books, the prices began to rise. Today, three of the top five best-selling books on the New York Times list for fiction cost at least $12. It’s not unusual to be able to buy a paperback book for less than the cost of the digital version.
There’s a widespread assumption that digital media always wins out over physical media. But even the Internet isn’t immune to the basic laws of economics. E-book sales declined 12.3 percent over the first 10 months of 2015, compared with the previous year, according to the American Association of Publishers, which compiles data from 1,200 companies.