Tuesday, June 25, 2013

An interesting case

An interesting point about ebooks is that their use is not governed merely by the technology available but by the marketplace. Sony had a very nice e-ink reader before Amazon came out with the first gen Kindle (which looked a little clunky in comparison), but Sony didn't have much of a bookstore, and its Reader never got much traction in the marketplace. Amazon was the first company to successfully deal with the chicken-egg problem: no one would buy an ereader unless there were lots of ebooks to read, and one one would publish in ebook form unless there were lots of folks with ereaders. Their success gave them a solid head start in the ebook race.

To establish the Kindle as a viable reading platform, Amazon not only created apps for other devices (iPhones, iPads, PCs, Android), they discounted the price of ebooks so that best sellers were rarely more than $9.99. They could do this because publishers sold ebooks at wholesale rates; they set a price, and Amazon paid them that amount. Amazon then turned around and set its own retail price at whatever it wanted, sometimes less than it had paid for the book.

It was the Kindle's success that made the publishers fear it. In case you haven't been following it, there is a case in federal court right now that relates to the struggle for the ebook market. The Department of Justice is suing Apple about possible price fixing and antitrust aspects of its agreements with five of six of the major publishers; those agreements called for agency pricing where the publisher sets the retail price and the retailers gets a set percentage of it when the book is sold. The five publishers, who made Amazon accept agency pricing, too, have all already settled.

Apple has a lot of (very good) lawyers, so I am wondering how this lawsuit will come out. A judge is hearing it, not a jury, so there won't be any kind of deadlock. But I do wonder if Steve Jobs were still alive if they would call him to the witness stand.

The case is awaiting a decision and speculation is rife on the internet.

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