We’re all familiar with the antitrust complaint that the Department of Justice filed against Apple and five major publishers back in April, but how much of an impact that case could have on the book business if the ruling goes against Apple and its partners is beginning to come into focus.
When Apple launched the iBookstore back in 2009, it had a huge impact on Amazon; it dramatically reduced the retail giant’s market share of the ebook business from 99% to just 60% in three years, breaking its monopoly on ebooks.
But it wasn’t all good for publishers.
Apple attracted publishers with an iTunes pricing model that meant they could pick and choose their ebook prices, then provide Apple with a 30% cut — just like Mac and iOS developers do. Amazon’s plan was vastly different. Instead, it paid publishers $15 each for their books, and then sold them to Kindle users for just $10.
This was great for the user, but publishers were worried that over time, this price model would devalue their content. And as Amazon was in control of the market, it could, at any time, decide to pay only $5 per book instead of $15, and publishers would have no choice but to accept it.
In the early days, then, publishers did their business with Amazon because there was no alternative. Then iBooks came along, which allowed them to regain control. But Apple had a catch: Four of the six major publishers in the United States would have to sign up, or none of them would be able to take advantage of the deal. In the end, five of them did.
The result of this was that publishers actually made less for each book sold through the iBookstore than they did selling their content through Amazon — sometimes up to $100 million less each year. But it meant Amazon’s monopoly was finally broken.
“Publishers believed that Amazon was attempting to control every part of the industry,” Auletta writes, and that they were “worried that bookstores, burdened by the costs of rent and staff, were unable to compete with Amazon. Without the stores, publishers would lose their main customers, and their strongest ally in marketing.”
For customers, this should be great news, because it means we have choice, and that we can’t be forced into paying certain prices because only one retailer is selling ebooks. However, the DoJ believes that customers were harmed because Apple and the publishers colluded to make prices higher.
If the case goes against Apple and the two remaining publishers who haven’t already settled with the DoJ, it could have a huge impact on the ebook business. Amazon could regain some of its monopoly yet again.
Source: The New Yorker
Killian Bell is a freelance writer based in the U.K. He has an interest in all things tech and also covers Android over at CultofAndroid.com. You can follow him on Twitter via @killianbell.
10 responses to “Apple’s iBooks Scheme Dropped Amazon’s Monopoly To 60%, But Killed Industry Profits”
As bad as this sounds, as a consumer, I don’t care who has the monopoly–what I care about is that content delivered via e-format is rightfully priced lower than a hardcover or even a paperback edition of an actual book. That is the sad fact that just hasn’t happened since Apple got involved in this process. I don’t agree with paying the same or sometimes MORE than the cost of a printed book when I know that logically; it shouldn’t have cost the publisher any more to produce.
I thought consumers always wanted choice, so why all the bitching? Choose either Apple or Amazon and keep the money flowing.
Explain the Amazon model to me. They sell the Kindle at or below cost to make it up on content sales. Then they sell the content for $5 less than their cost. It seems to me that the model is badly mis-designed or this report has got it’s facts out of whack. What’s the real story??
I totally agree with you on the wanting to pay a decent price for ebooks…my problem is with your indifference to the monopoly, because if Amazon or Apple end up being an ebook monopoly and also kill off the brick&mortar stores, life for people who read is going to suck hard…prices are going up, you can bet on that, and quality is going to go down, because the monopolist can (and you bet they will) pay less to the publishers, who in turn will pay less to their workers, including writers…it’s gonna become an ugly mess, just as it was starting to happen when Amazon was solely in control.
You are
not paying too much for ebooks. You are
paying too little for many of the paperbacks and hardcovers sold at a loss by
Amazon. Predatory pricing is just as
insidious (if not more-so) towards a fair competitive marketplace as is agency
pricing.
The problem for publishers is that Amazon – itself – IS A PUBLISHER. Amazon – itself – competes directly with the publishers.
The publishers set the prices so if they aren’t making money, that’s on them.
Also, that whole at least 4 companies feels pulled out of thin air. I’m not sure I buy that detail as true.
I still haven’t purchased a book from iBooks. Every time I looked for a book, I couldn’t find it or it would be less expensive elsewhere. So I shopped Amazon, B&N and the self-publishing stores out there. Now I don’t even bother looking in iBooks and don’t have the app on my devices. I’d delete my empty Newsstand app as well if it let me. Just haven’t found anything there that provides value to me personally.
I don’t think they do that anymore or ever did for every book. They also make a lot of money off the Self-Publishing business they are running because they get 30% plus delivery fees for any book over 99 cents.