In the wake of Apple antitrust claims, Amazon cuts ebook prices

The US government’s decision to take Apple to the cleaners for running a price fixing racket on its ebook customers means that Amazon can lower the price of its products.

Just as the Department of Justice announced that it was suing five major publishers and Apple on price-fixing charges, and simultaneously settling with three of them, Amazon announced plans to slash prices on e-books. Some major titles could fall to $9.99 or less from $14.99.

Publishers and booksellers warn that users should not celebrate as Amazon is already too powerful in the market.

Apparently it is much better to pay them and Apple shedloads of cash to keep the prices up instead.

Book publishing analyst with Simba Information Michael Norris told the New York Times that if Amazon had been puppeteering the whole play, it could not have worked out any better.

Of course the New York Times would be desperate to support Apple in this particular case. The idea of forming a cartel was Steve Jobs’ idea and the Times thinks he could do no wrong.

The Times claims that Amazon can afford to take a loss on every book it sells to gain market share for its Kindle devices. When it has enough competitive advantage, it can dictate its own terms.

The Times is practically claiming that it is all a plot by Amazon to force its Kindle on users over the iPad

But the situation is more than simply Amazon becoming too dominant. The bookseller has reached that position because the publishers have had their eyes shut over the last decade. Ebooks are just another example of how they have been inflating prices.

What is distracting the argument is that for years, publishers have had to pay huge amounts of money to get books distributed. Typically 60 percent of the cost of a book  would be spent on distribution.

Ebooks put a spanner in the works. Not only are they incredibly cheap to make, they are also very cheap to distribute.

This has left the industry wondering what to charge. Practically, publishers could sell ebooks for a quarter of the price of a hard copy and still profit.

The fact they didn’t and even did a dodgy deal which effectively gave the ebook market to Jobs shows how out of touch they were with what was happening.

What everyone should have been doing was forming their own Amazon for ebooks which effectively undercut the outfit. Instead of trying to push prices up, they should have been forcing them down themselves.

Part of the problem is the book retailers themselves, who are going to the wall extremely fast. If you think about it, how often do you buy a book from a shop these days?

However, when they go under, they take a lot of stock with them – which damages the publishers’ profits because old stock has to be remaindered.

Ebooks were a way of propping up the market in transition.  Apple and its colluding publishers missed the boat with that. They thought it was all about short term gain in a way that no anti-trust regulator could ignore.

Eventually we will see prices of ebooks fall further. Not because of a conspiracy to push a particular type of reader, but because that is what users want.

While hard copy books will always be wanted, there is more pressure for electronic versions to be made.