The Apple vs. Amazon story: e-books, tablets

A judge’s approval of a settlement in the e-books price-fixing case, which was announced Thursday, means Apple and three major book publishers will have to rip up their agreements to use an agency pricing model. The model allows publishers, not retailers, to set the prices of e-books. It was adopted by Apple and five publishers when the company introduced the iPad. The deal emboldened publishers to put pressure on Amazon, and it, too, eventually adopted agency pricing. In April, the Department of Justice accused Apple and the publishers of conspiring to fix prices. (See Apple and e-book lawsuit: If DOJ prevails, will readers find happy ending?)

The settlement’s approval is being seen as a win for Amazon.com. Apple, publishers and others such as the Authors Guild say moving away from agency pricing will be a boon for the mighty Seattle-based online retailer, which early on cut prices on its way to dominating the e-books market. The New York Times points out that Amazon, which makes the popular Kindle e-reader, indicated in April when the settlement with three of the five publishers was first announced that it intends to slash e-book prices.

Has the end been written? Will Amazon prevail over Apple in e-books because it will sell e-books for less?

Well, the hardware side might also have something to do with how the story turns out. Amazon unveiled new models of Kindle e-readers and tablets Thursday. While Apple’s iPad continues to dominate the tablet market — Gartner projects the iPad’s 2012 market share at 61.4 percent — Amazon stepped up the competition by introducing Kindle Fire tablets that are larger and have a high-definition display. Amazon CEO Jeff Bezos reportedly claimed that “we have just built the best tablet at any price.” Analysts quoted by the Associated Press say Amazon’s unveilings mean the company’s tablets are a “legitimate competitor” in the market.

If the new Kindle Fire hardware makes Amazon’s tablets more competitive with the iPad, and are cheaper besides, can they pose a real threat to Apple’s tablet? Not yet, writes Jon Fortt for CNBC: “Amazon has content galore, and great services for the Kindle lineup. But a weak spot? Apps.” So it goes back to the platform, and apps are a vital part. Amazon may have the e-books advantage, but Apple’s iOS platform has the bells and whistles that can make a tablet sing. Or play a movie. Or explore content in some other way.

Yet we know the iPad is not assured of dominance. Note that Gartner’s numbers show that the 61.4 percent iPad market share for 2012 actually shrank from 66.6 percent market share last year. Gartner reports that Android-based tablets, which include the Kindle Fire, are growing in market share, 31.9 percent (projected) in 2012 compared with 28.8 percent in 2011.

So the Apple vs. Amazon story continues. It’s sure getting to be more interesting.

Amazon shares were up sharply as of this post, about 2.5 percent to $258.80. Apple shares were up less than 1 percent to about $681.05.

 

 

 

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  • Publishers and authors can still try to command a minimum revenue share per title sold when/if they can negotiate with living, breathing personnel at these marketplaces. It all comes back to demand, just as it does with most anything sold. If the book or catalog of titles available are in high demand then marketplaces might be inspired to deviate from their fixed formulas.

    The one formula that is proven not to work far more often than not for publishers, authors, developers of any content is the one that many online marketplaces intent on selling hardware force upon their IP providers: a race to zero dollars per unit sold will squash quality content development.

 
 
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