$9.99 Ebook Price to Cost Apple $252 Million
The traditional publishing world fears the discounting power of Amazon so much that it sided with Apple in a price-fixing scheme that brought on an antitrust suit from the U.S. Justice Department. If the defendants lose the case (three publishers named in it have already settled) the publishers have the most to lose. It would cost them millions in having to drop back down to Amazon’s ebook prices, which were typically 33% less than what they were charging through Apple’s scheme. A loss won’t matter much to Apple, and such a price cut could save consumers $252 million on its e-books between now and 2015.
CEO Jeff Bezos headed to Seattle in 1994 to be near the warehouse of book wholesaler, Ingram, when he started Amazon. One of the forces that’s been driving Bezos is a vision to create a more direct connection between authors and readers.
And when he looked at the network of participants in the traditional book industry, he saw plenty of inefficiency. After all, between the author and the reader, there was the publisher, the book manufacturer, book wholesalers, and retailers. Bezos achieved initial success by bypassing the book retailers, And his ultimate vision is a world in which authors contract with Amazon to write e-books that readers digest on their Kindles.
And while that would make selected authors and readers better off — since popular authors would end up with more cash and readers would pay less to read their work - the vision Bezos is pushing causes a world of hurt for book marketers, manufacturers, agents, retailers and their suppliers.
Not surprisingly, the publishing industry eventually responded to Amazon. Among its moves, alleges the U.S. government, was collaborating to raise ebook prices. More specifically, the U.S. alleges that in “phone conversations, e-mails and dinners at exclusive New York restaurants,” top executives of Amazon’s e-book competitors, “colluded to wrest control of the market from amazon.com and raise prices on e-books.”