The Department of Justice last week sued Apple and a cabal of book publishers for fixing higher prices for e-books. The government sided with Amazon, the maker of the Kindle e-reader, in concluding that Apple's deal unfairly drove up prices for customers. Amazon immediately announced that it would lower its e-book prices to as little as $9.99, from the previous basement of $14.99, ostensibly a huge victory for readers everywhere. But booksellers and publishers are warning that the bargain will have ugly consequences. Could cheaper e-books actually be a bad thing?
It could give Amazon a monopoly over e-books: "Amazon, already the dominant force in the industry, will hold all the cards," says David Streitfeld at The New York Times. Amazon is willing to "take a loss on every book it sells to gain market share for Kindle devices," a luxury unavailable to publishers and booksellers. Amazon's low prices will push prices down across the industry, while making physical books all the more unattractive price-wise. That could spell financial ruin for brick-and-mortar stores, including Barnes & Noble. The "ultimate effect" of the Department of Justice's suit "will be to exchange a perceived monopoly for a real one."
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Publishers have only themselves to blame: Lower e-book prices will be a "boon to smaller publishers, authors, and — most importantly of all — readers," says Will Entrekin at The Huffington Post. Amazon rose to dominance by "innovating, advancing, and refining its business model to better serve its customers," while corporate publishers "clung to a business model despite innovations that could have helped lower their costs." Why didn't any of the publishers design their own e-readers or enhance their websites? It's their own fault if they didn't take advantage of new technologies.
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Apple's price-fixing actually helped fight monopoly: Apple is saying its deal with the publishers was necessary to break up Amazon's "monopolistic grip" on the industry, says Melissa Daniels at Mobiledia. Amazon's market share of the e-book industry used to be 90 percent, and has since fallen to 60 percent, which is evidence that Apple's price-fixing arrangement encourages more competition. "If Apple wins the case, it could mean such arrangements aren't considered a violation of antitrust laws but serve as a vehicle to keep one competitor from cornering the market."
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