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Description: The government’s decision to pursue major publishers on antitrust charges has put the Internet retailer Amazon in a powerful position: the nation’s largest bookseller may now get to decide how much an e-book will cost, and the book world is quaking over the potential consequences.

Source: nytimes .com

Date: April 11, 2012

But publishers and booksellers argue that any victory for consumers will be short-lived, and that the ultimate effect of the antitrust suit will be to exchange a perceived monopoly for a real one. Amazon, already the dominant force in the industry, will hold all the cards.

“Amazon must be unbelievably happy today,” said Michael Norris, a book publishing analyst with Simba Information. “Had they been puppeteering this whole play, it could not have worked out better for them.”

The government said the five publishers colluded with Apple in secret to develop a new policy that let them set their own retail prices, and then sought to hide their discussions.

After that deal was in place in 2010, the government said, prices jumped everywhere because under the agreement, no bookseller could undercut Apple.    Read Rest of Story

Questions for discussion:

  1. If you were in the book industry, what are the ramifications on the industry of the discovery of price fixing with Apple and others?

23 Responses to “Cut in E-Book Pricing by Amazon Is Set to Shake Rivals”

  1. JC

    Being in the book publishing industry is a difficult industry to be in right now. The way companies do business has obviously changed over the past few years and every company has had to evolve or go under. As was mentioned in the article, the price difference between hard copy books and e-books is growing and due to this new legislation it will soon become even greater. The inexpensive nature of e-books has already changed the book industry as a whole, putting hundreds if not thousands of smaller book stores out of business and even putting strain on huge corporations like Chapters. It will be interesting to see what this lowering of prices by amazon will do to the remaining book stores around the world. If anything the alleged price fixing by companies selling e-books has helped the industry stay afloat and kept it from becoming a complete monopoly, something we are about to see happen as amazon will now be able to put their competition out of business for good. Amazon already controls the majority of the industry, as was talked about in the article, but now with the help of government intervention they are in position to take the remaining forty percent.

  2. Jillian

    I believe the fate of bookstores is short-lived. Consumers value service, and the certain atmospheres of sitting down with a book and drinking a coffee (such as chapters/starbucks). However, with that said, “new” is what a consumer wants. Innovations in technology such as e-books and Kindle provide consumers with ease, accessibility, compactability, and initially lower prices. With a Kindle, consumers are able to easily pack up their book to go on vacation, the beach, etc. As mentioned in this article prices of e-book are much lower than book prices. As a result, what consumer wouldn’t want cheaper?
    As for price fixing, this is an unethical practice. I believe this will damage the reputation of Apple, and those publishers that worked with Apple to develop the plan of price fixing. Amazon as a result will reap the benefits from these unethical practices. Amazon is promoting e-books, and since consumers will likely purchase from them, the popularity of e-books will grow and profits in this industry will heighten.
    Although I believe that e-books are the way to go I would still purchase a book, because the initial cost of purchasing a Kindle is expensive. Especially for the minimal time I have to read books while being in University.

  3. Sarah Fletcher

    I’m disappointed with the increase of electronic copies of book as opposed to hard cover books. I’m personally not a fan of electronic copies of books and have never purchased one. I’m not sure where I read it but there’s also a correlation between increased learning with hard copy books over electronic copies. It shows that students for example, obtain more information when they purchase hard copy textbooks then students who purchase ebooks. Although, as a student I find it frustrating how much cheaper it is to purchase the ebook. However, I am also aware that there is no resale value of an ebook. I guess there’s pros and cons depending on the user just like anything. My hope is that there will always be physical bookstores but I know that likely one day these will slowly diminish and become far and in between in nature. The marketplace will grow and change to meet consumer demand. Since I’m not a fan of ebooks in the first place, it doesn’t matter to be if these become more expensive. I’d actually be excited if ebooks became more expensive then hard copy books due to their ease of accessibility and transportability.

  4. Michael

    I believe book prices are too expensive now and should be cheaper. It is a good thing amazon is working to slash prices in order to drive up their sales. I read that apple is now being investigated for alleged price fixing with their ebooks it is good to see a company like amazon is now trying to compete on book pricing. I think the model of pricing will eventually change allowing individuals the ability to have more books because of the competitive market place. Textbooks are really expensive and anything retailers can do to encourage lower prices is good to me. With apple encouraging price fixing it is no wonder prices have been so high on books. With more competition in the market it will be good to see competitors begin to lower their prices in order to drive more sales to their books. Hopefully this has an effect on the prices we as consumers pay. Myself I have been selling my old textbooks online through amazon and like their system. I would say about half of the costs of the textbook are recovered when I sell my books online so this definitly helps to lessen my expenses on textbooks.

  5. Sarah Lawson

    If I were in the ebook business, I would watch out for Amazon. It seems they have the most popularity in the industry and are working faster to cut prices than any other business. Since Amazon is such a large company, they are more likely able to afford to cut prices. This will probably increase their sales and popularity. Although, anything can happen with increased competition in the industry. I believe the prices of ebooks should be cheap since less resources are needed to produce them. It makes sense to think that hard cover and paperback books will become less popular as the technology for ebooks increases. There are many advantages to ebooks for both the producer and the consumer. The producer uses less resources and the consumer can easily purchase books from the comfort of their own home. Another advantage is not having to carry around the book. An ebook doesn’t weigh anything and takes up no extra space my purse!

  6. cl

    Book prices have been way too expensive for a long time now, publishers have been making a killing. Collusion is never a good thing for the consumer because as in the article they can agree to a price and everyone will agree. Now that it has come to light I think amazon will be trying to undercut all the competitors quite substantially in order to gain more market share. They might even sell for no profit, but then once they get that market share that they want then they can boost the prices on ebooks, and make a substantial profit. As the article stated the ramifications for the publishers are hugely increased prices, and if amazon does get a monopoly market on ebooks then we will see another huge increase in prices. Ebooks are great in the way that you are giving lots of books popularity that havnt before been popular. Also if someone doesn’t know the name of the actual book then you can just do a key word search and it will pop up. And as for me the consumer for now I will enjoy the low prices which I do not expect to last for too long.

  7. Garang

    The ramifications in book industry are mounting at an alarm rate. It is a high likely possibility that these implications that emerge are a result of e book online industry my eclipse the book industry in the near future. The discovery of price fixing is definitely a core competitive advantage for e booking commerce as compared to traditional book industry. The book publishing industrial variable and fix cost are not comparable to e booking. E booking can provide a cheap services online that could draw low income or price sensitive customers. As a matter of fact, majority of books seekers are low income students who needs cheap and affordable texts books. The availability of cheap E books offered online is an ideal choice. This is a big blow to the book publishing industry.

  8. dns

    Being in the book industry would be difficult at this time because the booming of e-books are more convenient and cheaper for consumers. Although I personally perfer hardcover books, e-books are just easier for consumers to obtain and takes away the fuss and clutter that comes along with hardcovers. Going to a bookstore is quite expensive and the only ones I am aware of are Chapters and the few that are located inside of malls. It seems difficult to come by a bookstore strolling along the street nowadays. The way we use to do things back then are now being reinvented in a format that is directed towards technology-based devices and users. It makes it easy for someone to buy an e-book online and have it on their tablet to read at their lesiure instead of carrying around a heavy book all day. E-books I think are cheaper because there is less production in creating them. Where as hardcover books there is the mass production of the covers, binding, and printing of pages.

  9. JX

    Price is a key point in every commodity. Most people think that price of books is so high now, so electronic book appears and become a good way of reducing price of book. A lot of industries and retailers are developing electronic book now. There is no doubt that electronic book has many benefits such as easy to take, save paper and low price than paper book. However, I do not think electronic book will replace paper book. The big ramification is from paper book store. If book publisher do not publish paper book, how these book stores alive?! In other hand, if a book publisher just publish electronic book, book stores must disagree it. This situation is like video game area. A number of video game companies release electronic version games in order to reduce cost. Three years ago, Sony released PSP go that is a type of PSP, but it doesn’t accept physical game such as DVD or card, gamers must download games. So many game stores did not like it because they cannot get profit from selling games. These stores did not recommend customer to buy a PSP go, or even did not sell it! As a result, PSP go was not a successful production. So I think book stores will become the most powerful opponent and resistance for E-book replacing paper book.

  10. Tyler

    I think that if Apple and the book companies are found to have been price fixing there would be very little ramifications in the future. While bookstores are in trouble i believe that there will always be a demand for hard copy books since many people prefer to read them over ebooks. In terms of the ebook industry I believe that this will help consumers in the long run as prices should be lower across all platforms for them to buy books. While the individual prices for books will be lower companies can still make money by being able to increase total sales due to prices being more reasonable. As well if these allegations are found to be true it could damage Apple’s reputation in the minds of consumers since for the most part Apple has enjoyed a very sterling reputation with consumers around the world and allegations of them fixing the prices of ebooks in order for consumers to be forced to pay more for the books could cause a big negative backlash towards the company. In order to avoid that Apple would need to get on top of things with press conferences that would mitigate the backlash from the public

  11. mp

    i don’t have any sympathy for the publishers. They are charging prices that are near what they charge for a hardback book, but in reality this is cost much less for them to deliver to customers .If the other big retailers are worried about losing market share to Amazon, they can discount the books also, or find a new more competitive way of doing business. I do feel sorry for the small neighborhood book stores and small online ebook sellers, but I don’t understand why this seems like such a surprise its obvious amazon has found a way to competitively hold a majority share of the market and like other companies such as Walmart and apple they are using it to dictate to suppliers how business is to be conducted. This may be something that lasts a while or there could be some new technology that leads a different company to majority market share holder. This is capitalism working at its finest companies and industries just need to change and adapt.

  12. [email protected]

    As print becomes less and less utilized the real money to be made has been through digital products and services and the publishers of a shrinking paper industry seem to come off as behind the times. Unable to adapt to the new competitive digital marketplace as quickly as Amazon has, the only way to match the momentum of the popular website company was to collude behind the banner of Apple. The article is correct in stating that any victory for consumers will be short lived because all we will be doing is transferring control of the e-book market from Apple back to Amazon. Consumers in North America are already gouged by a relative few big competitors with holds on the market, and that is unlikely to change as legal challenges proceed and settle disputes between the big companies. Apple’s foray into legal infractions is reminiscent of Bill Gate’s Microsoft undergoing judicial scrutiny, and one can’t help but wonder if this just history repeating itself. While the law will speak for itself on the software matters, the laws themselves were created in a time where digital products and services were nonexistent. Consumers lose confidence in the checks and balances of the legal system as wealthy corporation’s battle for who will be able to gouge the greatest share of customers. I think most people would agree that more competition would be better, in the classic sense that it would lower prices. We see our own trouble with relatively few companies controlling the landscape, such as Telus, Bell and Rogers communications in Canada.

  13. aaron

    The truth of the matter in my opinion, is that its going to go to E-books in the near future anyway. why by $600 worth of text books every semester, when the online E-books are less than half that. maybe books stores will still have customers until the baby boomers generation is gone, but with all this technology and the way generations are dropped into a technologically advanced society. i think there is no going back to hard or soft covered text. i mean sure, they will still exist in physical forms. but why would someone want to go down to the library to get a book when they could just download it from home over the internet. i think it could be disastrous for price fixing to occur. if a competitor created a product that was received as a direct substitute to a product. the competitor could lower its price and gain market share just as amazon is doing. However, it would be nice if apple did not feel the need to make so much money, and i could afford one of their phones. Since products from apple are not necessary and are only wants, i find no problem with people buying inflated products.

  14. Mike

    I think that book publishers need to adapt and change their business models to an electronic setup if they want to stay in business. It is neglectful to stay with a traditional medium when the industry is changing and many companies will go out of business if they just complain and sit around while the world moves on without them. EBooks are inexpensive compared to paper copies and take up less space. They also allow for transfer between multiple locations instantaneously. The longer other book publishers wait the more powerful and advanced the companies like apple and Amazon are becoming. By the time they decide to enter the world of eBooks they will be left in the dust and lose the benefits of being (closer to) first to market. Price fixing definitely is a problem and Amazon is gaining a significant advantage due to the unethical behaviour of the companies being charged. The idea of Amazon gaining a monopoly is not a pleasant one but the government should step in when it gets to a certain degree and prevent a full monopoly from occurring. A 60 percent hold of the eBook market is scary but with their reducing of prices they have not endangered consumers at this point.

  15. Morgan

    If e-book sellers lower their prices, then brick and mortar bookstores such as Chapters will have to follow suit in order to compete with the inexpensive nature of e-books. That means the publishers will receive less money and, as a result, the cost may eventually outweigh the profit. If Amazon and Apple set their prices too low for Chapters to compete against, publishers will have no choice but to go out of business and brick and mortar bookstores will have nothing to stock their shelves with, effectively putting them out of business as well.

    If e-book selling companies lower the prices too much, publishing companies and bookstores will become obsolete. We’ve already seen it with Borders and it’s only a matter of time before it happens to others. At that time, e-book sellers would have free reign to charge whatever they want, and because there are no alternatives, consumers will have no choice but to pay the demanded price for their e-books.

    On the other hand, if Amazon and Apple make the mistake of raising their prices too soon, I believe people would rather buy traditional books instead. E-books are appealing because of their portability, convenience, and inexpensiveness but many people (including myself) prefer tangible objects to feel, smell, and observe. If e-book sellers have their prices set too high, publishers may still have a chance as long as they don’t continue charging $35 for a hardcover.

  16. Jarrett

    I feel like this suit is a blow to a historically magnificent industry. The book industry has traditionally been dominated by publishers, with book stores and authors taking a back seat in profits. Now the tables have turned for book sellers but not all stores. Amazon is clearly set to continue to be the biggest name in books. I feel like the case is simple. Apple and the publishers conspired to set specific prices on e books. I totally agree with the case, but i feel like it was in everyones best interest. Apple wanted to increase their market share, the publishers wanted to sell more books, yes at a lower price, but regardless, they are turning a profit And this helps the authors as they make money off of each sale. The people it hurts are the common book store and amazon. However, if this suit goes through, then it will give AMazon a monopoly like it stated in the article. Amazon will control where consumers by books more then they currently do. And as a person who has bought from amazon, i can understand why. However, this monopoly will put a large number of people and stores out of business, and that is unfair.

  17. BK

    I think the biggest effect we will begin to see is a decline in how many books are published. My brother’s sister-in-law just published her first novel no more than a month or so ago. So far, sales have been limited to people she immediately knows. What will be a tell tale for whether or not the book has any success is it’s sales in about 6 months from now. As a small-time writer, I can imagine that it must be difficult to think that only selling a few hundred copies of a book would be worth while if you were only making nickels and dimes for every copy sold. If the price of e-books begins to fall, obviously (as aforementioned) the price of hard copies will fall. This will lead to (in my opinion) a decrease in books written and published by small time writers such as my brothers sister-in-law. With less books out there, we might become a less creative, mute generation.

  18. LW

    The book industry is an industry that has been around for centuries dealing with the price fluctuations and changes in prices constantly. The ability for large big players in the book industry to set and fix prices in order to gain an competitive advantage on the market place. Amazons choice to lower prices significantly on E-book will gain them a serious competitive advantage among customers. E-books have become more and more popular significantly changing the ideals of the book industry. The government suit, filed in United States District Court for the Southern District in New York, made clear that the publishers were resentful and angry about the way that their relationship with Amazon had evolved. This suit is based in order to develop a clear understanding that these large five players have majority of the actions in the market. In that others need to have the option to possibly “stay healthy, this industry needs a lot of retailers that have a stake in the future of the product,” Mr. Norris said. “The bookstore up the street from my office is not trying to gain market share.

  19. Ali Almasoud

    I personally believe that electronic books are much better in terms of price,environment,and for reading purposes. It is much easier to read an electronic books as it enables us to to search and find the main idea of the topic discuses as well as viewing the book as a group through projectors.For the environment, there is a lot of non-disposable waste of paper that we can absolutely reduce to protect the environment by purchasing electronic books. When it comes to the industry of hard copy books, it is for sure going to be dead sooner or later with the evolution of technology and the internet.It is true that some books might be more enjoyable when we read them,stories for example, but, overall, electronic books will help more in educational institutions. If I were in the industry of bookstores , I will switch somehow to electronic books industry since it is even better for having more room in the marketplace.

  20. Mr. White

    I am not taken aback by the news that Apple and a number of major publishers have been implicated in allegations of price fixing. I believe that what these companies did was wrong; however, the fact that these companies have been exposed (allegedly) does not mean they are the only ones with dirt on their hands. I think that corporations across the board participate in illegal business activities much more often than we hear about, so I am pretty impartial in light of the news.

    Amazon is in a dominant industry position, and is a major threat to the livelihoods of publishers and booksellers, which is why they are screaming antitrust. They are in a desperation mode, and probably see legal action as their only opportunity to continue to make a living in the book industry. They claim that Amazon will begin to gouge consumers once they eliminate all competition and monopolize the industry; however, I suspect that they are much more concerned with their own personal stake, rather than the consumer, so I take the comments with a grain of salt. In fact, I look forward to the changes that Amazon may bring to the industry, and hope that textbooks become less expensive for students as a consequence.

  21. Keely

    I believe that even with the introduction of e-readers and e-books bookstores should have no fear of being overrun. There are some people that like reading the hard copy of books, and won’t change that, even with the introduction of new technology. The older generation of people will not adapt to this changing technology, as they either don’t know how to use the new technology, or just don’t want to make the change as they find it too expensive or too much of a hassle.

    Although, I do believe that e-books are a new and better technology, which people should accept and begin adapting to. They are more environmentally friendly, much easier to acquire, and easier to bring along with you. As students it is not unlikely to spend $500+ per semester on text books, which we haul around, or in some cases just leave at home as they are too heavy to carry around to classes. If they were to make more textbooks available as e-books I believe a huge proportion of University students would take advantage of it, no matter what the price is. Even the local library lends e-books, it is just like renting a regular book, but it goes onto your e-reader and you can read it when and where you please, until the expiry date, of course. I believe once technologies for e-readers and e-books increase most books will end up as e-books rather than hard copies.

  22. Debbie Kennedy

    Publishers charge way too much for books. It would be interesting to know where their revenue goes other than variable and fixed costs. Do they contribute to environmental causes and charities, and if they do how much? Do you know how much pollution is caused by pulp and paper industry? It’s huge….I come from Saskatchewan where the Meadow Lake Pulp and Paper mill causes destruction of the forests and the air.

    If a company gets caught with breaking antitrust laws then they should pay the price. I believe alot of illegal deals are made behind closed doors, but they should remember if they are caught they should take the blow that comes with it. Money talks in all areas, and people are more than willing to break laws just to put more money in their pocket. You would think the law would do an entire investigation into illegal deals especially if it affects and entire industry, but I doubt they will. I think the consequences will force the legal side to watch the industry more closely because many jobs, companies etc are at stake. Companies such as Apple and the book industry will be watched very closely, not only by the law, but the industry itself. The publishing industry has a big stake and they will be watching them. I can see the publishers becoming obsolete with the ever changing business on the internet. Ebooks will become more popular because more people are becoming environmentally aware and because ebooks will ultimately be cheaper to buy. I would be willing to buy ebooks rather than a paper copy. I win and the environment wins.

  23. Megan H

    It seems that technology is slowly creeping into every aspect of our lives. I am one of those people that would much rather hall around a big old bulky book then use an e-reader of any kind. Maybe I’m old fashion but I will always choose a physical book over an electronic one, I always find them easier to follow and after staring at a computer screen all day long, I would much rather read a good old book on paper then have to stare at another backlight, bright screen. I do also understand the argument of cost saving and going green (less paper less waste). At the same time there is nothing like finishing a book and holding it and realizing how much you have read, it is like a sense of accomplishment. As far as Amazon cornering the e-reader market, it seems that there is always a company at the forefront of any technology boom. Apple did it with the ipod, iphone and ipad, RIM added mobile email and high security features to smartphones. There will always be one company that seems to be at the top, but at the same time as soon as it becomes a monopoly and consumers have nowhere else to go besides Amazon, then we have run into a problem.

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