What Apple’s Ebook Fiasco Means for Amazon and the Book Business

April 16th, 2012

FAKE NEWS for the Zionist agenda

Mashable OP-ED

Now that the Department of Justice is officially probing the alleged price-fixing conspiracy on ebooks between Apple and many of the major publishing houses, some clear winners and losers have begun to emerge.

Winner Number One: Amazon, which said earlier this week it drop prices once again on ebooks, many of which it had been selling for $9.99 before the so-called “collusion.” Basically, Apple made an agreement that let publishers set the price, but also got the guarantee that its iBookstore could not be undersold (for its part, Apple has said it did nothing wrong). If Amazon dared keep it’s $9.99 pricing, it would risk losing those titles altogether. Amazon had no choice but to raise prices on ebooks, which typically run for about $14.99.

But the government called shenanigans on the publishers’ deal with Apple, so it looks like Amazon is free and clear to drop prices again. Which brings us to Winner Number Two: consumers. Anyone interested in buying ebooks should be happy about the lawsuit, since it means you’ll be spending less for ebooks. Yay!

Publishing Goes Down

Of course, that leads one of the main losers here: Publishers. Amazon is now free to pursue its strategy of selling cheap ereaders and cheap ebooks — both of which the company is widely thought to be losing money on — in order to cement a dominant position in the ebook marketplace. Since Amazon makes money in other ways (and is profitable), it can do this more or less indefinitely.

“Amazon has a history of operating at a loss,” says Paul Levinson, a professor of communication and media studies at Fordham University and author of the book New New Media. “Back in the 1990s, year after year, they would operate at a huge loss and they would say, ‘We’re succeeding. This is part of the master plan to get people accustomed to online shopping.’ Whenever you’re trying to break a decades-old trend, you have to do unusual things in terms of business. People’s habits run very deep.”

But Amazon won’t endure losses on ebooks forever, though, since it doesn’t make sense to keep a business where you lose money on both the hardware and the software in the long term. Amazon’s master plan is clearly based on gobbling up as much market share as possible for its Kindle platform. And it appears to be working.

But then what? Once it has de facto control of the market, will it raise prices in a “gotcha” move on consumers? Extremely doubtful. More likely, it’ll use its dominant position to force publishers to lower their wholesale prices. Then Amazon can actually start to make money on the ebooks themselves — what it wanted all along. It doesn’t matter if the margins are thin, either — there will be so many Kindles out there that it’ll add up to real dollars for the company.

What if the Kindle doesn’t dominate as much as Amazon hopes? Doesn’t matter. Even if the iPad/iBookstore and Nook/Barnes Noble platforms — Amazon’s main competitors in the ereading space — build a significant market share, Amazon will still have enough clout for its plan to work. If Amazon’s ebook prices are low, they’ll have to cut prices, too.

Also, Apple has no dog in this fight anymore. The publishing industry may have pinned its hopes on the Cupertino giant to save it, but Apple doesn’t need the publishers. It’ll sell iPads hand over fist regardless of what happens to them — or reading in general. They’ll insist on lower wholesale prices, too, and the publishers will simply have to agree.

All this will lead to a general downsizing of the industry, though it won’t die, or even come close to dying. To save money, the publishers may cut back on lucrative advances and book tours for some authors, and there may even be some layoffs, but the most direct response will probably be to save money by simply printing fewer physical books. That could even lead to greater profits down the road.

“As far as publishers are concerned, they are in it for the money,” says Levinson. “They’ll do whatever’s necessary to stay afloat and make money. It’s not like they’re trying to fight to maintain some kind of traditional standard for its own sake. I think prices will be lowered, but publishers may make more money. They’ll stop printing books and they’ll sell more of them. It’s a lot easier to distribute to a million people on Kindle than in bookstores.”

Book Selling 2.0

So the publishing industry will still exist, just in a leaner form. A lot has been made of Amazon’s move to help authors self-publish. Although the publishers certainly took offense, it’s an overstatement to say Amazon is now competing directly with them. Basically, Amazon is just providing a last resort for authors who wouldn’t otherwise get their books published. Advances, promotion and book tours will remain the domain of the publishing industry, and they’ll always be the first choice for almost any author.

“[Publishers] still have some very powerful cards,” says Levinson. “One is the advance. If you can get $25,000 from a publisher, that’s very good money. Amazon doesn’t do that. Also the whole production editing of the book, which includes copy editing and careful proofreading — publishers are still good at that. And if an author can get a publisher to do some promotion, that’s helpful also.”

So authors and publishers may make out okay, but the obvious consequence of fewer physical books is the demise of the bookstore. It’s a sad and painful development, but believe it or not, it’s progress. Even if you put aside the convenience of ebooks, they put physical books to shame in terms of environmental impact: no trees chopped down, no ink used and no trucks on the roads delivering them. If a few bookstores need to become antique shops in the process, so be it.

That leads us to the biggest loser in this whole affair: Barnes Noble, whose stock price has taken a beating since the lawsuit was announced. Even though its budding Nook platform is generally well-regarded, as a company that’s essentially still a retail business, its future isn’t looking too bright. It’s hard to see its physical book business going anywhere but down, and the Nook appears destined to play second fiddle to Amazon.

What consequences do you think the government’s lawsuit will have on the publishing industry? Share your thoughts in the comments.

Image courtesy of iStockphoto, Bosca78

This story originally published on Mashable here.

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