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Thursday, June 7, 2012

Amazon Will Lower ebook Prices

The decision of the American government to fleece Apple of all its money for running a price fixing racket on its ebook customers will mean that Amazon might cut the price of its products

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After the Department of Justice has announced the lawsuits against 5 major publishers and Apple over price-fixing charges, and simultaneously settled with 3 of them, Amazon was quick to announce plans to cut prices on ebooks. A number of the most popular titles could fall to $9.99 or less. However, both publishers and booksellers believe that the consumers should not celebrate, because Amazon is already too powerful in the market. As a result, it’s much better to pay them and Apple in order to keep the prices up instead.

Industry experts admitted that if the online giant had been puppeteering the whole play, it couldn’t have worked out any better. Undoubtedly, the New York Times would be eager to support Apple in this case, because it was Steve Jobs’ idea to form a cartel, and the Times believe he could do no wrong.

Amazon can afford to lose on the books it sells in order to gain market share for its Kindle. As long as it has enough competitive advantage, the Internet giant is able to dictate its own terms. The newspaper is virtually claiming that it’s all a plot by Amazon to force its ebook reader on users over the iPad. However, the whole situation is more than just Amazon becoming too dominant. The service has reached that point thanks to the publishers that had their eyes shut over the last 10 years. Electronic books are simply another example of how they’ve been inflating prices. On the other hand, publishers had to spend huge amounts of money for distribution – normally, it was around 60% of the cost of a book. Meanwhile, ebooks are not just very cheap to make, but also extremely cheap to distribute. As a result, the industry is now wondering what to charge: in fact, publishers can sell ebooks 4 times cheaper than a hard copy and still profit. But they don’t.

The experts point out that everyone should have been forcing prices down instead of pushing them up. The problem is the retailers, who are going to the wall very fast, and when they go under, they take their stock with them. This, in its turn, will damage the publishers’ profits, as old stock has to be remaindered. As a result, we’ll see prices of ebooks falling because that’s what consumers want.

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