Apple Inc. (NASDAQ:AAPL)’s recent loss is a major win for Amazon.com, Inc. (NASDAQ:AMZN). A judge recently ruled that the tech giant from California violated the United States’ antitrust laws by conspiring to increase eBook prices which would put other eBook retailers at a major disadvantage.
Tesly Advisory Group’s Tom Forte explained, ““Amazon emerges as the winner from all of the activity related to e-book pricing. The company seems to be free to price the way it wants to, which, by Amazon’s standards, is aggressively to gain market share.”
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Apple Made Agreements To Fix Prices
Apple Inc. (NASDAQ:AAPL) made agreements with publishers to fix the prices on e-books. Though the deals did benefit Apple Inc. (NASDAQ:AAPL) and help them sell e-books, it also forced Amazon.com, Inc. (NASDAQ:AMZN) to increase the prices of their e-books and made them abandon their former one-size-fits all price strategy. The verdict now allows Amazon to make more negotiations with publishing companies.
It’s important to note that although e-books are still big business in the United States, collectively they only make up twenty percent of the market. Those gains are growing at a slow pace. In 2012, e-book sales rose 44 percent to $30.4 billion.
The US government and 33 state attorneys filed a lawsuit against five publishing companies and Apple Inc. (NASDAQ:AAPL) early last year. The reason for the lawsuit was because Apple Inc. (NASDAQ:AAPL) allegedly forced publishers to sign agreements that would let them sell e-books under a new price model that would raise prices. Although Apple fought against the lawsuit, they sought to continue letting the content owners set prices and took commissions.
S&P Capital IQ Analyst Explains
S&P Capital IQ analyst Scott Kessler explained, “Apple is using that agency model in a number of contexts and they chose to use it in part for e-books because they were using it in other contexts.”
Apple Inc. (NASDAQ:AAPL) already created a pricing model for their music store iTunes, where single songs start at $0.99 and albums start at $9.99. A similar pricing structure for television shows and movies would not be as successful as competition from companies like Netflix, Inc. (NASDAQ:NFLX) and Hulu make it impossible.
As an efforts of taking on a new price model, Apple Inc. (NASDAQ:AAPL) wanted Amazon.com, Inc. (NASDAQ:AMZN) to change their prices. There was a time when Amazon sold the majority of their e-books for $9.99 or below. The e-books now vary in price. According to Bloomberg, “More than 650,000 e-books sold by Amazon cost $4.99 or less and more than 1.2 million are $9.99 or less, the company said in May. Currently, the digital version of Dan Brown’s “Inferno” sells for $12.99.”
This win should satisfy Amazon fans.