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.”
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.
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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.