April 12, 2012

Amazon to cut e-book Prices

Amazon, the biggest Internet retailer may soon be powered enough to decide the price of an e-book. This is the repercussion of the US government’s decision to sue some major publishers.

However, the other publishers expect a bad consequence for them as well as for the customers in this context. Recently after the Department of Justice (US) announced about the suing of five major publishers and Apple Inc. on price-fixing charges, Amazon declared its plans to cut prices of e-books.

Although this seems to put the consumers in a beneficial position, the status would not continue for long. On the other hand it will only make Amazon a more dominant power in the e-book industry.

As per the government report, the five publishers conspired with Apple in secret to develop a new policy that let them put their own retail prices. Hence when the deal was executed in 2010, prices increased everywhere as under the agreement, no bookseller could challenge Apple.

The government suit, filed in the US District Court for the Southern District in New York, made clear that the publishers were dissatisfied with Amazon.

They advocated that Amazon, which already controls about 60 percent of the e-book market, can be ready to bear a loss on every book it sells to gain market share for its Kindle devices to put its own terms. In this way Amazon will enjoy a monopoly status which has already been started.

Also the Traditional bookstores (hardcopy sellers), whose market had already been deteriorated due to e-books , fear that the price gap between the physical books they sell and e-books from Amazon will now become so much wider that their business will be ruined.

The market of both the hardcopy book sellers and Electronic books was okay till 2007 when Amazon introduced the first Kindle e-reader in 2007. It immediately built a commanding lead. The results were that at an earlier point of time Amazon had even 90 percent control over the book market.

This commanding position of Amazon was challenged after Apple's introduction of the iPad in 2010 which seemed to offer a way to fight Amazon.

Interestingly, Steve Berman, the lawyer who filed the class-action lawsuit against the five publishers and Apple for price-fixing has his law firm, Hagens Berman, in a Seattle office building that also houses Amazon offices. This coincidence leads to a speculation that Amazon might be the disguised instigator of these suits, which will actually benefit the company the maximum.

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