Amazon gains advantage with Apple’s ebook defeat
In the retailing wars with Apple Inc., score one for Amazon. com Inc.
A judge’s ruling that Apple violated U. S. antitrust laws by colluding to increase ebook prices gives retailers such as Amazon added flexibility to sell digital books more cheaply and gain market share. The decision may also lead to greater government oversight of the iPhone maker’s ability to control pricing in other markets, such as music and movies.
“Amazon emerges as the winner from all of the activity related to ebook pricing,” said Tom Forte, an analyst at Telsey Advisory Group in New York. “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 used agreements with publishers to fix prices of ebooks, a federal judge in
Amazon emerges as the winner from all of the activity related to ebook pricing.
TOM FORTE
ANALYST AT TELSEY ADVISORY GROUP
Manhattan ruled yesterday. Those deals helped the company sell reading content that boosted the appeal of its smartphones and tablets, while forcing Amazon to raise prices on some books and abandon the one- size- fits- all pricing that lured users to its Kindle readers. The verdict stands to give Amazon more leverage in negotiations with publishers.
While sales of ebooks have exploded in the U. S., they still make up only 20 per cent of the market, and those gains are slowing. Last year, ebook sales rose 44 per cent to $ 3 billion after more than doubling in 2011, according to the Association of American Publishers.
The U. S. government and 33 state attorneys general sued Apple and five of the biggest publishers in April 2012, claiming the Cupertino, Calif. - based company pushed publishers to sign agreements letting it sell ebooks under a model that raised prices and harmed consumers.
Apple fought the lawsuit, seeking to fend off greater oversight and continue the agency model of letting content owners rather than retailers set prices, while generating income by taking a commission.
“Apple is using that agency model in a number of contexts and they chose to use it in part for ebooks because they were using it in other contexts,” said Scott Kessler, an analyst at S& P Capital IQ.
U. S. District Judge Denise Cote said Apple lost the case, in part, because of statements by its deceased founder, Steve Jobs, that government lawyers said showed Apple was targeting Amazon.
States are seeking triple damages for overcharges, according to Connecticut Attorney General George Jepsen’s office. Another trial will be held to determine Apple’s penalty.
The ruling gives Seattle- based Amazon leeway in an industry that already accounts for a significant portion of its revenue.