Matthew Lasar:
This action sees Apple and Amazon as adversaries, the former forcing the latter’s hand. The accusation is that the publishers and Apple fixed prices via two means. First, the publishers embraced an “agency model” arrangement with Apple in which Apple would act as an agent for the publishers, accepting their pricing and simply taking a cut of the proceeds. (Compare this to a model where a company agrees to “buy” each e-book at a set price, but it can then offer those e-books at any price it chooses. Amazon, in fact, was widely believed to be taking a loss on many e-books in order to encourage adoption of e-readers like the Kindle and e-books at the $9.99 price.)
Its like Target forcing Wal-Mart’s brands to fix to a higher price so consumers have to pay an equal amount across the board. Ultimately, consumers should be responsible for determining the market price for an e-book, which in theory has much less of an overhead cost. In comparing the two strategies, both business models could co-exist and wallets can decide the market’s fate.
The lawsuit seems to further bring to light the relationship between Apple and Amazon as real product competitors. If any company has the ecosystem and competencies to dethrone Apple in the e-media marketplace, it is Amazon.