DOJ Antitrust Lawsuit Against Price-Fix 6 Only Benefits Amazon
It looks like that ant-trust lawsuit against the Price-Fix 6 (which we last heard about back in December) is about to go to trial. The WSJ is reporting that the Dept of Justice is threatening Apple and 5 publishers with a suit alleging that they conspired to set prices.
The specific details are vague in the WSJ piece, but this story can pretty much be summed up by what we already knew. Back in early 2010, Apple colluded with publishers to raise ebook prices and enforce agency pricing. And now they’re hoist by their own petard. And yes, I am stating this as fact. The civil lawsuit against the Price-Fix 6 has already revealed damning info.
This is going to have a rather interesting effect on the market, but do you know who is the one most likely to benefit? Amazon, that’s who.
One likely outcome from this lawsuit (even if it never goes to trial) is that it will shake up agency pricing. I doubt we’ll see the 70% cut going away (it’s written into too many contracts), but we could see price fixing going away. And that would be a terrible thing for everyone.
Right now Amazon is blocked from underselling their competition on agency priced ebooks. Take that away and they will discount ebooks again, just like they were doing before.
But the big difference between now and then is that no one has the margin to offer good sale prices anymore. All (most) ebookstores are existing on a tight 30% of retail. If Amazon drops prices as much as 40%, no one will be able to compete – not even B&N or Apple (aside from niche ebookstores). What’s more, Amazon might actually be able to afford that discount.
So yes, I think the Price-Fix 6 handed Amazon a bigger club to beat the ebook market with.
Update: The WSJ took 4 times as many words to make the same point as what I wrote above.