Here come the ebook price cuts

Apparently we were waiting for a federal judge to sign off on the settlement between the DOJ and the three publishers — Hachette, Simon & Schuster, and HarperCollins — before we got them.  Here‘s the story in the Times.

The settlement approved on Thursday called for the publishers to end their contracts with Apple within one week. The publishers must also terminate contracts with e-book retailers that contain restrictions on the retailer’s ability to set the price of an e-book or contain a so-called “most favored nation” clause, which says that no other retailer is allowed to sell e-books for a lower price.

For the next two years, the settling publishers may not agree to contracts with e-book retailers that restrict the retailer’s “discretion over e-book pricing,” the court said. For five years, the publishers are not allowed to make contracts with retailers that includes a most favored nation clause.

In other news, Amazon announced a new generation of Kindle Fires, probably putting them in direction competition with iPads.  (And who knows what Apple has up its sleeve at its announcement next week?)

So, clearly Amazon is going to cut ebook prices, presumably to help Kindle sales and freeze out other vendors:

Amazon, which in April called the settlement “a big win for Kindle owners,” has vowed to drop prices on its e-books, probably to the $9.99 point that it once preferred for most bestsellers and newly released e-books.

Then what?  Presumably some or all of the following:

  • Barnes & Noble and other ebook vendors will try to cut prices to match.  Maybe they won’t be able to, and they will lose their reason for existing.  Apple will obviously continue to exist, but they’re not gonna be happy about having to compete with Amazon.
  • There will be increasing pressure on the other three publishers in the suit to settle, as their ebook prices start looking ridiculously high next to those of the competition.
  • Brick & mortar bookstores will also come under increasing pressure, as lower ebook prices and better devices on which to read them cut into their business model.
  • Publishers will therefore need to reevaluate their own current business models, which rely on ebooks to be priced high enough not to cannibalize sales from print books.  With less ability to sell print books, some of them may lose their reason for existing.
  • New online ebook vendors will pop up that can figure out a way to compete with Amazon.  (Buy ten ebooks and get one free, 40% off all fantasy novels this week only, etc.)

What did I miss?  Whatever happens, the publishing world will start looking a lot different over the next couple of years.

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