The fight between Apple and Amazon on ebooks ain't over yet
Apple was found guilty on Wednesday of fixing prices of ebooks in its iTunes Store by U.S. District Judge Denise Cote. Apple and a group of publishers, including Simon & Schuster (which is owned by CBS Corp., which owns ZDNet), raised the prices of ebooks above the deals available on the Kindle platform, which is owned by Amazon.
"The plaintiffs have shown that the publisher defendants conspired with each other to eliminate retail price competition in order to raise ebook prices, and that Apple played a central role in facilitating and executing that conspiracy," said Cote in the 159-page decision.
Apple said it would appeal the ruling and its fight against "these false accusations." In a CNET article, Apple was quoted as saying that the iBookstore increased market choices for customers and "breaking Amazon's monopolistic grip on the publishing industry."
Certainly, the judge and few others outside the halls of Cupertino bought the testimony of Apple Senior VP of Internet Services Eddy Cue about a 2010 memo from the late Steve Jobs and its line: "Wow, we have really lit the fuse on a powder keg.” This was read as being about how Apple’s entry into the ebook market would affect Amazon. Cue instead said it was a comment on how Apple was able now to make changes in content industries.
Still, with Apple's appeal of the verdict and the penalty phase of the decision still outstanding, a simple look at the market dynamic would lead most onlookers to believe that little will change for customers both on and off the iOS platform.
According to presentations at the recent Apple Worldwide Developers Conference in San Francisco, Apple has an 82 percent market share for tablet computers. The entire worldwide ebook reader market was estimated as 20 million for 2012, most of which were sold in the U.S. There's increasing pressure on the single-purpose reader hardware market from tablets.
Apple also appears to be nailing down the textbook market. In June, the company announced a $30 million deal for Los Angleles county schools.
“The Board voted unanimously for Apple because iPad rated the best in quality, was the least expensive option and received the highest scoring by the review panel that included students and teachers,” said Jaime Aquino, LAUSD Deputy Superintendent of Instruction. “The vote is another step forward in the District’s plan to equip every one of its students with a device by 2014. When completed, the LAUSD will become the largest district in the nation to provide each of its students with the technology.”
Many industry watchers discount the "stickiness" of the Apple iOS platform and the content and apps delivered by the iTunes Store. Apple well understands how to keep an installed base happy and that doesn't mean industry-shaking announcements every quarter. Apple ebook customers are happy with their experience and feel they have an investment that they want to protect. This will keep them on the platform, judgement or no.