Amazon, Apple fight over e-books, you lose

As Apple and Amazon battle over the pricing of e-books in their respective stores, it’s clear that the consumer stands to gain nothing.

Amazon is trying to lock book publishers into a business model where Amazon buys books at a wholesale rate and then sets the prices. This differs from Apple’s approach to the iPad bookstore, in which publishers can set their own prices. Publishers prefer Apple’s model because it gives them more control, and so Amazon was forced to accommodate the so-called “agency” model in order to keep making major publishers’ books available on the Kindle e-reader.

The problem, as the New York Times revealed, is a clause in Apple’s contracts with publishers that requires the iBookstore to get the same or lower prices than any other seller. Ostensibly, that’s a good thing, except that it precludes publishers from agreeing to Amazon’s “wholesale” model, because publishers’ contracts with Apple would be violated if Amazon ever set lower prices on e-books.

Amazon, Apple fight over e-books, you lose

Amazon has already caved on several major publishers, and agreed to adopt Apple’s business model. However, Amazon is now looking to secure long-term agreements with these publishers that also guarantees Amazon will have the lowest prices. Publishers are hesitant to lock into three-year contracts, given the fast pace of the e-book market, so it’s possible (though unlikely, in my opinion) that some e-books will be removed from the Kindle store.

Smaller publishers are the bigger issue. Amazon doesn’t need the little guy as much, so it has more power in negotiations. The result could be an agreement to Amazon’s wholesale model by small publishers, therefore precluding their e-books from being sold in the iBookstore.

It’s a messy situation, and the likely outcome is that not every digital bookstore will have the same selection of e-books. If every digital book worked on every device, this wouldn’t be such a big deal, because you could just use the Kindle store to buy iPad books, and vice versa. But because all these digital book stores are locking products up with their own DRM, the result is a less attractive e-book market for consumers.