Amid the fallout from the Department of Justice’s settlement with three major publishers for conspiring with Apple to fix prices, it appears that Apple is doing an about-face from their previous agency model and dropping prices even lower than Amazon’s on some titles, showing that they are ready and willing to compete.
The DOJ’s ruling last week has forced Apple to tear up existing “agency model” contracts with the major publishers HarperCollins, Hachette and Simon & Schuster that had allowed them to enforce a set retail price for their ebook titles across all retailers. Previously, the “wholesale model” favored by Amazon had allowed retailers to sell the book for any price they wished, even at a loss.
Following the settlement, HarperCollins has been quick to sign new contracts with retailers Amazon, Barnes & Noble and Google, who began to drop prices immediately. Now it seems that Apple got in on the HarperCollins action as well with a new contract and has dropped their prices even lower than Amazon’s on some titles, forcing Amazon to follow suit. Apple is also now selling many HarperCollins bestsellers at the $9.99 price point set by Amazon.
Don’t take this to mean Apple has given up – they are likely to appeal the settlement, and they are still fighting the DOJ in court alongside MacMillan and Penguin, who have not settled. Apple maintains the argument that its agency model pricing was necessary to allow itself and other companies to enter the market and make a profit, and that Amazon’s wholesale strategy should be considered monopoly abuse.
Despite the ongoing court battles consumers should continue to see prices fall on titles by the three publishers that have settled, and perhaps even by the publishers still in court if they have to drop their prices in order to compete. It might not be what Apple wants, but it looks like they are willing to play the game if they have to.