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Tess Vigeland: Shares of Amazon.com shrank from their lofty heights today. And for this they can blame, in part, a certain new technology wunderkind you may have heard about last week. Prior to the introduction of the Apple iPad, Amazon had a near-lock on setting prices for so-called e-books.
But Apple’s full-fledged entry into the market, and the deals it struck with publishers, have forced Amazon to re-kindle its own relationship with those same publishers. Marketplace’s Sarah Gardner has the latest.
SARAH GARDNER: Amazon had been selling e-books for $9.99 to fuel sales of Kindle, its e-book reader. That infuriated publishers, who said the price undervalued their products.
Colin Sebastian at Lazard Capital Markets, says the big publishing company Macmillan threw down the gauntlet.
COLIN SEBASTIAN: And what we saw is Macmillan take an aggressive stand against Amazon and essentially say if you don’t price books higher then what you’re doing right now, then we’re going to give you access to those books later than other retailers, later than other distributors.
Amazon said Sunday it would “capitulate” to Macmillan, even though it believes $13 to $15 an e-book is too high. That’s not only because Macmillan publishes lots of titles. Amazon also has new competition. Apple’s new iPad also e-reads books, and Apple made clear it is willing to sell e-books at higher prices than Amazon.
Publishing consultant Mike Schatzkin says Amazon has reached the limits of its ability to bully publishers.
MIKE SCHATZKIN: Now it doesn’t mean that they can’t push publishers around at all anymore. But what it means is that their ability to say, we’ll buy the books, we’ll price them how we want, you don’t like it, that’s too bad. That’s not gonna work.
Ironically the new e-book competition from Apple, and eventually Google, which plans to open an online bookstore, is leading to higher prices, not lower. At least, for the time being.
I’m Sarah Gardner for Marketplace.
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