It looks like another win by Amazon against so-called “agency” pricing model employed by Apple’s iBookstore and other digital bookstores. Following the lead of a US court, the European Union (EU) Thursday announced that the iPhone maker along with four publishers will relent after all.
Specifically, Apple and publishers reportedly have agreed to lower e-book prices on competing stores, including the Kindle store operated by Seattle-based Amazon. Apple, along with Simon & Schuster, HarperCollins, Hachette, and Macmillan, signed the agreement because it wanted to avoid fines that could have topped an astounding $15 billion.
As part of the settlement, Apple’s so-called “most-favored nation” clause – that barred publishers from offering lower prices on competing stores – gets suspended for five years…
“The decision hands online retailer Amazon a victory in its attempt to sell e-books cheaper than rivals in a fast-growing market publishers hope will boost revenue and customer numbers,” Reuters reports Thursday.
While the “agency” model let publishers set their own prices on the iBookstore in return for Apple’s customary 30 percent revenue share, Amazon’s model gave the online retailer the power to set prices as it saw fit, typically selling Kindle books for as low as $9.99, which wasn’t always in publishers’ best interests.
The publisher Penguin was not part of today’s settlement with the EU. Apple offered one and a half million books on the iBookstore as of end of September.
European regulators said Apple had offered concessions to end the antitrust probe, which was launched in December 2011. If the targeted companies had not come to an agreement, the European Commission could have levied fines of up to ten percent of their worldwide sales.
Today’s settlement is similar to one publishers signed with the U.S. Department of Justice. While the American agreement involved Apple (which deemed it unlawful) and publishers HarperCollins, Simon & Schuster and Hachette, Penguin and Macmillan still await a 2013 court date.
The EU settlement comes as Amazon opens its first Kindle store in China.
Although the store won’t initially sell e-reader devices, customers will be able to get iOS and Android apps for viewing Kindle books. The store could shine a spotlight on the Kindle brand as homegrown e-book stores dominate the market.
Amazon already has 65 percent of the e-book market in the United States, according to a Fordham University professor interviewed by Reuters.
Can Apple’s “agency” pricing model survive discounting efforts from Amazon?
It has already ended in Europe.
If American courts follow the EU and order the suspension of contracts favoring publishers at the expense of Amazon, how will that affect Apple’s iBookstore?
After all, the ability to set their own price was about the only leverage Apple had to prevent a mass rush of e-book titles to Amazon.