Does Competition Lower Prices?

February 4th, 2010

Apple and its iconic leader Steve Jobs rank near the top of any list of great innovators. Dating back to the introduction of the Macintosh on Super Bowl Sunday 1984 – and the Orwellian ad directed by Ridley Scott – continuing through the iPod, iMac and now iPad… Apple keeps churning out the hits and changing industries.

After Amazon shook the publishing world with its Kindle electronic reader, most pundits felt it was a matter of time before Apple would introduce a better device. It took two years before last week’s announcement of a “truly magical product” that comes in full color, allows Internet access, works with all 140,000 Apps – and this is just version 1.0.

Of course, there’s a ‘dark side’ of any great story… and this one impacts consumers. Kindle pricing on new releases is $10 – a tremendous savings compared to buying the hardback; however, within days of the iPads’ introduction, Macmillan said it will increase e-book prices to $13-$15.

Amazon reacted by pulling Macmillan titles: “We have expressed our strong disagreement and the seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. Ultimately, however, we will have to capitulate and accept Macmillan’s terms.”

So going forward, Macmillan will set prices and pay Amazon a 30 percent commission. Not surprisingly, that’s the agreement Apple made with major publishers. (And you thought all of the mystery and drama only happens inside the pages!)

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