Apple Loses. Amazon And Consumers Win.

A couple of years ago, we learned that Steve Jobs' Apple had colluded with publishers to undercut Amazon's bid for galactic domination of the e-book market, which it was quickly gaining by charging $10 for bestsellers and most every other title. Apple hoped to get a quick and dirty piece of the action for the iPad and its own bookstore. Instead it got the attention of the Justice Department, which sued Apple and five big publishers for blatant price-fixing.

Rather than celebrating this victory for the consumer, David Streitfeld of the New York Times is worried about Amazon's clout:

[P]ublishers and booksellers argue that any victory for consumers will be short-lived, and that the ultimate effect of the antitrust suit will be to exchange a perceived monopoly for a real one. Amazon, already the dominant force in the industry, will hold all the cards.

“Amazon must be unbelievably happy today,” said Michael Norris, a book publishing analyst with Simba Information. “Had they been puppeteering this whole play, it could not have worked out better for them.”

If Amazon's 60% of all e-book sales can really be called a monopoly, Amazon earned it by brilliantly parlaying its dominance of mail-order books sales into a launching pad for the Kindle. If it was willing to take a loss on a $10 e-book sale (based on what it was paying publishers for resale rights) to encourage readers to buy Kindles, that was literally its own business. But the media appear to be buying the publishers' complaints that they couldn't make money on $10 e-books and that the price undercut the perceived value of text. The oil companies need to find reporters this credulous. We need higher prices to spur our exploration efforts! Only by paying more for gas will people appreciate the preciousness of this scarce resource!

Besides, I agree with Matthew Yglesias, who wonders how you don't make money on a $10 file download. If publishers can't, they need to streamline their business, which began to happen with recorded music after Apple figured out how to sell $10 downloads to people who'd been paying $18 for CDs. Apple used its wits to help the consumer get more affordable music and to spur restructuring of an arteriosclerotic industry. Apple then turned around and tried to stop Amazon from making text more affordable in precisely the same way. This week both companies got what they deserved.

This Video Is So Hot

Is there a 12-step program if you keep hitting the Apple sauce?

iPadding The Books

Apple may understand the way people like to buy music these days, but it doesn't understand readers. When reading this excerpt from a recent New York Times article, remember that from Amazon you can get a monthly Kindle subscription to "The New Yorker" (four issues) for $2.99:

Many applications cost almost as much as a printed copy of a magazine, a difficult concept for consumers to get their heads around considering that a paper product is more expensive to assemble and distribute than an electronic version of a magazine. The New Yorker, for example, costs $4.99 an issue in Apple’s App Store but $5.99 on the newsstand. Esquire is also $4.99 an issue, the same as the cover price on the newsstand.

Subscriptions are another sticking point. A vast majority of magazines available on the iPad must be bought per copy. Customers cannot subscribe and have it delivered as they can with other publications available on the iPad like The Economist, The Wall Street Journal or The Daily, the News Corporation’s new iPad-only venture that is to begin within the next few weeks. That means if consumers want to receive the magazine regularly, they would have to pay far above normal subscription rates.

“Sheer highway robbery,” read one recent comment about The New Yorker in the App Store. “I’ll keep with my paper subscription. I will never pay $250 per year for an app."

Apple Of Our Ear

One of iTunes' great new Beatles spots. Remember the first time you heard "I Want To Hold Your Hand"? I was nine years old, and I was with my grandmother, Lily, in a Rexall drug store in Grosse Pointe, Michigan. In just a week, Apple customers downloaded 450,000 albums and eight million individual tracks.

iRonic

Amazon sold almost all Kindle books for $9.99 until Apple, trying to leverage a share of e-book sales for its new iPad, goaded publishers into raising prices. They were afraid that text was being undervalued by Amazon, which wasn't making money at $10 but had quickly come to dominate the e-book market.

Ironically, Apple had driven a radical restructuring of recorded music prices by selling $10 albums for its iPod that had cost $15 or more on CD. Apple's interference with the analogous favor that Amazon did for readers was pretty hypocritical. It also didn't work. So far, the iBook store is a failure.

The Phone Company

This is the first picture I took tonight with my new iPhone 4, about 20 yards from the Apple Store in Brea. Is that he? Mr. Nixon? Sure looks like it, but how would the young people know?

I'd arrived about an hour before, breezing past a dozen sad, tired people snaking along the front window, and noted with satisfaction that the store wasn't crowded. No salesperson approached me, however. After about five minutes, I asked the guy at the cash register (how's that for a retrograde term?) what the people were in line for. "iPhone 4s," he said.

I joined the line. In the course of 20 minutes three or four people walking by in the mall asked what we were waiting for. I said to the young man behind me, who was about 30, that in Moscow in the old days, people didn't ask. Toilet paper, meat, fresh eggs -- whatever it was, they needed it, so they just joined the line.

He eyed me blankly. The Soviet Union, and by and large its state-induced shortages, had ceased to exist when my companion, a pharmacist named Dan, was a little boy. He did tell me he'd worked in southern Germany for five years. He asked if my work as a priest had taken me to Russia. I paused and was about to say I'd been three times with a former President, but I was saved from that outlandish assertion by Carlo, a young man in his early 20s in a blue Apple Store t-shirt, who shook my hand and asked if I wanted the 16GB or 32GB.

You know what I said. As his fingertips danced on the screen of his own iPhone, disentangling me from Verizon forever, I gave in to the temptation to garrulousness, which has never been my tendency. I assume no one's that interested. But I'm beginning to think the privilege comes with age. Most young people listen politely to older people. It's pretty cool.

I told Carlo and his colleague that, as an AirTouch-Verizon customer since 1999, I'd gone to the Verizon store today intent on replacing my ailing BlackBerry Storm with a Droid Incredible but hadn't been able to persuade the salesman to give me an extra four months' grace on my contract, which would've made the new phone affordable. It wasn't his fault. He was a good guy, but he didn't have the latitude. When I called to ask what my termination fee would be, I gave the operator another chance to give me the four months, but he didn't bite, either.

Verizon lost half a lifetime of business (okay, I'm being a little optimistic there) for a lousy four months. I told the Apple guys, "Going in there, it's like what dealing with the phone company used to be like." They eyed me blankly, too. Carlo's colleague said he'd been born in 1989, the year the Berlin Wall fell and several years after the conglomerate formerly known as today's least sought-after wireless carrier was broken up into the baby Bells, which created our raucous telecom reality.

You say "the phone company" to someone my age and we all remember when, a week after mom or dad called, the guy came by to install our new phone, choice of two designs and three colors. You say "the phone company" to the kids in the blue t-shirts at Apple, and you might as well be talking about the Inchon landing or Ozzie and Harriet.

But hey: Nixon's still cool enough for a white t-shirt at the mall. And I've got a phone that can tune my guitar and call Mars.

Newspapers' Latest Digital Savior

Apple's sizzling full-color Tablet could smother the once-smoking Kindle.

Oops

Gracious of Apple to prove it's not perfect:

Apple has apologized for a "deeply offensive" iPhone application called Baby Shaker, which made a game of quieting crying babies by shaking them.

But You Can't Get Led Zep On The Kindle, Either

It appears that during the first full year of sales, Amazon sold more Kindles than Apple sold iPods in its first year.

Steve Who?

Showing the way to save journalism with the Kindle (e-book sales are already skyrocketing) and posting a 9% increase in net profits in the fourth quarter of 2008, Amazon under founder Jeff Bezos is the new Apple.

A Giant Amazonian Apple

Adam Engst predicts the Kindle will make the iPod get bigger:

Look for Apple to introduce a new version of the iPod touch with a larger screen designed for better video viewing and text reading; Bluetooth keyboard compatibility; and optional 3G data access. Although this could be a bit too much wishful thinking, the market is ready for such an iteration of the iPod touch. Sure, it won’t fit in a pocket, but (a) many people in their 40s and 50s simply can’t see the tiny screens on current devices; (b) there’s a sweet spot between the iPhone and the MacBook Air that’s currently unfilled; (c) Amazon’s Kindle has been sufficiently successful to prove that people want a larger device for reading; and (d) the whole pocket thing is sexist anyway, since women mostly carry purses and don’t have reliable pockets. Oh, and (e), I want one.

And here's another techno-blogger promoting the idea of a larger iPod Touch comprising an Apple move on the Kindle. I love iTunes, too, but do we really want one company dominating music and text markets?