Amazon e-book prices reach Wal-Mart levels after government sues Apple for price fixing

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Steve Jobs

As a response to the Justice Department's lawsuit against Apple and five major book publishers, Amazon has gleefully announced plans to drop its e-book prices from $14.99 back down to $9.99, a move that has the publishing industry huddled in a corner, quietly weeping. "I am now more convinced that we need a viable alternative to Amazon or this nonsense will continue and get much worse," the lawsuit quoted one publishing executive as warning.

More or less since the inception of e-books, Amazon has locked down a vast majority of the market, since it can afford to sell the content at a loss in order to promote sales of its Kindle e-reader. In an effort to fight corporate evil with corporate evil, Apple (at the specific behest of Steve Jobs, it seems), began talks with several book publishers in order to reach a deal to get around what they referred to as "the $9.99 problem." They succeeded, managing to switch the industry over to an "agency" model (in which publishers set the price for their products) as opposed to a more typical "wholesale" one, in which vendors like Amazon simply buy rights to the product and price it however they want. As a result, the Justice Department claims, the average price of e-books shot up by $2 or $3 over a period of a few days in 2010. Thus, an anti-trust lawsuit was born, and three of the five publishing houses involved have already settled out of court.

Though the new, lower prices are ostensibly a boon to consumers, publishing experts are anxious about the long-term implications of the cost-cutting. "It will look like blue skies," said one consultant, "But in the longer term, competition erodes as the spread between e-books and physical books grows greater. There will be fewer retail stores." In other words, Amazon just might be well on its way to becoming the Walmart of books.