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Originally Posted by darryl
Very interesting link. I hadn't seen this take on things before and don't think it is correct, though I can't think of anything that absolutely blows it out of the water. However, based on what Amazon is saying, everyone generally makes more money at a $9.99 price point. Also, Apple and Google are already well and truly in the EBook business. Microsoft is playing catchup just about everywhere. It is difficult to believe that fear of Apple, Google and Microsoft is such that Amazon's whole market strategy is to keep margin's unattractively low. In fact, margins seem to be quite healthy. Amazon is a formidable competitor and would continue to be so even in an aggressive price war with Apple, Google or Microsoft, not that I expect that to happen.
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There is a few things in the link that, while not by itself incorrect, stretch the truth still.
First Amazon does not use predetory pricing for the ebook division (that would be illegal, they never been found guilty of). The losses on some titles are recovered with other titles. The profit margins are NOT marginal per title, only because the ebook division makes only little profit overall. The margins are either a loss or a good profit depending on title.
Second the assumption that a competitor can just as easily discount as Amazon and overall make a profit is not true. If it wasn't for Amazons "secret sauce" in marketing and presenting their books, the losses from certain titles would be hard to recover from other titles. Stating that it is cheap to start an ebook store and then mentioning Apple, Google, and Microsoft is strange.
Third is the fear of monopoly. There is nothing illegal (in the US at least) to have a monopoly. It is not even illegal to crush all competitors to become a monopoly. The only thing that is illegal would be to abuse a monopoly to screw over the consumers. Morally wrong and unethical to stomp competitors into the ground? Yes, most definitely, but that is part of competing.
And the last thing the post assumes is that Amazon will be put out of business if others enter and they lose market share. Guess what? If all prices were the same in every ebook store it would only result in higher profits overall for Amazo even with a smaller market share. Lack of discounting is not necessary the death sentence of Amazon.