Tag Archives: antitrust

Amazon is discounting ebooks, whenever it’s allowed to, unlike Apple

Some really silly journalism covering the ebook marketplace today. It starts with this really bad, no good article in the New York Times by David Streitfeld. The headline gets off to a completely wrong start — “Little Sign of predicted E-Book Price War” — and it goes down hill from there, as Streitfeld asserts there was going to be a “ferocious price war over ebooks.” Who was ever saying that? Of course, it was the made-up nightmare scenario that publishers were screaming about after they got sued for illegally conspiring to raise ebook prices. Streitfeld never explains that and actively seeks to mislead the reader, writing those expectations were “fueled by Amazon.” It’s a bad set-up that only gets worse.

Next, he asserts that prices have “selectively fallen but not as broadly or as drastically as anticipated.” No data, not a shred, is offered to back up this bold assertion, not even the usual misleading average price of all best-sellers publishers have sometimes cited in the past (an average which included all the sales of 99 cent independently published ebooks). Even a brief look at Amazon’s prices compared with the high price leader, Apple, makes it pretty obvious that a ton of discounting is occurring. It is limited because two of the big six publishers are still banning discounts and another, Penguin, just settled and is not yet allowing discounts, either. But on ebooks where Amazon can discount, it is doing so to the tune of 15% or more.

Compare, for example, ebook prices of the New York Times fiction best-seller list on Amazon and Apple. On four of the top 10, both carry the ebooks at $12.99. And, no surprise, in all four cases the publishers are still banning all discounting. Another older book is priced at $9.99 on both and, again, discounting is banned. On the other five, Amazon is discounting every single one, with the average price $10.93 versus $12.19 for Apple. It’s the same if you go deeper down the list or look at non-fiction.

The biggest laugh-out-loud line comes next:

“The $10 floor that publishers fought so hard to maintain for popular new novels is largely intact.”

See the old switcheroo there? Publishers hated the $10 price — the whole point of their illegal, price fixing scheme was to kill the $10 price. They weren’t trying to maintain a $10 floor — they were trying to push the “floor” up to at least $13 to $15. And that effort has failed. Amazon itself wasn’t trying to get below $10 for best sellers. In fact, even before the illegal price fixing, Amazon often priced best sellers between $11 and $12, just like it’s doing now. Jeff Bezos was going around back in 2009 and saying he intended to make a profit on ebooks as a stand alone business. And that’s right back where Amazon is pricing. Not to mention that we still don’t have a true free market for ebooks as even publishers forced to allow some price cutting retain the ability to limit the amount of overall discounting. Also left out of this narrative is the massive growth of independently published ebooks at prices well below $10. The price fixing conspiracy certainly fed the growth of this part of the market and gave Bezos plenty of cheap offerings for Amazon customers looking for bargains. That wasn’t true back when the Kindle first started.

Streitfeld then picks the one book on the best seller list that’s discounted the least by Amazon as his example. Prices of the other discountable titles are all cut by more. Lame. My favorite example, if we’re going to cherry pick, is JK Rowling’s new novel, A Casual Vacancy, which the publisher was selling for $18 as an ebook, now cut to $12.74 by Amazon.

Then come a couple of wacky theories to explain the lack of discounting, which obviously have to be pretty wacky since they are meant to explain a non-existent phenomenon. It’s the slow down in ebook buying growth rates. It’s the demise of Borders (a true WTF). It’s Amazon holding back. Blah, blah, blah.

I love the next bit where Streitfeld cites an ebook market forecast from two years ago as “typically ebullient.” It’s James McQuivey calling for $2.8 billion of ebook sales in 2015. Crazy? Insane? Hmm, maybe right on. Ebook sales last year hit $2.1 billion and up some 34 percent this year, according to Streitfeld, thus reaching — wait for it — $2.8 billion.

The finish is, of course, the most wrong: “this might be as cheap as ebooks will ever be.” That’s pretty unlikely given that Penguin is about to allow discounting again and Macmillan is being prosecuted in court for its recalcitrance.

A second, slightly better piece from Laura Hazard Owen needs a few corrections, too. She buys into the data-free assertion that prices haven’t fallen and the headline is off-base. But she’s correct to point out that not all ebooks were sold at $9.99 before the wave of price fixing in 2010 — though I’m pretty sure she has previously gone along with publishers assertions that Amazon cut everything to $9.99 in the bad, old days (I’ll have to double-check). And she explains that Amazon’s ability to discount now is still limited, as I explained above.

Ironically, it’s the element of competition that she seems to get wrong. Apple isn’t discounting to match Amazon. It’s sticking with high prices. So whereas when Amazon was the only major player, it used $9.99 as a kind of promotional advertising, a psychological sweet spot, now it has a simpler task of undercutting the actual prices of the competition. No need for psychology, there’s a whole ebook marketplace consumers can see. And in the new market where Apple likes to sell for at least $13 when it can, a discount to $11 looks pretty enticing.

But Owen doesn’t get it as she writes: ” These retailers have all shown themselves willing to match Amazon’s price drops on ebooks. The prices aren’t always exactly the same across stores, but they are at least close enough that there is little incentive to switch retailers if you’re already using a platform you like.”

That’s the chuckler in her piece. Prices are not that close. And there’s less platform lock in than ever — it’s easy to switch around. Amazon offers free ereading software for almost any platform including the iPad, iPhone and Mac. Ironically, it seems to be the higher-priced competition that’s having the biggest impact on Amazon’s pricing, creating a price umbrella that has eased the pressure to price at $9.99.

A Casual Vacancy, a serious rip off?

There’s a bit of a surprise in store for you if you go to buy the electronic book version of the new J.K. Rowling novel, “A Casual Vacancy.” Despite it’s best-seller status, the ebook’s price is not $9.99 or $12.99 or even the high-end of best-sellers brought to you by the price fixing cabal of $14.99. Nope. At Amazon’s Kindle store it’s $17.99. And it’s the same price at the Google Play store, at Barnes & Noble and at iTunes.

How could this be? After all, the Justice Department smashed the price fixers and three of the big publishers, including Hachette, which sells the new J.K. tome, agreed to settle all charges and allow discounting to resume. The answer, it seems, is that “A Casual Vacancy” hit at just the wrong time.

Under the settlement, Hachette almost immediately had to cancel its contract with Apple’s iBooks store, the one that would have automatically priced the ebook lower while banning any discounting. But it didn’t have to renegotiate its contracts with others ebook sellers at the same pace. Laura Hazard Owens at PaidContent says it could be 60 days or so before new deals must be in place with other retailers. Once the deals are done, Amazon will be allowed to discount again. The giant online book seller already has a new deal with HarperCollins, for example, so ebook versions of Mitch Albom’s “The Time Keeper” are only $9.99 on the Kindle. But until all the deals are done, only Apple has price flexibility and it has little interest in discounting when all its competitors must sell at the high, Hachette-dictated price.

Some have gone so far as to argue that the high price shows consumers will be hurt by the DOJ price fixing settlement (see some of the comments on the PaidContent piece linked above). But when the only ebook retailer given price flexibility is the one that was among the accused price fixers and the one that hates to discount, it doesn’t prove much of anything.

Still, JK’s ebook is selling. It’s number 2 among paid ebook best sellers at the Kindle store as of right now. For a book with such high expectations, it’s hard to say if that’s actually a success or a disappointment. But assuming discounting resumes shortly, many folks may be holding off until the $9.99 version arrives. And while they wait, they’ve got plenty of time on their hands to ding the book with one-star reviews, it looks like.

UPDATE: On October 13, I checked again and the publisher on its own has cut the ebook price to $14.99. That may be because the book was slipping down the ebook best seller list at the original price. Then, at the end of December, with discounting back in Amazon’s control, the ebook price was down to $12.74.

History will show journalists missed the big Amazon story today: ebook discounting is back

There were a gazillion Amazon headlines today across virtually every news site, tech blog and twitter feed I follow but almost none had the truly important news development about Amazon today. While everyone was gorging on the announcement of upgraded “Kindle Fire” tablet computers, U.S. federal judge Denise Cote in New York approved a controversial settlement to the massive ebook price fixing scandal.

The settlement requires three of the biggest book publishers in the world to soon terminate their so-called agency pricing arrangements over ebooks and allow Amazon and others to resume discounting ebooks. Two other major publisher and Apple were bitterly opposing the settlement. But the judge went with the Justice Department and major consumer groups. The law seemed pretty clearly on the side of the government and the settling publishers, as I wrote last month.

This will very soon benefit tens of millions of ebook buyers. And the long-term benefits of a slightly cheaper, slightly fancier tablet? Less so.

Update: Making my point further, the New York Times buried the story inside the business section and it’s not given prominent play on their web site, either. But their blog post about the ruling is the number one most emailed story right now. And, wow, the second-day coverage in the paper is embarrassingly bad, too. The Times story in print, link unseen, aside from various spokespersons, quotes a long-time publishing industry consultant, the head of the Author’s Guild and a publishing industry lawyer. The Wall Street Journal is no better, quoting the same lawyer and the AUthor’s Guild. Come on, people. You can do better.

 

Reality Bites: DOJ takes down Apple, publishers ebook defenses

Since the Department of Justice stood up for fans of digital books a few months ago and sued the major publishers and Apple over their 2010 conspiracy to raise prices, the amount of whining, spin and flat out lies emanating from some of the publishers and Apple has been both impressive and depressing. That so many journalists and bloggers who should know better repeated much of this truthy crap storm is even more depressing.

So it was like a breath of fresh air yesterday when the Department of Justice released, along with some 868 comments it received, a powerful and straightforward brief refuting much of the garbage that lately passed for analysis and history of the ebook market. The whole 66-page brief (PDF) is worth reading — actually should be required reading for reporters and bloggers covering the issue — so I’ll limit myself to highlighting just a few key points. To start, the brief offers a simple, concise explanation of what went wrong:

When Apple launched its iBookstore in April of 2010, virtually overnight the retail prices of many bestselling and newly released e-books published in this country jumped 30 to 50 percent—affecting millions of consumers. The United States conducted a lengthy investigation into this steep price increase and uncovered significant evidence that the seismic shift in e-book prices was not the result of market forces, but rather came about through the collusive efforts of Apple and five of the six largest publishers in the country. That conduct, which is detailed in the United States’ Complaint against those entities, is per se illegal under the federal antitrust laws.

It’s really as simple as that.

Among the many detailed refutations and take-downs in the brief, the main one I want to focus on is about the role of Amazon. Recall that for more than a decade, the ebook market was nearly moribund. It wasn’t until November, 2007, when Amazon introduced its Kindle ereader and related ecosystem that the market exploded. A critical component, of course, was the deep discounts Amazon offered on some Kindle books, although that was far from the only innovative and important feature that helped the platform succeed where so many others had failed.

Publishers and their allies have centered their defense on outlandish claims that Amazon was simultaneously discounting them to death (even though they still had full control over how much Amazon paid them) and creating a monopoly to rip off consumers (even though Amazon’s entire business was predicated on low prices).

The Justice Department’s brief offers at least three powerful rejoinders:
-Amazon wasn’t do anything wrong
-The ebook market was vibrant and competitive
-“He hit me first” isn’t actually a viable legal defense

First, the Justice Department noted that it investigated allegations against Amazon and found no evidence of predatory pricing or other illegal conduct. Amazon’s ebook effort was consistently profitable, as only some ebooks, such as best sellers, were sold at $9.99, the money-losing price point so hated by publishers.

“Loss leaders,” two-for-one specials, deep discounting, and other aggressive price strategies are common in many industries, including among booksellers. This is to be celebrated, not outlawed. Unlawful “predatory pricing,” therefore, is something more than prices that are “too low.” Antitrust law prohibits low prices only if the price is “below an appropriate measure of . . . cost,” and there exists “a dangerous probability” that the discounter will be able to drive out competition, raise prices, and thereby “recoup[] its investment in below-cost pricing.” Brooke Group v. Brown and Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993). No objector to the proposed Final Judgment has supplied evidence that, in the dynamic and evolving e-book industry, Amazon threatens to drive out competition and obtain the monopoly pricing power which is the ultimate concern of predatory pricing law. The presence and continued investment by technology giants, multinational book publishers, and national retailers in e-books businesses renders such a prospect highly speculative. Of course, should Amazon or any other firm commit future antitrust violations, the United States (as well as private parties) will remain free to challenge that conduct.

Second, the agency reviewed some of the history of the ebook market after the Kindle arrived and before the illegal price-fixing conspiracy, which has been the subject of some of the most ridiculous propaganda from Apple and the publishers. And what was the condition of that market? Highly competitive and filled with innovation. Barnes & Noble, for example, not only had already introduced its popular Nook reader and garnered over half of ereader sales, but Google and Apple were far along in planning to launch their own offerings as well. Color ebooks, to pick one particularly silly example offered by Apple, were coming soon whether or not publishers colluded to raise prices.

The idea that somehow Amazon could now gain a monopoly is even sillier. The company has only a fraction of the profits and cash flows of its competitors, Apple, Google, Microsoft and Sony. Barnes & Noble was in a bit of financial turmoil earlier this year but got a $300 million injection from Microsoft as part of a wide-ranging alliance and remains a highly competitive number 2 in the market.

Third and finally, even if Amazon was in the midst of some heinous scheme to monopolize the ebook market, U.S. law still does not permit a bunch of companies to get together and agree to raise prices.

When Congress enacted the Sherman Act, it did “not permit[] the age-old cry of ruinous competition and competitive evils to be a defense to price fixing,” no matter if such practices were “genuine or fancied competitive abuses” of the antitrust laws. See United States v. SoconyVacuum Oil, 310 U.S. 150, 221-22 (1940); see also, e.g., FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 421-22 (1990) (“[I]t is not our task to pass upon the social utility or political wisdom of price-fixing agreements.”). Competitors may not “take the law into their own hands” to collectively punish an economic actor whose conduct displeases them, even if they believe that conduct to be illegal. See FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 465 (1986) (“That a particular practice may be unlawful is not, in itself, a sufficient justification for collusion among competitors to prevent it.”); Fashion Originators’ Guild of Am. v. FTC, 312 U.S. 457, 467-68 (1941) (rejecting defendants’ argument that their conduct “is not within the ban of the policies of the Sherman and Clayton Acts because the practices . . . were reasonable and necessary to protect the manufacturer, laborer, retailer and consumer against” practices they believed violated the law (internal quote omitted)); Am. Med. Ass’n v. United States, 130 F.2d 233, 249 (D.C. Cir. 1942), aff’d 317 U.S. 519 (1943) (“Neither the fact that the conspiracy may be intended to promote the public welfare, or that of the industry nor the fact that it is designed to eliminate unfair, fraudulent and unlawful practices, is sufficient to avoid the penalties of the Sherman Act.”). Thus, whatever defendants’ and commenters’ perceived grievances against Amazon or any other firm are, they are no excuse for the conduct remedied by the proposed Final Judgment.

No excuse, indeed…

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Verizon’s stingy 4G Internet pricing and other downers of the week

I had a really busy week at work and I’m just catching up on some of the tech news of the week. None of the stories are positive developments for we the denizens of Internet nation, sadly.

Headline A that caught my attention was Verizon Wireless announcing pricing for its new super-fast, fourth-generation mobile broadband service. I’ve long been a customer of Verizon’s current 3G service, which is more dependable and widespread than the service I get either from AT&T (with my iPhone) or Sprint (with an Overdrive). But for 4G, Verizon has decided to go with data limits that make the service’s super-fast speeds practically useless. They are going to charge $50 a month for 5 gigabytes of data or $80 for 10 gigabytes. As a headline from PC Magazine noted, you can blow through your month’s data allocation in 32 minutes!

I’m slightly surprised by the news, since my 4G-capable Sprint Overdrive costs $59.99 a month for unlimited 4G downloads (though it carries a 5 gigabyte cap when it defaults down to 3G speeds). Supposedly one part of the appeal of mobile 4G networks was relief from overcrowding that hampered 3G networks and required all these onerous bandwidth caps in the first place.

Of course, the Journal’s spin was more upbeat, as they noted that the new 5 gigabyte cap was priced $10 a month less than the old Verizon 3G plans with the same data limits. But since the whole point of getting on a faster 4G plan is to download more, to me, the fact that the cap is the same is a killer. It reminds me of that line from the movie You’ve Got Mail that the purpose of a VCR is to record TV when you leave the house but the whole point of leaving the house is to skip out on watching TV. The reason to get a 4G connection is to download more data but the reason for Verizon’s stingy cap is to prevent you from downloading more.

Things became clearer when the paper explained some of the thinking behind the pricing.

Verizon Wireless is able to offer the five-gigabyte plan at a lower rate than its 3G plan because it costs less to deliver that wireless traffic on 4G, Chief Technology Officer Tony Melone said. But he expects most people to sign up for the high-capacity $80 plan because the higher speeds will lead to more usage.

I don’t know if they’re serious but the market for people who are willing to pay $80 a month for mobile Internet service can probably fit in the front pocket of Tinkerbell’s blouse. I mean, really. The fact that 4G is fast enough to replace wired home broadband connections for many people — like those millions sold by Verizon — might explain some of the pricing strategy.

Another downer this week came from broadband provider Level 3. The company just grabbed the contract to send Netflix customers streamed movies and TV shows. But Comcast, which is now the largest retail broadband provider, is demanding some mega-payments to allow Level 3 to send Netflix streams to Netflix customers who use Comcast.

The debate quickly descends into some pretty technical historical details of the connections among different kinds of Internet and broadband service providers. But suffice it to say that if Comcast can price Level 3’s Netflix customers away from NetFlix, they’ve gone a long way to protect their lucrative cable television franchise. Hmm, sensing a theme yet?

The back and forth prompted law professor Susan Crawford to cut through the crap and get to the point with some painfully pointy rhetorical questions.

The takeaway from today: No market forces are constraining Comcast – or any of the other major cable distributors, none of which compete with each other. How will consumers and innovation be protected from their machinations? The FCC is currently facing two defining moments in US telecommunications policy, and it’s unclear what the Commission is going to do in either case. Will the FCC act to relabel high-speed Internet transmission services, reversing the radical Bush-era deregulatory turn? Will the FCC block the Comcast/NBCU merger? Can we expect that anything will happen (at all) to ensure that local monopoly control over communications transport isn’t leveraged into adjacent markets for devices and content?

What will the legacy of the FCC be, as the looming cable monopoly stops looming and starts muscling levers into place?

Finally, whatever you think about Wikileaks and its controversial founder Julian Assange, the way big Internet companies have reacted scares some free speech and civil rights advocates. Dan Gillmor, writing for Slate, warns that online, the censors are scoring big wins. Internet hosting and address companies booted Wikileaks out so quickly and so cavalierly that Gillmor worries for the future when we all depend more and more on information stored in the “cloud.”

The WikiLeaks affair is highlighting the Internet’s soft underbelly: the intermediaries on which we all rely to store our information and make it available. We are learning, to our dismay, that we cannot trust them. Combine that with increasing government intervention, we’re also learning that the Internet is somewhat easier to censor than we’d assumed.

This should worry anyone who believes that we’re going to move our data and online lives into the fabled “cloud” — the diffused online array of hardware and services where, proponents say, we can do our online work, play and commerce without the need for storing data on our own personal computers. Trusting the cloud is becoming an act of faith, and it’s time to question that faith.

And that’s it for GravitationalPull dot net today. Hopefully, cheerier postings ahead.

The real agenda of Apple’s ebook partners: death to ebooks

The head of one of the big book publishers, MacMillan CEO John Sargent Jr., is out with an “open” letter about his dispute with Amazon over the pricing and timing of electronic books. It’s telling that this “open” ebook letter wasn’t released publicly and isn’t directed towards readers, book lovers and customers. It was placed as an ad in a small publishing industry trade rag and the message is for publishing industry insiders. Sargent’s message, despite a bunch of misleading surrounding verbiage, is simple: let’s strangle the growth of ebooks.

If you want to understand where Sargent and other major book publishers are coming from, I strongly recommend watching this online footage from a conference New York University hosted last September. Here you can see Sargent and a couple of fellow old media dinosaurs whine and complain about the digital world, dismiss Facebook, Craig’s List and Twitter as irrelevant non-businesses that will never make money and generally explain their plans to charge everyone for everything at every opportunity.

The real critical portions come towards the very end, in part three, as Sargent grows more animated about his opposition to giving away ebooks for free, even for promotional purposes. Despite being in charge of one of the largest publishing conglomerates in the world, he’s pretty pessimistic about the future of books. Challenged by Wired editor Chris Anderson to use digital distribution and new business models to attract new readers and expand the book market, Sargent is in full rejection mode:

“As the Internet grows, as all the other types of entertainment grow, it’s hard to imagine sitting here how we are going to convince everybody in this room to spend an extra six hours every week to consume another book. So in a way, if you look at the overall demand for books, it’s pretty hard to make that grow. We’ve tried. A whole bunch of people worked very hard to try and grow that. It’s pretty hard if you look at the demographics, how people read, to actually convince yourself that we have a growth business in books.”

In other words, what we have in books is a dying audience, a shrinking audience. And the way you extract the most revenue and profit from a shrinking audience isn’t with creative promotions and new ideas. It’s with ever higher prices. As Sargent says at a another point, in a barely veiled swipe at Amazon’s $9.99 ebook price:

“What we need is variable pricing. I think you guys would agree with this, variable pricing for content. You want a range of price points. You want to find a place — what you don’t want to do is give the consumer something for less than what they’re willing to pay for it in the rush to a new business model. Because once you get it out there it’s dangerous and hard to go back.”

Again, challenged to charge less because producing ebooks cost less, Sargent obfuscates, fixating on just one bit of savings, the printing costs of books (ignoring distribution, returns, overage, lost sales from out of print etc):

“Guys I can walk you through this. How much do you think a hardcover book costs us? A buck sixty. What are we saving? Not enough for the price point to drop from $22.50 down to $8.”

Amazon has been saying that its Kindle customers buy more total books – electronic and print – than they bought previously. It’s certainly been true in our household. I don’t have the figures at my finger tips, but I’d imagine that the whole creation and growth of Amazon.com has enlarged the book market, as well. But that’s not really happening in John Sargent’s world of mega-best sellers.

So keep in mind what Sargent was saying a few months ago when you read passages like this in his letter:

“In the ink-on-paper world we sell books to retailers far and wide on a business model that provides a level playing field, and allows all retailers the possibility of selling books profitably. Looking to the future and to a growing digital business, we need to establish the same sort of business model, one that encourages new devices and new stores. One that encourages healthy competition. One that is stable and rational. It also needs to insure that intellectual property can be widely available digitally at a price that is both fair to the consumer and allows those who create it and publish it to be fairly compensated.”

Leave aside for a moment the completely dishonest portrait Sargent paints of the old print book-selling world, and remember that he doesn’t believe the there will be any growth in book sales in the future. He’s not interested in a fair price for anybody — he’s interested in making sure that he never gives the consumer something for less than what they’re willing to pay for it.
He wants to extract the big bucks from the big sellers and move on.

The great danger to MacMillan is that it’s the authors of those big best-sellers who are becoming increasingly able to cut him out. If ebooks really take off, an author like Stephen King or Nora Roberts can sell a lot more of their books direct to their audience with no publisher at all. And that’s why Sargent’s real goal here is not to increase competition or create a level playing field. It’s to squeeze as much profit out of a dying industry as quickly as he can and hold off the digital future for as long as possible.

UPDATE: Henry Blodget also really gets it in his post today called “Hey, John Sargent, CEO of Macmillan Books, Screw You!” An excerpt:

Did Steve Jobs seduce you with that temporary “charge-whatever-you-want” speech?  Well, Steve has been known to seduce people from time to time.  Just imagine what will happen once Steve has put the Kindle out of business and Steve owns the ebook platform instead of Jeff Bezos.  That’s right: You’ll get held up even worse than Jeff’s holding you up today.  Just ask the music industry.  Careful what you wish for. So, bottom line, John, take your $15 ebooks and shove them.  We’re with Amazon on this one.

Good work.

Will Apple continue to allow competing ebook reading apps?

There are many, many unanswered questions about Apple’s forthcoming tablet computing device, or the “God tablet” perhaps I should call it. For those of us particularly concerned about the future of electronic books, I have one pointed question for Apple. Will the company, which at times acts against its own customer interests, allow competing ebook vendors like Amazon, Barnes & Noble and Sony onto its new tablet? Or will it boot the competition in favor of its own iTunes ebook store? You know, one ereader to rule them all and in the darkness bind them…

There’s little question among the Mac-erati that the tablet will follow the software model of the iPhone/iPod Touch and not the Mac itself. That is, customers will not be allowed to load any software they want. Customers will be limited to software offered at Apple’s iTunes app store. Apple has been much and rightly criticized for its slow and ham-handed management of the app store approval process.

But at least for right now, Apple is letting all of its potential ebook competitors offer ebook reading apps. The Kindle iPhone app is usually the top-ranked download in the book section and B&N’s app is usually second or third. If Apple sticks with this policy and just adds its own ebook store, likely with its own proprietary digital rights management lockdowned formatting, I don’t think Apple is going to have much impact on the ebook market.

Why no impact? After cozying up to the music labels and granting them an unprecedented 30% price hike last year, Apple now appears to be sucking up to book publishers. Apple will reportedly let publishers set prices and conditions for sales of all ebooks on its new platform. That’s a recipe for disaster with consumers. Publishers want to keep prices high and further reduce the value of ebooks by limiting the ability to share or resell them, prohibit computerized audio reading and generally delay the inevitable as long as possible.

To see just how little traction this kind of strategy is likely to garner, recall Apple’s former darling ebook app vendor, Scrollmotion, and its hideously overpriced Iceberg reader app. Given prime stage time at last June’s World Wide Developer Conference, Scrollmotion charges full print retail prices for ebooks that can only be read on the iPhone. I’ve rarely seen any of their editions on the top 100 best-selling apps in the books category and you don’t even hear them mentioned by Apple or publishers anymore.

But – here’s the big but – what if Apple yanks ebook competitors out of the app store. There’s some slight precedent for that after the Google Voice debacle, when Apple not only declined to approve Google’s app but went back and yanked a few minor apps that also worked with GV. On the other hand, federal regulators are looking into the GV debacle, so there may be too much pressure on Apple to pull another fast one.

If Apple does pull competitors off the entire iPhone platform, then you’d have to give their publisher-loving, consumer-hating ebook strategy more of a chance. I think it would have more of a chance of holding back the whole market than taking over the whole market but who knows.

Publishers could also “help” if they follow what I call the “slow boil a frog” strategy. That was the Barnes & Noble strategy in the 1990s when it was opening new superstores all over the country. Start with big discounts on everything for a few years to wipe out lesser competitors. Once most of the independent books stores are gone, eliminate most of the discounts.

One final aside: as I’ve said before, book publishers are clearly following the music industry’s template for getting leverage against an entrenched, market leading digital retailer. Amazon won’t do what they want to they’re going to try and help some smaller players with the ultimate aim of getting Mister Number One to cave in to their demands. Ironically, in the case of music, Apple was the leader under attack and the industry made a sweet heart deal with Amazon.

UPDATE: As the always useful Teleread blog just pointed out, GearDiary’s Carly Z was on this topic yesterday. She sounds a touch more optimistic than I am:

So who wins when Apple gets involved in ebooks? Overall, the consumer with no library tie-ins is probably going to be very happy. Assuming the pricing is reasonable, Apple will no doubt pull a rabbit out of their hats and ebooks for some time now, it’s probably going to be a mixed bag. As great as it is to see a tech giant like Apple involved in ebooks, it means big changes are no doubt in store, and it is going to be a very bumpy ride along the way.