How Steve Jobs Ruined Amazon’s Ebook Pricing Model
Steve Jobs really was a genius. And I’m not just saying that because of his recent passing (RIP). The products Apple comes out with are always beautifully designed and surprisingly simple.
But Jobs’ genius didn’t just extend to making great products, he was also a cunning businessman who knew how to give Apple a leg up on the competition.
A great example of this is how Steve Jobs single-handily forced Amazon’s hand when it came to ebook pricing. He looked at how Amazon’s was pricing their ebooks and basically said their business model was stupid.
An article from thenextweb.com explains:
Jobs thought that Amazon had “screwed up” in that it was paying wholesale price for some books from publishers but selling them below cost. The publishers hated this and had started to hold some books back from the ebook model because of it.
Jobs solution was ruthless and brilliant. He told the publishers that Apple would “go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.”
Of course the publishers loved this. But why would readers pay more for ebooks from Apple when Amazon was selling them cheaper? Steve Jobs thought of that too and made a pretty cunning move:
To solve this, Jobs negotiated an agreement from the publishers to allow Apple to sell the books at a lower price if any other vendor began selling them in ebook form cheaper than Apple was.
This effectively turned the publishers into Apple’s crow bar, gaining them leverage against Amazon. As Jobs explains it, “they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”
Did anyone ever think that Amazon, who pretty much set the ebook pricing bar, could be strong-armed by Apple to raise their ebook prices? I sure didn’t. This is even more amazing given that Apple joined the ebook game relatively late.
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Read More: Amazon Kindle, Apple, eBooks, Publishing News
