Every ebook iOS Kindle app users buy will allow Amazon to slap Apple
Earlier this week I wrote that Amazon had brought a "revolutionary new feature" to its Kindle for iOS app: the Kindle Store. The company introduced a workaround that, despite being frustrating, convoluted and technically unnecessary, allowed users to go from the Kindle app on their Apple iPads and iPhones to the Kindle Store for the first time since 2011.
That's when Apple, riding roughshod over its platform, forced Amazon to remove this direct-to-market functionality from all future updates. Kindle users might be about to catch another break. Amazon might soon be able to provide a direct link to its ebook marketplace from within the Kindle app, courtesy of the US Department of Justice.
A federal judge ruled in July that Apple was conspiring with five major book publishers to force Amazon to raise the price of its ebooks. (Slate declared the attempt the "stupidest thing Apple ever did.") Now, in a proposal meant to remedy the issue, the Department of Justice has proposed that, among other things, Apple be required to allow Amazon and Barnes & Noble to link to their online marketplaces from within their iOS apps. Quoth the proposal:
To reset competition to the conditions that existed before the conspiracy, Apple must also for two years allow other e-book retailers like Amazon and Barnes & Noble to provide links from their e-book apps to their e-bookstores, allowing consumers who purchase and read e-books on their iPads and iPhones easily to compare Apple’s prices with those of its competitors.
The basis of Apple and Amazon's conflict stems from (what else?) money. Amazon refused to give Apple a 30 percent cut on every in-app purchase made through the Kindle app and opted instead to send users to the Kindle Store via the Web browser, which lies outside Apple's purview. At the time, Amazon was selling many Kindle ebooks at razor-thin margins and many others at a loss in an attempt to wrangle control of the burgeoning market for digital books.
This was good for consumers but bad for publishers, which complained that even though they were paid the full wholesale price for each ebook, Amazon was wresting control of pricing from them. Fear of Amazon led them to strike a deal with Steve Jobs and Apple, which agreed to let publishers set the price of ebooks in an attempt to force Amazon to adopt an agency model, through which companies like Apple and Amazon would make a 30 percent commission from each ebook sale. Publishers would be able to charge higher prices, Apple and Amazon would be guaranteed a profit, and consumers would simply have to adapt to the changing market.
And that's where the Department of Justice came in. The pricing issue allowed the court system to end Apple's collusion with publishers -- a win for Amazon in its own right -- but also seems to have drawn attention to Apple's other anti-competitive practices. By trying to force Amazon to adopt a friendlier pricing model and gain marketshare by the ensuing fallout, Apple has created a system that could allow Amazon to make money from iPhone and iPad users easier than it has since Kindle first made its way to the iPhone.