THE BATTLE TO CONTROL ONLINE PRICES

The struggle to control prices of digital content sold online continues, with producers and distributors battling over prices for downloads of books and music.

In the latest skirmish, Amazon removed Macmillan books from its website after the company protested that online retail was using monopoly power to force publishers to accept prices no higher than $9.99. Macmillan and other publishers have now signed distribution deals with Apple that allows them to price downloads at $12.99 and $14.99.

Producers, of course, want higher prices because they produce higher revenue and better profits.

The struggle to control prices is not unique to the online environment. In the offline world, producers of books, magazines, CDs, and DVDs have long struggled to gain limited shelf space because there is a large oversupply of products and retailers’ have selection preferences for popular, rapidly selling products.

Large national and retailers have also used their bargaining power to push wholesale and manufacturer suggested retail prices downwards. Wal-Mart, now the number one music retailer in the World, uses its purchasing and sales power to sell large quantities of music at the lowest price possible—the basic price/quantity model for all the products it carries.

What is new in the offline world is that the conflict does not merely involve struggles over the price and quantity strategies of retailers, but that the retailers are using the media content as a joint product with their proprietary digital hardware.

Amazon wants content prices low not merely to sell more books, but because it helps it sell Kindle, its e-book reader. To date, it has been able to do so because it was the leading seller of both products—something it learned from Apple’s strategy with i-Tunes and i-Pod.

Competition in distributing content, even just a little competition, helps shift some of the power away from the retailer and back to the producer. Apple was forced to back away from its enforced price of 89 cents for a download when recording companies made deals with other download providers and threatened to end the rights for Apple to see their popular music. Apple is now playing spoiler to Amazon in the book downloads and Amazon has agreed to carry Macmillan books again.

Newspaper publishers are now seriously testing and considering a variety of e-readers as ways to reduce production and distribution costs. As part of their strategies, however, they would do well to learn from the experience of the music and book business. They need to remember that a basic rule of business is that if you don’t control price, you don’t control your business.

First Thoughts About the iPad

Immediate Reaction to the Announcement of the iPad:

1. Apple is taking on the mobile phone industry and Amazon at the same time. Wow.

2. The plug-in keyboard/charger is the future-now of mobile computing. Hands down.

3. They actually priced this right; and with no contract required.

4. I'm thinking about cancelling my cell phones and my home DSL, Craigslisting my various computer crap, and buying two of these on the 3G plan.

*add 3:41PM: But @deangroom just reminded me that you can't play WoW on this thing... guess I'll keep my home LAN for the time being and just ditch the phones ; )

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More nuanced immediate reaction:

I think there's something that's largely going unsaid here.

In making iTunes cloud-based, this device really doesn't have to be 'owned' by anyone. What I mean is: this is just a device for connecting to your content (and record collection, and games, and magazines, and bookshelf) on the cloud. Which means that we could see these popping up in every hotel room and on the coffee tables of every office; we could see these things lying around for public use in the faculty room, in student centers, and in libraries.

I think what I'm suggesting is that this could sort of mash up what we think about when we think about personal computing.

Instead, could we be looking at the dawn of communal computing? Where the device is ubiquitous and shared -- sort of the Zip Car of computing. The real essence of what's going on is that the 'stuff' is out there on the cloud; all we really need is an easy to use device to access and play with our stuff.

We own our stuff; who cares who owns the device?

That said, I'm sort of envisioning one or two at home with one hooked up to an LCD projection to watch movies and whatnot. But I'm also imagining communal Pads lining bookshelves at school and a Pad or two sitting where the magazines used to be at the Jiffy Lube.

One place where I definitely see a future if this thing takes off (and it will) is in accessories. You're gonna need some way to carry that thing. Enter skinny bike messenger iPad bag.

I'll take two.

We don't need digital textbooks any more than we needed paper textbooks.

This is a big mistake:

The maker of the iPhone is discussing ways to include McGraw-Hill and Hachette e-book titles on its tablet, due to be introduced Jan. 27

If Apple really wanted to help out in education, it's new tablet would automatically erase e-textbooks.

We don't need digital textbooks any more than we needed paper textbooks.

Kids need primary sources and smart teachers, not manufactured questions and one-size-fits-all standards.

[Thanks to @NMHS_Principal for Tweeting out the original article.]