First, news came out that Apple was making strict contracts with book publishers leading to high prices for your favorite novel on Apple reader apps. Then the Department of Justice got involved with a warning to Apple and similar companies. Apparently, these contracts are a little too anticompetitive.
The big deal is how publishers make money when a digital text is sold. The deals Apple was making with its major publisher clients resembled traditional contracts, where publishers set their own prices for e-reader products. This nixed any chance of discounts, sales, deals or any sort of pricing strategy for any companies that wanted to sell digital novels. Only publishers could create discounts.
Book publishers are desperate: the digital market is threatening to take away all their business, and if they lose control of prices then their doom is already written. Amazon and Barnes & Noble, creators of other popular e-readers like the Kindle and Nook, have similar agreements with publishers, mostly forced. Back when Amazon controlled pricing, they could set release prices lower than bookstores, winning business over to the digital side. Publishers hated the switch because it resulted in immediate losses in profits.
But the Department of Justice warning over the whole mess is more than a slap on the wrist. The letter to Apple and publishers promised charges of collusion and price fixing, backing up a flurry of lawsuits that hit e-reader companies last year.
The major difference between Apple and Amazon is that Amazon fought publisher control, while Apple offered complete control as a way to win publisher business, essentially locking out competition. Publishers were providing similar ultimatums to Amazon, which eventually caved and may be facing lawsuits of its own.
The result of the battle? It looks like the publisher price control idea is failing, which means Amazon had it right after all and Apple may be in some hot water (Barnes & Noble sits off to the side with its traditional publisher contracts, hoping no one notices). E-book prices are set to drop, and not only to the $9.99 level. How many years until 99 cents for a first day release? The day looks like its coming, so publishers have a deadline to reinvent the way they do business.