How the NY Times Bought Apple’s Spin
on the Feds’ Antitrust Suit Allowing
Amazon to Cut Prices on E-books
BY PETER SCHEER
The U.S. Justice Department announced this week that it will sue e-book publishers and Apple Computer
for conspiring to raise e-book prices above the levels that Amazon, the dominant retailer for e-books, had
News reporters, responding critically to the government’s charges, were quick to point out that Amazon
was willing and able to lose money on its e-books in order to boost sales of its profitable Kindle devices. The
New York Times, for example, stated as fact, and without any attribution, that:
Amazon, which already controls about 60 percent of the e-book market, can take a loss on every book it sells to
gain market share for its Kindle devices. When it has enough competitive advantage, it can dictate its own terms,
something publishers say is beginning to happen.
But only five months ago, following the launch of Amazon’s Kindle Fire, The New York Times explained, as
fact, and without attribution, why Amazon had priced the Kindle at just $200 (while also making commensurate
price cuts in the company’s other Kindle e-readers) this way:
Amazon sees the Kindle line of devices as critical for its future as a virtual store, and is willing to lose money on the
sale of each one for the sake of market share. Once dominance is achieved, it plans to make money on the movies,
books and music that users download directly from Amazon.
Now, both of these statements can’t be true. It’s not possible for Amazon to both (1) sell e-books at a
loss in order to reap big profits on Kindle devices, and (2) sell Kindles at a loss to reap big profits on e-books.
It may be doing 1 or it may be doing 2, but it can’t be doing both at the same time. (Or, if it is, readers of this