As you may have heard, a federal judge recently found Apple guilty of conspiring with five leading publishers to fix the price of ebooks  in 2009 and 2010, a move that was intended to displace as the primary online marketplace for ebooks.

What this case most clearly shows is the extent to which these two businesses were willing to leverage their respective and often opposing business philosophies to achieve greater control over ebook market share.  In this instance, both were equally well positioned to dominate, each having their own hardware (Amazon's Kindle to Apple's iPad) and consumer distribution channel ( to iBookstore).

Amazon (much to nobody's surprise) chose effectively to lose money in exchange for market dominance by setting the average retail price of ebooks at $9.99, 16% to 28% less than the $12 to $14 wholesale price set by the publishers.

Apple (much to nobody's surprise) found this strategy to be antithetical to its core business ethos of creating healthy margins on their software, hardware and content, and sought to fight a different battle by colluding with the publishers to raise retail prices across the board.

The publishers, of course, were very much stuck in the middle of two giant rocks the size of Mount Rushmore.  Since they were still being paid current wholesale prices by Amazon, everything was good at the moment, however they understandably feared the $9.99 consumer price to be unsustainable in the long-term. 

Apple's offer for publishers to set retail prices at $12.99 to $14.99 and to take 70 percent of the revenue, between $9 and $10.50, actually lowered the publishers overall profits but provided them with what they believed to be a more sustainable foreseeable market.

In the end it appears that the judge's ruling was a win for consumers of ebooks and yet another shining example of the ongoing battle between Amazon's and Apple's competing business models.
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