The buzz around the e-book pricing wars refuses to subside. After the very public Amazon-Macmillan disagreement, and a renewed hope on Apple's iPad as a savior for the publishing industry, the news isn’t getting better for publishers. The New York Times is reporting that Apple is likely to have included with publishers aboard the iPad platform, a clause that lowers the prices for bestsellers, to a level matching Amazon's $9.99. These machinations, coupled with internal turf wars over pricing, throw the spotlight on what is likely to become a recurring theme over the coming months - one that of constant strife between platform promoters (in this case, device vendors such as Amazon and Apple) and content providers (Publishers, music labels). And this is not something that is likely to be witnessed only in the e-reader market. Apple's issues with developers over its app approval process, and with music labels over pricing of tracks are more examples of this strife.
While it might seem atavistic to say so, however, the current scenario indeed appears a throwback to the era of walled gardens , where mobile carriers decided what content you could browse on your mobile phones and which content provider gets the best positioning in their on-portal content decks. Those days are, arguably, gone. But guess what, players in the device and content industries have now begun to see the merit that telcos had seen all these years in being gatekeepers to the consumer's user experience. Content and device players are now in a face-off over who can lay claim to the 'last mile'.
What is it that is driving both these categories of players at one another's throat. In the case of the e-reader, the reasons appear to come out of a recent survey done by consulting firm L.E.K. In the study on changing media consumption habits, the survey found that over 44% of e-readers increased their consumption of other media content. This is a very telling statistic indeed. While it has been a generally acknowledged fact that the early wave of e-book adopters have been the most compulsive of book readers, however, such results point to a future where the e-reader has the potential to be a gateway for a new era of content consumption. And this is where Apple's trying to get its foot in the door with its iPad.
However, more than specific devices and the corresponding business models, one key underlying driver for all these changes is the massive impact that the Internet is having on traditional content consumption. And that is what is encouraging multiple players to try and set up vertically integrated ecosystems where they drive the user experience, and more importantly, own the billing relation with the customer. And this movement towards closed systems is happening everywhere. Take for instance, the case of Microsoft's Windows Mobile. One of the key issues for Microsoft over the years has been the inability to create a uniform user experience across devices that ran Microsoft's earlier versions. Platform splintering between multiple device vendors became rampant, and the end result, Microsoft started loosing market and mind share after the advent of the iPhone. And Microsoft's response, the stunningly beautiful, Windows Phone 7 Series , with its long list of hardware and software restrictions. Yes, Microsoft has realized the value of Apple's approach in offering as minimal a portfolio of devices as possible. However, since Microsoft already has a history of working with several mobile carriers and hardware vendors, it did not directly replicate Apple. Rather Microsoft put in place several restrictions that are going to determine how the Windows Phone 7 Series platform evolves.
Platforms begin with restrictive definitions of who can offer services, what kind of services can be offered, what are the pricing points, what are the hardware features, what is the role of the gatekeeper. And every major content and device company out there is now trying to build its own platform where they can define each of these parameters. We can debate ad nauseam whether such closed platforms offer more value to the end consumer or they are just a walled garden with invisible-to-the-consumer walls. However, the fact of the matter is, they are here to stay. And it is in this context that the current e-book pricing wars and aggressive tactics appear as nothing beyond a red herring. The real battle is for the control of the platform.