Amazon’s biggest ally is Apple

I’ve never understood why people position Apple and Amazon as rivals in the ebook game. While it’s true that the two have clashed that conflict is a result of incompatible platform goals, not rivalry.

Conflict is not rivalry and two organisations that conflict occasionally may well be allies in the bigger picture where rivals may not.

Let me elucidate…

The Apple/Amazon conflict has presented itself in a variety of ways:

  • Direct competition. Apple entered the ebook retail game and broke the law when it enabled big publishers’ price collusion.
  • App restrictions. Apple prevents vendors from integrating ebook sales into their ebook reading apps.
  • Apple entered the proprietary format game by forking EPUB with iBooks Author books.

—How can you say those two aren’t rivals? I mean look at that!

Easy. These conflicts are not a result of an Apple/Amazon rivalry but of Apple’s ambitions for its platform.

Apple wants three things for iOS:

  • Lock in. It very much doesn’t want people to be able to switch easily to Android. (This is abundantly clear from the emails published as a part of the DOJ’s investigation into agency pricing.) An iBooks ebook platform that only works on Apple devices serves that end goal nicely.
  • It wants its platform vig. Apple would rather a digital transaction not take place at all than for it to take place on iOS and it not getting its cut.
  • It wants large-scale education contracts for iPads in schools. For that it needs textbooks and, since it wants its vig, it can’t just work with one of the existing vendors.

None of these things are specifically directed at Amazon except insofar as they are the biggest ebook vendor. Apple can’t claim it is doing these things out of concern for the consumer or in an attempt to make its platform more secure against fraud. If that were the case hey would have done what Google did with its Play Developer Program Policies: on Google Play services and cross-platform digital goods such as ebooks are specifically exempt from the requirement that apps use Google Play’s in-app billing service.

—Okay, okay. So, maybe Apple isn’t specifically targeting Amazon but there’s still conflict. I don’t see how you can claim that Apple is Amazon’s biggest ally.

Because Amazon is the default choice for ebooks. It is what your average consumer first thinks of when somebody mentions ebooks. They have a mindshare that is even bigger than their marketshare (which is big enough to begin with).

Amazon isn’t hurt at all by Apple’s demands. A reader who can’t buy an ebook in the Kindle app will just go to the website. It only hurts the Kindle app for iOS development team.

Apple’s demands hurt Amazon’s true rivals—other ebook vendors—much more that they hurt Amazon. These vendors would benefit enormously from being able to directly integrate ebookstores into their apps. They even have a standard that would let any vendor offer their ebook catalogue for sale within any ebook reading app: OPDS.

The EPUB faction of the ebook world is hurt more by Apple forking the standard and by its general platform behaviour than Amazon is. Apple’s tactics have weakened the standard and made it less competitive.

If Apple added an exemption for ebooks to their developer policies, something similar to Google’s exemption, we’d get a more competitive landscape for ebooks on iOS. If Apple went all in on EPUB, extending it instead of forking it when necessary, the modularised EPUB ecosystem would be stronger for it. If Apple made ebook development tools that targeted EPUB and not a proprietary format, the non-Amazon side of ebook retail would have more diversity of titles and would be more competitive. If Apple turned iBooks into an iBooksView, a general purpose widget for rendering ebooks, every single ebook app on the platform would improve as a result.

Doing all of these things would strengthen iOS by improving the apps available for the platform. That, in and of itself, should be enough reason for Apple to do so.

But, no. Apple wants lock-in and a vig.

6 thoughts on “Amazon’s biggest ally is Apple

  1. a “primary weakness” that has led them
    to a market cap greater than 400 billion.


  2. Hi Baldur,

    Thanks for this piece. I having a little trouble unpacking what you are saying.
    Let me give this a shot…

    Apple and Amazon aren’t rivals in the ebook game. Sure. Ok.
    They have clashed. Yep.
    Clashing doesn’t make them enemies. I get that.

    But why does that make them allies?

    I think you are saying they are allies because they have a common enemy — other ebook vendors — and by inference Apple is happy to ride on the coat tails of Amazon’s mind share.

    With what goal exactly? To carve out their share using lock-in and other practices that are anti-consumer and which are inherently unfriendly to the ebook community?

    If I follow your logic correctly, lock-in ensures their cut and since that is all they care about (not growing the ePub community as a whole) then they are truly working in parallel with Amazon — and not how everyone perceives — against them.


    That seems circular to me but I will get back to that in a second.

    What you don’t seem to factor in is the other side of the equation. Apple might see Amazon’s activities as benign, but Amazon definitely doesn’t mirror the sentiment. Amazon is gunning for Apple.

    To back that up, I would point to Amazon MP3, Amazon Instant Video, and even Amazon Studios.

    It seems clear (to me at least) that Amazon is running down the full content stack. And in that game — with Netflix and Spotify in the margins — Apple is king.

    That’s not a content play. It’s a credit card play. Amazon wants the fees from recurring content consumption. It’s bigger than Kindle v. iBooks.

    (I won’t even mention that Amazon seems to have been influencing the DOJ in the pricing case from the beginning.)

    Which brings me back to one of your premises above — Apple just wants it’s cut.

    I agree. Apple is mercenary in it’s “FU pay me” attitude towards its sellers on its platform. But I think it’s critical to recognize that is Apple’s hardware profit centre speaking. Their contention is they build great hardware, people flock to that hardware, and for the privilege of accessing their install base you need to pay them 30%. In their view, they are doing the audience aggregation for you.

    If you doubt that look to the details from the court case, Apple didn’t even want to sell books in the first place and they appear not to care that the margin is in single digits. Jobs came around because he didn’t want to expose his flank.

    Amazon doesn’t have the same luxury (or perhaps the myopia that selling tons of $900 computers affords you).

    Apple has layered a content ecosystem atop a hard business. While Amazon is trying to build a content ecosystem on top of a logistics company.

    They are simply different kinds of companies, with different strategies, and different tactics.

    So yes you can argue they aren’t enemies, but the goals they have in common seemingly negates any possibility of them being allies.

    Hopefully that all makes sense.

    Thanks again for writing this.

    • My argument is simply that Apple’s policies help Amazon more than they harm them, by a large margin.

  3. I’m quite fascinated that you are taking Apple to task for wanting to lock in users and be paid for the use of their platform. You may want to consider doing a similar analysis of Amazon’s business model. I believe you will find that Amazon has achieved exactly that. From my perspective, the main thing that Apple has done wrong has been to be a market follower instead of a market leader.

    I understand that your argument is that Apple isn’t harming Amazon by following their lead. That’s fine. But Amazon is not an innocent bystander here. Amazon’s tactics should also be examined, and in my opinion, criticized, because Amazon’s choice to use ebooks as a loss leader to lock users into the Amazon infrastructure for EVERYTHING is unquestionably harming the ebook market.

    A friend of mine who is a successful midlist author continually points out that Amazon wants ebook prices to fall to zero. That seems to be bearing out, although I’ve noticed that it reserves the really low prices for itself–below $2.99, the author/publisher is paying Amazon double for the privilege of selling cheap, whereas Amazon often cuts deals with chosen authors to sell $0.99 ebooks at the full 70% royalty, and thousands of books are sold where tens may have been at the higher price. Therefore the only way to be successful at that price point is to jump into bed with Amazon. The game is fixed.

    But that’s not the worst of it. You may actually argue that what I’ve described is just good, but aggressive, business practices. However, Amazon requires and enforces a “most favored nation” clause, that allows them to match or beat any other price out there. This effectively kills any possibility of an author or publisher making a reasonable profit anywhere but Amazon. They have the biggest marketshare, sure, but if the author or publisher wants to make money, they must sell through Amazon, and they may not offer a better price anywhere else. If Amazon was in the business of playing fair, any author or publisher could offer their content anywhere at any price. But it’s not. Amazon is in the business of squashing all other competition, or at least hobbling it. And what’s worse, the federal government seems content to allow them to do that, to the point of punishing those who wish to even the playing field. (Granted, the Big 5 and Apple did it wrong–illegally in fact–but it isn’t their responsibility to keep Amazon in check, it is the very federal government who is backing Amazon.)

    So do us all a favor, Baldur. In your next post, lets have a little equal time for the multi-billion dollar gorilla in the room.

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