Dynamist Blog

Amazon's Big Mistake: Forgetting They're a Utility

As John Scalzi has scathingly noted, Amazon really screwed up when they pulled all of Macmillan's titles from their site. Although I think they have the right idea about book prices, they betrayed their customers' expectations and, worse, did so without warning. They forgot that Amazon is what Professor Postrel called in this 2007 post on Organizations and Markets a "new-wave utility" and, a such, has adopted a strategy that implies a high level of reliability.

How do you get sustainable advantage in a service business today? One approach: Become a new-wave utility. Think about Google or Yahoo, eBay, Amazon, etc. on the Internet; think about UPS or FedEx, Grainger, Ryder, Public Storage in logistics; think about McDonald's, Starbucks, 7-Eleven, in convenience food consumption.

To see the implications, read the whole thing.

Apple vs. Amazon: What Should E-Book Prices Be?

Amazon has backed down from its weekend dispute with Macmillan, agreeing to charge the publisher's higher prices for Kindle editions rather than its preferred $9.99. But the long-term questions about e-book pricing remain.

Amazon still calls Macmillan's prices--generally $12.99 to $14.99 for new books--"needlessly high." Apple, meanwhile, has made deals with publishers like the one Macmillan demanded from Amazon: higher prices for books, with Apple keeping a percentage of sales.

Who, in fact, has the better strategy? To maximize revenue, what should prices for e-books look like?

Read the rest at TheAtlantic.com.

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