As Barnes & Noble is helpfully demonstrating the device business is a difficult one to crack, with high initial overheads to get into the game and then equally expensive R&D to keep up. And that's before you consider the content side. Amazon, Apple, Google and, perhaps, Kobo, look like companies that can make both these businesses work, B&N is now considering whether to carry on with the tech side, given its poor Christmas. Instead it will look to partner with other tablet producers such Microsoft and Samsung.
Coming in the same week as news broke that three independent booksellers in the US are taking Amazon and the so-called 'Big Six' publishers to court over their use of Digital Rights Management to control the e-book market, the developments give a hint of how the market could develop. Particularly if the regulators are watching.
The booksellers' complaint was slightly undermined by the use of the term 'open-source' when describing an interoperable file-format (that may or may not have DRM applied to it), but nevertheless their intentions are noble. The e-book market is dominated by a company that locks users onto its platform through its file format AWZ, and publishers' use of DRM: if Amazon allowed other file formats to be sold directly onto the Kindle (as Apple effectively does with the iPad), and publishers allowed their files to be switched between devices, the world might seem a happier place.
Is this likely to happen? Amazon would have little interest is removing its single biggest advantage given the dominance of its Kindle device; and while publishers could in theory unilaterally remove DRM (as some have) opening up at least the possibility of the free-flow of e-book files between devices, it has always seemed to me to be unlikely that many punters would take advantage. The litigation, though initially attractive looks flawed: it outlines the problem well enough, but the remedy looks flakey.
The Booksellers Association, which is arguing for interoperable e-books, is making a stronger case.
There is a precedence for all this that the B&N news strengthens. In the late 1990s Microsoft was sued under the US Sherman Antitrust Act over its bundling of Internet Explorer web browser with its operating system on PCs. The complaint alleged that it gave Microsoft an edge in the browser wars since every PC user was supplied with IE.
If the Kindle becomes the de-facto device for e-reading, then might regulators look at Amazon's dominance over content sales, and force the company to open up its e-reader to other file formats. It it moot whether the Microsoft legal case, which was eventually settled, did anything to undermine Microsoft's dominance of the PC market (or browsers), but if anything the Amazon situation is more egregious since Kindle users cannot even download an alternative store front/ or app to get their content elsewhere.
There is no one solution that will fix this. Amazon is essentially smarter, more focused, and has more money to spend than the competition, meaning that the competition will have to get smarter, more focused, and throw more money at the problem. Since that is was Barnes & Noble has already done, the regulators might want to take a look to see if the market is operating as it should.
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