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Comment by floppydisk | Hacker News Reader

It seems counter intuitive, but I think it has to do with the opening up of the ebook market. Several years ago, Amazon offered the only decent ereader in town--the Kindle. Thus, given the limited market, they could dictate price and keep the market price low because there wasn't much demand.

Fast forward several years and each of the major bookstore chains offered their own ebook reader (Nook, Kobo) and tablets started offering ebook experiences--either through Amazon/Barnes and Noble/Kobo apps or the tablet creator's own ebook reader (iBooks). The market explodes in terms of the number of devices people now read on, and publishers start treating ebooks as an accepted way of offering content--with that comes the high costs in terms of marketing, promotion, post-production costs (do they do anything special for ebooks), that kind of thing.

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I'm dubious about this analysis. You seem to be saying that prices were low when Amazon had a monopoly and prices have risen as competition entered the market. That's counterintuitive so perhaps I've missed something.

I am saying the prices where lower then they are now. When Amazon had a almost all the market share they were able to bully the publishers to the pricing they wanted. When Apple entered the market publishers stood strong and got together and got Apple to the prices on there ebook store.

Amazon then was forced to raise there prices if they wanted to get the same books that Apple got. So yes as the market has grown and there are more choices the prices have gone up. The publishing industry conspired with each other to get hire prices.

But by all accounts that spat was not about what Amazon was paying the publishers. It was about what price Amazon were allowed to sell those books at to their customers. Those are fundamentally different issues.

I think it's the same idea as what happened with the online music market. Initially, it was a niche market that reached a turning point when Napster hit the scene and started offering music online for free. At that point, publishers started taking action and we saw the rise of digital music stores and the complete marginalization/destruction of the previous market with low prices/easy access.

In other words, Amazon had a niche market that few people competed in. Hence, price ended up being artificially low (same as the online music market in the 90s). Once people realized they could turn it into another distribution channel, competitors exploded and the price of the good adjusted to a more normalized market value.

In economics, a monopoly can go one of two ways. It can either push prices to an extreme high in order to maximize profit, or it can push prices to a low in order to lock competitors out of the market and incentive the purchase of other goods (Kindles in Amazon's case). Once the monopoly broke, the price of the good normalized--which for us means it increased.

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