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Publishers have been displeased with the pricing on Amazon Kindle since the beginning. They’ve wanted higher prices on newly released books, in order to protect hardback sales. Along comes Apple’s iPad, challenging Amazon’s de facto monopoly, and the publishers have taken their chance. The result of this new competition appears to be higher consumer prices, rather than lower — an odd outcome.

Megan McArdle has written a good post on the topic.

But Kindle’s strategy was on the “benevolent monopolist” side:  Amazon wanted to attain a virtual monopoly over the eBook market by using its bargaining power to keep the prices of eBooks low.  Once Steve Jobs showed that he was willing to give publishers better terms, that bargaining power was eroded.

Does that mean consumers are worse off?  Maybe.  As someone who likes to consume cheap electronic reading material, I’m tempted to say yes.  But the publishers would say that if consumers like new books, they need profit margins high enough to feed the queue.

She also points out that monopolies are not always as bad as they are thought to be. Sometimes, what matters is the threat of competition. With no law to enforce their monopoly, and with a product that is relatively cheap to start producing, the mere possibility of other companies entering the market forced Amazon to keep their prices down. At the same time, their market dominance gave them a lot of sway over the publishers. The emergence of the iPad does not, in itself, remove the incentive for low prices. What it does is to take away Amazon’s influence over publishers. Whether the end result is good or bad for consumers is difficult to predict.

My guess is that while eBooks become more expensive, the devices on which to read them will be cheaper.

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