In this week's reading, we learned about the different sources of organizational crises. One of the potential external situations which could adversely effect Harper Collins is its ongoing struggle with Amazon over rights to set e-book pricing. This crisis is explored in an article by BNET which suggests that publishers like Harper Collins are succeeding in their efforts to help determine e-book prices.
The obvious category of this crisis is one of technological forces. E-books are an industry innovation that have the potential to ruin book publishers. In this situation, Amazon, a major book wholesaler has used its technological innovation, their Kindle e-book reader, to set e-book prices market-wide. In selling many of their most popular e-books for $9.99, other retailers such as Barnes and Noble are forced to sell for the same low price in order to compete. Being that Amazon and its few e-book competitors have the market cornered, they can easily use their leverage to undervalue the product, much to the chagrin of publishers.
This dispute could be a major source of organizational crisis for a company like Harper Collins for its propensity to rapidly deflate the value of the published product, and thereby cause a great deal of damage to the bottom line.
Fortunately, according to the article, Harper Collins, with its corporate backing by Rupert Murdoch owned News Corp, is one of the publishers that has established the widely used model for author royalties and manuscript acquisitions, and it can use this as leverage against Amazon in its pursuit to compete in its own e-book/reader market, thereby hurting the book market in general.
The outcome of this struggle will be very interesting, and it is something that I will be following closely in the next few months. But it should be noted that while competition driven deflation of e-book prices may look like a good deal for Amazon, its potential to adversely effect those companies which provide the product could be disastrous for Amazon as well.
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