The strategy is to go to smaller competitors, ironically in the music case it included Amazon’s MP3 store, and offer much better terms, like no DRM requirement, higher quality and lower prices. Book publishers could do the same using Google’s new ebook platform.

In the music case, of course, Apple capitulated to the demands of publishers and hiked prices. It maintained its market-leading position. Not long after, $1.29 songs hit all the other music sellers online including Amazon. While the demise of DRM-infested music files is good thing, consumers ended up paying a lot more. The prior status quo, with some DRM-free tracks in iTunes, all DRM-free tracks at Amazon, and lower prices everywhere, was a better deal for consumers who shopped around.

And p.s. remember how the record labels promised the higher prices would only be for new music? Guess how much Michael Jackson’s suddenly-hot-again 1982 single Thriller is at iTunes or Amazon? Yep, $1.29.