Amazon’s Prime Service Has an Ace Up Its Sleeve

Harry Potter fans will be very happy with Amazon.com Inc.’s (NASDAQ:AMZN) new licensing agreement, which allows them to lend digital copies of all 7 books in the popular J.K. Rowling series in the U.S.

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The books will be available for free starting June 19 via the lending library. Books in the lending library are accessible to Kindle users who also subscribe to Amazon’s Prime service, which offers free two-day shipping, streaming TV shows and movies, and e-book rentals for an annual fee of $79.

Amazon’s digital lending library, launched last November, contains about 145,000 titles. The six largest publishers in the U.S. declined to participate in the venture due to objections over the pricing model. Publishers who use a wholesale pricing model are paid for each copy that is lent.

According to analysts, the structure of the lending library likely costs Amazon a pretty penny. And securing a name like Harry Potter likely just increased those costs significantly. According to a statement by Chief Executive Officer Jeff Bezos, the company believes the investment is worth it: “This is the kind of significant investment in the Kindle ecosystem that we’ll continue to make on behalf of Kindle owners.”

Amazon may be picking up more new titles in the near future. A recently settled civil antitrust lawsuit filed by the Justice Department will allow retailers to discount e-books from 3 major publishers: News Corp.’s (NASDAQ:NWSA) HarperCollins Publishers Inc., CBS Corp.’s (NYSE:CBS) Simon and Schuster Inc., and Lagadère SCA’s Hachette Book Group.

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