DOJ files antitrust suit over e-book prices

Like many nerds, I am particularly fond of the physical object of the book. They smell like everyone is about to leave me alone for a while. Last year, my dear mother gave me a Kindle as a gift, and I was suspicious of it for maybe 20 minutes. Then I acknowledged that an e-book is superior to a p-book in so many regards as to render its few inferiorities petty. On the minus side, you can’t flip through it—this turns out to be a deal-breaker for textbooks and reference materials—and you can’t loan it to people. Amazon’s lending policy is bullshit, but it is compensated for by their not-obliterating-thousands-of-trees policy, their books-weigh-nothing policy, their instant delivery and the fact that most new titles cost $9.99. I was using the past tense of “cost,” there. E-books used to mostly cost $9.99; then they suddenly cost $12.99 and $14.99. Then the Department of Justice filed an anti-trust complaint against Apple and five major publishers. That brings us to where we are now.

Three of those publishers have already agreed to settle, so via the awesome legal shortcut that is the presumption of guilt, I think we can say that this thing has legs. Justice has phone records and other evidence indicating a series of meetings among large publishing houses and e-book retailers in 2008 and 2009, all coordinated by Apple and all designed to force Amazon to come off its “wretched” price point of $9.99. Their goal was to urge the e-book industry toward an “agency” model, by which publishers set prices and retailers like Apple take a percentage of each sale. Compare to the model used by Amazon, in which publishers sell the books wholesale and retailers keep the full consumer price.

One would think that the agency model would be a natural fit for e-books, since publishers are really only selling one master and a license to retail downloads of it, but whatever. Amazon has apparently been buying and selling e-books one copy at a time, however metaphorically that works. What is galling about this case is that, at a time when pretty much everyone is decrying the abandonment of reading and the struggles of the publishing industry, that industry colluded to fix prices. On books.

I think it’s safe to say that books are a niche market. Meet someone at a party and, once you reach the first lull in conversation, start talking to them about In Search of Lost Time. Are you popular? Now shift the conversation to How I Met Your Mother. Readers are few and far between, and they only survive by being smarter and better able to pay attention than everyone else. They are a loyal market, if they are dwindling. Penguin’s solution is to illegally gouge them for 30% to 50% per copy.

It’s a move that is at best penny-wise and pound-foolish. You would think that, given the promise of a new technology that reduced the copying and distribution costs of their product to near zero, book publishers would seize the opportunity to make books cheaper, easier to get—more popular. Instead, they committed a federal crime to preserve their existing business model at a price higher than the market would bear.

Those of us who came of age in the CD era remember the List Price phenomenon, where the retail price of CDs somehow went up in the decade after the technology was invented. Then Best Buy started selling new albums for $9.99, and music labels complained that it was destroying them. Now you can download the new Curren$y mixtape off the internet for free, and the question of why we need a music industry is more pointed than ever. Somebody else does the production, distribution and, increasingly, sales. Labels do the marketing, sometimes, and they also collect most of the profits.

So: why do we need a publishing industry? Obviously we need editors and the curatorial function houses like HarperCollins provide. I don’t want to scroll past 11,000 amateur vampire stories every time I go looking for a novel. By extension, we also need marketing, since I suspect books do not have the same viral potential as talking cat videos. We do not need printing presses, binderies, warehouses, paper mills or trucks. I am not a publisher of books, but I suspect that those items account for a significant portion of the expense.

Books should be cheaper now that they are magical ghosts. That it takes a national conspiracy to make them more expensive only supports that contention. Maybe if the publishing industry devoted itself to broadening its dwindling audience, rather than colluding to preserve its existing business model for as long as possible, it might regard new technology as something other than a disaster.

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  1. Amazon eBooks have one other flaw which was nearly a deal breaker for me to ever get involved with them. All you really get is a license to have the data on an Amazon approved reading application/device. Conceivably, Amazon could stop providing access to your purchased licenses through the free applications and force you to maintain ownership of a kindle in order to read your old books. It troubles me greatly to pay for something and not actually acquire it.

    That being said, the DRM is able to be circumvented, which solves the problem. Although it might be illegal even if you just want to make a back up. The data isn’t technically yours to preserve.

    I’m not sure what happens with the other ebook distributors, but I imagine it’s mostly the same situation.

  2. I think part of the reason ebooks started out so cheap is because Amazon wanted to get as many people locked into their ‘device hierarchy’ as possible before serious competitors arrived.

    Now I guess most ebook reading people are either in the nook camp, or the kindle camp. So it’s not as much about acquiring market share anymore, as it is about reaping the profits that were sown. That’s something both companies can get behind.

  3. Lastly, the market price is not necessarily determined by how expensive a product is to distribute and manufacture.

    ebooks should only be cheaper if a lower price point will attract enough new purchases to make up the difference in profit.

    On the one hand, they might be more expensive because they are more conveinient than physical books, and people are willing to pay more for them.

    None of that is to say that colluding with your competitor is okay, but an increase in price alone is not evidence that there was collusion in my opinion. Now if there really is evidence the companies were talking to each other, that’s another thing.

  4. An interesting (read: widely-reported) aspect of this story is that the DOJ’s action may ultimately increase book prices. Amazon may corner the market on ebooks and then be free to raise prices as they see fit. O

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