March 8, 2012
Apple And Publishers May See Antitrust Litigation Over e-Book Pricing
The news of the Justice Department likely suing five major publishers and Apple over what amounts to price-fixing the cost of e-books is not much of a surprise. When the dust settles there should be a book about the machinations between Apple, Amazon, and yes, Google, over the way e-books are sold and read. Apple and Amazon were there at the beginning with Apple advocating the agency model where the publishers set the price and Apple taking 30% of transactions passing through the iTunes store. Amazon wanted to set its own prices at around $9.99 a title. The publishers have said at one time or another that lower prices for e-books lower the perceived value for the content. Gosh, nobody wants that except Amazon, and oh, possibly consumers. One point about pricing is that 30% of $10 is a lot less than 30% of $25.00, even for something that costs less to produce and distribute compared to the overhead of print copies.
Many of the news stories out there are quoting the biography of Steve Jobs as advocating the higher pricing scheme as something the publishers want, despite the higher cost to consumers. As he is no longer with us, there is probably documentary evidence out there that may suggest some form of collusion between Apple and the publishers to make this happen. I can’t imagine the Justice Department threatening suit on anecdotal evidence. The case appears strong enough that there are reports of publishers in settlement talks to avoid a suit. I don’t know what remedies could do that, short of an open pricing model, but there are no details. No one is talking, which is par for the course in these matters.
How does this affect Google? They have a bookstore as well, so any changes to the pricing model affect them as they are part of the market for these kinds of goods. Barnes & Noble and their Nook product will likely be affected as well. Then there is the on again off again Google Book Settlement. I imagine the outcome of the DOJ action will affect the valuation of damages or of any deal that ultimately comes out of this. And let’s consider the global ramifications as well. The European Union is investigating the same issue in its own bureaucratic way.
The five publishers mentioned in many of the reports are Simon & Schuster Inc., Hachette Book Group, Penguin Group (USA); Macmillan and HarperCollins Publishers Inc. Most of the reports are based off a single report by the Wall Street Journal. HarperCollins is owned by News Corp. which is the parent of the WSJ as well. The invisible hand of the e-book market may get just a bit more visible by the time this is all over. [MG]