Thursday, March 15, 2012

Why Apple and Big Publishing are Not The DoJ's Victims

by Laurie K.

The Department of Justice is about to sue Apple and five of the six Big Publishers for collusion in ebook price fixing.  As an early-adopter of ebooks and after some conversations with Wyndes, I've become very interested in publishing of all sorts - traditional publishing, indie publishing, self-publishing, etc - and so I follow a broad swath of people on Twitter who participate in such things.  Authors, editors, agents, publicists, ebook advocates, etc. Most of these folks link articles about the price fixing allegations, and I get the idea that quite a few people think the accused publishers and Apple are being targeted unfairly by the DoJ.

Yes, the poor massive corporations. I pity them so.  (Swearing ensues after the jump.)

The latest of these articles had the tag line: Who cares if book publishers are colluding with Apple to raise e-book prices?

I get what they're saying here. I do. They're saying that big publishing is obsolete and thus shouldn't really be a concern for the DoJ. That's nice except they're still really the only game in town as of yet for mass production, and 99% of the books I'm reading come from them. This means I get fucked every time I click 'buy.' So, yeah, this is me caring.  In ten years, it won't be an issue, but it is undeniably an issue now.

The problem is a thing called the agency model.  It allows the publishers to set the price of an ebook, as opposed to letting the retailer who is selling it decide the price it charges. As soon as the agency model appeared - with every ebook price in the same range from every publisher, no less - I thought, "Jesus, price fixing much? There's no way that's legal." Apparently, the DoJ agreed with that sentiment and has decided to bust some heads.

One of the most popular arguments used to justify the alleged price fixing is that it was the only defense against Amazon. Here's how Amazon worked:  Amazon paid the publishers for their asking price for ebooks and when it discounted those ebooks to try to sell more Kindles, Amazon ate the difference itself. The publishers didn't lose a single dollar on those cut-rate transactions. Once ebooks started taking off, however, the publishers got angry because Amazon was setting the potential value of ebooks lower than the publishers wanted it. How could they jack you for premium author releases if Amazon taught people that an ebook should always be between $6.99 and $9.99?

Now, I hear you asking, "Why did Amazon have the power to set the expectation of price in the first place?" (If you're not asking that, you should be.) This is because big publishing had no idea how to deal with ebooks and figured those silly things would never catch on. Amazon saw the potential and cornered the market while the publishers declined to take the product seriously. When it became clear that this crazy concept was going to be huge, the publishing industry shat a collective brick. Unfortunately for them, it's not illegal for someone else to be more business savvy than you, even if they innovate your own industry out from under you while you're sleeping on the job.

Enter Apple. Apple said, "Hey, why don't you guys decide what the price should be and then you can tell everyone (*cough*Amazon*cough*) what the customers must pay for their books instead of letting retailers (*cough*Amazon*cough*) set the price they want to charge - and, by the way, we'll take 30% off the top of whatever you set your prices at."  Thus was the agency model born, and there was much rejoicing - and ebook prices rose from a uniform $6.99 to $9.99 as set by one retailer to a uniform $9.99 to $14.99 as set by five of the six major publishers. (I'm sure that was totally an accident.)

This is where the Department of Justice gets all judgy and mean. The allegation is that the five publishers that Apple talked with all agreed to set the price range that ebooks would sell for. When a bunch of industry giants get together and decide to fix the price of an item, we call that a cartel. Unless the government is regulating it, the practice is frowned on - by which I mean they will sue your ass off if you pull that shit. If you think the US is super mean about this, try having a cartel in the European Union. The US frowns at you; the EU slaps your mama.  (I suspect this is, in part, why a great many ebooks that are available in the US are not available in the EU.)

Now, why they thought they could get away with this, I am not certain. And why anyone thinks we should be okayfine with it is fucking mind boggling. "Hey, it's cool if they break the law to make you pay more because Amazon was super unfair!" Bzzzt, try again. "Hey, it's cool if they break the law to make you pay more because they need to fund their dying business model!" Negative. Once more with feeling. "Hey, it's cool if they break the law to make you pay more because I work in that industry and change could impact me." Oh, strike three! When you're talking about the justifications for breaking the law, you're still talking about breaking the law. This isn't some bad, archaic law like not having anal sex in Texas, either. This protects consumers. We want this one enforced, regardless of who's getting the ass whuppin'.

So, please, spare me all the hand-wringing and justifications. These publishers allegedly broke the law to get around paying the price of complacency in the face of new technology and they wanted their customers to foot the bill. Fuck them. I hope the DoJ nukes them from orbit.
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  1. A great many books are available in the US and not the EU because the way the industry is set up, both agents/authors and publishers are encouraged to withhold/grab whatever rights they can, whether they intend to exercise them or not.

    So an author may sell US only rights to a publisher and be unable to find one interested in the EU rights, or a publisher may hoodwink an unrepresented author into selling all territorial rights but not bother to publish outside the US or resell those rights.

    Plus, we unfortunately do not have first sale rights for ebooks. For physical books, a bookstore can buy US editions and sell them wherever they like. The publisher is not breaking it's US only contract because they aren't the ones selling the book.

  2. :)

    This made me very happy. The whole "woe is me" from the book industry really annoys me. Especially B&N. Amazon didn't actively set out to destroy the independent bookstores by building competing stores two doors down the block everywhere they found a location with a successful indie -- that was B&N! Now they want us to defend them from Amazon so that people can still have the bookstore experience? Um, nope. And I'd love to know how many of the surviving independents (especially the ones that sell used books) make a big chunk of their income using Amazon's ecommerce tools.