Publishing/Writing: Insights, News, Intrigue

04/24/2012

Digging Further Into the Intrigue RE the DOJ Investigation of the Big Six Publishers


Looking Into DOJ Intrigue

Have you ever asked yourself the question “If the DOJ had evidence against the big publishing houses, why didn’t they indict them criminally instead of just civilly?”

Hmmmm.  

Well, according to a former prosecutor for the DOJ, they could have prosecuted them criminally (seems he had prosecuted successfully on less evidence).

Could it be that some white-collar crimes are treated differently than others due to who is involved? A kind of class privilege pass, so to speak.

Of course this is true ! Especially to those living in the ‘real’ world.

Some intriguing details of this case are offered by former DOJ prosecutor, Carl Steinhouse in Naple News dot com:

The Humorous Side of the Law: No indicting an Apple?

The Department of Justice recently announced that it has sued civilly Apple, Barnes & Noble and a whole bunch of book publishers for conspiring to fix the price of e-books (digital books) to the consumer reader.

The target of this alleged conspiracy was Amazon, which had the temerity to discount e-books down to $9.99 and lower, and often at a loss to itself. This, of course, put competitive pressures not only on Amazon’s competitors having to match Amazon’s low prices, but upon the competitors’ suppliers, the book publishers, to lower their prices as well. This price cutting of Amazon had to go, they decided.

Before the alleged conspiracy, on the sale of an e-book, Amazon would pay the publisher the wholesale price for that title, with Amazon free to charge its customers whatever it wanted. Publishers were unhappy because their other customers, mostly bookstores, were screaming bloody murder about the unfair competition from Amazon. This put a publisher in a quandary. It could, on its own, refuse to sell to Amazon. But just one publisher refusing to deal with Amazon would not make much of an impression on Amazon and that publisher would stand to lose a lot of business from the world’s largest e-book reseller. But if a group of publishers did the same thingnow that would be a different kettle of fish, depriving Amazon of its stock in trade, at least in e-books.

Enter Appleand Steve Jobs. Apple, with its new entry into the digital landscape, the iPad, became part of the equation because it now offered e-books on its devices in competition with Amazon’s Kindle. As we all know, Jobs, may he rest in peace, was no blushing violet and not one to ever sit on his hands and let someone take a bite of his Apple. Apple was not in business to lose money on any of its products, and e-books, in its iBooks store, Jobs determined, were not to be the exception.

According to the Justice Department, Jobs got the publishers and some of Amazon’s competitors to meet in the private dining rooms at upscale New York restaurants and by emails to discuss how to stop Amazon from steeply discounting their e-books on Kindle. The government says the defendants hatched a plan to band together to force Amazon to change from buying under the traditional wholesale pricing to a so-called “agency pricing” where the publishers set the price and pay Amazon and all e-book sellers a 30 percent commission. If all of the major publishers did this, Amazon would be required to raise its price from the $9.99 and lower, that it had been charging.

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04/08/2012

A Compelling Case for the Agency Model or Reasons Why the Agency Model Will Not Lead to Higher Book Prices


 

Will blind justice kill the agency model?

Tonight a little hard data showing that the free market ecosystem would not allow the agency pricing model to cause book prices to rise.

Why not? One main reason is because authors and publishers would use price as a competitive tool, and this would naturally lead to lower prices.

Mark Coker, founder of  e-book distributor Smashwords, gives up some inside numbers on the Smashwords official blog  — data he has also shared with DOJ: 

Does Agency Pricing Lead to Higher Book Prices?

According to a March 9 story in the Wall Street Journal, The U.S. Department of Justice is considering suing Apple and five large US publishers for allegedly colluding to raise the price of ebooks.

At the heart of the issue, I suspect, is concern over the agency pricing model. Agency pricing allows the publisher (or the indie author) to set the retail price of their book.

Although Smashwords is not a party to this potential lawsuit, I felt it was important that the DoJ investigators hear the Smashwords side of the story, because any decisions they make could have significant ramifications for our 40,000 authors and publishers, and for our retailers and customers.

Yesterday I had an hour-long conference call with the DoJ. My goal was to express why I think it’s critically important that the DoJ not take any actions to weaken or dismantle agency pricing for ebooks.

Even before the DoJ investigation, I understood that detractors of the agency model believed that agency would lead to higher prices for consumers.

Ever since we adopted the agency model, however, I had faith that in a free market ecosystem where the supply of product (ebooks) exceeds the demand, that suppliers (authors and publishers) would use price as a competitive tool, and this would naturally lead to lower prices.

I preparation for the DoJ call, I decided to dig up the data to prove whether my pie-in-the-sky supply-and-demand hunch was correct or incorrect. I asked Henry on our engineering team to sift through our log files to reconstruct as much pricing data as possible regarding our books at the Apple iBookstore.

We shared hard data with the DoJ yesterday that we’ve never shared with anyone. I’ll share this data with you now.

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