Wednesday, August 10, 2011

We interrupt our regular programming to bring you this bulletin ....

So Apple's being sued for price fixing, along with five of the Big Six publishers -- HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group Inc. and Simon & Schuster. The class action lawsuit, filed in the U.S. District Court in Northern California by a Seattle-based consumer rights firm, claims that the named companies "colluded" on book prices in order to force Amazon to change its own pricing model.

You can read a more detailed story over at GeekWire if you're interested, by the way, since I'm not going into tremendous background here. And I've written about the Agency Model of eBook pricing before as well, in the July issue of Independent Publisher magazine, which is another topic I'm not going to delve too deeply into.

Now, I haven't read the text of the filing itself, but the press release the law firm (Hagens Berman) put out clearly states their position that Apple and the named publishers made a backroom deal with each other to force Amazon -- here portrayed as the champion of the consumer -- to raise prices on its eBooks rather than face windowing of the electronic versions of the title. The suit also claims that Amazon's business practices were eating away at the publisher's business model.

Steve Berman, one of the founding partners of Hagens Berman, goes so far as to mention that an eBook of The Kite Runner is $12.99 while the paperback is $8.82. Pretty big price difference right? Enough to make you angry?

Well here's the problem -- Berman conveniently leaves out the fact that the list price of the paperback copy of The Kite Runner is $16.00. So that $8.82 Berman mentions? Yeah, it comes down to the traditional discounting of books by retailers. This is particularly striking in Amazon's case because of the wholesale discount they get on physical books (which I think is 50% off the list price).

Looking at it with a comparison of list price to list price, the eBook of The Kite Runner is sold at a price that's $3 less than the paperback version. But of course, this discounting of books by Amazon in order to drive sales isn't even mentioned. Berman makes much of Amazon being "pro-consumer" and proclaims loudly that Apple and its publisher cronies were terrified of Amazon's dominance and so needed a way to stymie competition. Essentially, Berman is painting Amazon as a friend to the consumer and saying that the Big Bad Publishers are profit mongers who want to destroy all competition to their bloated and outdated business model.

I have one honest to goodness question for Mr. Berman and his lead plaintiffs -- Anthony Petru and Marcus Mathis -- though: Why did they wait so long to file a lawsuit?

The Agency Model has been in place for more than a year. I know it takes awhile to prepare a case, but for something this big you'd expect the filing to come much sooner than 20 months out. The only thing I can think of is that the firm needed time to make absolutely certain they had a case and didn't end up sounding frivolous taking on such massive companies.

Because see here's the thing: eBook sales have been on the rise in the 20 months since the agency model took effect. Sure, it's a case of these 5 publishers controlling 85% of the market of new titles, but the funny thing about consumers is that they won't file lawsuits to change things most of the time -- they'll go buy something else if they don't agree with the price. I've seen this happen so often before that it's become something truer than the sunrise for me. Heck, when I worked for Sears I once had a woman refuse to buy a $200 jacket because she had to pay $1.57 worth of tax on it*.

The lesson of that story is that the consumer and not lawyers should determine how much something costs. If people didn't purchase eBooks at the $12.99 to $14.99 pricepoint then I can guarantee you that major publishing houses would've dropped the price back to $9.99 quicker than a $2 hooker. And to people who complain about the pricing of an eBook, I have it on good authority that many libraries offer eBooks that you can check out. Or ... gasp ... you could get a real book.

Most telling about the suit is that the firm acknowledges that Amazon used proprietary technology with its Kindle device to capture much of the market and drive prices down. However, it's Apple and the 5 publishers that are at fault for deciding free market competition was to be disallowed. Never mind the fact that the Kindle holds so much of the eBook market as to almost be a monopoly by itself. No, it's Apple and the 5 publishers that are creating a monopoly and discouraging free-market competition.

Riiight .... sure they are. By demanding that eBooks be priced at $9.99, I'd argue that it's Amazon who's discouraging free market competition. If the publishers want to set their prices higher for eBooks, I say let them do it. If consumers don't want to pay that price, then they won't pay it. It's a simple fact, and one that does not need to be put into a lawsuit.

What's your ta

* Clothes aren't taxed in Massachusetts, unless it's a single item that costs more than $175. The state calls that a "luxury item," and charges you tax on whatever dollar amount is over $175. The customer was being charged tax on $25 of coat.

1 comment:

dolorah said...

See, this is why I'm focusing on short story writing and publication. No monopolies to consider.

I wish I understood all this stuff better.