Apple Ruled Liable for E-book Price Fixing

A federal judge has found that Apple colluded with the big five publishers to illegally set prices for ebooks.  The court stated that Apple “played a central role in facilitating and executing” a scheme with the big five publishers to keep ebook prices high in the face of fierce competition from Amazon.

Federal Judge Denise L. Cote stated that the trial on damages will follow.

The impact of decision on the ebook buying public will be minimal.  The big five publishers all earlier settled anti-trust claims brought by the United States Department of Justice.  All five are now operating under a consent decree that prohibits those publishers from withholding their ebooks from discount sellers.

The antitrust claim came about when Apple and the big five publishers tried to made a dent in Amazon's domination of the ebook market.  They withheld their most popular titles from Amazon unless the books were sold at a minimum price, thereby trying to thwart Amazon's pricing structure.



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Winner (Amazon) & Losers (Everybody Else): E-book Anti-Trust Settlement

Amazon, the little start up company that has grown to be the 900 pound gorilla of the publishing industry, is about to become an even more dominant force in the growing e-book market.

Publishers, independent book stores, the Authors Guild and prominent literary agencies are aghast at the government's settlement of its anti-trust suit against the last three of the big five publishers to settle.  It seems everyone involved in book publishing (except Amazon) maintains that the settlement has handed the keys to the ebook kingdom to Amazon.  They fear this resolution will return Amazon to market dominance approaching 90% of all ebooks sold.  It may also be the death knell for many independent booksellers.

The settlement resolved the anti-trust lawsuit brought by United States Justice Department (DOJ) against the big five publishers and Apple.  The lawsuit claimed that the big five conspired with Apple to set prices for ebooks.  Specifically, the conspiracy was aimed at Amazon's practice of selling best-sellers at $9.99, a price other booksellers cannot match.   The big five and Apple agreed to set book prices at higher levels, and forbid Amazon from selling those books below the set price - usually $14.99 or higher.

The business plan worked.  As the Nook and Ibooks took off, Amazon's share of the ebook market dropped to 60 percent.  But the problem was that the collusion to set book prices violated anti-trust laws.

Hachette Book Group, HarperCollins Publishers and Simon & Schuster were the latest to settle. The DOJ earlier settled with MacMillian and Penguin.

Some have likened this situation to a playground fight where the school bully is beating up on a smaller kid.  Seeing the fight, a teacher intervenes by grabbing the smaller kid and holding his arms behind his back while the bully gets to punch away unimpaired.

In more of a business sense, it is like Wal-mart moving into a small town and driving out all the local mom and pop stores due to Wal-mart's incredible volume buying power. In the short term, the customers win.  Lower prices - $3-5 on best selling ebooks.  But in the long run, what is the price of driving competitors from the market place?  What happens when Amazon becomes the virtual sole source of ebooks - and the dominant seller of all books?

The big five publishing houses now have to recognize that Amazon is the piper of the book business.  Publishers will have to dance to Amazon's tune. So will everyone else.

No one knows exactly how this situation will impact authors.  But if Amazon sells 90% of ebooks, and it will not price them for more than $9.99, what happens to author royalties?  How can publishers offer author advances when their price ceiling is under $10?

 And those independent book sellers that most writers - most readers - have so dearly loved?  They seemed destined to go the way of the record player, the typewriter, and film cameras.

For a detailed account of the law suit and its settlement, check out the New York Times article "E-book settlement has publishing world in turmoil."  (Click HERE)

UPDATE:  HarperCollins has implemented the settlement agreement by allowing retailers to set the price of its ebooks.  Amazon has already reacted. Two of HarperCollins bestsellers, Fallen Angel and Solo, are already available on Amazon for $9.99.  Simon & Schuester and Hatchett Book Group must follow within 30 days but have not yet commented on when they will take action.  For Publishers Weekly article providing details: Click Here.

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Technology, Copyright and the Future

In 1970, Alvin Toffler wrote Future Shock.  It is one of the most far reaching and prophetic books ever written.

Toffler, who at 84 is still thinking and writing about the future, dissected the exponentially growing rate of change and the impact it would have on psyches and society.  According to Toffler, as knowledge grows at faster and faster rates, people know less and less of the knowable universe, and with that comes a dramatic impact on the ability of people to feel grounded and secure in the world around them.

Over the past decade, this has hit full force for writers, publishers and others who live in a world of words.  The internet, the demise of brick and mortar book stores, and the the growth of ebooks have changed publishing and writing forever.

Publishing and writing is experiencing much of what the music industry encountered a decade ago with streaming, Napster, infringement lawsuits, and finally Itunes andIpods.  It was the genius of Steve Jobs and his little devise that showed the industry a way to make money in the age of portable digital music.

Kindle and Amazon have slipped into the place Steve Jobs created within the music business. We have seen the future and it is digital.  Hell, we are in the future.

Which brings us to writing, publishing and copyright in our electronic future. Tim Parks has written a wonderful essay, "Does Copyright Matter,"  in the New York Times Book Review.  The article challenges writers -- and everyone -- to think about the concept of copyright in this modern world.  It's not a new battle.  As Parks points out, Charles Dickens battled his own unauthorized versions.  But today's landscape is much different.

In today's world, it is so easy to find something on the internet, to copy and paste with a couple of clicks, and post whatever you find, no matter how extensive, to the entire world.  In such a world, what does copyright mean? 

In this digital present, we need to ask two important questions:

(1)  Are we ourselves guilty of this unthinking use of the intellectual property of others;  and

 (2) Are we degrading the value of our intellectual work product, imbuing upcoming generations with a value system that says "if it's on the internet, I can use it."

I don't have a crystal ball and cannot see the future - certainly not as well as Alvin Toffler.  But for those of us who write,  it is  worth some thought.