L is for Lawsuit

04/13/201204/13/2012 Sonia Lal21 Comments

L is for Lawsuits.

Specifically, the lawsuit the government brought against Apple and five of the big publishers: Simon and Shuster, HarperCollins, Hachette, Macmillan and Penguin. Basically, they are accused of conspiring to fix e-book prices. (The lawsuit is a 36 page document. I have read only half of it so far. It’s pretty interesting, for a legal paper.)

Which they probably did. They deny it (who wouldn’t?) but I think they probably did do exactly that. If they hadn’t, I doubt they Agency Model could have worked.

Three of the publishers – Hachette, HarperCollins and Simon & Schuster – have settled. Part of their settlement includes the right for retailers to set their own prices. (A right retailers had before!!!!)

I mean, I kind of understand why they did it. Amazon is no angel. Amazon was selling bestsellers at a discount in order to sell kindles and get the bulk of the market share. So, yeah, lots of stores have loss leaders. Even physical bookstores discount popular books in order to get people in the store and maybe buy other books (how many readers you know who can actually just buy one book in a store, hmm?). Physical stores still do and the publishers have nothing to say about them.

The thing with Amazon is that Amazon is bigger than most (all!) physical bookstores. If they had succeeded in gaining most of the e-book market, if the e-book market grew larger than physical book, and if it got to the point where a good chunk of a publisher’s money came from Amazon, Amazon could than have turned around and said: you must sell your books to me at this price or don’t sell to me at all. The books would have stayed cheap (or at least cheaper than hardcovers!). But Amazon would be making a profit, too.

From what I remember from one and only business class, Walmart did the same thing. Since their stores provided most of a manufacturer’s money, they threatened to discontinue selling their products if the manufacturer didn’t sell to them at the price Walmart wanted. It’s why a lot of businesses started outsourcing their manufacturing jobs.

Amazon might have done that, too. (They did get rid of the buy buttons for one of the publishers’ books when they first fought over pricing. Amazon lost.) I doubt it would have worked. The readers, us, would have objected if we couldn’t buy the books we wanted. Maybe Amazon would be willing to risk it. I don’t know.

Either way, I think the publishers were afraid of falling victim to Amazon. They wanted to decrease or slow down the speed with which Amazon was gaining market share. I understand that. They were afraid being forced to sell bestsellers to Amazon at the paperback price instead of the hardcover price like always. Fixing e-book prices, with Apple, was their solution.

IMHO, it was a bad solution. They managed to break the law. Price fixing is illegal. Okay, yes, no one has actually been convicted of price-fixing and they all deny it. But, really, what am I to believe? Also, three publishers settled.

Then they set e-book prices which are almost the same or higher than physical copy (this makes so little sense I have to conclude they were trying not to sell ebooks in an effort to hurt Amazon.). I ranted on this topic a while back.

I think, at some point or other, Amazon would have stopped using ever single bestseller as loss leaders. A few maybe, but not every single one. Thing is, 9.99 is still higher most paperbacks. Cheaper than hardcovers, but paperbacks are usually cheaper, just not a whole lot cheaper. (Used books are cheaper still. Sometimes only 1 penny. But by the time the physical book drops to that price, the e-book version will likely be less than 9.99.) So.

Also, I don’t think there is anything wrong with selling ebooks at a little less than paperback prices instead of slightly less than hardcover prices.

So . . . I think the publishers deserve this lawsuit. Yeah.