Hachette, Harper Collins, and Simon & Schuster-Anti-Trust settlement

I received the same email and am also curious. Yeah, there's no way I'm paying more for an ebook than print. The first thing that comes to mind on this is the textbook industry. Some textbooks are $100 in print and $50-$60 in kindle form. This is huge for college students wanting to save some money, and you'd think that companies would make more money off the e-version as there is no printing involved.

I don't know.

It will be interesting to see some answers.

The credits are the result of settlements by the publishers in lawsuits brought by the Attorneys General of a number of states. These lawsuits in turn stem from a Department of Justice investigation into alleged price-fixing by the publishers and Apple (at issue was the agency model of ebook pricing), which resulted in a lawsuit where some of the publishers settled and others didn't.

For an overview of the lawsuits and the issues involved, see my blog post.

- Victoria

A.P.M. said:

Would anyone who knows more care to discuss it? Does anyone think this will affect us writers?

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Yes, it will affect writers. And no, it's not good for anyone but Amazon.

And it really doesn't mean they can't charge as much as they like for an e-book. Price fixing isn't about how much is charged, it's about collusion to set prices.

And, as Medievalist says, it's not good for anyone except Amazon. And I suspect it'll come back and bite Amazon in the butt before it's all over.

Two publishers haven't settled:

• Penguin Group (USA) Inc. (“Penguin”); and
• Holtzbrinck Publishers, LLC, known as Macmillan (“Macmillan”).

The suit(s) is/are, in my opinion, meritless. No collusion or "price fixing" existed.



Perhaps next the DOJ can investigate how much Amazon spent on lobbying to bring about this attack on authors and publishers.

I'm sorry, I don't understand. What's going on here? Think of me as that dimwit back in grade school -- I get most of it through the blog post, but what is the settlement for and why are people getting random emails about it? Someone please explain?

I'm confused for a different reason: This suit was brought about by Apple, yes? So how is Amazon benefitting from it? I mean, I guess as retailers they'll be affected, but was this their idea?

Read my blog post. It will explain all.

- Victoria

Rhoda Nightingale said:

This suit was brought about by Apple, yes?

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No.

Rhoda Nightingale said:

... but was this their idea?

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It's got Amazon's sticky fingerprints all over it.

victoriastrauss said:

Read my blog post. It will explain all.

- Victoria

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I did, twice, and I'm still confused.

And having done that, tell me if I've at least got this much right: This suit was brought by the US Department of Justice, against Apple and these other publishers. And Amazon is happy about this because it means they get more control over pricing. Okay, I think that makes sense.

But what exactly did Amazon do to bring this about? I think I see how it benefits them, but I don't see what their role was in making this lawsuit happen.

James D. Macdonald said:

Two publishers haven't settled:

• Penguin Group (USA) Inc. (“Penguin”); and
• Holtzbrinck Publishers, LLC, known as Macmillan (“Macmillan”).

The suit(s) is/are, in my opinion, meritless. No collusion or "price fixing" existed.

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I dunno. I read the MediaBistro page (found via Victoria's link--thanks!), and if turns out to have a basis, some of these actions sound like collusion to this lay person. Although it is only alleged, any time one tries to hide evidence that looks hinky, it usually means something hinky is going on.

Jodi

1.) Amazon dumped Kindle best sellers in order to gain market share for the Kindle platform. This wasn't illegal since Amazon did not have a monopoly in books at the time, but it was a grand part of Amazon's strategy of putting brick and mortar (read: Barnes & Noble and Borders) retailers out of business.

Amazon routinely sold Kindle best sellers for less than what it paid for them, and the result was that the Kindle platform exploded and Amazon garnered 90% market share in ebooks. Note that in most markets, this sort of thing tends to equal monopoly power.

At first, many publishers and authors were delighted because they got full price for their books and sold more in the process. Then they began to realize that Amazon was training customers to value best sellers at $9.99 and they began to panic.

2.) Apple didn't want to compete on price with Amazon in ebooks and Steve Jobs recognized that the publishing industry was going to let Amazon drive it into ruination. Fortunately (or not), he had the formula for solving both problems.

3.) Apple offered the six major U.S. publishers the tools to retake control of its product. It was a two-pronged approach, with the first step being to allow publishers to use the agency model to sell books through iBooks on Apple's soon-to-be-released iPad (this was in 2010). The second was the so-called "most favored nation" clause that prohibited publishers from allowing their books to be sold for less elsewhere (read: Amazon).

4.) Five publishers recognized the lifeline being thrown at them and signed on the dotted line. Armed with the MFN clause, they forced Amazon to move to the agency model. The result was that prices on ebook best sellers rose $2-3 more or less overnight. The other result was that Amazon's share of the ebook market fell to 60%, while B&N's Nook took 15ish% and Apple took another 10%. Independent ebook sellers also flourished.

So on the one hand, prices went up to something closer to sustainable, but on the other we had competition in terms of platform, a move away from DRM, and advancement in technology. Even Amazon's Kindle iPad app is far superior today than it was when the iPad was first released. Nook also became a very viable platform, and of course iBooks 2 and Apple's Author are a huge advancement in the ebook experience.

5.) Apple negotiated with each of the publishers separately (or so it says), but the five colluding publishers had breakfast one morning (at a fancy place whose name I don't remember, but it's apparently a Thing™ in NYC) and agreed that Apple's deal was their best course of action. Unfortunately, this is the smoking gun in this case.

6.) Eric Holder and/or his minions looked at this, plus the overnight increase in best seller prices, and said "ZOMG! WE MUST RESTORE COMPETITION TO THE MARKET PLACE! TO THE COURTS!"

The DOJ essentially is working to restore monopoly power to Amazon in the name of competition. It's perverse, IMNHO.

Amazon is known to have met frequently with the DOJ in the months leading up the investigation/suit—as noted above, the whole thing has their stink all over it.

7.) The settlement goodies announced by Amazon on Monday are related to three publishers settling—they rolled over faster than you can say "submissive bitch" a few seconds after the DOJ announced its suit.

The settlement won't be approved (or not) by the judge presiding over the case until February 2013, but Amazon decided to tell folks the "good news" today, a smart strategy that nonetheless makes my skin crawl.

I wrote up some coverage of this at The Mac Observer earlier today, FWIW.

As I said in that piece, fans of Amazon's rush-to-the-bottom business model who can't wait for the day when books are unedited and un-marketed should be delighted.

I am personally un-delighted and marvel at the lack of sophistication in the DOJ's approach to this whole situation.

GeekTells said:

I am personally un-delighted and marvel at the lack of sophistication in the DOJ's approach to this whole situation.

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Given it is Eric Holder, and given his long track record of incompetence, in what way can anyone be surprised at the level of sheer jack-assery being put on display by the DoJ in this case?

A.P.M. said:

Do people honestly think this will drive publishers out of business?

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Yes.

Publishing works on very narrow margins.

Most of their profit -- the money that pays for everything else -- comes from hardcover best-sellers. Amazon selling those same books at the same time at fire-sale prices has already been proved to kick the legs out from under publishers' income. The money that goes to finding and nurturing new authors included.

Where might this go? To there being one e-reader in the world: Kindle. To there being one publisher in the world: Amazon.

Could this possibly be good for authors? No.

What if, since the books will be cheaper, customers will buy more of them?

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You can sell a great many five-dollar bills for twenty cents each without making a profit.

James D. Macdonald said:

Where might this go? To there being one e-reader in the world: Kindle. To there being one publisher in the world: Amazon.

Could this possibly be good for authors? No.

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Just to come at it from an odd angle, if this does kill off the fiction arm of some of these publishers, then those that survive would be better off due to less competition. Anyway, I don't think commercial publishers are slated for extinction. In fact, I think print has more likelihood of being replaced by ebooks and ereaders than that--and I don't think that will happen in the foreseeable decades. It's just nowhere there yet.

Also, I don't think its legal in America to have just one company in control of all of publishing.

But I do think that if collusion occurred, it needed to nipped in the bud, for that is just as bad as selling less than cost to kill those who can't follow. And either one is bad for the industry in the end--and for the consumer--and generally is bad for the business itself. Certain unethical practices tend to come around and bite the user in the a** eventually. Only problem is they tend to destroy a lot of other things during that journey.

Jodi

Jodi, I completely understand the kneejerk reaction of "collusion is bad," but it's simply not that simple in this case. For instance, it turns out that the DOJ's own guidelines allow for horizontal price fixing if it will, "create efficiencies in the operation of a market."

At the above link you'll find a story about a cartoon submitted as a brief in this case explaining that concept and several other places the DOJ got it wrong. It's merely the opinion of one IP expert, but it's compelling to me.

I think the reality is that your other assertions are not backed up by recent history, though this is certainly subjective. The collusion of the five publishers (with or without Apple's direct participation) resulted in a better, more interesting market for ebooks. As suggested in my lengthy post above, I believe the ebook experience today is better as a result of the industry breaking Amazon's monopoly power over the market. From my perspective, competition in the form of platform (i.e. software and hardware) is ultimately better than competition on price.

Lastly, James's point about Amazon's goal of being the only publisher and seller of ebooks on the planet is real. Even if one or two major publishers are left to compete with Amazon in the end, that will not be good for authors or readers.

James D. Macdonald said:

Two publishers haven't settled:

• Penguin Group (USA) Inc. (“Penguin”); and
• Holtzbrinck Publishers, LLC, known as Macmillan (“Macmillan”).

The suit(s) is/are, in my opinion, meritless. No collusion or "price fixing" existed.



.

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I certainly can't find a single example anyone can point to and say, "That is collusion, that is price fixing."

ios said:

Just to come at it from an odd angle, if this does kill off the fiction arm of some of these publishers, then those that survive would be better off due to less competition.

Jodi

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Even if it worked that way, and it seems unlikely, do you really think less competition of this kind is better for you, or for writers as a whole? For readers?

Who gains, other than a tiny few publishers, when this kind of competition is lost?

Jamesaritchie said:

I certainly can't find a single example anyone can point to and say, "That is collusion, that is price fixing."

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The problem is that breakfast meeting I mentioned. That probably does amount to collusion. It's certainly a major piece of evidence in the DOJ's case, as I understand it. In that meeting, they agreed to move to the agency model as offered by Apple, and perhaps the DOJ thinks it can prove a price fixing component was also part of the meeting.

The other major thing is the over-night increase in best seller ebook prices once the agency model kicked in at Amazon.

That's all surface stuff, though. To me, Amazon's monopoly power and the anticompetitive nature of the company's dumping scheme warranted the move to the agency model championed by Apple. Turns out Mr. Holder didn't ask my opinion.

Jamesaritchie said:

Even if it worked that way, and it seems unlikely, do you really think less competition of this kind is better for you, or for writers as a whole? For readers?

Who gains, other than a tiny few publishers, when this kind of competition is lost?

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This!

GeekTells said:

As suggested in my lengthy post above, I believe the ebook experience today is better as a result of the industry breaking Amazon's monopoly power over the market. From my perspective, competition in the form of platform (i.e. software and hardware) is ultimately better than competition on price.

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I guess I just feel to wrongs do not make a right. If they want to break up a monopoly, the ends do not justify the means. Do it ethically and legally. If collusion is allowed, then why is part of the case? And if the alleged actions took place, why hide the fact that legal collusion was going on? People don't hide things they are unashamed of. Sometimes it feels like, and I'm not pointing fingers here, that people overlook possible unethical and illegal happenings on one person's side just because they dislike the person they are fighting against.

I guess my point is 1) why is DOJ bringing it up if they don't think something is going on worth investigating and 2) if what these publishers are doing is wrong according the allegations, how are these alleged actions justified just because it makes price and competition better?

Lastly, James's point about Amazon's goal of being the only publisher and seller of ebooks on the planet is real. Even if one or two major publishers are left to compete with Amazon in the end, that will not be good for authors or readers.

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When people mention this possibility, I think of Microsoft. Microsoft is not the only game out there. In fact, I heard it purposefully invested in Apple to help save it. Microsoft would only have done that if it would have helped Microsoft to have Apple out there. So, I think Amazon being the only e-game in town is a possibility, not "real," not a truth.

And what isn't good for authors doesn't mean it isn't good for publishers. Publishers are like most businesses, they care about the people involved in the chain to the extent it relates to business. It doesn't get down to the personal level. Publishers are out there to do business, not make life better for authors just because--and there is nothing wrong with this. Now I'm not saying having Amazon out there is good for publishing business, though, in a way it is--lotsa people buy books via it. But decreasing the number of rival publishers is likely good for a publisher because of decreased competition. That doesn't have to be good for the author, from the publisher's pov.

Jodi

Jamesaritchie said:

Even if it worked that way, and it seems unlikely, do you really think less competition of this kind is better for you, or for writers as a whole? For readers?

Who gains, other than a tiny few publishers, when this kind of competition is lost?

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It doesn't have to be good for the author, in general, from a publisher's pov; all that matters is if it is good for the publisher's business. The two can be exclusive to varying extents. That's the point I'm making. I'm not arguing it will be good for the author, because it won't be; I'm pointing out what can be good for the publisher does not have to be good for the author.

Jodi

ios said:

I guess I just feel to wrongs do not make a right. If they want to break up a monopoly, the ends do not justify the means. Do it ethically and legally. If collusion is allowed, then why is part of the case? And if the alleged actions took place, why hide the fact that legal collusion was going on? People don't hide things they are unashamed of. Sometimes it feels like, and I'm not pointing fingers here, that people overlook possible unethical and illegal happenings on one person's side just because they dislike the person they are fighting against.

I guess my point is 1) why is DOJ bringing it up if they don't think something is going on worth investigating

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The DOJ isn't infallible—that's what trials are for. Apple and two of the five publishers are fighting the case. It remains to be seen what their defense will be.

ios said:

2) if what these publishers are doing is wrong according the allegations, how are these alleged actions justified just because it makes price and competition better?

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I'm not even sure what to make of this question. It sounds like you think restoring monopoly power to Amazon in the name of competition is a good thing. If so, we have arrived at the crux of our differing opinions.

ios said:

When people mention this possibility, I think of Microsoft. Microsoft is not the only game out there. In fact, I heard it purposefully invested in Apple to help save it. Microsoft would only have done that if it would have helped Microsoft to have Apple out there. So, I think Amazon being the only e-game in town is a possibility, not "real," not a truth.

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You may also remember that Microsoft was sued by the DOJ for antitrust violations. Microsoft lost that case and is a convicted monopoly abuser. The Bush administration punted on the remedy re-trial, but the watered-down remedies that were put into place are part of why we have browser competition today.

I noted above that the DOJ isn't infallible, but we had a trial in that case, too.

ios said:

And what isn't good for authors doesn't mean it isn't good for publishers. Publishers are like most businesses, they care about the people involved in the chain to the extent it relates to business. It doesn't get down to the personal level. Publishers are out there to do business, not make life better for authors just because--and there is nothing wrong with this. Now I'm not saying having Amazon out there is good for publishing business, though, in a way it is--lotsa people buy books via it. But decreasing the number of rival publishers is likely good for a publisher because of decreased competition. That doesn't have to be good for the author, from the publisher's pov.

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I agree that there have been upsides to Amazon's disruption of the publishing industry, but it's a mixed case. On weight, it appears clear to me that the downsides outweigh the upsides for authors and readers.

I am not interested in preserving competition among publishers for their sake. It's as a reader that I get most tense about this stuff. I love good books. I want great books. Good and great books require talented authors, agents, and editors. New authors need development and nurturing. Amazon's end-game threatens all of that, which means I will have far fewer good and great books to read.

ios said:

It doesn't have to be good for the author, in general, from a publisher's pov; all that matters is if it is good for the publisher's business. The two can be exclusive to varying extents. That's the point I'm making. I'm not arguing it will be good for the author, because it won't be; I'm pointing out what can be good for the publisher does not have to be good for the author.

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I don't think anyone in this thread has been arguing from the publishing point of view.