The past two days have seen some real shake ups
in the e-book market. Yesterday, it was
reported that the “Big Six” publishers—HarperCollins, Random House,
Hachette, Simon & Schuster, Penguin, and Macmillan—are refusing to sign new
contracts with Amazon. The online
bookseller is looking to increase the co-op promotional fees (money the
publishers pay a bookseller to promote their titles), and publishers are refusing to sign on to the increase.
Perhaps even more significant is the anti-trust suit filed today by the US Department of Justice against Apple
Inc and five of the Big Six publishers, HarperCollins, Hachette, Simon &
Schuster, Penguin, and Macmillan. The
claim is that the publishers colluded amongst themselves and with Apple to set
e-book prices. In anticipation of the
launch of the iPad in 2010, publishers started using the agency model in 2009 when
selling their books to e-book retailers.
In the agency model, publishers set the price of books and the retailer
takes a percentage (usually 30%) cut of the sale. This differs from the traditional wholesale model
where publishers would sell books to retailers who would then set whatever
price they wanted.
In his letter supporting the publishers, President of the
Authors Guild, Scott Turow, explains the benefits of the agency model: “Two
years after the agency model came to bookselling, Amazon is losing its
chokehold on the e-book market: its share has fallen from about 90% to roughly
60%. Customers are benefiting from the surprisingly innovative e-readers Barnes
& Noble's investments have delivered, including a tablet device that beat
Amazon to the market by fully twelve months. Brick-and-mortar bookstores
are starting to compete through their partnership with Google, so loyal
customers can buy e-books from them at the same price as they would from
Amazon. Direct-selling authors have also
benefited, as Amazon more than doubled its royalty rates in the face of
competition.”
However, Attorney General Eric Holder sees the publishers’
business model differently. He cites
secret business luncheons attended by publishers to discuss fixing the prices
of e-books. “As a result of this alleged
conspiracy, we believe that consumers paid millions of dollars more for some of
the most popular titles,” he said.
In addition to the federal suit, 16 states, including Ohio,
have also filed their own anti-trust suits against publishers. Several settlements have already been reached
at both the federal and state levels, but Apple, Macmillan, and Penguin insist
they will keep fighting the charges in court.
Find more about the anti-trust suits at these sites:
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