How To Understand the DoJ's E-Book Pricing Settlement

It’s been my experience that avid readers tend to be the sorts of people who take great pride in their intelligence. And intelligent people, for reasons that are obvious enough, aren’t always forthcoming when they encounter complicated subjects they don’t entirely understand. I mention this because I suspect that a decent portion of the e-reading community is having a hard time wrapping its collective head around the now-approved e-book pricing settlement situation.

And that’s a shame, because this particular case offers anyone who’s interested a fantastic opportunity to observe the process of free-market capitalism in all its exquisite absurdity.

I’ll be the first to admit that all the unsaid implications and random exceptions in this case have my head spinning. I’ve probably read thousands of words related to the case, and I still have questions; I can’t imagine I’m the only one. For instance:

Why did the DoJ choose to go after this particular instance of price-fixing? Exactly how and why were they tipped off? Did the State Department’s RFP for e-readers have anything to do with the genesis of this case, or is that merely conspiracy-theory talk? And what of the anti-loss leader “commitment” clause that was tacked onto the settlement? It certainly seems fair, but how, exactly, will such a commitment be enforced? And what of the 868 public comments submitted on the agreement, and the fact that a whopping 90 percent of them opposed it? That fact alone makes it a little tough to have confidence in Judge Cote, does it not?

Anyway, you get the idea: Thus far, it almost feels as if this case has raised more questions than it’s answered. In the meantime, the wisest thing we can probably all do is to continue doing the one thing we all do best: reading. It’s with that philosophy in mind that I offer the following selection of articles and blog posts about the case; these are a few that made the situation seem at least a small bit less confusing to me:

E-Books Pricing Settlement Approved
This Wall Street Journal write-up is probably the best general-info article I’ve read so far about the settlement, its implications, and the actions that led up to it.

Judge Approves E-Book Pricing Settlement Between Government and Publishers
This piece from the New York Times’ Media Decoder blog gives a good overview of the settlement, and even the case itself. Read this if you’re somewhat familiar with the case, but not up-to-date on all the latest specifics.

Federal Judge Approves Settlement in DoJ E-Book Case
This Publishers Weekly piece goes into much more depth than the aforementioned WSJ and NYT articles, but does a great job of explaining a complicated situation in relatively easy-to-understand language. Recommended!

Hats Off to Amazon
Publishing legend Mike Shatzkin definitely isn’t afraid to share his opinions about the case on his well-trafficked blog. And that’s probably because he’s almost always right. (Fun fact: Shatzkin is a featured character in Vanity Fair’s How a Book is Born: The Making of The Art of Fielding, a Kindle Single you should absolutely read if you’re truly interested in the publishing industry.)

What the DoJ settlement means for ebook prices now
I’ve said it before, and I’m sure I’ll say it again: Paid Content reporter Laura Hazard Owen is one of the very best journalists working the e-reading beat today. This piece explains the various implications of the settlement, financial and otherwise.

That was fast: Amazon is already discounting settling publishers’ ebooks
Another Hazard Owen item, this piece can be considered a follow-up of sorts to the LHO post I’ve linked to directly above. The short version: Amazon isn’t wasting any time at all in its quest to become the world’s first e-book monopolist.

5 Comments on How To Understand the DoJ's E-Book Pricing Settlement

  1. Yes, Amazon is already lowering prices on some books. I needed a new book yesterday and found the first four books on my Wish List had their prices lowered since I put them on there just a week or two ago. Two of these books were definitely slated to be borrowed from the library as audiobooks, so nobody was going to make any money on them. The other two would have been pushed aside until I could no longer resist; but yesterday, I bought all four.

    My savings from pre-settlement prices? $10.00 Yay!

  2. Yes, the judge in the Google Book Settlement clearly listened to what writers were saying, particularly that some 90% of them who wrote in opposition to it (including me). This judge seems less open to news from the trenches or the facts of the case.

    Keep in mind that there’s another and more mature market that demonstrates just how effective agency pricing can be at keeping prices down and quality high. That’s the apps for Apple’s iDevices. One reason I opted for the latest iPad rather than a MacBook Air is the marvelously low prices for impressive iOS software. I just picked up a well-featured, beautifully laid out writing app (Notability). A similar app on a Mac would cost at least $30. This one was on sale for 99 cents and the list price is just $1.99. That’s agency pricing with the price set by the developer precisely like the iBookstore.

    My own take is that this move is yet another example of the Chicagoification of the federal government in the last almost-four years. It’s a simple but vile scheme. Create lots of complex and often ambiguous rules, so many that anyone can be branded a criminal. Then apply those rules selectively to ‘encourage’ campaign contributions and crush opponents.

    The owners of Gibson Guitar give to Republicans and they’ve been prosecuted on dubious grounds–‘violating Indian laws that India doesn’t consider violated. Their chief competitor gives to Democrats and is left alone. Gallup has had a similar clash with the Obama administration over their tracking of unemployment rates and is facing similarly dubious prosecution. And don’t forget the prominent big city Democrats who thought they could ban Chick-fil-a from their cities. They cannot do that, but watching Obama in action, they thought they could. This is nasty stuff.

    That’s precisely how the Chicago machine works. If you’re a nobody, you can’t fight the machine. If you’re a somebody, you have a business or real estate in the city. All of a sudden your restaurant is violating a fire code and gets shut down. All of a sudden, you’re violating all sorts of regulations. You’re too buried in hassles and prosecutions to fight city hall.

    The scary thing about this book settlement is that it applies a muddled set of pricing rules to at least some publishers and authors, opening the door for similar prosecutions of you and I. Do you want to take on the DOJ when even some of the Big Six publishers didn’t feel they had the resources to do so?

    And that’s moving into political free speech.Take a very recent example. The Obama administration has leaked life a sieve in an effort to put a positive spin for itself on Bin Laden’s execution, including the names of Seal Team Six–putting their families at risk. But when one member of that team, Mark Owen, publishes No Easy Day, which has a less flattering look at Obama’s role, his prosecution is threatened. And the administration’s defense of that is almost Nixonesque. The president, Defense Secretary Panetta claims, can’t break the law.

    And we should not think that the potential for political censorship is confined to Democrats. More that a few incumbent Republicans find it appealing. That’s why we had FECA–the Federal Election Campaign Act that was overturned by the Supreme Court in Citizens United.

    Ponder for a moment what is the most valuable form of free speech. Like me you’ll probably come us with a list that includes:

    * Political free speech as opposed to artistic, literary or religious. Artist can’t throw me in prison. Governments can.

    * Speech directly connected to those running for political office. These are the people who’ll be running the government.

    * Speech made just before elections when the impact is greatest.

    * Speech by advocacy groups as opposed to general news outlets. And keep in mind that we know what POV advocacy groups represent. They’re at least being straight forward.

    * Speech that is likely to be the most effective at reaching the most people, i. e. TV ads rather than long, serious books.

    What I’ve listed is precisely what FECA banned. If fact, during the Supreme Court hearings, a debate developed over whether the act could be used to ban the publication of a book critical of a candidate just before an election. Opinion from those supporting FECA waffled on way and the other, but the general consensus from FECA supporters seemed to be that what they wanted to ban were effective ways to prevent advocacy groups from reaching the great mass of voters. Since a book is unlikely to have that impact, it didn’t have to be banned.

    In short, FECA was an effort to target the most critical and effective forms of political free speech just before elections. Those in politics who supported it are the ones who need to be watched carefully. Most of us know who they are.

    For my part, I want to live in a society where my opponents as well as my friends have the right to influence elections right up to election day and by any peaceful means they choose. As Martin Niemoller, a German pastor said:

    ****
    First they came for the communists,
    and I didn’t speak out because I wasn’t a communist.

    Then they came for the socialists,
    and I didn’t speak out because I wasn’t a socialist.

    Then they came for the trade unionists,
    and I didn’t speak out because I wasn’t a trade unionist.

    Then they came for me,
    and there was no one left to speak for me.
    ****

    This fuss is not just about how books are priced. It’s about what rules the government can impose on the books we write and publish–meaning what rationale they can use to ‘come for us.’

    In the end, this is a free speech issue. The price I set for my books is my business and not the government’s affair. Prosecuting me for using agency pricing is as much censorship, or at least potential censorship, as kicking down my door in the middle of the night or burning my books in a public square. All it takes is for laws to be selectively applied.

  3. Now, when Apple and the other publishers come up on the docket, they can point to Amazon’s behavior (pricing below cost) and cite that as evidence of monopolistic intent.

    Print is a “front loaded” investment where “maximize profit, minimize loss” makes sense because a print run can fail to sell out at the initial offering price. With unsold paper books on hand, it is reasonable for a retailer to consider discounting and even discounting below cost (minimize loss) as a last resort. There is no such thing as unsold digital inventory and, so, there is no rationale for discounting an eBook. Price it right to begin with and stick to that.

    Publishers simply haven’t re-thought their business plans in light of these new realities.

  4. “Now, when Apple and the other publishers come up on the docket, they can point to Amazon’s behavior (pricing below cost) and cite that as evidence of monopolistic intent.”

    That’ll work well with Apple pricing a lot of Harper Collins titles lower than Amazon right now.

  5. As an agent, Apple doesn’t set prices. It’s the publisher that sets the price. Apple just takes 40% of whatever the publisher sets. Amazon is not acting as an agent of the publishers. This is an important difference.

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