DoJ Threatens Apple, Publishers over “Agency Pricing” of e-Books
March 8, 2012 - 6:29 am
Philosophically, I’m not a big fan of the current state of antitrust law, but this is interesting. The DoJ is threatening Apple and several major publishers with an anti-trust suit. Wired says:
The DoJ is reportedly concerned that agency pricing — and its uniform adoption by five of the big six publishers, timed with the launch and rollout of Apple’s iBooks — has reduced competition in the industry, with the overall effect of raising e-book prices for consumers. A federal class-action lawsuit filed in August against Apple and the same group of publishers (HarperCollins, Hachette Book Group, Macmillan, Penguin Group Inc., and Simon & Schuster Inc.) raised similar concerns, pointing to higher e-book prices as a result of the defendants’ actions. A settlement or lawsuit could either restructure agency pricing or eliminate it altogether.
So what’s agency pricing? When the Kindle first came out, Amazon uniformly priced them at $9.95, but when Apple started selling e-books, they introduced a model of pricing called “agency pricing”. Steve Jobs said:
We told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway…” They went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”
(The quote is from Walter Issacson’s biography of Jobs and is stolen bodily from Wired. Yay cut and paste.)
We talked about e-book pricing just recently, so I’m going to refer you to that discussion for details, but the main point is that when a publisher — Penguin in particular is notorious for this — charges as much or more for an e-book as for their physical book,they’re charging far in excess of their costs; their claim that it costs just as much to produce an e-book as a physical book is nonsense.
Normally, the market would take care of that, and the current flood of indie books is part of the market’s reaction — when an indie published book can make the author more money while costing the reader less, the market is going to naturally more that direction.