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Friday
Apr132012

Amazon and Apple, booksellers and publishers

I've put off sharing my thoughts here about the U.S. Department of Justice's action against Apple and the conglomerate publishers charged with colluding to raise ebook prices. I'll admit that my first thoughts weren't very temperate--certainly not as temperate as Scott Turow's very lucid and informed thoughts. Turow, as both an attorney and head of the Authors Guild, makes what I think are the most germane points about this situation, which have to do with what I see as the DoJ barking up the wrong tree here. I fear I do not understand how the DoJ, and the other bodies around the world that have pursued legal action against Apple and these publishers, could fail to see Amazon, in terms of its business practices, as the bigger threat to competition, consumers, and the marketplace in general than the organizations pursued in this action. I have written about this before here (and leaned on Turow in similar fashion).

Companies like Agate are relatively vulnerable and powerless in these kinds of large-scale disputes. We depend on our business relationship with Amazon, and other massive companies like Apple and Barnes and Noble and Google, to reach the buyers of our books. I'm under no illusions about the munificent nature of these big companies--or about most companies of any sort, for that matter. To me, what matters is the health of the larger system, not the health of particular companies besides my own. A little company like mine can't survive if it doesn't become somewhat effective navigating among the big dreadnoughts that control its industry. The larger concern is what happens when one organization gets too big and too powerful, and in its growth and spread begins to affect the health of the entire industry. Isn't that precisely the situation that institutions like the Department of Justice exist to address?

As I see it, there are some especially troubling aspects to this whole ebook pricing situation, specifically in business terms. One is Amazon's eagerness to apply its traditional wholesale terms to ebook sales, and then price those ebooks to consumers at rates that appear, in many cases, to be well below the wholesale prices they're paying publishers for those ebooks. Would the government look at this as "predatory pricing?" Perhaps not quite yet, according to the Federal Trade Commission. A second troubling aspect is Amazon's movement into publishing--not only through its more-traditional trade imprint led by Larry Kirshbaum, but also through its Kindle Direct "self-publishing" program. In this respect, Amazon is using its market power not only to compete with other retailers, but also to compete with the publishers for whom Amazon is ostensibly a customer. Again, this kind of business practice might not seem too monopolistic to the DoJ and FTC quite yet. But depending on how Amazon continues to evolve, might it start looking that way before too much longer? Last, there's the fact that in supposedly colluding with Apple to establish the agency pricing model, those large publishers showed themselves willing to accept less money from retailers per ebook sold, in order to preserve some measure of control over how their product was priced to consumers. Why? To me (as a publisher, of course), it seems clear: because they realize that losing control over the pricing of their products will have a disastrous effect on their businesses. This is not an illegitimate concern.

What's happening to big book publishers right now is starting to look a little like what happened to the newspaper industry over the past ten years, and to the record industry over the past fifteen years. It's not pretty. It's not even necessarily bad for small publishers like Agate. But is it good for our culture at large? More specifically, is it good for the individual Americans who read books, or who write them, i.e., most Americans? And are those not the people whose interests the DoJ is meant to protect?

It will be interesting to see what happens to the ebook marketplace next. In particular, I'm very curious whether big publishers will see it as more in their interest to risk alienating some readers by holding off on the ebook releases of their most popular titles, just as they delay their lower-cost paperback releases. It's certainly within their power, and their rights, to do so. Also, how aggressive will Amazon wish to appear in pricing ebooks? The company certainly hasn't been shy in painting publishers as the bad guys when it comes to disputes over ebook prices. It's this that I think bears the most watching--not so much how Amazon battles its rival retailers, but how it treats the companies that supply the products it sells.

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