We have all been waiting for decisive action by the U.S. Department of Justice, mostly in redressing the catastrophic wrongs of Wall Street that precipitated our current economic morass. So there was mild surprise when the DOJ turned its attention instead to a largely defenseless and almost moribund book publishing industry, filing a recent lawsuit for price fixing by five large publishers. The lawsuit also included defendant Apple, an almost insignificant player in the universe of bookselling. Conspicuously missing from the DOJ lawsuit was our own Seattle-based Amazon, which has been sitting silently on the sidelines while the U.S. government in effect does its dirty work.
Ironically, it was the iconoclastic Steve Jobs who allegedly set this monopolistic ploy in motion when he urged a group of book publishers to move to an "agency" model of bookselling, which protects the right of publishers to set the retail price of their ebooks while the distributor takes a flat 30 percent in the transaction. This was created to do an end-run around Amazon, who was dictating a mandatory $9.99 selling price for ebooks without exception. Publishers and booksellers were overwrought about Amazon’s pricing scheme, but their protests went unheard.
Technically the five publishers are probably guilty of the charges (three have already admitted as much), inasmuch as they met and discussed what action to take. And while the DOJ may have hit a target that qualifies as restraint of trade, it missed the real elephant in the publishing room, Amazon, which has been turning publishing practices upside down, ultimately threatening the art and vitality that readers value most in books.
With the advent of digital books and their $9.99 pricing, Amazon had quickly commandeered 80 percent of the ebook business. It was exercising its first-mover business practice, a willingness to lose money in support of steering readers to its new ebook reading device, the Kindle cum Fire cum Conflagration.
Amazon had learned and practiced this tactic when it first started its online business, selling deeply discounted books in the 1990s. Jeff Bezos’ rule of thumb was that he who was first to market would ultimately own the market and recoup the initial years of lost profits. For the book publishing industry, a co-conspirator since Amazon’s inception, the new ebook tactics were déjà vu all over again. It’s reminiscent of the old joke about the farmer who lays eggs. When his wife is asked if she doesn’t want to do something about this problem, she answers meekly, “Well, frankly, we need the eggs.”
And for Amazon, who better than hapless book publishers to exploit for their necessary content to build the online empire before quietly strangling the meager profits out of an industry that had become the weaker co-dependent in the relationship? Publishers were caught gasping for air as they watched the underpinnings of their business get sideswiped by technology and a ruthlessness not seen since the rise of the book chains, Barnes & Noble and Borders.
Book publishing, which I practiced for many years as head of Sasquatch Books in Seattle, is a marriage of art and commerce. Publishers are akin to midwives, who bring an author's creation to full artistic flower and then commercially breathe success into the printed words through good editing, public relations, wide distribution, and royalty payments back to the author. Publishing was regarded as a "gentleman's" business with deals consummated over tete-a-tete lunch meetings. Ironically, the DOJ complaint accuses the five publishers involved with fixing prices for the agency model at a swank New York bistro. They are probably still wondering how else they were expected to conduct business.
And as for the prerogative of publishers to set the retail price of the books they publish, well, this has always been the industry practice, as it is for almost all manufacturers. Just not in collusion with each other, thank you very much. Not until Amazon demanded the $9.99 set price for ebooks had publishers ever been dictated the value of their goods. Amazon knew it could withstand the losses. The publishers could not.
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