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Who wins and loses from DoJ's suit against Big Publishers and Apple?

Here's a roundup (with links) of stories and analysis about the Department of Justice's plan to sue five major publishers and Apple for colluding to raise the prices of electronic books (eBooks). Three publishers have agreed to settle. On his blog, After the DoJ action, where do we stand?, Mike Shatzkin, whom I read for the big picture (publishers' view), tentatively summarizes the situation thus: "Amazon (which includes any other player largely dependent on Amazon) and the most price-conscious ebook consumers have won. Everybody else in the ecosystem: authors, publishers, and other vendors, have lost. The reaction from all quarters seems to confirm that analysis." (Shatzkin Files, 4-14-12). Do take time to read the comments on all these pieces. Many believe this major shift in book publishing is as big in its way as Gutenberg was, when he brought printing to the world.

Three of the Big Six publishers (Hachette, HarperCollins, and Simon & Schuster) have agreed to a settlement with Justice. Two (Macmillan and Penguin) will contest the DoJ position that they acted illegally. Random House did not participate in the meetings that led to the complaint of collusion.

• Here you can read the Department of Justice complaint (PDF), in its in its antitrust lawsuit filed against Apple and the Agency Five.

In Shatzkin's earlier piece, If the government makes agency go away, he explains: "Agency pricing, for those who have not been following the most important development in the growth of the book market, enabled the publishers to enforce a uniform price for each ebook title across all retail outlets. This was Apple’s desired way to do business, and it addressed deep concerns the big publishers had about the effect of Amazon’s loss-leader discounting."

• In an earlier story -- U.S. Warns Apple, Publishers ( WSJ, 3-9-12) -- reporters Thomas Catan and Jeffrey A. Trachtenberg explain: "The case centers on Apple's move to change the way that publishers charged for e-books as it prepared to introduce its first iPad in early 2010. Traditionally, publishers sold books to retailers for roughly half of the recommended cover price. Under that "wholesale model," booksellers were then free to offer those books to customers for less than the cover price if they wished. Most physical books are sold using this model.

"To build its early lead in e-books, Amazon Inc. sold many new best sellers at $9.99 to encourage consumers to buy its Kindle electronic readers. But publishers deeply disliked the strategy, fearing consumers would grow accustomed to inexpensive e-books and limit publishers' ability to sell pricier titles." By acting together to raise prices across the industry, says DoJ, the publishers and Apple are violating U.S. antitrust laws.

• According to Michael Cader (Publishers Lunch 3-8-12), in Justice Department Said to Threaten Suit Over Agency eBook Pricing, "Google Play's new promotion offering a different ebook every day for 25 cents is doing wonders for Amazon." Much of Cader's analysis is behind a paywall; you need a subscription to read everything he has written.

Amazon, the 800-pound gorilla in this competition, can afford to match loss-leader offers from competitors like Google. Publishers can't afford that kind of deep discount and have never been strong on the kind of marketing Amazon excels in. Authors (who earn a fraction of what publishers earn on a title) stand to lose a lot, too -- except those few who are successfully self-publishing eBooks (especially genre fiction) through Kindle.

• On April 12, Kelly Burdick (Melville House) posted The Collusion Files: How it really happened, showing emails DoJ had between Steve Jobs and the Agency Five publishers, about meeting for lunch to discuss the $9.99 problem.

• Authors Guild president Scott Turow weighed in with Grim News (3-9-12): "The irony bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition." The Guild is concerned chiefly with Amazon's "chokehold on the e-book market," fearing that traditional (legacy) "publishers won’t risk capital where there’s no reasonable prospect for reward." Turow defends book publishing against Amazon, which he sees as a threat to our rich literary culture.

• Joe Konrath and Barry Eisler, who have made a killing in the eBook wars self-publishing their own fiction, support Amazon and take on Scott Turow in their piece, Barry, Joe, & Scott Turow (A Newbie's Guide to Publishing 3-10-12). Says Barry: "Scott argues that what’s central to a 'rich literary culture' isn’t books, but rather legacy publishers and brick-and-mortar stores. If this isn’t a sentimental concern, I don’t know what is....Books (that is, literature) are what’s central to a rich literary culture. Not who sells them. Not how they’re sold." Mind you, they have succeeded in self-publishing genre fiction as eBooks. Authors in other genres have not achieved a similar success, by and large.

Further down (after the two apply their BS-detectors to Scott Turow's defense of "legacy publishers"), Barry writes: "the legacy publishing industry is sick, and when someone is sick, you don’t want him to die; you want him to get better. But I think it bears mentioning that if Amazon weren’t aggressively innovating, none of the players Scott salutes would be moving at all, or at least not nearly as fast. Competition is good. Amazon is causing it, and it’s nice to see other players reacting, if only as resentful and reluctant catch-up." Not to mention that although the legacy publishers are fighting for their share of the market, they are reluctant to up the authors' share. (So would Amazon be, without pressure from competition.)

Essentially these two and Suzanne White see the Guild as defending publishers, not authors. "Where in the traditional publishing industry can an author command 70%? Where can an author have utter dominion over cover art? Formatting? Content? Illustrations? Impact? Marketing? The answer is Amazon. And a little bit Pubit and sometimes Smashwords or Apple as well. Where in the standard publishing industry can an author revive a book that he or she wrote in 1982, sold to a publisher who printed it, didn't sell very many and took it right off the market? Amazon, that's where. Author gets rights back, re-formats the book, slams it up for sale on Kindle and in six months is making money with that book."

That a lot of the self-published books could have used better writing and editing is another point, and a lot of garbage is crossing the eWaves. But publishers as gatekeepers and quality assurance people are clearly not giving the authors who do write well a fair share of the pie and they are certainly not giving old, obscure, highly specialized backlist titles the support the authors themselves can give, without the publishers. The question is, if the publishers disappeared, would Amazon be so generous to authors? Highly unlikely.

• Here's "legacy" novelist Richard Russo (Amazon’s Jungle Logic (NY Times, Op Ed, 12-12-11), with a roundup of opinions about Amazon's sales tactics from writers Stephen King, Dennis Lehane, Andre Dubus III, Anita Shreve, Tom Perrotta and Ann Patchett. Lehane called Amazon's price-check app attack on bookstore sales "scorched-earth capitalism." Russo writes: "Though it’s under siege, such real-life literary culture exists in unexpected places. A few miles down the road from where I live on the coast of Maine, a talented young bookseller named Lacy Simons recently opened a small bookshop called Hello Hello, and in her blog she wrote eloquently about her relationship to 'everyone who comes in my store. If you let me, I’ll get to know you through your reading life and strive to find books that resonate with you. Amazon asks you to take advantage of my knowledge & my education (which I’m still paying for) and treat the space I rent, the heat & light I pay for, the insurance policies I need to be here, the sales tax I gather for the state, the gathering place I offer, the books and book culture I believe in so much that I’ve wagered everything on it' as if it were 'a showroom for goods you can just get more cheaply through them.' "

• And here, for now, is Dear Consumers Who Apparently Think the Current Drama Surrounding eBooks is Like a Football Game (John Scalzi, 4-15-12). Scalzi urges us, as writers and as customers, not to give in to binary thinking ("us vs. them"). "Amazon wants you to stay in their electronic ecosystem for buying ebooks (and music, and movies, and apps and games). So does Apple, Barnes & Noble and Google. None of them are interested in sharing you with anyone else, ever. Publishers, alternately, are interested in having as many online retailers as possible, each doing business with them on terms as advantageous to the publishers as possible. All of them will work for their own ends to achieve their goals. Sometimes, their corporate goals will work in your immediate personal interest. Sometimes they will not....Recognize that they love you for your money."

• Victoria Strauss for Writer Beware presents an excellent overview of what has happened, in The DOJ’s Ebook Price Fixing Lawsuit Against Apple and the "Agency Five": An Overview. She quotes Mike Shatzkin on what may happen in the long term: "Over time, the biggest losers here will be the authors. The independent authors will feel the pain first. Agency pricing creates a zone of pricing they can occupy without much competition from branded merchandise. When the known authors are only available at $9.99 and up, the fledgling at $0.99-$2.99 looks very attractive and worth a try. Ending agency will have the “desired” effect of bringing all ebook prices down. As the big book prices are reduced, the ability of the unknowns to use price as a discovery tool will diminish as well. In the short run, it will be the independent authors who will pay the biggest price of all." (from Shatzkin's If the government makes agency go away)

As I find more stories on this topic, I will add links to them -- or you may suggest them in the Comments section below.
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