As you may know, the American Department of Justice (DOJ) has been considering taking legal action against the big 6 of the publishing world for some time for what they consider to be illegal collusion to fix the retail price of ebooks, the so called Agency Model.

The way that paper books are sold to book sellers is based on a system in which publishers set a wholesale price, normally about half the cover price, and then the retailer can decide how much they actually sell the book for.  In the early days of ebooks, this system was also used for ebooks.   But this changed about the time the iPad came along, at which point at the urging of Steve Jobs of Apple, the main publishers and Apple adopted what has become known as the Agency Model

What is the Agency Model?

The Agency Model is one in which the publishers sell the ebook to a retailer and set the retail price of the ebook, and base this on about a 30% mark up for the retailer.  The point at contention is that the publishers insist that the retailer sells the ebook at the price they (the publishers) set.  This is the heart of the legal case against them, as this is price fixing between producers of a commodity, and as such is illegal as it is seen as removing any sort of competition between publishers.

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Rich Adin, in his always intriguing and diverse blog – An American editor – has posted an interesting article about the infamous Agency Pricing Agreement for selling ebooks.

This structure, which is currently the subject of legal inspection in the USA, Europe and the UK has caused a real stir over the last year, as it is seen as a form of price fixing, aimed chiefly at preventing Amazon from taking over the entire world of ebooks, and in passing, to give Apple a fighting chance to break into the market as a result of the launch of the iPad.

From the point of view of the consumer, it has had the effect of frequently pushing the price of ebooks up to levels higher than many paper books, which, not surprisingly has caused a lot of anger and resentment.

In this post, Rich gives a rather more nuanced view of this system, and it is because of this broader view of it all that I felt it might be of interest to you to read – assuming you have not already seen it on his blog, of course.

So, the word is with Rich now….  Read on.

eBooks: Is Agency Pricing Good or Bad?

Recently, there has been a lot of focus on the “conspiracy” between 5 major publishers and Apple regarding agency pricing and whether these 6 entities have violated antitrust law. The focus is not on whether agency pricing is good or bad, but whether the parties colluded. That question I’ll leave for the US Department of Justice.

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As you probably know, Apple and 5 major publishing houses are facing legal action in both the USA and the European Union for allegedly setting up a price fixing ring for ebooks – which is illegal in both areas, and if proven, the damages could even hurt Apple very badly.

What is happening is that the Department of Justice in the USA and the European Anti-Trust Commission have decided after months of vacillation to properly examine the so called “Agency Model” of ebook pricing, which basically is an agreement that Apple and the 5 biggest publishers in the world – Harper Collins, Hachette Livre, Simon & Schuster, Penguin and Macmillan – dreamed up between them that sets the retail price for all ebooks rather than leaving the retail price up to the seller.

In both the USA and Europe such agreements between competing companies is completely illegal, and seen as anti-competitive and criminal.

It is being claimed that this whole sorry mess originated with Steve Jobs as part of his strategy for selling the iPad, and was aimed specifically at Amazon, who to all intents and purposes control the world market in ebooks, and were thus seen as the company to beat into the ground in order to ensure that iBooks (as with iTunes) ultimately became the world leader for selling ebooks.

Apparently at a number of meetings with the leaders of the 5 publishing houses, he managed to convince them that their future was safer with Apple than with Amazon, as quotes from Steve Jobs to his biographer Walter Isaacson would indicate

“We told the publishers … you set the price, and we get our 30 per cent, and yes, the customer pays a little more, but that’s what you want anyway,” Jobs reportedly said.

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Back in March I wrote about raids that the EU commission had organized on the offices of a number of big publishers in Europe owing to suspicions that they were possibly guilty of cartel forming in regard to pricing of ebooks.

Setting up a cartel is illegal in Europe as it is seen as stifling competition between suppliers of any particular product or service, and in this case it concerns an agreement between Apple and 5 major European publishing houses, to be exact it concerns Apple, Lagardere’s Hachette Livre, News Corp.’s Harper Collins, CBS Corp.’s Simon & Schuster, Pearson Plc’s Penguin and Verlagsgruppe Georg von Holtzbrinck GmbH.

EU Commission moves slowly:

It has taken the European Commission rather a long time to study the documents they seized back in March when they raided the offices of these companies, but it seems that they have come to the conclusion that there is a case to answer, so the Commission’s Anti-Trust Office will be taking the matter further.

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In a post on his always intriguing and diverse blog – An American Editor – Rich ponders something that he came across in his most recent paper book acquisition.

In a moment of paranoia, Rich suspects that publishers have come up with a novel and cheap (for them, that is) way of getting us to buy both the paper and electronic version of the books they publish.

If the supposition he lays before us in this post is true, then publishers have more imagination than I had given them credit for.

So, the word is with Rich, read on…………..

Is This the Next Sneak Attack on eBookers?

Here’s something I’m sure every major publisher is thinking about: How can I get consumers to buy both the pbook and ebook versions of a book? Well, maybe they aren’t really sitting around the table thinking about that, but with my latest pbook purchase, I’m wondering if they are thinking about it.

I have enjoyed the “Safehold Series” of books by David Weber. Because Weber is one of my favorite authors, I buy his books in hardcover so I can read them and add them to my permanent library. A week ago, the fifth book in the series, How Firm a Foundation, was released. I had preordered it in hardcover and eagerly awaited its arrival.

It arrived and I put down my Sony 950 Reader to take up Weber’s book. That lasted a whole five minutes and two pages. The publisher chose a font size that was so small I could barely read the text. For my eyes to read the text, I needed a magnifying lens. This is the first time this has happened; I don’t know whether my eyes suddenly got worse (not likely based on the lack of problem I have with any other pbook I own) or the font size was deliberately smaller than usual in an attempt to keep production costs down.     Read full story »

Rich Adin mulls over my post on the dangers for authors in a world dominated by ebooks.

Rich Adin who runs an interesting blog (An American Editor) read my post about the problems that the advent of ebooks have brought to authors who want to make a living writing and left a comment there, which finished with these words:

“Hmmm. I think I will stop here and use this comment as a basis for a post at my blog. Writing for you has freely inspired me to write for me; the consequent cost to you is that the balance of my thoughts are not currently available. Sounds like the publishing industry in decline, doesn’t it?”

Well, he has now written that post for his blog, and it seemed to me that I should repost it here as it is a reaction to things I wrote in that post on my blog.  And in passing make those thoughts he referred to available to us all here as well as on his blog!  Ha!

So, here is that post for your interest and enjoyment:

Clashing Perspectives: Coming Home to Roost

Ewan Morrison wrote about the future of publishing from the publisher’s and author’s perspectives. I somewhat share his bleak, perhaps apocalyptic, outlook for the future of the publishing industry (see “Are Books Dead, and Can Authors Survive?“; for “outsider’s” perspective, see Tony Cole’s discussion of Morrison’s article, ”Can Authors Survive in the Age of eReaders and eBooks?“).

The mistake being made in publishing is, I think, one of clashing perspectives. People in the industry look at a book, regardless of its form, as simultaneously a commodity and something unique. The mistake is that it has to be one or the other; it cannot be both. It cannot be both because each perspective demands a different approach to the book and the two approaches are incompatible.

As a result of this clash, each step in the production of the book is degraded. The result is that, for too many authors, the only thing that matters is getting “published,” with the consequence of “free” being the optimal way to get noticed. With the growth of free, there has to be a decline in “not free.” Misbalance of free and not free is, in the end, the death knell of “traditional” publishing.

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