Lower prices coming on ebooks

The Department of Justice has brought suit in the ebooks pricing case, and three publishers (Hachette, HarperCollins, and Simon & Schuster) have settled.  We mentioned the possibility of the suit here.  The government is saying that five publishers and Apple colluded to force the “agency model” onto the ebook business.  In the agency model, the publisher sets the price, and the seller gets a percentage of that price for each sale.  There’s nothing illegal about the agency model; it’s the collusion that got these guys in trouble.  Apparently the government has pretty good evidence of the collusion.  Here’s the DOJ’s statement, which says in part:

During regular, near-quarterly meetings, we allege that publishing company executives discussed confidential business and competitive matters – including Amazon’s e-book retailing practices – as part of a conspiracy to raise, fix, and stabilize retail prices.   In addition, we allege that these publishers agreed to impose a new model which would enable them to seize pricing authority from bookstores; that they entered into agreements to pay Apple a 30 percent commission on books sold through its iBookstore; and that they promised – through contracts including most-favored-nation provisions – that no other e-book retailer would set a lower price.   Our investigation even revealed that one CEO allegedly went so far as to encourage an e-book retailer to punish another publisher for not engaging in these illegal practices.

The three publishers who settled have agreed to abandon the agency model for two years.  Amazon is already saying it’s ready to lower e-book prices:

“This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books,” said an Amazon spokesperson, referring to a settlement the Justice Department reached with Hachette, HarperCollins and Simon & Schuster.

But the Wall Street Journal warns:

The settlement allows publishers to negotiate limits on how much retailers can discount, ensuring retailers can’t lose money overall on e-book sales. Moreover, Amazon may be cautious about across-the-board discounts because its profit margins are already thin.

This is clearly bad news for publishers and bookstores.  Lower prices on ebooks means lower sales of print books.  Amazon may not do across-the-board discounts, but this still opens up the possibility of price-shopping for the best deal on any given ebook.  So it’s good news for ebook readers, at least in the short run.

In the long run, who knows?  What if Apple leaves the ebook business, Barnes & Noble goes bankrupt, and only Amazon is left as a major ebook retailer?  Monopolies aren’t good for consumers.  On the other hand, the barriers to entry in the ebook market are pretty low.  All these vendors have their own reading devices for ebooks, so there is a convenience element to buying and downloading books from their online stores, but I’m not sure how big a deal that will ultimately be.

And, as I mentioned before, this doesn’t affect people like me, who are essentially independent publishers.  Both the wholesale model and the agency model work fine for us, as far as I can tell.  We just have to get people to buy our stinkin’ books.

1 thought on “Lower prices coming on ebooks

  1. Pingback: Barnes & Noble would prefer not to compete with Amazon on ebook pricing | richard bowker

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