Barnes & Noble would prefer not to compete with Amazon on ebook pricing

This is dog-bites-man news, I suppose, but Barnes & Noble is opposed to the idea of having to compete with Amazon on the price of ebooks.  They have made their case in a court filing in the Department of Justice’s lawsuit against Apple and several publishers.

“We think that the Department of Justice got this wrong,” Gene DeFelice, the company’s general counsel, said in an interview. “The settlement destroys independently negotiated commercial relationships. It harms authors, innocent publishers and bookstores, including small-business owners. And it also punishes consumers who stand to benefit from increased competition and lower prices brought about by the agency model.”

Here’s some background on the DOJ suit.

The crux of the disagreement, it seems, is whether the “commercial relationships” were “independently negotiated.”  The DOJ contends that there was collusion, because none of the publishers could afford make a deal with Apple that guaranteed higher ebook prices (via the agency model) if its competitors weren’t going to follow suit (and, probably, Apple wouldn’t have made that deal).

Note that it’s not just the agency model that’s at issue, but the “most favored nation” status granted Apple, in which publishers agree that they must use the agency model with all other ebook distributors if they use it with Apple.  This is what prevents Amazon from undercutting Apple’s prices.

In any case, Barnes & Noble (who isn’t a party to the suit, just a very interested bystander), claims that prices will go up as a result:

Barnes & Noble replied to us with a statement from general counsel Gene DeFelice, who says “The settlement is likely to lead to predatory pricing and increase monopoly by Amazon.” The settlement will also decrease competition, leading to “less choice and increased prices in medium and long term,” DeFelice said.

This is the scenario that I just don’t get.  Right now I buy ebooks on Amazon and read them on the Kindle app on my iPad.  If Amazon starts raising prices, I’ll just go buy my ebooks at the Apple store and read them on the Apple reader for the iPad.  Further, if ebook prices do go up, that would make the prices of hardcover and softcover books attractive once again, which should please Barnes & Noble (assuming they’re still around at that point).  Where does the monopoly pricing power kick in?

Of course, authors are worried, because their royalties may go down.  Bricks-and-mortar bookstores are worried, because their sales may go down.  The world is changing, for everyone.  The question is what can the various parties do–legally–to protect their interests in the new world.

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5 thoughts on “Barnes & Noble would prefer not to compete with Amazon on ebook pricing

  1. The New York Yankees recently announced they want to end their relationship withStubHub (a ticket reseller) on the grounds that SH is “unfair” to fans. Translated that means that SH prices are invariably lower than the face price of the tix. The Yankees are worried that this will upset their season ticket holders who of course pay the face price. What is also means is that Yankee tickets are overpriced and the Yankees would prefer not to have a competitor like SH that makes the overpricing so obvious.

    This is not all that different from the ebook situation. B&N obviously prefers price-fixing to a free market.

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    • The Author’s Guild, headed by Scott Turow, also prefers price-fixing (that is, the agency model). This seems rather short-sighted to me. If books are too expensive compared to other forms of entertainment, people will stop buying books.

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  2. There’s an awful lot of static on this question, some of it from the Authors Guild. The agency model probably was price collusion, and in general I think it’s led to higher ebook prices, not lower. It also pretty much destroyed BN subsidiary Fictionwise, which used to be an attractive place to buy ebooks because of their membership discounting program. Now they don’t have any Big-Six publishers’ books.

    But the predatory pricing charge (from BN) is quite real. Amazon did (and will, if allowed) happily sell ebooks at a loss in order to corner a larger and larger part of the market, and lock readers into their proprietary Kindle-DRM ecosystem. They have deep pockets, and they can afford to lose money while they kill the competition. On the other hand, they do what they do very well, and they’re easy to shop at, and that’s another reason customers flock to them. And of the big e-tailers, they’re the one currently most friendly to indie authors.

    I don’t see any easy answers to this question.

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    • Amazon may kill Barnes & Noble, but it isn’t going to kill Apple, right? Apple has already made it harder to download Amazon ebooks to the iPad Kindle app; I imagine they could make it harder still. And I bet there’ll be a space for an indie website that uses the membership discounting model. So I continue to have difficulty seeing the problem for consumers if the agency model goes away.

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  3. I’m not defending the agency model. But I think if BN goes under, that would be very bad for the consumer–the loss of the physical stores, the loss of diversity in the ebook marketplace. Apple isn’t serious competition for Amazon in books; their store sucks, and books bought there can only be read on iOS devices. (At least with Kindle books, you have *some* options for the devices you use. And I probably shouldn’t say this, but their DRM is relatively easy to defeat; I don’t think Apple’s has been cracked yet.)

    As a writer, Amazon is my largest source of income from ebooks, and the easiest to work with. I don’t wish them ill at all. The Authors Guild has developed a rabid animosity toward them, and I think it’s misplaced. It makes me embarrassed to be a member. But I still don’t want to see Amazon develop any more of a hegemony over the market than they already have. I don’t know how to prevent it, though.

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