Paper, Print & Pixels

Books and Publishing in the Digital Age

Publishers Settle with DOJ in Price-Fixing Suit

On April 11, 2012 the U.S. Department of Justice filed an antitrust lawsuit against Apple and five of the big six publishers, Macmillan, Hachette, Simon & Schuster, HarperCollins, and Penguin, for colluding to fix ebook prices. The five publishers had entered into an agency model deal with Apple in an attempt to gain greater control over ebook prices. Amazon set the $9.99 ebook price and dominated the market with over 90% of ebook sales.

Source: macobserver.com

Shortly after the lawsuit was filed, Hachette, Simon & Schuster, and HarperCollins agreed to a settlement. The terms of the settlement included a two year period in which the publishers cannot restrict online ebookstores from discounting prices. Penguin held out until late December before it also settled the lawsuit. The news of Penguin’s settlement was thought by insiders to have been a calculated move in the pending merger between Penguin and Random House, the one big publisher not involved in the antitrust lawsuit.

Macmillan CEO John Sargent was the subject of an article which appeared in a June 2012 issue of The New Yorker. The article detailed Sargent’s deal with Apple, from the time when he was first approached by Steve Jobs up until the news that the first three publishers had agreed to settle the lawsuit. Sargent said that he acted alone in the deal with Apple and that he would continue to fight the lawsuit. However, in February of this year, Macmillan agreed to a settlement. Apple remains as the lone defendant in the suit.

Whether or not the publishers actually conspired with each other and Apple to fix retail prices, the lawsuit brings to light several issues that could affect the future of the publishing industry. The price of ebooks was set by Amazon, a multi-billion dollar company that is able to sell them at a loss and thereby maintain its dominance in the market. The agency model deal that the publishers signed with Apple allowed more competitors to enter the ebook market while providing Apple with a percentage of the sales.

Ebooks prices are set low due to the relatively inexpensive cost it takes to produce and distribute them. However, the costs for maintaining the website, developing platforms and forums, along with traditional costs regarding design, editing, production, and author compensation all take their toll on the final estimate of profits on each ebook published.

Now that all of the publishers involved have agreed to settle the suit, Apple is left alone in the fight. The ebook price war has demonstrated the publishing industry’s inability to innovate as quickly as major corporations such as Apple and Amazon. A digital age requires companies to look to new models that can better address the needs and desires of consumers who are eager to interact directly with publishers. Social networks, online stores, discussion forums, reviews, recommendations, and feedback are all necessary parts of a publisher’s strategy for keeping consumers from seeking out their competitors.

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This entry was posted on March 29, 2013 by in Ebooks, Publishing and tagged , , , .
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