The Justice Department alleges that Apple‘s collusion with book publishers to fix ebook prices has cost readers $100 million. So why are so many news reports on the anti-trust suit suggesting that the Apple/publisher alliance is actually good for consumers?
The New York Times‘ David Streitfeld (4/12/12) warns:
Amazon, which already controls about 60 percent of the ebook market, can take a loss on every book it sells to gain market share for its Kindle devices. When it has enough competitive advantage, it can dictate its own terms, something publishers say is beginning to happen.
Likewise CNN‘s Doug Gross (4/11/12):
But some say Amazon‘s lower prices have been the problem all along…. The argument goes like this: By selling most new ebooks for $9.99, Amazon is setting a price that’s too low for other competitors to match in a price war. If that eventually drives the competition away, Amazon (which is already projected to account for more than half of all U.S. book sales by the end of this year) would be essentially unchecked and able to set whatever prices it wants.
And Reynolds Holding on Slate (4/11/12), talking about Apple‘s don’t-let-anyone-undersell-us contracts with publishers:
The scheme seems to be working for publishers, retailers and even consumers…. If readers pay a bit more than they did in the experimental days of ebooks, at least it means publishers will make enough money to keep more books coming.
In the alternative universe where these arguments make sense, Amazon‘s competitors are poor, powerless companies that the online retailer can drive out of business by selling at a loss, and then jack prices up as high as it likes–with no one else able to enter the market ever again. But in this reality, Amazon‘s chief competitor is Apple, for crying out loud–literally the richest company in the world. Believe me, if Steve Jobs wanted to sell ebooks for $14.99, it’s not because he couldn’t afford to sell them for $9.99.
No, he expressed his pricing philosophy very clearly (TheVerge.com, 4/11/12): “Yes, the customer pays a little more, but that’s what you want anyway.” (Remember that “a little more,” or as Slate put it “a bit more,” is actually 50 percent more.)
The other thing you have to keep in mind when you read these stories is that publishers make about as much money selling a $9.99 ebook as they do selling a $26 hardcover (Extra!, 8/10)–despite doing a whole lot less.
It is true that faced with a choice of two formats, one of which costs 38 percent what the other does, many readers are likely to go with the cheaper one. It’s also true that when there’s no physical book to print and distribute, the publisher’s role becomes largely parasitical, and the book industry is likely to move to a model in which authors work directly with retailers and cut out the middlemen.
So one can understand why publishers might see it as being in their interest to conspire with Apple. But please, journalists on the publishing beat, let’s not dress that up as if they’re doing readers a favor by charging them half again as much for an ebook.