Right pricing e-books: Is the government actually discouraging competition?
Authors Guild President Scott Turow charges in an open letter about e-book pricing: “Our government may be on the verge of killing real competition in order to save the appearance of competition.”
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That’s the latest question circulating publishing forums and tech blogs since last Thursday’s news that the Justice Department may be close to filing an antitrust lawsuit against Apple and five publishers. What’s more, interested parties like the Authors Guild, a writers’ advocate group, are coming forward to defend Apple’s agency model.
“The irony bites hard,” writes Authors Guild President Scott Turow in an open letter defending the agency model. “Our government may be on the verge of killing real competition in order to save the appearance of competition.”
Let’s back up. The DOJ is threatening to file a lawsuit against five publishers (Hachette Book Group, Simon & Schuster, MacMillan, Penguin, and Harper Collins) and one distributer (Apple), all operating under the agency model and all suspected of e-book price collusion.
There are two competing models for distributing books, print or electronic: the wholesale model and the agency model. Under the wholesale model, a publisher sells its goods to a distributor for a fixed price and the distributor is free to decide the actual price for the public (including selling at negative margins to dump books on the marketplace in the case of Amazon). Under the agency model, publishers set the retail price and the distributor gets a fee (30 percent in the case of Apple).
The problem, writes Turow of the Authors Guild, is that wholesale pricing gives distributors control at the expense of the publishing industry. “Amazon was using e-book discounting to destroy bookselling, making it uneconomic for physical bookstores to keep their doors open,” he writes.