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Scott Turow doesn’t like the DOJ’s actions against Apple and Publishers

March 12, 2012

The views in the post are solely those of its author and do not necessarily reflect the views of the Florida Writers Association, its leadership, or its members. 

Alanis Morissette had a hit called Ironic in the mid-1990s, in which she described a number of situations she thought were ironic (like a guy who had a phobia of flying, then died in a plane crash the first time he flew). The typical response was “that’s not ironic, that sucks!”

Morrissette’s song came to mind in reading Scott Turow’s note to Author’s Guild members about the Department of Justice’s notice to five of the big six publishers and Apple. The DOJ is investigating collusion among the parties in instituting the agency model for book pricing. Turow called the action “grim news for everyone who cherishes a rich literary culture.”

Turow’s e-mail says that Amazon is using its deep pockets and predatory pricing to capture the entire e-book market with its proprietary format for Kindles. In other words, the supercheap pricing Amazon has made available is there to assure that it captures the market for e-books. Once that’s done, and it’s the only game in town, it can do whatever it wants with e-book prices.

Turow also claims that Amazon is pushing to make bookselling unprofitable for current competition, taking losses it can sustain in order to force its competition to cut its prices–effectively forcing them to discount themselves to death to compete. He cites Amazon’s business practices as a contributing factor in Borders’ demise.

From this viewpoint, there’s a lot of validity to some of Turow’s claims. As he points out, since the agency model was adopted, Amazon’s share of the e-book market has dropped from 90% to 60%. The Nook has gained a foothold in the market, but Amazon is taking steps to funnel people toward the Kindle family of products. Its lending library requires an exclusivity period for included books. Its other books are available on a proprietary format that doesn’t run on other e-readers. And it is starting to cut ties with business partners who don’t concede to its pressure for more favorable business terms.

In short, now that Amazon is the distribution point for a huge percentage of publishers’ products, it’s using that leverage to dictate business terms–at least in Turow’s eyes.

Many customers cheer Amazon’s discounting and have taken revenge on “greedy authors” who seem to inordinately profit from the agency model through customer reviews.

In my view, it’s unclear whether publishers and Apple are guilty of collusion. If they are, it was a stupid move born of desperation. Amazon appears to believe it has enough power to dictate the terms of engagement with its customers now, and it doing so. It is actively trying to establish itself as a near-monopoly in bookselling and using its deep pockets to inflict losses on its competition with the ultimate goal of wiping them out.

But some of the blame must lie with the publishing industry. Its approach to e-book sales to libraries–particularly Penguin’s–are keeping its products from customers who want to pay for them. Its approach to e-books in general could be seen as recalcitrant. They fought their future business model when they should have been embracing it and exploiting it to assure future survival. In this rebuttal to Turow, David Gaughran says that Amazon should get credit for essentially creating the market for e-books when everyone else pursued it half-heartedly. Gaughran’s response tackles what Turow says point-by-point and is worth reading. (It does not, however, response to the concerns of others about Amazon’s pricing approach.)

The simple fact is that publishers may have colluded with Apple and Amazon may be using predatory business practices that merit a second look as well. The two “sides” to this argument are hardly mutually exclusive. It’s very difficult to view Amazon as a victim when it is using its role as a prime distributor to force deeper discounts from the companies whose products it is carrying.

Any DOJ action will undoubtedly favor Amazon, even if there’s no judgement in its favor. Everyone else will find it harder to stand up to the biggest kid in the sandbox.

It’s like rain on your wedding day. A traffic jam when you’re already late. It’s like meeting the man of your dreams and then meeting it’s beautiful wife.

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7 Comments
  1. Ron permalink
    March 12, 2012 7:15 am

    Great thoughts; The big guns trying to control the purse strings, just a different big Gun. Us “want/thinking we are great authors,” looking for a way to sell books with a new type of market to opening up? Great! Yet at the same time if it’s a flea market mentality, selling price you never truly win, although you may be selling books/ebooks. This is making it interesting about how are we going to sell books? What makes your’s better? There’s is no set rules anymore and those could change. Thanks for the updates.

  2. March 12, 2012 9:31 am

    Hi,

    Thanks for the mention. I just wanted to clarify one point. I don’t think Amazon “should get credit for essentially creating the market for e-books.” I think that counts for nothing in business and law. The reason I mentioned that “everyone else pursued it half-heartedly” (or not at all), was to explain *why* Amazon had 90% of the market (at the beginning of 2010).

    They didn’t achieve this figure through browbeating the competition or (as is often implied but never proved) predatory pricing or anything like that. They achieved it virtually by default as they were the only serious player with a serious product focusing on this market.

    I’ve no issue whatsoever with Amazon potentially being investigated, if there is a case. I’m confident the DoJ would have no problem pursuing such an action if there is grounds.

    Dave

  3. March 12, 2012 3:00 pm

    Amazon does not set prices of books sold at Amazon, authors do. I decide what price my E-books sell for. The Big Six New York publishers want me to raise my E-book prices so they can better peddle their paper books. And, NY wants me to go away. I will do neither.

    Amazon’s business model has allowed thousands of new and mid-list authors to make a nice living. NY rejected us, and that won’t be forgotten.

    It’s too late for NY to recover. Amazon now sells more books than anyone. And, once readers buy a Kindle, there is no going back to paper. The NY publishing establishment created a dsitribution monopoly through sweetheart deals with bookstores. But now, they have competition, the same way NBC, CBS, and ABC had to step aside for Cable TV. There’s a new Sheriff in town, and NY still doesn’t realize their monopoly on what gets published is over. Too bad, so sad.

    • Chris Hamilton permalink
      March 12, 2012 3:10 pm

      I don’t think that used to be entirely true. Based on my understanding, the publishers weren’t telling Amazon to take a loss on e-books. That was Amazon’s decision.

      Under the agency model, for those books published by publishers that opted into that model, the author has nothing to do with it either. Amazon is acting as an agent of the publisher and getting a cut of the money.

      Based on your comment, it sounds like you aren’t published by one of those guys, so you would set your own price. It worked very nicely for Amanda Hocking.

    • Attila Berki permalink
      March 16, 2012 11:58 am

      NY isn’t trying to make you (self-publishers) raise your book prices; they are trying to control what their own books are sold for. Imagine Amazon telling you that they were going to sell your book for 25 cents when you want to sell it for $2.99. Once they sell it for .25 people will think $2.99 is an outrageous price, and you will likely never recoup your costs, much less make any money from your work.

      • Chris Hamilton permalink
        March 16, 2012 12:40 pm

        Amazon’s argument is that they’re paying the publisher what it asks for the book. The publisher gets its money (and recoups its costs) and Amazon takes a loss.

        NY’s worry is that Amazon will corner the market and force publishers to accept 10 cents per books so they can sell at 25 cents per book (amounts included for purposes of illustration only).

      • March 16, 2012 12:40 pm

        Actually the equivalent would be for Amazon to start selling my $2.99 book for 25 cent, but still pay me the same royalties.

        And that would be a dream result. Have you seen what happens to the Kindle Daily Deals? Top 10 almost every time.

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