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Industry News: Anti-Trust Settlement Proposed in Europe, Scholastic Posts Losses, Hachette Increases e-Book Prices for Libraries

September 22, 2012

Apple, Publishers Propose Settlement in e-Book Antitrust Case–In Europe

The Department of Justice and states aren’t the only ones pursuing anti-trust remedies against Apple and publishers over the agency model of selling e-books. But they are seeking a settlement with the European Commission on charges that Apple, Hachette, HarperCollins, Simon & Schuster, and Holtzbrinck (MacMillan’s owner in Germany) created a cartel. Under the proposed agreement, the publishers would agree not to engage in agency pricing–where they set the price of the book and the retailer (Amazon, Apple, etc.) gets a cut of that price–for five years. They would also eliminate contractual terms for maximum retails prices and commission levels. The proposed agreement is now open for comments on the proposal. If it’s accepted, it will become part of the eventual agreement.

What this means to you: This proposal, plus ongoing negotiations for agreements in the United States, seem to indicate that the anti-trust case against Apple and the publishers is strong. Why settle if you think you’ll win? If settlements are agreed to and implemented, the prices of e-books are likely to fall. Although Amazon formerly sold e-books at a loss, some believe it is less likely to drop prices as low now, as it has slashed prices on the Kindle e-readers and tablets. (Though it has dropped prices on titles from HarperCollins, which has reached a DOJ settlement in the US.) Any agreements, should they be accepted, would end the agency model and provide the possibility of a price war.

Scholastic Posts Quarterly Loss

Scholastic, the publisher of Harry Potter and The Hunger Games, missed its quarterly revenue estimates as revenue from educational sales fell. According to CEO Richard Robinson, must of the slide could be attributed to reluctance on to spend on the part of school districts concerned about Federal budget cuts that could come at the end of the year. The loss was also fed by the end of a bump in the sales of Hunger Games books after the release of the movie based on the first book in the trilogy, which was released in March. Overall revenue fell 8 percent to $294 million, with educational revenue falling 17 percent to $80 million.

What this means to you: The fall of educational revenue is an indicator that this isn’t necessarily part of an industry-wide revenue dip. However, if the economy softens, revenue for the industry is likely to reflect the economic conditions.

Hachette to Increase e-Book Prices Three-Fold to Libraries

The American Library Association isn’t happy about Hachette’s move to increase prices on backlisted books (books published in 2010 or earlier) by 220 percent. Maureen Sullivan, the President of the ALA said that the group would pursue a more aggressive strategy to get e-books in the hands of patrons at a reasonable price. Publishers are trying to maximize revenue from libraries, arguing that e-books don’t wear out and require replacement the way physical books do. Earlier this year, Random House tripled the price on some e-books, while HarperCollins has placed a cap of 26 loans on each e-book it sells to libraries.

What this means to you: Bluntly, it means you are less likely to see a huge increase in e-book titles in libraries. As municipalities have been forced to cut costs, library budgets have been reduced. If the price of e-books goes up, there’ll be less purchasing by libraries and less lending.

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