The U.S. Justice Department Is Readying A Lawsuit Over eBook Pricing
In December we wrote about how the U.S. Justice Department was investigating the method under which eBooks are priced, believing the process to be anti-consumer and anti-competitive.
Today we have word from The Wall Street Journal that the Justice Department is now planning to sue Apple and five other publishers, and there's even talk of a settlement.
First, a recap:
When the iPad was released in 2010, Steve Jobs' biggest competitor was Amazon. The iPad would be less competitive if eBooks were less expensive in the Kindle store. So Jobs got five of the Big Six publishing houses--HarperCollins, Hachette, Macmillan, Penguin, and Simon & Schuster--to abandon the "wholesale model" of pricing in favor of the "agency model."
Under the wholesale model, the retailer determines the price of a product. Under the agency model, the publishing house determines the price. And the publishers were eager to jump on board, as they were all blinded by dollar signs. (Random House, the only major publishing house not named here, signed onto the agency model afterwards, which means they weren't party to the original agreement.)
And that's why most traditionally-published eBooks cost $9.99.
When I first wrote about this issue is December, I postulated three scenarios.
- Nothing will happen because big business nearly always wins
- There will be a settlement and staggered pricing will be introduced, similar to iTunes
- The agency model will be dropped all together
I still believe we're headed for the second scenario. The agreement to stagger pricing in the iTunes store sets a precedent, and it allows the book companies to maintain some degree of control, while giving the illusion that there's some more parity within the pricing system. It's not the best scenario (prices still aren't being set by the consumer), but at least we'll be moving away from the ridiculous "everything must cost exactly the same" model.
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