Apple and e-book lawsuit: If DOJ prevails, will readers find happy ending?

In the U.S. antitrust lawsuit against Apple and five of the nation’s largest book publishers that accuses them of illegally conspiring to fix e-book prices, the words of the late Steve Jobs may prove to be key. The Department of Justice lawsuit filed Wednesday reportedly refers to Jobs recounting, in his authorized biography, how he got book publishers to agree to an agency pricing model.

“Given the situation that existed, what was best for us was to this aikido move and end up with the agency model. And we pulled it off,” Jobs told biographer Walter Isaacson. Under agency pricing, publishers set book prices and Apple gets a 30 percent cut, upending a model in which, an e-reading pioneer with its Kindle e-reader, had previously set e-book prices mostly lower. Once Apple struck the deal with the publishers, Amazon adopted the same model — after initially putting up a fight. (See Amazon, Apple and the book publishers: When elephants fight.) E-book prices rose.

Some say agency pricing has done some good by allowing others — the once-mighty but now-struggling Barnes & Noble,  for example — to compete in a market Amazon had come to dominate.

Mark Coker, founder of Smashwords, a distributor of independent e-books, blogged last month that he has talked with the DOJ and voiced his support for agency pricing, offering his own data: “We’ve seen the average price of books in our catalog drop from $4.16 in October 2010 to $2.97 today.”

But Mathew Ingram at GigaOm points out that “the story might be quite different for the major publishers than it is for an independent distributor or self-publishing platform.” Indeed. Somebody show us the proof that prices for books by major publishers didn’t rise, because early adopters who got used to paying $9.99 a title now find themselves paying more. Why else would the publishers have agreed to agency pricing? (Three of the five publishers, Simon & Schuster, HarperCollins and Hachette Book Group, have reportedly agreed to a settlement with the DOJ, which is scheduled to hold a news conference today. The reported holdouts, along with Apple, are Pearson’s Penguin Group and Macmillan.)

Coker writes, “in the end, I think authors and publishers should have the freedom to decide their pricing.” There’s the catch-22. Give independent authors and publishers a fighting chance, or let e-book retailers duke it out and risk the Walmartization of e-reading. It seems like any way the story ends, readers lose.

The DOJ suit follows an investigation by the European Commission that was announced last year. (See Probing Apple and the e-book ‘cartel’…) That investigation targets Apple and the same five publishers mentioned above.


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