Jul 102013

So I’m still a little salty that the Department of Justice appears to have won round one of its predetermined case against Apple. I say “round 1” because, as stated by the company, Apple will appeal this until verdict until the end of time. Regardless of how long this witch hunt is allowed to continue, from the perspective of the consumer i.e. the people that are at the very heart of the government’s concern, the outcome shouldn’t matter. The 5 publishers named as defendants  already tucked their man-parts and settled with the DoJ long before the Apple trial commenced. HarperCollins, Simon & Schuster and Hachette settled in April 2012. Penguin, which at the time was angling to merge with Random House (the deal was recently approved, which I’m sure had nothing to do with a quiet government settlement) agreed to terms with the DoJ in December. Macmillan was the last of the publishers to settle, inking an agreement in February. A concise explanation of the settlement terms provided courtesy of the folks over at PaidContent in an article posted in December:

“According to the DOJ’s competitive impact statement (PDF), Penguin has agreed to “substantially the same terms” that the three other settling publishers — HarperCollins, Simon & Schuster and Hachette — agreed to in April: The publisher will terminate its existing agreements with ebook retailers and enter into new ones that, for two years, allow retailers to freely discount its ebooks (with a few limitations). Most-favored nation clauses (which state that no other retailer can charge a lower price) are prohibited for five years. If and when the settlement is approved by Judge Denise Cote of the New York federal court, Random House will be subject to the same terms and will also have to negotiate new retailer contracts.

Like the original settlement, the DOJ’s proposed settlement with Penguin (PDF) is subject to a 60-day public comment period. The DOJ received over 800 public comments on the original settlement, the vast majority of them opposing it. Judge Cote approved it anyway.

Since the original settlement went through, HarperCollins, Simon & Schuster and Hachette have entered new ebook contracts with Amazon and other ebook retailers. They are still setting the prices for their ebooks and paying retailers a commission, but retailers can discount the books as they wish and can sell them at a loss. The DOJ claims that “[the] settlement likely will lead to lower e-book prices for many Penguin titles; prices for titles offered by HarperCollins, Hachette, and Simon & Schuster fell soon after those publishers entered into new contracts as a result of the Original Judgment.” (Many of the settling publishers’ ebooks have only dropped in price slightly.)”

As a term of their settling, all publishers had to cancel their existing ebook contracts and new contracts would not permit the most-favored nation clauses so despised by the government for 5 years. The government’s contends that it was the agency model, which Apple “masterminded” – along with their diabolical MFNs –  that spiked the prices of ebooks in 2010-11. There’s about 20 versions of this argument peppered throughout the DoJ’s closing PowerPoint deck.

Screeny Shot Jul 10, 2013, 9.30.10 PMScreeny Shot Jul 10, 2013, 9.29.52 PM

Screeny Shot Jul 10, 2013, 9.31.17 PM

Apple made ebook prices go up – GET IT?

With the destruction of those contracts as well as the most favored nation clauses that infected them, my understanding is that prices would have returned to pre-Apple interference levels. Because I’m a man with a chip on his shoulder, I wasn’t immediately convinced that this was the case, so I decided to look up the ebook prices for The New York Times bestsellers in fiction and non-fiction categories for both Apple and Amazon.

Screeny Shot Jul 10, 2013, 10.16.29 PM

For fiction bestsellers, 2 of Amazon’s offerings are cheaper, one by 19 cents. The total difference in price across the top 10 fiction bestsellers is less than 2%. For non-fiction ebooks, the majority of the difference is again concentrated in one book, “The Guns at Last Light”, but even then the total difference is less than 5% Remember: MFNs are out, which is proven by the fact that some of Amazon’s offerings are cheaper. Hilarious side note: Apple’s ranking of nonfiction bestsellers is the same as it appears on the the NYT’s list. Amazon, under their “New York Times Bestsellers” section, ranks 6 of them out of order. Amazon, the company fucking founded on books, can’t mirror a list of 10 of them accurately. But why should you have to do things like that right when you have the government to protect your monopoly position?

Back on point: where are all those $9.99 books that roamed the prairies before Apple got uppity with their agency crazy talk shenanigans? Why hasn’t that 40.4% rocket up the asses of Amazon’s average bestseller price settled down now that things are back to the way they were? I’m sure the government has a perfectly reasonable explanation for why what they claimed would be the outcome of their meddling doesn’t bear even a passing resemblance to the ebook market today.

I’m all ears.

 Posted by at 10:36 pm

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