Apple has been found guilty of conspiring with book publishers to fix ebook prices in an effort to challenge Amazon’s dominance.
Claiming that the decision will have a “chilling effect” on how companies make deals for digital media including music and movies as well as books, Apple insists that it has done nothing wrong.
The decision is not likely to translate into any concrete changes for consumers, at least in the immediate future.
If anything, the lawsuit has rather laid bare the greed of the publishers and the extent to which their “paranoia about ebook piracy has given vast power to the online sellers,” as Dan Gillmor writes in the Guardian.
Both Amazon and Apple have instituted “draconian DRM (digital rights management)” that can restrict what devices an ebook can be displayed on; such rules can make one feel something like nostalgia for books that can pass through many pairs of hands until their pages fall out.
The central issue in the Department of Justice’s antitrust suit was how the prices of ebooks are set.
Before Apple decided to enter the market, publishers followed the wholesale model for selling paper books. Under this, retailers (i.e., Amazon) pay a set wholesale price and then sell the ebooks at whatever price they choose. A mega-retailer (i.e., Amazon) has accordingly been able to offer bestsellers at very low prices ($9.99).
Publishers have been none too happy about Amazon offering such low prices and being able to, in effect, monopolize the online book market. Small wonder (from a business, and a profit, perspective), that publishers wanted to sell books via another model, one that Apple then introduced.
Under Apple’s “agency” model, publishers were to be able to decide on the retail price of an ebook and collect a percentage of the sales. They would therefore retain more control over prices.
As emails of meetings with publishers reveal, Apple not only colluded with them to set prices. It also had publishers agree that they would not sell ebooks to retailers who would price them lower than the publishers wanted to. Such an arrangement could effectively shut out Amazon from offering hundreds of titles unless it too raised its prices.
A glance at Manhattan Judge Denise Cote’s ruling(.pdf), which quotes extensively from testimony and from Apple executives’ emails (especially that of Steve Jobs), paints a not very pretty picture about the extent to which Apple and the publishers banded together to eliminate any retail competition for ebooks.
Jobs knew very well that Apple’s entering the ebook market at the time the iPad was introduced would push prices up; he was equally aware of publishers being displeased at Amazon’s low prices. Judge Cote noted how Apple “convinced” one publisher, Random House, to acquiesce to its pricing preferences:
In an email to Jobs, [Apple executive Eddy] Cue attributed Random House’s capitulation in part to “the fact that I prevented an app from Random House from going live in the app store this week.
The antitrust suit, one of the biggest that U.S. federal authorities has ever brought, reveals Apple to be more of a bully (and a greedy one at that) than its image as that friendly company offering smart solutions for our every activities, the New York Times observes.
Judge Cote has ordered another hearing to determine damages. Five of the publishers who had been named as defendants in the original antitrust suit have already settled with the DOJ; Apple remains defiant and is planning to appeal.
But a consumer may well be left wondering what all the fuss has really amounted to. Prices on ebooks on Amazon have for the most part continued to rise and consumers have no choice but to abide by the limitations on what sort of device an ebook can be read that are laid down by Apple and Amazon.
The disputes about ebooks and the selling of digital media are not at all over, either.
All the more reason that readers may find cause to refresh their acquaintance with not only books but with libraries whose content can be borrowed by many, for an umpteen amount of times. After all, do we really need need to get ecopies of every single book as soon as they are published?
Photo via JoeInQueens/Flickr