Earlier today Sharis Pozen, the Justice Department's acting antitrust chief, confirmed in front on a Congressional panel that they had been conducting an investigation since last year. "We are also investigating the electronic book industry, along with the European Commission and the states attorneys general." And it looks like the Justice Department is investigating the same 5 publishers as everyone else: Macmillan, Simon & Schuster, Penguin, Hachette , and HarperCollins. Once again Random House ducked the noose.
At this point I'm sure my readers all know about Agency pricing, but I feel the need to be redundant today. The Agency Model is a system where publishers set a fixed retail price and collect a 70% cut of that price. Ebookstores are considered to be agents of the publishers and cannot lower the price.
Now, it's widely accepted that publishers went with Apple's plan because they feared the growing dominance of Amazon and the Kindle Store. But what the publishers failed to realize at the time was the weapon that they were handing Apple.
It was the shift to agency pricing that gave Apple a chance to drive their competitors' ebookstores off of the iPad and iPhone. With over a hundred million eGadgets in use, Apple had a platform that they were able to control ruthlessly (and they did).
Between one day and the next in early January 2011 Apple decided that the ebookstores needed to move all ebook sales inside their apps and pay Apple a 30% fee. Naturally no one could afford this, given that they were only earning that 30%. It would have left them nothing.
One of the indies went under as a result, and a number of iOS developer came close to closing doors. Eventually Apple backed down a degree and settled for making life difficult for their competitors. Amazon, B&N, Kobo, and the other apps could stay, but you couldn't even tell people that the app was connected to an ebookstore. Apple won't even let the apps link to online help pages.
And that's where we re today. To be honest, I don't understand why the earlier collusion is being investigated but not the later blackmail. I'd have thought that was the greater offense.
image by barockschloss