Cheaper ebooks on the horizon?
Sometimes the best intrigue happens not in books, but because of books. For over nine months, the European Commission has been investigating Apple and five well-known book publishers, Macmillan (run by Holtzbrink), Penguin, Harper-Collins, Simon & Schuster, and Hachette Livre, over allegations of price fixing and forming a cartel. They have been charged with banding together and forcing Apple's e-book competitor, Amazon, to adopt a similar payment model and pricing. To avoid dragging out the litigation, Apple has proposed to allow Amazon to sell books at lower prices for the next two years. All of the publishers have come on board, except for Penguin Books. The proposal hasn't gone through yet, since the Commission is testing to see how this solution might play out in the market.
Even though the case officially opened in December 2011, earlier that year the European Commission raided the offices of a few publishing houses to look for evidence of a conspiracy. Later, they teamed up with the US Department of Justice, who, starting April, began prosecuting the same companies through an antitrust lawsuit filed by Amazon in the US. Last month, the trial made a breakthrough when three out of the five publishers, Hachette, Harper Collins, and Simon and Schuster, came to a settlement where they will distribute $69 million (53 million euro) to customers who bought e-books from Amazon at the higher prices between 1st April 2010 and 21st May 2012.
Apple, Macmillan, and Penguin, on the other hand, are still fighting the US litigation. They claim that it was 'innovation' that broke the Amazon monopoly, not conspiracy. Yet, since the case has not been going so well for both sides, Apple and the publisher's move to placate one of the frontiers is understandable.
The beginnings of the e-book controversy started with Amazon's rise to the top. When the first e-book reader, Kindle, appeared in 2007, Amazon has been selling e-books at $9.99 or lower, even though they were buying them for much more. The company was willing to lose money in order to beat out any competition. Publishing houses were afraid that this tactic would ruin their business in the long run and frantically tried to find an answer. When the iPad came out, the publishers had a chance to change the tide. They each set up a deal with Apple called the 'agency model,' where the publishing house would determine the price of the book, and the online distributor would get a 30% cut of the price. They also signed contracts with specific clauses in them, not allowing that the books the publisher sells to Apple be sold at a lower price somewhere else. They then pressured Amazon to switch to the agency model and hike their prices at least $2 or $3. To even further connect Apple's collaboration with the publishers, at the unveiling of the iPad, Steve Jobs said to a journalist "The price [of the e-book] will be the same. Publishers may withhold their books from Amazon. They're unhappy."
Amazon wants to return to selling books under $10, and with governments on their side, they can resume doing so. Fortunately for consumers, cheaper e-books are now back on the market.