Of Apple, E-books, and Game-changers

The Apple e-book price-fixing trial finally got underway in U.S. federal court in Manhattan last week. Five of the six original defendants – the Big Five publishers – agreed to settle with the government, leaving Apple as the sole defendant at trial.

I’m tempted to insert a pun here about the U.S. Justice Department making like William Tell and aiming the arrow of the law straight at Apple. But I’m restraining myself because this is serious business.

Briefly, the government’s position is this: In early 2010, Apple colluded with the publishers to set prices for all e-books sold through iTunes for the iPad, which was still in development. The strategy is known as “agency pricing.” That made the publishers happy; they had been watching Amazon price their wares at a flat $9.99 in order to entice customers to buy a Kindle. The publishers wanted to charge more because, they said, they couldn’t make a profit at that price. But when businesses that dominate production of a particular item (which pretty much defines the Big Six publishers prior to the Kindle rollout) agree behind the scenes to charge a particular price for that item, instead of competing against one another and letting the market set the price, they run the risk of violating U.S. antitrust law. That’s why the government got involved.

The publishers say they were only fighting back against Amazon, which, they contend, runs the real monopoly here. Amazon had pretty much cornered the e-book market by using either the Kindle, or the content, or both (depending on who you talk to) as a loss leader. The publishers say Amazon’s business plan is the same one WalMart used to drive America’s small, local stores out of business: price low to entice buyers in, and make it up in sales volume.

Apple, for its part, claims it didn’t know the publishers were talking to one another. And an Apple exec who has been described as Steve Jobs’ right-hand man testified that the publishers came to Apple, not the other way around.

The trial is likely to last for several weeks. The question before us today is this: What does it all mean for indie authors? David Biddle and Martha Nichols made the point at Talking Writing this week that what KDP offers us is, in essence, agency pricing. As long as we’re willing to set prices for our work between $2.99 and $9.99, Amazon will pay us 70% of the cover price.

So why is this not price-fixing? Because while Amazon is the biggest dog in the fight, it’s not the only dog. And we indies can walk any time. Kobo is looking more and more like a viable alternative to Amazon, particularly if they put in place some of the author perks Mark LeFebvre told Laurie Boris about at BEA. And Apple is an enticing market, although only to indies with Macs and/or those who are willing to subject their work to the Smashwords Meatgrinder so far.

KDP, of course, is part of Amazon’s strategy to corner the market on books. I’m only speculating here, but it seems very possible to me that the Select sales bounce is gone because it has served Amazon’s purpose: Kindle is king, so Amazon doesn’t need to give away as much content anymore. By the same token, I suspect Amazon has not changed the algorithm in its non-U.S. stores because it’s still building out those e-book markets, and free content reels in customers.

As indies, we should be aware of the nature of our bedfellows. All of these sales venues are giant corporations that are out to make a profit for themselves and their stockholders. That doesn’t mean we shouldn’t take advantage of the perks they offer us while they last. It simply means we should keep our eyes open, in case the game changes again.

Author: Lynne Cantwell

Lynne Cantwell grew up on the shores of Lake Michigan. She worked as a broadcast journalist for many years; she has written for CNN, the late lamented Mutual/NBC Radio News, and a bunch of radio and TV news outlets you have probably never heard of, including a defunct wire service called Zapnews. But she began as a fantasy writer (in the second grade), and is back at it today. She currently lives near Washington, DC. Learn more about Lynne at her blog and at her Amazon author page.

9 thoughts on “Of Apple, E-books, and Game-changers”

  1. Great post, Lynne. Writer beware and all that. I’ve always understood Amazon, Apple, et al to be in it for profit. As long as indies make them money (free content) they’ll remain relatively indie friendly. (although one should probably remember ebooks are a drop in the bucket of the ‘zon’s as well as Apple’s earnings)

    Thanks for using your crack investigative talents on the story 🙂

  2. Thank you so much, Lynne, for this interesting and informative article. And you’re right, as indies, we need to keep abreast of the market and its diversifying trends.

  3. Thanks for that update Lynne. I guess the truth is that none of those big players have any vested interest in indies per se, but we are far more useful to Amazon than any of the others, so for now Amazon is still the best game in town.

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