Amazon and the Price Fixing Wars

Last week, the Department of Justice brought a civil suit against Apple and the Big Six publishing houses,[1] charging them with price fixing. This has a lot of people in the publishing industry intrigued, to say the least, and even those not in the publishing industry are keeping an eye on the story. The complexities of the matter are pretty, well complex, but Charlie Stross does his usual bang up job of explaining it, and I highly recommend you read his analysis and the ensuing discussion.

(A few hours later…)

Alright, now that you’ve read all that, we can discuss the unremarked upon gorilla in the room, which is: why is everyone blaming Amazon for this?

After all, the DoJ is suing Apple and the Big Six publishing houses. Amazon isn’t even mentioned.

Amazon is regarded in this case as the proverbial slut with the short skirt who was asking for It. It being the collusion to fix prices on eBooks. So the analogy isn’t great. But everyone agrees, it is Amazon’s eBook pricing model and Kindle distribution platform that made them do It. Which is BS.

Amazon may have some shoddy business practices (they are a corporation after all) but their Kindle/eBook market isn’t one of them. It’s textbook capitalism straight out of Adam Smith: they saw a potential profit in a market that was being under-served, came up with a way to serve that market what it wanted, all while turning a profit.[2] And best of all, there was no radioactive sludge hidden in playgrounds, no gigatons of carbon flushed into the atmosphere, no slave labor. For once, a corporation turned a profit and no one got hurt.

Except, the publishing houses are claiming that Amazon has hurt their business. That by undercutting them in eBook pricing and locking the eBook format down to the Kindle, they are creating an unfair advantage. This is a sketchy claim, though it does have some merit, though more of the coulda, woulda, shulda variety.

Amazon didn’t hide their intentions. They announced back in 2007 that they were going to make an eReader platform and offer eBooks on the cheap, and that they would use their Kindle platform also to publish new content as well.

The publishing houses could have taken this as a challenge (which it was) and developed their own alternative. And sure, we would have probably ended up in a format war like we did with VHS/Beta and HD/Blu-Ray but eventually we’re going to have to do that for eBooks anyway. Had the publishers even attempted to compete five years ago, they could have undercut Amazon, defanging the kindle right out of the gate. They could have innovated and carved out for themselves and their clients (authors) a tidy little niche in a n emerging market.

Instead they clung to their old ways, did nothing, and let Amazon colonize the ebook biome. Now they have to fight an invasive predator (the kindle model) and figure out how to stay alive (solvent) during a global economic crisis, all while shrugging off the public perception that they’ve already formed a price fixing cartel. And seeing as how it took a multimillion dollar lawsuit brought by the DoJ to get the publishing houses to even consider competition with Amazon (albeit of the back room cigar smoke and dirty handshake variety) this does not bode well.

The format war for eBooks isn’t over and this lawsuit will probably only be the first of many that will, over the next decade, lead to a transformation of the publishing industry. If we’re lucky, it will be into a modern, streamlined and open access publishing world, where established and independent authors can take advantage of the same services and distribution network to create a thriving, robust literary world that allows all involved to make a comfortable living committing art for the betterment of humanity.

Or we may get an interminable corporate war where a coalition of aging print behemoths try and maintain the status quo and the eBook market is locked into a single proprietary format, with stagnant creation and rent seeking being the norm,unto the end of a new Dark Age.

There are of course other options, all along the spectrum between these extremes. I’d like to get as cose to the first option as possible, but it’s going to take a lot more to get there than just hopes and dreams. And lawsuits. It’s going to take innovation, creativity and good business sense, all of which is in short supply.

This is far from over. Stay tuned…

(And for those looking for more on the story.)

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1. Random House, Hatchette, MacMillan, Harper, Penguin and Simon & Schuster. Random House, while not part of the DOJ suit, is still an interested party in the proceedings.

2. Full disclosure: Amazon is technically the publisher/distributor of my first novel and forthcoming novella. More on that later.