On Thursday it was reported that the U.S. Justice Department was preparing to sue five of the largest publishers, and Apple, for (allegedly) colluding to fix e-book prices. Despite the shock expressed in some quarters, this is hardly a bolt from the blue.
It’s almost a year since the European Union raided the offices of several publishers in France, Italy, and Germany, kicking off their own Europe-wide anti-trust investigation – later folding into that probe a similar move by the Competition Authority in the UK to examine the Agency Agreement.
It was also widely reported late last year that a U.S. Justice Department investigation, along similar lines, had commenced.
On top of that, it’s over six months since the law firm of Hagens Berman announced a class action suit against the same five publishers, and Apple, for the (alleged) price-fixing of e-books. (Interestingly, the same firm which launched a similar action against several publishers for the (alleged) chronic under-reporting of e-book royalties to their authors.)
Thursday’s news upped the ante somewhat, with the Wall Street Journal reporting that the Justice Department were preparing to sue (link may expire in a few days).
This latter news prompted Scott Turow, President of the Authors Guild, to publish a letter to the Guild’s members. You can read that letter here in full, but any regular reader of the Authors Guild’s blog or Mr. Turow’s public comments on Amazon, e-books, or self-publishing won’t be surprised at its contents.
It’s simply the latest in a series of disingenuous, inaccurate, misguided pronouncements aimed at maintaining the status quo – at any cost.
Scott Turow seems to be desperate to carve out a niche for himself and the Authors Guild on the wrong side of history. Here’s the letter:
Yesterday’s report that the Justice Department may be near filing an antitrust lawsuit against five large trade book publishers and Apple is grim news for everyone who cherishes a rich literary culture.
Except perhaps readers, who have been forced to pay higher e-book prices for the last two years because of this (alleged) price-fixing. I’m also not sure how the Justice Department doing its job by investigating (alleged) criminality threatens our literary culture, but we’ll get to that.
The Justice Department has been investigating whether those publishers colluded in adopting a new model, pioneered by Apple for its sale of iTunes and apps, for selling e-books. Under that model, Apple simply acts as the publisher’s sales agent, with no authority to discount prices.
Here is the relevant quote from Steve Jobs’ authorized biography. “We told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway […] They went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books.'”
We have no way of knowing whether publishers colluded in adopting the agency model for e-book pricing.
Actually, we do have a way of knowing, and as a lawyer, Mr. Turow should really be aware of the process. We can investigate, collect evidence, and, if necessary, file suit, and thrash the whole thing out in a court of law. Which, by the way, is precisely what is happening, and what Mr. Turow is campaigning to prevent. If that sentence was more honest, it would have said “I don’t want to know if publishers colluded to fix prices,” or, “I don’t want to know if publishers broke the law.”
We do know that collusion wasn’t necessary: given the chance, any rational publisher would have leapt at Apple’s offer and clung to it like a life raft. Amazon was using e-book discounting to destroy bookselling, making it uneconomic for physical bookstores to keep their doors open.
Let me get this straight. Amazon’s policy of discounting one product (e-books) was making it uneconomic for physical bookstores, who sell a completely different product (print books), to keep their doors open? Let’s just pause for a moment and ponder the ridiculousness of that statement.
The Agency Agreement is roughly two years old. Two years ago, e-books made up roughly 4% of the market. 96% of the market was print books. And yet somehow Mr. Turow is convinced that Amazon’s policy of discounting e-books is responsible for the trading difficulties of physical bookstores (which, by the way, predate the introduction of the first Kindle).
Just before Amazon introduced the Kindle, it convinced major publishers to break old practices and release books in digital form at the same time they released them as hardcovers.
The key word here is “convinced.” Nobody forced publishers to sell their e-books through Amazon, or to release the e-book at the same time as the hardcover. There was nothing preventing them from doing the exact opposite, if they chose.
Then Amazon dropped its bombshell: as it announced the launch of the Kindle, publishers learned that Amazon would be selling countless frontlist e-books at a loss.
I’m not sure how much of a “bombshell” this really could have been. This practice has been common in print bookselling for a long time (by Amazon, and several other retailers).
This was a game-changer, and not in a good way. Amazon’s predatory pricing would shield it from e-book competitors that lacked Amazon’s deep pockets.
Competitors like the most valuable company in the world, Apple? Or the internet search giant, Google? (Both of whom have far deeper pockets than Amazon.)
Amazon quickly captured the e-book market as well, bringing customers into its proprietary device-and-format walled garden (Sony, the prior e-book device leader, uses the open ePub format).
Amazon were able to “quickly capture the e-book market” because no such market really existed in 2007, when they introduced the first Kindle (according to the American Association of Publishers, e-books captured 0.6% of the market in 2007).
I remember the launch of the first Kindle. The device was widely mocked. Personally, I couldn’t see the point of it. However, everyone underestimated the demand – even Amazon. That first device sold out in five-and-a-half hours, and it was another five months before Amazon had the Kindle back in stock.
E-books had been around (in one form or another) since the 1970s. E-readers had been around since the 1990s. But the market didn’t really take off until Amazon entered the game.
I don’t know if it was timing (widespread availability of the Internet), luck, or just a reasonable device allied to a great store which was marketed well, but Amazon pretty much created this market. The other big players didn’t see value in it for quite some time.
And, by the way, the publishers’ wrongheaded insistence on DRM did far more to create that walled garden than any format choice by Amazon.
Two years after it introduced the Kindle, Amazon continued to take losses on a deep list of e-book titles, undercutting hardcover sales of the most popular frontlist titles at its brick and mortar competitors. Those losses paid huge dividends. By the end of 2009, Amazon held an estimated 90% of the rapidly growing e-book market.
This is quite disingenuous. Amazon were the only serious player in the market. Sony was there, true, but weren’t doing much; it was hardly a focus for the company. Amazon was pouring everything into the Kindle. They saw it as the future of reading when virtually no-one else did. They bet the farm on it.
Traditional bookstores were shutting down or scaling back. Borders was on its knees. Barnes & Noble had gamely just begun selling its Nook, but it lacked the capital to absorb e-book losses for long.
And now this is completely disingenuous. The launch of the Kindle, and Amazon’s successful foray into the e-book marketplace had nothing to do with the troubles that bookstores were experiencing. Again, according to the American Association of Publishers, e-books captured 3.2% of the market in 2009. Quite frankly, to imply that “Borders was on its knees” because of Amazon’s policy of discounting e-books is intellectual dishonesty of the highest order.
Our concern about bookstores isn’t rooted in sentiment: bookstores are critical to modern bookselling. Marketing studies consistently show that readers are far more adventurous in their choice of books when in a bookstore than when shopping online.
This is a laughable claim. Physical bookstores are, obviously, limited by their physical space, and, by necessity, must restrict the amount of titles they can sell. An online bookseller can have a far greater selection. I’m not sure what studies Mr. Turow is referring to (as he doesn’t link to them), but they bear no relation to reality.
Compare the New York Times bestseller list (or any of your choice) to the Kindle Bestseller list. Honestly, Mr. Turow, which is more adventurous? Which has the same names from the same large publishers reappearing week after week, and which contains books from small publisher and self-publishers who can’t get access to those physical bookstores which you are lionizing (by authors who can’t gain membership to your organization, by the way)?
In bookstores, readers are open to trying new genres and new authors: it’s by far the best way for new works to be discovered.
No it’s not. There are plenty of “new genres” for which publishers have decided there is no commercial appeal, and plenty of old genres that publishers pronounced dead. Authors working in these genres, if they wanted to be read at all, had to pursue deals with smaller, progressive publishers, or self-publish. These authors face an uphill struggle to get into bookstores. I’m not complaining about that, bookstores are entitled to stock what they choose, I’m merely stating how it is. But the fact is, these titles are available in online bookstores, not in physical bookstores. Ergo, the selection of authors and genres and books is far, far greater online.
For those of us who have been fortunate enough to become familiar to large numbers of readers, the disappearance of bookstores is deeply troubling, but it will have little effect on our sales or incomes.
Then why is it troubling? I would suggest that bestsellers like Mr. Turow have a lot to fear from the digital revolution. The path to the bestseller list is a little trickier when you aren’t piled high on the front table, and you have to compete with many, many more titles online.
Like rock bands from the pre-Napster era, established authors can still draw a crowd, if not to a stadium, at least to a virtual shopping cart. For new authors, however, a difficult profession is poised to become much more difficult. The high royalties of direct publishing, for most, are more than offset by drastically smaller markets.
Unlike you, Mr. Turow, I actually am a new author and I can tell you that things got a hell of a lot easier over the last couple of years. Instead of wasting my time sending queries to agents who never read them and don’t bother responding, I’m publishing my own work, reaching readers, and making money. No company has done more to make the self-publishing path viable than Amazon.
The increased viability of this path is the most positive development for authors in recent memory. Even those not keen on the self-publishing path are able to use it as leverage to seek better deals.
Two years after the agency model came to bookselling, Amazon is losing its chokehold on the e-book market: its share has fallen from about 90% to roughly 60%.
Sigh. At this stage, I don’t know if Mr. Turow is being deliberately disingenuous, willfully ignorant, or just letting his inner Sophist run wild. The claim that the Agency Agreement is responsible for Amazon’s share of the e-book market falling from “about 90% to roughly 60%” is ridiculous.
Here are some other things that happened in the two years since the Agency Agreement came into effect that might have been more responsible for Amazon’s falling market share (I presume Mr. Turow simply forgot about these major developments):
- America’s largest bookstore chain entered the e-reader and the e-book market, pushing the e-store and the device across their extensive, nationwide store network to their loyal customer base (Barnes & Noble).
- The most valuable corporation in the world, a company six times the worth of Amazon, entered the e-book market (Apple).
- A whole plethora of competing devices – e-readers and tablets – were released, including one you might have heard of: the iPad.
- A whole range of other e-bookstores sprang up to compete with Amazon (because, you know, Amazon really isn’t a monopoly).
It should also be noted that the e-book market is roughly seven times larger today. When you have serious players entering the market, and that market growing so rapidly, it’s natural that the market leader’s share would slip.
Let’s hope the reports are wrong, or that the Justice Department reconsiders. The irony bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition.
The irony indeed “bites hard.” Here we have the spectacle of the head of an organization which is supposed to advocate for authors’ interests, and who is also a lawyer, who is instead advocating that the Justice Department drop its investigation into (alleged) criminality, the result of which has been to increase prices for readers, and harm the sales of those writers of over-priced e-books.
This would be tragic for all of us who value books, and the culture they support.
What’s truly tragic is that Mr. Turow is using his considerable bully pulpit to repeatedly defend the status quo and bash the one company who has done more to allow an increased amount of writers to earn a living than any other – Amazon – a company, it should be noted, that is not implicated in this (alleged) price-fixing ring.
Perhaps Mr. Turow has writers’ block. If so, here are some suggested topics for future blog posts:
- The (alleged) under-reporting of authors’ e-book royalties by some of the largest publishers (you know, some of the same ones you vociferously defend here).
- The increasingly egregious rights grabs in publishing contracts by large publishers (again, some of the same publishers you are defending here).
- The increasingly restrictive and harmful non-compete clauses in publishing contracts (I think you know what I’m going to say here).
If Mr. Turow keeps blindly defending the status quo, I fear his tenure as President of the Authors Guild will have but one epitaph:
Scott Turow: Wrong About Everything.