Thursday, July 11, 2013

What the DOJ e-Book Lawsuit Is All About

Apple and several traditional publishers just lost a lawsuit in which allegations of price fixing were made.  The article at the link is a lot more sympathetic than I am to the plight of the traditional publisher.

Basically, Apple and five of the six major traditional publishers were trying to force people to buy their e-books for more than $9.99.  If this had been a case of a company - say, Simon & Schuster - deciding that it would only offer its products for a certain price, there'd have been no problem.  Individual companies are supposed to decide their own prices, for that's one of the foundations of a free market economy.  The problem comes when separate individual firms get together and collude to set prices artificially high.  That's what happened in this case, and it's illegal.

What these companies are upset about is the market share that Amazon has acquired.  Amazon sets its prices lower in order to spur sales of its Kindle.  In other words, Amazon is willing to take a small loss on selling e-books so that it can make a larger profit on its electronic platforms.  Again, that's part of what business is all about.

The traditional publishers are freaked out because this means they can't sell their products for as much money.  You know the solution to that?  Make a product that increases consumer demand to the point at which you can justify the higher price.

People are willing to pay for traditionally published books.  They get that it takes printing presses, ink, paper, etc., in order to bring a product to market.  However, they aren't willing to pay as much for something that is just an electronic file and costs next to nothing in terms of production.  Unfortunately, traditional publishing is such a bloated structure, that a lot of their costs don't change - they still have editors, marketing managers, secretaries, and a host of other fixed expenses.  Common sense would say that maybe a restructuring of the business would be in order, but these companies, terrified of where the market is headed, simply refuse to budge.  And since they couldn't pull the market with what they wanted, they decided it'd be easier to break the law.

Consumers should be thrilled with this verdict.  We get lower priced books that are price-rational.  I know that some of the traditional publishing defenders will claim that this limit choices when these firms can't or won't bring as many books to market, but that ignores the sea change that has occurred in the last two or so years.  It is no longer necessary to go through a traditional publisher to find good work, just as it is no longer necessary to buy lots of CDs to find a good song.  The market has changed, and traditional publishers refuse to acknowledge this world any more than is absolutely necessary.

To be sure, this also helps a big company, Amazon.  However, despite what you might think of Amazon's business practices, the fact remains that they've been an industry leader in this area for a long time now.  Their model has not just made things easier for consumers to get, but it has also pushed the boom in indie publishing and opened up things for previously unconsidered writers to get their shot - and that's all they wanted, a shot.  Let's let the market decide what's good work and bad work, what's a fair price and an unfair price.  That's something this lawsuit proves that Apple and traditional publishers have forgotten.

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