Rotten Apples

rottenapple On April 3, 2010 Apple launched the iPad. One other important thing happened that day. Apple’s late CEO Steve Jobs had numerous interviews with reporters, natural given that his company was launching a major product. What came as a surprise was that when asked why consumers would pay $14.99 to Apple to purchase an e-book that was selling at Amazon for $9.99, Jobs replied, “Well, that won’t be the case.” As a follow up to a question as to why that wouldn’t be the case Job’s responded, “The price will be the same.”

While Apple would have us believe that Mr. Jobs and the company as a whole did nothing illegal to ensure that the prices were equal, U.S. District Judge Denise Cote ruled differently. Apple has been found guilty of price-fixing and in the process violated antitrust laws. If you’re interested, you can find the decision here.

Here is how Judge Cote recapped what happened: “The plaintiffs have shown that the publisher (and) defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy. Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010.”

The ruling has been seen as a major victory for the Department of JUstice in spite of the fact that Apple has stated that it will appeal the decision. Apple, by the way, is the last man standing. The major publishers who had been part of the conspiracy have already settled.

According to Apple spokesperson Tom Neumayr, in a statement made to ABC News, Apple had sought only to give customers more choice. I find it interesting that Apples first thought in giving customers more choice meant forcing others to raise their prices in order to match that offered by Apple, not lowering theirs in order to compete. In fact, Apple showed exactly how they felt about customers in the following quote from Steve Jobs : “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, “ he told the publishers. That quote appears in Steve Jobs by Walter Isaacson.

The fact that both Apple and the publishers wished to squeeze extra dollars out of their customers is no surprise to me. Apple is not known for their reasonably priced products after all. They are innovative but they make you pay for that innovation. And as a longtime reader, the one thing I know about major publishers is that they seem to have little concern for anything other than getting money out of me. So no surprise that when they saw a chance to prevent prices dropping they grabbed it.

What does this actually mean for e-book consumers though? Given that Apple plans to appeal, I don’t think it means much in the immediate short term. If there is a final resolution coming, it may be some time down the road. I know that as disturbed as I am by what happened I am sure as heck not throwing my iPad out a window in disgust. I just read a book on it this morning. Various apps allow me to read on the device without purchasing directly from Apple. However upset I am by their businesses practices it doesn’t affect the quality of what they sell. Should I stop doing business with them just on principle? I’ll give it some thought but I can’t guarantee I’ll take the moral high ground. Competitors just don’t fill that void completely.

I also won’t stop doing business with the major publishers entirely. Many of my favorite authors still publish through them and as long as they have good books I will most likely continue to buy them. Will I drop them like hot potatoes when the chance presents itself? Yes. As I mentioned in a recent blog, I am fulfilling more and more of my reading desires via small press and independent publishing. But they aren’t meeting all my needs/wants and I will keep doing business with the biggies till they no longer have anything to offer me.

Still I feel the decision is important for readers and consumers. It shows companies that laws set out to protect the American people from corrupt business practices will be enforced even against big corporations. This is a lesson American businesses seem to need on a somewhat regular basis and I am grateful that the government is taking the issue seriously. Since the initial ruling brought some fairness back to e-book pricing, this ruling just solidifies the fact that the government intends to do what is necessary to assure that everyone understands the law regarding that area.

It also leaves Amazon in an even stronger position. This past Monday Barnes & Noble announced that chief executive officer William Lynch Jr. resigned over the Nook conundrum. The N.Y. Times had this to say about the change:

The decision(on Apple) came two days after Barnes & Noble lost its chief executive and said it would not appoint another, signaling that the biggest chain of physical bookstores could be immediately broken up.

I had known that B&N was struggling. I just hadn’t realized how much of a struggle it is.

In the same article the Times had this to say about Amazon:

Some in publishing suspected that Amazon had prompted the government to file its suit. The retailer has denied it, but it still emerged the big winner. While Apple will be punished — damages are yet to be decided — and the publishers were chastened, Amazon is left free to exert its dominance over e-books — even as it gains market share with physical books.

Since I already do a ton of business with Amazon, being forced to do more business with them won’t even appear on my radar. But it does make me a bit uneasy. I dislike the thought that at some point Amazon may destroy all of its competition, leaving them no motive to offer good prices on books. Perhaps in the future what price fixing will look like will simply be Amazon getting to decide all prices for e-books.

So what are your thoughts – much ado about nothing or an issue of great import? Does it affect how you will read in the future? Will it affect your purchases re the big publishers or Apple?

– Maggie Boyd

32 thoughts on “Rotten Apples

  1. I pretty much agree with what your opinions Maggie. Also, it so annoys me though when an ebook costs the same as a physical book.

  2. I think it’s interesting that now Barnes and Noble is being pushed by publishers and the press as “the little guy” that big bad Amazon is driving out of business. In my experience it was Barnes and Noble and the defunct Borders that drove every single independent and smaller chain bookstore out of business in my area before Amazon became a player. Bookstores that had existed, some for at least 40-50 years as independent and singly owned businesses, were driven out of business by these huge department store sized book store chains. Then it was “just business” and the way of the market. I think it’s ironic that Amazon infringing on their business is now the end of civilization as we know it. I also think they are failing to consider the impact of Costco. Sam’s Club. Walmart and Target as a huge amount of people buy a lot of their books from them.
    Amazon has gotten where it is with good business strategy and excellent customer service. As a consumer I have been nothing but pleased with my dealings with them. I also think it’s interesting that the only non- agency publisher is the one that saw sales rise, while the others saw sales fall.

    • Christina,

      I totally agree. While the though of Amazon turning into a monopoly gives me a twinge of fear, the fact is that I am a pleased customer. I have very few problems with what I purchase from them and they are always happy to help me resolve those issues.

      I don’t feel too sorry for B&N either. As you pointed out when they put smaller retailers out of business it was “just business” and what is happening now to them is essentially the same.

      • I also meant to say I really enjoyed your article. The whole price fixing thing even affected my reading-as I kept purchasing authors I had read for decades even when their quality declined (Jayne Ann Krentz) as I could get a new ebook release for $9.99 the same time it came out in hardcover. When agency pricing happened (along with the lagging economy) it caused me to reevaluate my often excessive purchasing. I not only stopped buying more of the very expensive books I was buying from habit, I actively sought out new authors and self published books I might not have tried who were offering attractive deals and more innovative work. Along with the expanding choice in ebooks available from the library, this re-shaped my book buying.

        • I think that is one reason I had trouble getting worked up about this ruling: My habits have already changed. Agency pricing caused me to drop several authors. Without the discounted ebook I determined that instant gratification from their stories wasn’t worth it. Those I still purchased I purchased in hardback so I could take the book to the UBS and get money back on it, which in itself is a sort of discount. I also began doing all my risk taking via small pub or independent press. The publishers, I think, will lose bigger from this than Apple. Ultimately, they kicked their own customers in the face and got caught doing it. Never a smart move.

    • While I agree with you that it’s highly ironic that B&N and Borders were directly responsible for the near-extinction of independent booksellers and now Amazon is responsible for the demise of both of these (I liken it to a big dinosaur gobbling up the little ones only to find itself facing a T-Rex!), I have to say that the idea of B&N disappearing makes me incredibly sad. However the process happened to put us in this position. B&N is the last place you can go to physically browse books and simply explore and find “hidden treasures”. I do use Amazon a lot, but the experience is purely a business transaction. The idea that there will no longer be bookstores is a travesty, IMO.

      And while I agree that the Costcos/Targets/Walmarts of the world will still offer books, there is no way they will ever be able to offer the breadth and depth of choices that you find at a big box bookseller. They will continue to carry only the best selling books and hottest authors, and they will all offer almost the exact same assortment. The days of perusing the shelves are coming to an end, and I think this is beyond sad.

  3. If publishers don’t want readers to be tied to Amazon, they can sell their books without DRM and without geoblocking, and then readers can buy books wherever they want and convert them to a Kindle-friendly format (if one is not already provided, as is the case with Smashwords). In fact, some already doing so, such as TOR, which is a MacMillan imprint. By treating potential buyers as potential crooks, they’re making it easier for Amazon to sell books in a proprietary format and harder for readers to shop around for e-readers and ebooks.

    I have little sympathy for the publishing houses and even less for Apple. There was more than one way to deal with Amazon, but they chose the one that was illegal, screwed consumers, and made it more difficult for smaller vendors to compete – Books on Board lost much of its stock for months as well the ability to do promotions, for instance; they never recovered and shut down a few months ago.

    I know not everyone on AAR is a fan of Dear Author, but they’ve been covering the lawsuit, agency pricing, and other related issues for a long time, and have a lot of good information on the subject.

  4. I’ve paid more money than I want to think about on iTunes and the App store… but I don’t think I ever truly bought an eBook from Apple. I’ve downloaded some free ones, but that’s about it. I’d rather read in the Kindle and Nook apps. Yes, even if I can’t buy books directly from those apps.

    Even before I had a Kindle, I bought two cheap Kindle books — because the price was low, and at least one was DRM-free (as it came from an author who was self-publishing his backlist). I knew I could read them on my PC if I had to, I was able to convert one to epub for my Nook, and of course, I realized I might eventually buy an eInk Kindle as the prices weren’t that high. Of course, I still have to get around to reading those two books. :)

  5. Judge Cote’s ruling is an island of grown-up wisdom in a sea of bottom-line sharks.

    My relationship with Apple is long: I’ve been using Apple products in my workplace since 1988 and own a Mac mini, iPhone, iPad and iPod nano. However, iBooks has NEVER appealed to me, and I’ve yet to purchase an ebook from Apple. I own an older Kindle and do my e-reading on it or my phone.

    Yulie nails it when she points out that publishers could sell DRM-free ebooks if they want, and that would completely open the market. Since B&N is wading through business mistakes on its way to becoming a toy & board games enterprise, I’m ready to convert the ebooks I’ve purchased from them via Calibre and try out the Marvin ereader app. If that works smoothly, I’ll probably do the same with the large number of Kindle ebooks I own (in my mind I own them, even if Amazon says I don’t).

    • I agree, I definitely feel I own all my ebooks no matter where I purchased them from and I feel free to fix them so I can read them anyhow I want on any reader.

  6. By the way, if you want a different perspective on the eBook pricing issues, check out the comments on Publishers Weekly articles. There are always some authors and other publishing professionals (often the same ones) commenting on the horrors of the discounts, the evils of Amazon, etc. (So the evils of Apple are OK? Whatever…) I don’t think they understand that when they complain about readers demanding lower prices, they are complaining about their customers. ;) Of course, many of them they also defend DRM, which makes me wonder how many of them have actually used eBooks for more than a few years.

    Once in a while, some lone voice will defend the poor purchasers, discuss why DRM can be a bad idea, explain why readers are upset about the prices. Of course, they are usually ignored. When my comments are ignored, I often commiserate by buying a discounted, DRM-free eBook. :D

    • I agree about the “evils of Apple” and their hypocrisy as well. I am on my second iPad and freely admit I love it and am addicted but often feel horrible about it when I think of how the Chinese workers who make the products or components are treated. Like others have said here, I read on all different apps on the iPad including Kindle, Nook, Overdrive etc. but never use or buy for iBooks.

  7. I got one of the first I-pads and it is now a white elephant. Apple is no longer supporting them and its only been 3 years. The new operating system does not work on the first I-pad and so all of the app upgrades will not work. Its just a matter of time before the apps I use will quit working (because they can’t be upgraded). I think the I-pad should have lasted longer than 3 years!

  8. What Apple and the publishers did was shameful, but it has to be said that a lot of the blame rests with the readers. If we had all refused to purchase ebooks at the agency price publishers would have lowered prices quickly, be darned to any agreement with Apple. As it is, I think most people are now used to exorbitant ebook prices and we’ll probably never see them change for the better, no matter what comes of Apple’s appeal.

    Someone with more time on their hands needs to lead a boycott movement!

    Great blog Maggie.

    • I agree to a point Wendy but the biggest problem was that when Amazon tried not to give in to Agency pricing they weren’t given the ebook files to put into the Kindle format.
      After about 5 months of getting no ebooks – Amazon surrendered

      • All this time and no one ever explained that to me. That makes the price-fixing even more egregious. I thought their action with Amazon was simply to disallow discount pricing. Still, I feel we should refuse to buy until prices come down- just for a week, or a day even.

        • What you say is more or less what I do. Never buy an e-book over 5 € -about 6.5 USD-. The problem is your auto-buys. Those three or four authors you love and you want to read their new books ASAP!

        • wendy: All this time and no one ever explained that to me. That makes the price-fixing even more egregious. I thought their action with Amazon was simply to disallow discount pricing. Still, I feel we should refuse to buy until prices come down- just for a week, or a day even.

          I’ve already done that for the most part. There are only 3 authors I currently buy in ebook format. Nalini Singh, Gena Showalter, and Kresley Cole. All my other favorites (Howard, Roberts, Krentz) are available via my local lilbrary, so that’ s where I get them from now.

  9. Okay…so I agree with everything that Maggie, Yulie and Christine said…but I want to take it a step further…when did it become the American public’s responsibility to keep any business in business? The idea that the consumer is obligated to keep any business profitable is laughable at best – the idea of a free market is to help the consumer..not the store owner..at best if the store’s owner makes good decisions they get rewarded by staying in business. I have little to no sympathy for Barnes and Noble….they have run a bad business model for years and it’s stores like them (stuck in the past) that have enabled publishers to use business models from the 1800s to drive their business. When B&N and Borders both had a chance to jump on ebooks…they said that they wouldn’t last…that people wouldn’t give up on print books..they should have seen the writing on the wall…they also should have realized that in a real economy (and not some executives daydream) that there is a limit for what people will pay for books. I have tossed certain authors whose product no longer has quality (I won’t name names but they are all “USA and NY Times authors who are publishing shoddy work) and they have the nerve to either take them to “hardcover” for their next book or raise the price past mass market…for authors who still put out a good product…well I find myself willing to wait on most of them because I don’t have time anyway so I’ll wait for the mass market on that too….I’m done being price gouged by publishers

    • Excellent points, Maria. Bookstores didn’t see ebooks coming even though they took a nice long time to get here. I am constantly amazed that people haven’t realized that the computer has completely changed the Western world. I was speaking to a UBS owner recently who was lamenting the economy. he seemed to think that if that would just bounce back his store would be booming with business. I talked to him a little about ebooks but I don’t really think he “got” that a lot of his customers are probably buying electronically and no longer have motive to buy paper.

      • These are great points too. It reminds me of the demise of the “Blockbuster” chain of video stores that put all the Mom and Pop stores out of business. It wasn’t the duty of everyone in the U.S. to help take down Netflix or cable TV etc. when Blockbuster began to decline, it was just the free market adapting to changes in technology and new business strategies.

  10. A very interesting article. We have talked about it during our family meal! –I’m writting around three o’clock in the afternoon-.
    My experience is slightly different. In Spain and France, books have a fixed price, in order to protect small bookshops. And it has worked for years. But now many of them are closing.
    In Europe you can hear that the enemy is Amazon. Recently, the minister of Culture of France has even declared ‘war’ against Amazon.
    But in my family, we buy in little bookshops and also in Amazon –and other retailers on line. We concluded that Amazon is not the problem. Paper books will end. As the LPs or the CDs. My children hardly buy them, they prefer everything digital. All the commerce about those products will come to an end, it doesn’t matter if your bookshop is big or little.
    What government and laws have to guarantee is competitivity, a free market with several companies giving you the opportunity to chose. Not just one provider.
    I’d like to add that although we all have at least one computer per person, we don’t have Apple. The majority thought it’s a brand not exactly expensive but overpriced. So in our group nobody read e-books in an Apple device.
    So thank you for an interesting topic for a hot summer meal.

    • I held on to buying in paper for a long time. I still do it. But at the end of the day I am slowly giving in to the inevitable and buying more and more ebooks. Price, convenience, speed, but most importantly access to independently published books at low prices. you are not just a puppet to the publishers prices but to what they determine people want to read. Someone made a recent ruling readers don’t like romantic suspense. Sorry but I still do. So I have to find the stuff through small press and independents most of them selling through ebook only.

  11. Years ago the Apple II and Macintosh were among the many computers we bought, but as soon as I heard about the Agency scheming, Jobs & Apple went on my permanent sh*t list. I have not bought an Apple product since.

  12. Did anyone read the article in the business section of today’s Washington Post. It said that actually the brick-and-mortar B&N are profitable; it’s only the Nook business that is losing money. So people do still want physical books, and I hope it stays that way. In my ideal world consumers have choices: they can download a just-released book they’ve been waiting for or go to a bookstore not knowing exactly what they want and browse until they find something that appeals.

    I agree with what others have said about the evils of agency pricing, but I’m far more worried than others appear to be about the evils of monopoly power, and Amazon is definitely heading in that direction.

  13. I’ll do a dance of joy if and when B&N goes under. They drove all the independent book stores in my area out of business and it would be poetic justice to me if they went out of business because of Amazon. My dealings with amazon have been mostly positive and their customer service and shipping speed is excellent.

    • I know a lot of people would do a dance of joy when a big chain they dislike goes under. But when the big chain goes under, that doesn’t mean the indie stores will come back. It means there will be fewer places where people can buy books. Grocery stores, drug stores, Costco, etc. don’t have a huge selection. Casual browsers will be screwed. Not everyone wants to shop on-line, at Amazon or at any other book seller. Many people want a place where they can browse books, be it a B&N or an indie store. I make discoveries in those places that I would never make on Amazon simply because of random physical browsing. On top of that, the last thing we need is even more people losing their jobs when yet another big chain closes because of mistakes the executives made. :\

      I’ve done most of my book buying in chains (both big ones and the little mall chains), and I’ve often found they served my needs as a customer better than most independent stores. Sure, there are indie stores I miss, but at the same time, many of the others didn’t stock a lot of genre fiction. Some don’t stock any at all. If a store wants to specialize, that’s fine. I don’t expect to find SF novels in a cookbook store. But if it’s not a specialty indie store, then my expectations are different.

      • Exactly. If B&N goes under, the entire culture of book buying will shift. No longer will people be able to discover great books and/or authors on their own. If a book is not in some way advertised – either formally via the publisher’s efforts all the way down to word-of-mouth from a friend or neighbor- no one will know of its existence in order to find it on Amazon or another e-book retailer. Gone will be the days of exploring thousands of titles all in one place. I foresee a scenario when only the biggest authors ever have any physical book presence because that is all that the Costcos/Targets/Walmarts et al will ever stock.

        And due to the insanely high capital cost and high risk of opening a bookstore, I find it doubtful that independent bookstores will rise up from the ashes of a B&N failure to fill the void.

        E-books are here to stay, and they are fantastic. But I truly hate the prospect of losing B&N. Regardless of how they may have mismanaged their business, I think society as a whole will be worse off if brick and mortar bookstores disappear.

  14. this seems to me a tempest in a teapot. i own ipads, an ipad mini, a MacBook, iPods, an iPhone. the products are all superb, long lasting and service is only a Genius Bar away in the rare event i need it.

    i read on my ipad constantly and here’s why I don’t think there is a problem. there are so many reading apps, most for free, that choice abounds. i can get incredible audio and ebooks from three public libraries on my overdrive app. i can get amazon books on my kindle app. i prefer non fiction books and graphic novels in PDF so use Good Reader. i get audible audio books on my audible app. i can download books in the public domain directly onto my ipad from Gutenberg and other resources, and on and on. or yes, I can use iBooks from apple. the only way this would get tight is if i insisted on reading or listening to books the moment they came out. i have so much choice that i rarely need to read a book at once. frankly, the resource that the libraries have become online is staggering.

    i also get the New York Times own my ipad plus several magazines.

    this is not to say apple does not do things which irritate me. i absolutely LOATHE when it messes around with its own software, like iTunes, and makes it virtually useless. iTunes is now working ok but for a number of months i just used Dropbox to get my selections onto my devices. this is when Apple gets into its rule the world mode and it annoys me hugely.

    but the other giants aren’t far behind. google is busy screwing up many of my favorite services because it has decided it needs to become Facebook!!
    amazon will willy nilly turn on a dime on say a reviewing policy and all of a sudden the numbers and stats make no sense. my husband tells me yahoo is staging a big comeback and i can scarcely remember using it, it was that long ago in tech time.

    actually, my real worry about apple is about its vision now that Jobs is gone. i am not really aware of one incredible idea to emerge from it since he died. everything i am enjoying now was developed under him.

  15. I am personally in favor of piracy, as it applies to written materials. Especially when the material has already sold a certain number of copies, I don’t think it’s morally wrong for one to provide others free copies of same via the Internet. If piracy is so morally wrong in cases of so-called “intellectual properties”, then some nations should rightfully be sued by China for publishing the “I Ching” without proper royalties given to the nation that produced it.

  16. @AnneAAR. “I don’t think they understand that when they complain about readers demanding lower prices, they are complaining about their customers. ” We customers deserve to get what we pay for. The question is, who sets the value for something? The producer or the consumer?

    @Wendy. “What Apple and the publishers did was shameful, but it has to be said that a lot of the blame rests with the readers. If we had all refused to purchase ebooks at the agency price publishers would have lowered prices quickly, be darned to any agreement with Apple.” Yup, Law of Supply & Demand. Good old Adam Smith has always been a favorite writer :)

    @MariaD. “I agree to a point Wendy but the biggest problem was that when Amazon tried not to give in to Agency pricing they weren’t given the ebook files to put into the Kindle format. After about 5 months of getting no ebooks – Amazon surrendered.” OMG really? So Amazon was in a bind! And I agree with you on this too: “when did it become the American public’s responsibility to keep any business in business? The idea that the consumer is obligated to keep any business profitable is laughable at best – the idea of a free market is to help the consumer” .
    I also concur with all the rest of what you said after that. Well said, MariaD!

    @ Joan. “In Spain and France, books have a fixed price, in order to protect small bookshops.” Viva Espana, vive le france!” (my exuberance overpowers my vocabulary)

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