Author's Guild Boss On E-Book Price Fixing Allegations: But... But... Brick-And-Mortar!

from the you-rarely-find-so-much-'wrong'-all-in-one-place dept

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.

We have no way of knowing whether publishers colluded in adopting the agency model for e-book pricing. 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.

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.

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... Amazon's predatory pricing would shield it from e-book competitors that lacked Amazon's deep pockets.

Critically, it also undermined the hardcover market that brick-and-mortar stores depend on. It was as if Netflix announced that it would stream new movies the same weekend they opened in theaters.

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).

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.

Enter Steve Jobs. Two years ago January, one month after B&N shipped its first Nook, Jobs introduced Apple's iPad, with its proven iTunes-and-apps agency model for digital content. Five of the largest publishers jumped on with Apple's model, even though it meant those publishers would make less money on every e-book they sold.

Publishers had no real choice: it was seize the agency model or watch Amazon's discounting destroy their physical distribution chain. That's why we publicly backed Macmillan when Amazon tried to use its online print book dominance to enforce its preferred e-book sales terms, even though Apple's agency model also meant lower royalties for authors.

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. 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.

Publishing shouldn't have to choose between bricks and clicks.

A robust book marketplace demands both bookstore showrooms to properly display new titles and online distribution for the convenience of customers.

Apple thrives on this very model: a strong retail presence to display its high-touch products coupled with vigorous online distribution. While bookstores close, Apple has been busy opening more than 300 stores.

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. And publishers won't risk capital where there's no reasonable prospect for reward. They will necessarily focus their capital on what works in an online environment: familiar works by familiar authors.

with strippers and blackjack

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.



This would be tragic for all of us who value books, and the culture they support.

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No sooner had the Department of Justice announced its plan to investigate Apple and five of the Big Six publishers for e-book price-fixing than a representative of those benefiting most from this (alleged) collusion boldly stepped into the fray. Scott Turow, bestselling author and president of the Author's Guild , has issued one of the most profoundly self-serving and wrongheaded statements ever to grace the pages of a legacy industry's website . There's a ton to unpack here, so let's get right to it.Scott Turow's statement is presumably issued on behalf of the Author's Guild, although there's no indication that any author other than Scott Turow was consulted. (You may remember the Author's Guild as the cheery people whose fear of technology led them to a successful claim that e-books utilizing text-to-speech violated a never-heard-of-before "audio right" , in essence stating that reading purchased e-books aloud is illegal.)Turow's burns through a whole lot of words to arrive at three basic conclusions:1. Apple is good.2. Amazon is evil.3. The future of books is brick-and-mortar.Let's take a look:Obviously, the emphasis is on "rich." Rarely do resellers and publishers collude toprices. There are many out there who believe a rich culture can be synonymous with low-priced books, music, and other media, but obviously our opinions don't matter because we haven't written and sold enough books. (No, seriously. Read the comment thread on Turow's post.) Thankfully Barry Eisler and Joe Konrath, who have worked in the business and sold plenty of books, also completely dismantle Turow's arguments , especially his abuse of the word "culture."Shouldn't those who cherish a rich literary culture prefer books at reasonable prices which allow that rich literary culture to be read by more people? All I can get from Turow's statement is: "the public must prefer their books to be more expensive." In what world is it "grim news" that our "rich literary culture" should be getting cheaper?You might have no way of "knowing," but the conclusions drawn by the DOJ don't look too pretty. Secondly, if "collusion wasn't necessary," then why do we have the appearance of collusion? Did the publishers not have anything better to do with their downtime than push prices around, mainly in an upward direction? Point the third: I thought it was Amazon who used deep discounts onto kill off physical bookstores like Borders, and Barnes and Noble, who in turn killed off independent bookstores, or so the narrative goes. Now all of a sudden it's re-killing off physical bookstores with digital goods?Because windowing is stupid. Especially in a digital world.Selling something as a loss-leader isn't new, it isn't "predatory", and it certainly isn't exclusive to Amazon. Retailers have been doing this for a long as retail has existed. It's no different than the local grocery store selling ultra-cheap cases of soda during the summer, in the hopes that you'll stock up on hamburgers, hot dogs, buns, chips, beer, etc. while you're there. Amazon selling e-books at a loss was a way to entice customers to purchase a fully-marked-up Kindle.If your business is dependent on a product whose popularity has taken a nosedive over the past few years, perhaps it's time to rethink your product line rather than blame the market leader's foresight. And since when is it Amazon's job to prop up brick-and-mortar stores?Oh, for the love of... Really? You hail Apple as the savior of the sinking USS Publishing Industry, and you somehow think you can still bash someone else's "walled garden" and "proprietary device-and-format?" Isn't it worth pointing out that one of theAmazon has a closed, proprietary device-and-format is because the publishers demanded a locked up system for fear of "piracy"?Well, looks like you should have gotten in on the ground floor, rather than ruefully envying a market that you seemed to want no part of.Enter Steve Jobs, creator of walled gardens and proprietary devices and formats. And look, the publishers jumped right in even though they were giving up a bigger chunk to the walled gardener. Wait. What are we arguing about? Oh, yeah. Amazon being more evil than price-fixing publishers. Got it.I'm sorry. You lost me, Turow. You want to discuss e-book pricing and yet we keep finding ourselves wandering the musty aisles of brick-and-mortar. And I'm sure your lower-tier guild members are thankful to you for ensuring that they receive less money in your preferred walled garden, while simultaneously sabotaging their future sales by using inflated e-book pricing to protect hardcover margins.No. Your concern is rooted in unsustainable profit margins. And would it kill you to link to these "marketing studies" that "consistently" back up your rose-colored vision of bookstores as far as the eye can see?It rhymes! And it's a false dichotomy! Publishing doesn't have to choose between those options. It can still have both. What it can't have is a return to the days of pre-digital book sales and the lush markups of first-run hardcovers. If you're looking to increase sales, it helps if you don't price yourself out of the market, via "collusion" or "agency pricing" or just flat-out refusing to align your e-book prices with reality.Does it? If the marketplace you have now (you know, the one that seems light on bricks and/or mortar) isn't a result of "demand," than what is it? When you say "robust market", what you're really saying is "a market that favors major publishers". It has nothing to do with the actual robust market we have today, with millions of titles and hundreds of options for both customerswriters.So... if Amazon just opened a few retail outlets to sell its Kindle and deeply-discounted e-books, everything would be cool? Is that it? The retail world needs more brick-and-mortar foisted upon it simply because The Prices Are Too Damn Low?And this week's winner of the Godwin Achievement Award (Content Industries Edition) is Scott Turow! Between this and the gratuitious Netflix reference (the killer of brick-and-mortar movie rentals), Turow is only one dodgy metaphor away from sweeping the category!Yeahyeahyeah. This argument. "Now things will suck for the lower tier of creators because no one will know or care that they've made anything, least of all those in the business of curating and selling creative content. Woe is everybody, especially those that find themselves handcuffed to a disinterested publisher who won't promote their latest and won't allow them access to their own back catalog." This thing that you think only works in an "online environment," Scott? "Familar works by familiar authors?" That's the same thing that the major publishers have been doing for years. This isn't an unfortunate side effect of the digital era. Mainstream publishers push mainstream offerings.The indies and the self-published are where the new, exciting things will happen. And they'll do it all without your precious walled-garden-of-choice, the one with the letter "i" in front of everything, crafted entirely out of brick, mortar and windows. They'll do it on their own. Or they'll find a few like-minded writers and start their own publishing house! And they won't need your "protection" or "author's guild" or lousy pricing or ridiculous windows to do it. Hell, some of them might even find a way to rake in hundreds of thousands of dollars while never pricing anything above a "predatory" $2.99. Weird, I know. But these things do happen. And they happen without the "power" of the major publishing houses behind them.Any final words, Scott?I can't even parse that sentence. Are you implying that price fixing is "real competition?" Or are you saying that windows, e-books at hardcover prices and walled gardens are the "real competition" and any entity working outside those self-imposed confines is only offering the "appearance of competition?" Or does "real competition" only include those that are looking to see how high they can price their offerings? And anyone who fails to price accordingly should be investigated for "predatory pricing." Is that about the size of it?Let me FTFY:That would be tragic forwhoourValuing something doesn't mean paying top dollar for it. Does the person who owns 30 hardback books purchased at full retail respect culture more than the person who has 30 lower-priced e-books on their reader? If you believe that, you've got to let it go. Trying to convince the rest of the world that the only way to "value" culture is to pay top-dollar isn't going dispel that aura of entitlement that seems to surround every legacy industry.Everyone values books and supports culture in their own way. What you want, Scott, is control over all of it. You want to be able to set the prices, timetable and delivery system. Unfortunately, you no longer have that option. Whether or not the DOJ finds evidence of collusion is largely unimportant in the overall scheme of things. If it does, prices will fall to market levels faster and windowed releases will become rarities. Even if the DOJ clears Apple and the publishing houses of any wrongdoing,. It's already happening. The future belongs to other people and businesses who move faster, respond to change quicker and are free of the fears that have held legacy industries back. This "statement" of yours is nothing more than the bitter noise of someone waist deep in water, cursing the incoming tide.

Filed Under: antitrust, authors, brick and mortar, ebooks, price fixing, scott turow

Companies: amazon, apple, authors guild