The Wall Street Journal reports that the Department of Justice warned Apple and five major publishers that it plans to sue them for “allegedly colluding to raise the price of electronic books.” http://online.wsj.com/article/SB10001424052970203961204577267831767489216.html
The publishers include Simon & Schuster, Hachette Books, Penguin, Macmillan, and HarperCollins. The suit centers on Apple’s plan to move ebook pricing from the “wholesale model” to the “agency model,” as it prepared to release the first iPad. Biographer, Walter Isaacson, quotes Steve Jobs:
“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,’”
The publishers were then able to impose the same model across the industry, Mr. Jobs told Mr. Isaacson. “They went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books,’”
William Lynch, CEO of Barnes & Noble, testified in a deposition that abandoning the agency model would effectively transfer even more power to Amazon, since they can afford to sell ebooks below cost to build market share.
Everyone who intuitively knows that an ebook is not “worth” as much as a physical book must wonder why the two are so often priced within a dollar of each other. If ebooks were “fairly” priced, would traditional publishers fall farther behind? Would more brick and mortar stores disappear?
I don’t know…
But I do know that everyone who has a stake in the issue, or is just curious about the upheaval in publishing, should read this article to keep up on the latest events in the ongoing drama.