E-Book prices begin fall

Less than 24 hours after the buzz began that the Department of Justice (DoJ) would seek legal action in civil court against Apple and several large publishing companies for alleged collusion, prices are plummeting.  While some companies have already settled out of court, publishers Macmillan and Penguin are preparing for what could be a legal war.

Critics agree that readers will benefit in the short term with a major downward price shift in their favor but are unsure what the future holds for the industry as whole.  In fact, many agree that prices will eventually rise beyond the $9.99 – $12.99 average once Amazon’s competitors begin to fold.  More alarming are concerns from major publishers that even more outlets, ranging from the big chains to the mom-and-pop used bookstores, will be forced to fold.

The DoJ seems focused on a series of 2010 deals between Apple and several major publishing houses that saw an immediate price jump and several titles being pulled from Amazon.

“This action drove up e-book prices virtually overnight,” said Sharis Pozen, head of the DOJ’s antitrust division, at a news conference on Wednesday. “Let me be clear: When companies enter agreements that prevent price competition, that is illegal.”

Macmillan Publishing’s CEO, John Sergant vowed to fight the government lawsuit, saying the company did no wrong and adopted the new business model in its deal with Apple in order to preserve competition.

“When Macmillan changed to the agency model we did so knowing we would make less money on our e book business. We made the change to support an open and competitive market for the future, and it worked. We still believe in that future and we still believe the agency model is the only way to get there.”   John Sergant via – Tor.com

Scott Turow, a best-selling author and president of the Authors Guild, called Amazon “the Darth Vader of the literary world,” Turow said in an op-ed piece for Bloomberg that a government lawsuit would give Amazon an unfair advantage to continue dismantling the industry.Even before the government’s anticipated announcement, Amazon was projected to haul in more than half of all books sales in the United States by the end of the year.  Amazon has wasted no time in making its move.  Within 24 hours of the DoJ’s announcement to pursue legal action against its rivals, the company has slashed prices on many titles by as much as 50%.

“Chief among the reasons is the death spiral of the traditional brick-and-mortar bookstore. The discounting of bestsellers by the large chains destroyed the financial underpinnings of independent stores, and the rise of online bookselling, led by Amazon, cut the legs off the chains, with Borders Group Inc. closing all of its doors last year and Barnes & Noble Inc. struggling to survive.”  (Full Bloomberg Article Here)

Publishers HarperCollins, Simon & Schuster and Hachette settled their cases with the government and are reworking contracts with vendors and outlets, which should pave the way for more price drops in the coming days.  Long-term effects remain anyone’s guess.

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  1. #1 by James Allen on April 14, 2012 - 1:33 am

    Yeah that competition will be squashed. Apple and Google are Amazon’s competition and they aren’t going anywhere. The whole argument is false.

    Borders failed for bad business practices.

    • #2 by Tom Clementson on April 14, 2012 - 8:02 am

      As far as Apple’s e-book business, as well as how that impacts major publishers, I agree with you completely. It might cut into profit margins but it’s not doomsday. I’m concerned though with how a price war impacts small shops – they contend with major chains and eventually the fallout from this online book-selling turf war between giants – many will have a difficult time remaining in business if the average price point settles below a certain level. Like you mentioned, Borders’ problems were alot to do with bad business practices. The little guys out there are going to have to get creative and market smart – local.

  2. #3 by Tom Clementson on April 13, 2012 - 4:40 pm

    I think in the long run we’ll have fewer options on where to purchase books – the bound kind. I think short term we see a major drop in price until businesses fold and once enough do the prices will increase again. Worse is when you have only a couple of choices on where to buy books you really run the risk of too much control over what gets published and what doesn’t and at what price point. Competition is good for the consumer. I don’t agree with a lot of the Amazon tactics nor do I like what the big press has done. I think as long as there remain multiple options we will pay a fair price.

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