This week Apple responded to the DOJ e-book antitrust charge by throwing down the gauntlet. Basically they ripped apart each and every one of the DOJ charges against Apple. Their first shot was directed against the DOJ contention that before Apple entered the e-book market it was a market with a “robust price competition”. Apple was quick to point out in their response that at the time Apple entered the market Amazon sold 90 percent of all e-books. This, according to Apple clearly shows there was no pricing competition in the e-book market prior to their entry.
Apple had no problem throwing the publishers under the bus when they stated if there was any conspiracy by the publishers, Apple had nothing to do with it and in fact had no knowledge of it. Apple said that the DOJ is concentrating too much on the increase in price and does not give enough credit for the growth in the number of e-book titles, and the types of e-books that are now available since Apple entered the market. The introduction of the iBook allowed for features such as color pictures, videos and audio innovations that were not available through the Amazon Kindle. Apple said that the DOJ offers no proof that the agency model that Apple uses harms the consumer. That there was and is nothing illegal about this model and that it has been around for quite a while.
Now that the first salvos by both sides have been fired, it is clear that this maybe a long battle. The US District Court has refused to throw out the class action suit brought by 31 states in a case similar to the DOJ. Apple continues to stand its ground and all indications are that it has no intention of backing down. Apple clearly has the money and the will to fight the case as far as it will go. This is one case where the consumer could end up losing no matter how the case goes. There is no doubt that the introduction of the iBook has forced the e-book market to innovate. However this same innovation has also caused the rise in the price of ebooks.
As I reported beforeApple and various publishers have been sued by the DOJ for price-fixing and collusion in US VS Apple. Apple responded today with a brief statement saying “ it’s not true.” Apple stated that they broke Amazon’s e-book monopoly and therefore did a good thing. Others, myself included would argue that the agency model has artificially raised prices for the consumer. This is a case where clearly the market is being manipulated to the advantage of a certain segment. In Apple’s statement they pointed out that before the iBookAmazon controlled ninety percent of the e-book market two years later it is down to 60 percent. The question may become whether which is more important the percentage of the market in numbers that a business controls or is it the ability to control pricing within that market. Apple controls less than 40 percent of the eBook market but because of their agreement with the publishers they and the publishers control the prices. Many legal experts think that it maybe difficult for the DOJ to win this case, especially the collusion charge. The papers filed by the DOJ clearly show that the various publishers met in secret in an attempt to block Amazon’s ability to sell their books at a discount. However there is little evidence that Apple participated in those meetings. Apple can argue that the publishers may have colluded but they had nothing to do with that. Apple definitely has the money to fight this case, so don’t expect a quick settlement. Sit back and relax, because this fight has just begun.
Apple and several publishers including Penguin, Harper Collins, Macmillan, Pearson and Simon & Schuster and Hachette have been accused by the U.S. Department of Justice of price-fixing and collusion. According to the Bloomberg various high level officials of these companies along with a representative from Apple met several times in secret at various locations in New York city prior to the release of the iPad 1. They agreed that the prices of e-books should be set by the publishers and the retailers could not make any changes. It also appears they agreed to the price they would be set at. According to the DOJ this was clearly directed at retailers especially Amazon, who had offered discount prices on e-books.
Simon & Schuster, Hachette and Harper Collins have settled the suit with the DOJ and have agreed to cancel any contract that would allow the publishers to set prices. They also agreed that for two years all contracts must allow for discount pricing by the retailers. Apple, Penguin and Macmillan Publishing have refused to settle. They are fighting to keep what they call the agency model. Apple appears to be the one that encouraged this model. They get 30 percent of all books sold in the iBook store. The agency model means the books will cost more for the consumers but it also means more money for Apple and the publishers. “Sales of e-books rose 117 percent in 2011, generating $969.9 million, Publishers Weekly reported Feb. 27, citing estimates from the Association of American Publishers.”
The European Union is also investigating the arrangement made between Apple and the publishers. It clear that the major publisher like the agency model. The cost of creating and publishing e-books is much lower than physical books and before this agreement the prices for books was going down. With this agreement, prices were stabilized or raised to a level agreed on by all participants and competition was removed. I have to admit I am a fan of Apple products, but I have found that I am less of a fan of some of their business practices and this is one of those times.
Feeling a 100% better and it is time to have a serious discussion about privacy and actions in the internet and public space. Looking for your feedback in a big way on these issues. Lots of great tech stories to share with you tonight as well.
No hiccups during tonight’s show, this one went off without a hitch. Plenty of tech content tonight and of course I have to talk about the big mess over at netflix. What an absolute mess they have made over these past couple of months and it is not going to get any better.
No more free ride with companies that want to buy off this show host with $10.00 in free products to give away on the show. Time to get their check books out instead. One more show left here in New Mexico before loading up and heading home. Lot’s of tech tonight and some serious soap box time.
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You have to watch to win! Video link is in the show notes. One more show here in Honolulu before I take the show on the road. It will be a very busy May and June as farmers say you have to make hay while sun shines. No locked in travel plans yet for listener meet-ups but will advise when I can. Tonight’s show has some incredible stories that will cause your eyebrows to raise.