On April 11, the US Department of Justice announced that it was suing five major publishers and Apple on price-fixing charges; three of the e-book publishers have settled but what will this landmark court case mean for consumers?
The case is based around accusations that several major e-book publishers including Hachette, HarperCollins, Simon & Schuster (who have settled) and Macmillan and Penguin (who are fighting the charges in court) allegedly conspired with Apple, a content reseller, to raise e-book prices.
These allegations are based around the decision of several major companies to switch from the ‘wholesale model’ – whereby retailers set the price -- to the so-called ‘agency model’ -- whereby publishers set the price. This change in models, driven largely by the popularity of the iPad, allegedly caused prices of e-books to rise and put pressure on retailers that offered discounts such as Amazon.
The new antitrust charges, however, could place Amazon in a powerful position – giving the internet retail giant the freedom to decide how much an e-book will cost.
While there is a fear that this could give Amazon, already a powerful player in the world of e-books, essentially a monopoly over the market, it is likely that in the immediate future customers will see large savings on e-books.
The New York Times is reporting that Amazon has announced plans to reduce prices of "some major titles" from the current $14.99 to $9.99, though no such report has yet been released through the Amazon press office.
According to the AFP, Amazon spokesperson Drew Herdener stated “this is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books."
However while this could mean good news to rabid readers on the Kindle it could spell the end for traditional bookstores. Lorraine Shanley, president of Market Partners International – a consulting firm for traditional and online publishing, stated to Relaxnews that while “in the short term it [the anti–trust suit] will appear to be a [e-book] book buying bonanza,“ there will also be negative consequences of the suit, should the Department of Justice win, for consumers.
Ms. Shanley explained that “in the longer term as every e-book that Amazon sells from one of the big publishers is selling at a loss, other retailers that don’t have Amazon’s breadth of non-book products or deep pockets will decline, [even stores like] Walmart etc that sell print books may begin to cut back on the amount of titles [they sell] as they can’t compete with heavily discounted e-books." Ms. Shanley also warned that we may be unable to foresee the consequences: “it all looks great until you begin to see the world in terms of [having just] one channel for book sales and we will see what the department of justice has wrought.”
Michael Norris, a senior analyst at Simba Information – a market intelligence and analyst firm for the publishing industry, also expressed concern about the implications of this lawsuit. Mr. Norris stated, “A lot of damage could be done to consumers; the implications of the settlement mean fewer retailers selling e-books, and if there are just a few powerful players standing between the consumer and the content the consumer loses."
Mr. Norris likened the implications for the publishing world to that of the decline of independent record stores and their replacement with multinational retailers and warned that if the antitrust suit left just a few major retailers selling books, consumers, while profiting from low prices in the short term, could be hit by price hikes in the future.
While it looks likely that if the suit were to succeed Kindle users may soon benefit from some low prices on certain titles, this could lead to the decline in the number of e-book retail outlets, ultimately creating a monopoly of a few major players who would not need to keep the consumers' interests, or wallet, in mind.