Thursday, September 27, 2012

TSOP: DOJ/publisher Settlement Could Make Ebook Prices Go Up

You may recall a lot of people, including this guy getting up in arms over the DOJ's lawsuit against the "big six" publishers and Apple, alleging price-fixing. There were, essentially, two arguments:

1. DOJ and Allies: "The agency model was agreed upon by a price-fixing cartel, which has schemed to keep ebook prices artificially high. Getting rid of it will stimulate consumer-oriented competition (i.e. price cuts)."

2. Apple, Publishers and Allies: "We're no cartel, but Amazon was a monopoly in the ebook space, so what we did, really, was inject competition into the market and help safeguard consumers from predatory practices in a future world where all books are sold by Amazon."

Turns out, both may be wrong. According to paidContent's Laura Hazard Owen, the reality may be that there's nothing left to stop publishers just raising the wholesale price:

Publishers Lunch’s Cader raises the seemingly counterintuitive point that settling publishers may actually raise their ebooks’ list prices. Nothing in the settlement prevents them from doing so, and “higher list prices could ‘use up’ a retailer’s annual discount pool more quickly and provide some protection against devaluation in the marketplace of a publisher’s biggest properties.” In other words, HarperCollins, Hachette and Simon & Schuster could raise the list prices on bestselling ebooks from $12.99 to, say, $18.99. A retailer like Amazon would then have to pay those publishers a higher commission and discount their ebooks even more steeply, if the retailer wants to offer the greatest discounts.

Depending on what you think the ultimate goal of the agency model was, this either solves publishers' financial problems by, well, giving them more money; or fails to solve their distribution problems, as Amazon can still undercut all their other retail partners. Either way, in its quest to lower prices for the consumer at all costs, the DOJ may have just laid down some friendly fire.

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