By Brendan Coyne, exhibits and awards manager
E-books and Amazon.
If you’re a reader (which presumably you are, since you’re visiting the blog of a university press), and especially if you happen to work in the book publishing business, both e-books and Amazon.com are inescapable entities, and deservedly so. Though Michael Hart’s Project Gutenberg created the first e-book back in 1971, the Rocket and Softbook e-readers launched in 1998, and Sony’s been churning out great portable devices since 2006, Amazon essentially created the modern-day e-book business when it released the first-generation Kindle e-reader in the fall of 2007 and fueled the device with aggressively discounted e-books. This strategy not only disregarded publishers’ list prices, but also sacrificed short-term profits on the sale of individual e-titles in order to spur sales of Amazon’s proprietary reader and inculcate consumers to the e-reading culture.
And it worked. In sowing the market with bargain-priced e-books and an attractively designed, (mostly) user-friendly device, Amazon was able to claim nine in every ten e-book sales as late as the beginning of 2010 and today is believed to hold about a 60 percent share of that growing market. A bevy of contenders has since jumped into the e-book and e-reader fray, most notably Google’s Play (née Books) e-book service, Barnes & Noble with the Nook, and Kobo Inc.’s eponymous e-reader, though none of these three, nor Apple’s iPad or any of the other fine devices—Story HD, anyone?—out there have come close to toppling Amazon. And now survey after survey shows that not only are people adapting rapidly to reading on handheld devices, they’re reading (and buying) more as a result.
As anyone with a pulse has to have noticed, Amazon has been in the news a lot lately, and not just for attempting to force new print and e-book discount terms on publishers such as McFarland & Co. and the Independent Publishers Group. In an effort to entice the online retailer to locate new warehouses and customer service centers in their states, governments from New Jersey to Indiana have offered millions of dollars in tax breaks and incentives; some states have even agreed to shelve sales tax collection concerns in favor of the jobs Amazon projects it will create. The Seattle Times earlier this month published “Behind the Amazon.com smile,” a four-part series highly critical of the company’s business practices. The series drew attention throughout the worlds of book creation and consumption—and a flood of hostile reader reaction.
All of this background is necessary to understand what’s really at stake now that the United States Department of Justice has sued Apple and five of the largest book publishers in the country—Hachette, MacMillan, HarperCollins, Penguin, and Simon & Schuster—for allegedly colluding to raise e-book prices.
As Greg Sandoval nicely explained last Wednesday on CNet, at issue is the question of who sets e-book prices, the bookseller or the publisher. Under the traditional model—which Amazon and book publishers follow for both print and electronic content—a publishing house sells books at a discount to various wholesalers and other outlets, who then price the book as fits their respective needs. In 2010, Apple adopted the agency model for e-books sold through its iTunes bookstore, an arrangement wherein publishers set their own prices and Apple takes a 30 percent cut of each sale. This in itself would be perfectly legal, but the Justice Department’s suit alleges that the publishers and Apple worked in concert to force the agency model on Amazon and other booksellers, in turn increasing the cost to consumers of e-books.
Almost immediately after news of the DoJ filing hit, Amazon announced plans to lower the prices on many books in its Kindle store, once again offering many e-books for $9.99 (or less). A flood of commentary followed, most of it in the form of dire warnings, as the New York Times piece linked above reports, that what may seem at first glance to be a boon for consumers actually amounts to a one-two punch that will significantly impede the ability of publishers to continue to produce quality works and eventually give Amazon enough power to control the entire e-book market, a likely untenable situation that would call for DoJ antitrust action against Amazon, as University of Minnesota Press Director Doug Armato alluded to on Twitter last week.
While it’s fascinating watching the power struggle among Apple, Amazon, and commercial and trade publishing houses play out, we smaller fish have a frighteningly large amount of skin in the game as well. E-content is a growing market for university presses and will almost certainly account for a large portion of our respective revenues in the near future. How much and under what terms? The short answer is that no one really knows—and ironically (for fear of violating antitrust laws), few in the business are talking about the issue outside of their own offices.
The Scholarly BIN (Book Industry News) is a semi-regular roundup of news about and of interest to the scholarly publishing industry. Got a tip? Please send it along to Brendan Coyne.