There is a bit of a kerfuffle at the moment around the way e-books are priced on retail websites. And this is more than readers complaining about prices that don’t make sense; it is about the US Department of Justice about to accuse several big publishers of pricing collusion.
Amazon and Apple and their business practices are at the centre of this. Both companies have the reputation and the ability to create a vision and then implement it. Both companies have the reputation, the ability and the desire to create closed “ecosystems”. Both companies sincerely want to be The Last Word and The Only Place for their technological niche. In Amazon’s case it is books, both on paper and electronic. For Apple, it is personal computing. Including electronic reading.
Amazon has been in the sights of most publishing houses and retail stores for quite some time for their fairly predatory pricing tactics. Their habit of pricing e-books as low as possible is the one that really annoyed Apple. But Apple, whilst wanting to run the e-book experience with their iBooks store, also didn’t really want to be a full retailer. So they came up with what’s called the Agency Model. This is where the distributors set the retail price and the retailer takes a fixed cut. For Apple, it makes retailing e-books much much simpler.
Amazon didn’t like it, but thought they could ignore it. Until the publishers told Amazon they had to adopt the Agency Model, too, or they couldn’t sell their books. Amazon caved in. Personally, I don’t think they had much choice.
And now we get to today. The US Department of Justice has apparantly decided that the Agency Model is price-fixing, which is illegal in most, of not all, western countries. However, it’s not that simple. Amazon had been aggresively discounting e-books below wholesale in an effort to gain market share. That’s technically price dumping. And it seemed to be working – but a horrible cost. The cost is physical bookstores who could not compete. The cost is retail websites who could not compete. Amazon’s marketshare of e-books was reportedlty 90% at one point. And that’s in Monopoly territory.
I don’t like Amazon’s predatory pricing. But I’m not sold on the Agency Model, either. Especially as Amazon won’t make it available to any other publisher than the five who have it.
What’s the solution? Pricing collusion is usually bad for all outside those colluding. But often so is a monopoly. In both cases, there are exceptions. Perhaps this time it might be a case of better the devil you know than the one you don’t.