Brought to you by OBS reviewer Annabell Cadiz

U.S. Justice Department vs. Publishing Industry and Apple Co.

E-books are on the rise and traditional publishing may soon become a thing of the past.

The writing industry is one of the slowest changing industries in the creative arts world. But due to recent increases in technology over the last decade, more so due to the launching of e-readers in the last seven years, the writing industry has taken a hit not so many who make deals in the book world were prepared for. As of February 27, 2012, stated by Publishers Weekly and cited by the Association of American Publishers, e-book sales rose 117% in 2011 and brought in revenue of $969.9 million. Whether those in the publishing arena are fully ready to recognize the powerful change e-readers have had on the industry, change has come.

But that apparently has not stopped some of the major players in the field from attempting to stop the changes, or at least, slow them down.

As of April 11, 2012, the U.S. Justice Department has issued an antitrust lawsuit against five of the world’s biggest publishing houses (HarperCollins, Simon & Schuster, Hachette, Macmillan and Penguin Group) and Apple Co; accusing them of fixing e-book prices, which in turn, forced consumers to pay tens of millions of dollars more on books.

The Justice Department states in their findings that the executives of the five publishing houses and Apple began to hatch their plan, starting in 2008, through phone calls, emails, and even dinners in New York restaurants to discuss how to diminish Amazon’s popularity in e-book sales and raise prices. Apple is seen as the one who created the ripe opportunity by launching the iPad in 2009 and discussing creating its own e-book marketplace much like it had done with iTunes in the past. Apple created a new model to work with publishers—instead of just buying the books from the publishers for one set price then selling those books to readers for a different set price, they would allow publishers to set the prices themselves, pricing e-books up to $16.99 and Apple would take a thirty percent cut.

According to the Justice Department’s claims, all five of the publishers did sign with Apple to make the deal in January 2010 and had raised the pricing for e-books in April 2010.

The publishing houses negate the accusations but according to Acting Assistant Attorney General Sharies Pozen, it was “coordinated effort” and stated, “We allege that these executives knew full well what they were doing.” (Washington Post, April 2012)

Three of the publishing houses have already settled –Hachette, HarperCollins and Simon & Schuster—while Macmillan and Penguin Group along with Apple continue to fight against the lawsuit.

The e-publishing world has grossed $1 billion dollars since the introduction of the e-reader and is said to triple by 2015. You would figure that the writing industries major players would change their tactics to a technology obsessed generation as to produce more work in order to gross in more revenue. The fact is avid readers want to pay less and gain more for their buck. (James McQuivey, Nov. 2010)

That’s where Amazon comes in. Amazon sets up pricing for e-books at a lower cost than printed versions since e-books are far cheaper to produce. But publishers fear that Amazon is gaining too much control over the industry, holding onto a 90 percent share of the e-book market since 2010 and believing that if the Justice Department’s lawsuit is won it would jeopardize the book industry by allowing Amazon to become a monopoly.

But even so, Amazon may not stay on top for long since so many devices to accommodate lovers of e-books have risen, “the retailer will likely see its e-book market share slip from 90 percent to 35 percent in 2015” due to competition from other retailers. (CNET News, 2010)

Many believe (myself included) that publishing houses need to change their business models to a more digitally appropriate method, instead of still following the old slush pile method, where a publisher spends hours reading through hundreds of manuscripts then chooses one through gut instinct to sign, they should look for already established writers in the market who have grown in a fan base through their work and sign them.

As much as I ADORE my hardcover copies of books and will always prefer them over e-books, I cannot deny the impact e-books have had on the industry. There are many authors I have befriended, who have made a name for themselves in the field of e-publishing and still want to seek out a traditional publisher, but are disheartened by the fact that publishers still often reject them, even though they have cultivated a loyal fan base and sells. If the publishing world is to stay afloat, publisher’s must change their way of thinking when it comes to both Self-Published and Indie Published authors.

As for the lawsuit, I feel it was ludicrous for such award winning publishing houses to attempt to artificially inflate pricing out of fear and pride. But I also don’t feel Amazon should become the only major retailer in the e-book field. That much power does not belong in one place but that will only change if publishers change. Only time will tell.

As to whether or not Apple, Macmillan and Penguin Group will win their case in the end remains to be seen and the verdict may be years of strenuous litigation away.

Credited Sources:

CNET.com Analyst: Amazon’s big share of e-book market won’t last (by John Paczkowski, Feb. 2010) http://news.cnet.com/8301-1023_3-10454894-93.html?tag=mncol;txt

Good E-Reader U.S. Justice Department Flies Lawsuit against Apple and Top Publishers while others Settle in Court (by Michael Kozlowski, April 2012) http://goodereader.com/blog/e-book-news/us-justice-department-files-lawsuit-against-apple-and-top-publishers-while-others-settle-in-court/

Publishers Weekly AAP Estimates: E-book Sales Rose 117% in 2011 as Print Fell (Feb. 2012) http://www.publishersweekly.com/pw/by-topic/industry-news/financial-reporting/article/50805-aap-estimates-e-book-sales-rose-117-in-2011-as-print-fell.html

Bloomberg U.S. Flies Antitrust Lawsuit Against Apple, Hachette (by Bob Van Voris, April 2012) http://www.bloomberg.com/news/2012-04-11/u-s-files-antitrust-lawsuit-against-apple-hachette.html

PC World Amazon Unveils Wireless Kindle E-Book Reader (by Melissa J. Perenson, Nov. 2007) http://www.pcworld.com/article/139777/amazon_unveils_wireless_kindle_ebook_reader.html

Forrester Blog eBooks Ready To Climb Past $1 Billion (by James McQuivey, Nov. 2010) http://blogs.forrester.com/james_mcquivey/10-11-08-ebooks_ready_to_climb_past_1_billion

Washington Post Justice Department sues Apple, publishers over e-book prices (by Ylan Q. Mui and Hayley Tsukayama, April 2012) http://www.washingtonpost.com/business/economy/justice-department-files-suit-against-apple-publishers-report-says/2012/04/11/gIQAzyXSAT_story.html