Apple, Amazon, Antitrust, and You: More Links to Chew On

Today’s post is really going to be a whirlwind tour and roundup of links.  I’ll have a few thoughts and commentary on a few of these links but mostly, at this point, I’m in learning mode.  The last few weeks have seen some major upheavals and changes in the publishing industry, and things are changing faster than you can blink: from the Department of Justice filing a lawsuit against 5 major publishers, to 3 of those publishers settling, to the sudden announcement by one imprint of one of the 2 remaining defendants that it will drop DRM… I don’t know everything about what’s going down in this case, I don’t know how this case is going to impact the future of books and ebooks, and I’m not even sure I can articulate what I think a best-case scenario looks like.  So, without further ado… More Links to Chew On, the Apple, Amazon, Antitrust, and You Edition:

  • Acclaimed Sci-Fi author Charlie Stross on “Understanding Amazon’s Strategy” is an excellent piece.  He hits a lot of points that I’ve tried to make here in the past, among them a fairly lucid and clear explanation of the Monopsony Problem.  The Monopsony problem is something that a lot of people don’t really understand – they don’t even know what it is much less how critical it is to understand it if one is to understand Amazon’s role in the current market.  Stross’s conclusion is also an interesting one, and the first time I’ve seen this idea articulated so clearly: the logical, strategic conclusion of the DOJ suit against Apple and various publishers is an end to ebook DRM.
  • Equally articulate and excellent is John Scalzi’s plea to people treating the ongoing battle between Amazon, Apple, Traditional Publishers, and the DOJ like a game of football: “Dear Consumers Who Apparently Think the Current Drama Surrounding eBooks is Like a Football Game“.  To those people he has a very truthful revelation to share: it’s not like a Football Game at all.  More to the point, none of these sides, really is your team and none of them is on your side.  They are all very much on their own sides, and sometimes that means screwing you, the consumer, over quite handily.
  • C. E. Petit of Scrivener’s Error has some really interesting analysis of various matters pending before the court and how they might impact the result of the DOJ lawsuit.  I won’t pretend I understanding everything he discusses there – legal matters can be pretty dense for the non-legal-professional.  I’m not positive I can tell you what I think Petit’s position on these matters is – but in keeping with Scalzi’s exhortation, Petit doesn’t seem to be on either “team”.  One important comment, I think: “Suffice it to say that nothing in this action [i.e. the DOJ suit against Apple et al.]  forecloses any action against [Amazon]…” This seems to suggest, I think, that Petit suspects the possibility that although Apple and the Publishers are currently in the DOJ’s sites, Amazon itself, having a history of abusing its monopoly position, may well find itself in those same sites soon…
  • The SFWA blog has a pretty clean run-down that gets you up-to-date on what’s going on, posted by Victoria Struass.  Her overview is sprinkled heavily with links, some of which may be of interest.
  • E-publishing Consultant, Author and Publisher Mike Shatzkin analyzes the DOJ suit and the impact on the industry in “After the DOJ Action, Where Do We Stand?”  In his analysis, he makes an interesting observation about how the impact of this litigation hurts digitally self-published authors.  His argument is basically this: as the big titles put out by traditionally publishers are aggressively discounted by Amazon after the Agency model goes away – as seems likely to happen if the remaining publishers battling the DOJ lawsuit fail – then the price for ebooks generally will fall.  This decrease in e-book pricing will erode the price advantage enjoyed by digitally self-published authors, who typically price at a discount to what a major publisher prices their ebooks.  This erosion in price advantage will hurt their long-term discoverability: that is, what’s the point in gambling on a no-name author without traditional publisher backing when you can get a polished, traditionally-published ebook without paying a price premium?  It’s an interesting argument, logically speaking.  There are other possible factors that might affect this, of course.  Give his article a read for further context.
  • A fellow named Baldur Bjarnason, who studied eBooks in his PhD, writes about “How to Beat Amazon“.  (Note that this is actually the subtitle to his article, which I use because the main title by itself is too oblique to be immediately useful.)  Baldur does an analysis of Amazon’s strengths and weaknesses, and what he thinks Publishers and others can do to take advantage of Amazon’s weaknesses and what Amazon can do to neutralize those weaknesses.  His conclusion is in many ways similar to Charlie Stross’s: the best competitive approach to Amazon’s current attempt at a Walled Garden is to embrace open standards and to avoid DRM (with a few other useful tactics).  But he swings it both ways: Amazon’s approach at a Walled Garden is rather doomed to failure (in part because they don’t do it nearly as well as Apple), and they can counter this by embracing openness and modularity early, themselves.
  • Mark Coker, CEO of Smashwords (an “Indie” digital self-publishing aggregator) asks “Does Agency Pricing Lead to Higher Book Prices?”  He digs into some data, and finds the answer is “no”: in fact, prices have gone down under the Agency model.  The problem with his data?  It’s pretty much limited to what Smashwords sells, or in other words, prices of small-time digital self-publishers.  That doesn’t tell us much about what happens in the space where most people are actually reading: traditionally-published NYT-Bestselling-grade books.  But Coker’s analysis largely agrees with Mike Shatzkin’s: the end of agency pricing for traditional publishers targeted by the DOJ will hurt “Indie” publishers, for various reasons.  Primarily, Coker’s argument is in favor of agency pricing as a model, and not in relation to whether the publishers targeted by the DOJ were in collusion with Apple.  Notably, however, the DOJ suit does not implicate Agency Pricing per se as illegal.  Rather, it specifically targets the suspicious behavior of the publishers, as each entered these agreements with Apple in a rather lockstep fashion.
  • Coker follows up his blog piece on Smashwords with an opinion piece on CNN, where he mostly repeats many of the points he made in the longer Smashwords blog article.
  • I must admit, I don’t understand the antipathy Passive Guy has for traditional publishers, but he let’s that flag fly in his post critiquing a Seattle Times article: “Speculation Abounds That Amazon Triggered E-Book Lawsuit“.  There, he likens Amazon to the hapless victim of a crime and the DOJ suit to a criminal complaint – a spurious analogy at best (anti-trust actions are, first and foremost, supposed to be about consumer protections – and the consumer is the one who best ought to be likened to the victim).  His followers (in the comments) are even more aggressive in their hatred and antipathy for traditional publishers and their unmitigated support for Amazon.  I’m not sure why Passive Guy is so offended by the idea that the DOJ lawsuit had anything to do with Amazon.   I do want to comment on one quote from the Seattle Times piece that Passive Guy pulls out:

“If Amazon becomes more of a monopolist than it already is, and it tries to raise prices, then other people will enter the field,” he [i.e. Steve Berman, managing partner of Seattle law firm Hagens Berman, lead counsel in the separate antitrust lawsuit on behalf of e-book buyers] said. “There are market checks out there.”

  • Well… Methinks Mr. Berman of law firm Hagens Berman doesn’t know a thing about business, market forces, competition, and barriers to entry, now does he?  Either that… or he’s being intentionally disingenuous about it.  There’s a reason we have Anti-trust and anti-anticompetion laws: because “market checks” alone have historically been insufficient to ensure that a monopolist does not abuse their monopoly position.  That said, Passive Guy’s point – that Hagens Berman only happens to be located in Seattle in the same building as one of Amazon’s large offices is only coincidental – is… well, on the one hand it’s laughable ( coincidence you say? O RLY?)  On the other… given Amazon’s history of anti-competitive behavior, I should think Amazon likely wouldn’t want to draw the attention of the DOJ to itself, even as a complainant in a DOJ case targeting an Amazon competitor.  This gets back to Petit’s musings on possible future DOJ actions…
  • Author Chuck Wendig has some advice for authors worried about all of this in “Prepping for the Publishing Doomsday“.  His advice is… not to worry about it.  Whatever happens is what will happen, and as a writer you can’t do anything about it, really.  (True.)  And he has some assuaging words: “People always want stories.”  Of course, these reassuring words don’t really… um… reassure someone who’s worried about questions of long term discoverability, and how you achieve that in the changing marketplace.  But whatever.  He’s right about one thing: you can’t do much about it, anyway.  So worrying doesn’t really help.
  • GalleyCat disects some of the allegations against Apple and the Publishers in “Publishers Allegedly Deleted Emails ‘To Avoid Leaving a Paper Trail’ in Agency Model Discussions“, and they claim to have direct evidence of the conspiracy to collude.  Have to say: this looks rather damning for the Publishers.  To borrow a quote from the Passive Voice article linked above: “If Big Publishing didn’t want to be sued for price-fixing, the CEO’s of Big Publishing shouldn’t have gotten together over lovely little dinners to engage in price-fixing.”  As I suggested in my post when news of the DOJ action first surfaced: the facts on the case definitely look like collusion occurred – although the same outcome could theoretically be arrived at without collusion, that doesn’t look like what happened here.
  • What Does the DOJ EBook Pricing Lawsuit Mean for Readers Now” has some speculations and predictions about how the industry and market will change as a result of the DOJ lawsuit.
  • In “Why I Break DRM on EBooks: A Publishing Exec Speaks Out” an anonymous executive at a publishing company (which purportedly uses DRM on its books) explains why he has come to routinely break DRM on ebooks he purchases.  This story has echoes with Charlie Stross’s argument in the very first link above.
  • On top of that comes the announcement from Tom Doherty Associates/Tor/Forge that it will, in fact, be the first of the major publishing imprints (Tom Doherty/Tor Books is an imprint of one of the defenders of the DOJ lawsuit, Macmillan, which has not yet settled the dispute).  At this point, Charlie Stross is starting to look eerily prescient.
  • Then turning back to John Scalzi, he shares some of his thoughts on the news of Tor/Forge dropping DRM.
  • And finally, back once again to Charlie Stross, he reveals his own role in the announcement from Tor/Forge. (He was called in to to offer his argument on why publishers should drop DRM, which hints that the publisher in question was already mulling this decision over, and was exploring the limits of its reasoning.)

I’m still processing all of this.  As I’ve pointed out before, I’m not immediately impacted by any of this.  I don’t own an EReader, so I’m not directly impacted as a consumer.  I don’t have a book in the marketplace, so I’m not affected as a writer.  And I don’t even have a finished manuscript that I’m trying to position for publication (neither self- nor traditionally-), so it doesn’t impact me in that way, either.  At least, not for me in the present.  But all of this radically alters the future landscape of publishing.  I’ve also said before, and this bears repeating, that whatever the world of publishing is going to look like in the future, we’re not in the end-game yet.  The changes are going to keep coming.