IN THE tradition of digital success leading to massive antitrust lawsuits, the US Department of Justice (DoJ) this week filed a suit against Apple and five publishers for allegedly conspiring to keep ebook prices artificially high. Apple’s epublishing rival Amazon rubbed salt on the wound by promptly cutting its Kindle ebook prices even further. But no one should be too smug. The upturning of traditional publishing models has only just begun and neither Apple nor Amazon – certainly not a DoJ prosecutor – has the answer to where it will all end up.
Some think that Apple and the big publishers should be seen as heroes, bravely defending a model that allows them to produce books of real quality and authors to make a living. On this view, the DoJ is merely a hapless stooge of Jeff Bezos as he ruthlessly uses content as a loss-leader to gain market share.
But anyone who thinks like that is in for a nasty shock. First of all, Apple is also in the business of undercutting traditional publishing. As Walter Isaacson’s biography of Steve Jobs revealed, Jobs planned that the iPad would be a replacement for textbooks, the prices of which have spiralled in the US to over $200 (£125). Jobs thought the market, which has also been accused of cartel-like tactics to maintain its pricing levels, was “ripe for destruction”. After the launch of iBooks 2 this January, with a clear focus on educational content, Apple clearly has textbooks in its sights. Some publishers may have found it a temporary ally, since Apple came late to Amazon’s ebook party and needed to get on the right side of rightsholders, but there’s no reason for that to last. Apple has been pretty ruthless in its attitude to other ebooksellers, changing the rules of its app store in its own favour. It isn’t going to be any more sentimental to Hachette, Macmillan, Penguin and the others when the time comes.
That doesn’t make Amazon the hero of this story, either. True, its wholesale price model does more to recognise the disruptive nature of electronic publishing, where marginal costs fall to zero. But it is hardly innovative, simply replicating an approach long accepted for physical books. Meanwhile Amazon’s commitment to digital rights management (DRM) via a dedicated Kindle format harks back to the most short-sighted policies of the music industry’s traumatic encounter with digital disruption.
With many ereaders barely out of their Christmas wrapping paper, it is far too early to tell what publishing’s future will look like. But it would be foolhardy to trust either Apple’s strategic commitment to agency pricing or Amazon’s gated Kindle. Far more intriguing is Amazon’s Kindle Direct service, which has already allowed 26-year-old Amanda Hocking to become a self-published millionaire, while selling books at $0.99 a copy, making even Amazon’s $9.99 bestsellers look absurdly overpriced. With that kind of supply chain disintermediation on the horizon, government lawyers are the least of the industry’s worries.
Marc Sidwell is City A.M.’s business features editor.