At What Temperature Does an eBook Burn?

At What Temperature Does an eBook Burn?

In Ray Bradbury’s dystopian sci-fi classic Fahrenheit 451, books are outlawed by the government in the 24th century.

According to Bradbury, this imagined ban didn’t happen overnight. It was preceded by gradual trivialization of information in general. People increasingly preferred TV sound-bites and frivolous, out-of-context nuggets of information over reasoned argument and well-researched books about important ideas.

Eventually, writers and readers of books became so culturally marginalized that it was easy for the government to just eliminate them and their work by burning down any home or building that contained books.

Bradbury’s nightmare is in fact happening, and way ahead of schedule. 

Obviously trivial information is being favored over the substantial, not only because of TV and the Internet in general, but a phalanx of cultural forces Bradbury didn’t consider when he wrote Fahrenheit 451 in 1953 — blogs, social networking, online videos, video games, Internet memes and many others.

Despite this general trivialization of content, we still have a book publishing industry that employs full-time professional writers, researchers, editors and publishers. And millions of people still buy relatively long, well-researched, well argued and well-made books on every subject.

If you look at the New York Times Best Sellers List, it’s dominated by people who make their livings writing books.

The existence of professional writers, editors and publishers is inconvenient for every government, which would love to rule an idiocracy too distracted by shiny objects to care about the misdeeds and abuses of those in power.

The continued existence of this profession is not certain. In fact, a bloody battle being waged for the future of book publishing.

Needless to say, electronic books are rising in prominence and will become the dominant medium for the distribution of books.

There are two possible outcomes in this battle for the future of publishing.

The first possible outcome is that Amazon.com will own the entire eBook market. It will use its total dominance to squeeze every penny from book creators, so much so that publishing companies will largely cease to exist, book editing will be eliminated. And books will be written for free by amateurs with something to promote.

In other words, book publishing will be like the news industry would be if The Huffington Post was the only news source.

This is the Fahrenheit 451 future.

The second possible outcome is that Amazon.com does not control the whole eBooks market, but that multiple retail stores for eBooks exist and compete with each other. Publishers exist. Editors edit books. Writers can make a living. High-quality books well researched, well edited and well designed continue to be available to the public.

In other words, book publishing will be more like the the news business is today — lots of trash, but also the New York Times, the Wall Street Journal and the Washington Post continue to exist and somebody out there is doing investigative journalism.

Either Ray Bradbury’s scenario will essentially play out, or it won’t.

The Obama Administration has taken sides in this battle. They are actively supporting the destruction of the book industry as an industry. They are working to end editing and writing as professions, and actively supporting a monopolist using its dominant position to sell books at a loss in order to eliminate all competitors.

President Obama’s DOJ has taken a huge step in bringing about Bradbury’s Fahrenheit 451 scenario.

How? By aggressively shutting down the publishing industry’s only current hope for survival: The “agency model” of selling eBooks.

What the lawsuit is all about

Amazon uses the “wholesale model” of selling eBooks. It buys books from publishers, then sells them at any price it wants to.

Amazon takes advantage of the “wholesale model” to sell many eBooks at a loss. (Note that they sell some of their eBook readers at a loss, too.)

The only possible purpose to sell books at a loss is to drive competitors out of the market. The more competitors are driven out, the more power Amazon has to force publishers to take ever lower wholesale prices for their books, leading to their inability to stay in business.

Apple sells books using something called the “agency model.” This is the same model Apple uses for apps. The content creators in both cases (book publishers or software developers) can charge any price they like, and pays Apple 30% as the “agent” or the conduit through which the content creators sell to users.

Of course, this whole model wouldn’t work if publishers were coerced into a below-cost price from Amazon and sold at an above-cost price through Apple, plus Apple’s 30%. Nobody would buy from Apple because the price of a book that doesn’t destroy the industry is always higher than the one that does. So Apple’s agreement with the publishers is that if they sell the same eBook title elsewhere, it must be sold at the same price or higher than the iBooks price.

And this is the “price fixing” the DOJ is suing Apple over.

However, the lawsuit is bad antitrust enforcement. Here’s why:

1. Amazon is the monopoly, not Apple

I don’t know exactly what Amazon’s market share is, but two years ago they claimed somewhere between 70 and 80 percent of the eBook market.

Amazon’s dominance is so great that authors and publishers must publish on Kindle in order to have a bestselling eBook.

Apple, on the other hand, is a minor, bit player in publishing with little power to dictate prices.

In this lawsuit, the government’s highest anti-trust authority is siding with the monopoly against a tiny player in order to preserve and strengthen the monopoly and give it additional powers to eliminate competition.

2. Apple isn’t “price fixing” because it’s not setting prices

Price fixing exists when two or more companies conspire to control pricing in a market. One example might be if Coke and Pepsi had a meeting and decided that they’d both make more money if they agreed to sell sugary beverages at three dollars per can.

There are many ways price fixing can occur. But all of them involve a conspiracy to raise, lower or set prices.

In the case of Apple’s distribution agreement for iBooks, Apple is entirely uninvolved in the setting of prices, neither up nor down nor at a fixed rate. Publishers can choose to sell an eBook title for a penny or a million dollars — Apple doesn’t care.

More to the point, one publisher may choose to radically discount eBooks and sell each book for a dime. A competitor may decide to gouge customers and sell their titles for $100 each.

Apple’s policies do not involve a conspiracy to drive overall prices down or up.

The DOJ is assuming that Apple’s policies raise prices. Their evidence is that iBook prices are more expensive than Kindle prices. But this is because Amazon is selling at a loss, and Apple isn’t.

Giving retail pricing control to the publishers rather than the tablet maker doesn’t necessarily mean publishers will charge higher prices, or charge anything at all. It just means they have control.

3. Kindle is closed, iPad is open

Anyone can read any Kindle book on any iPad, but you can’t read iBooks on a Kindle, at least not without complicated fiddling and loss of features.

In fact all eBook formats are supported on the iPad, most with free apps.

That’s why Apple’s clause that publishers can’t undercut iBook prices elsewhere is necessary.

Consider: If a book is $9.99 from Amazon and $12.99 on iBooks and you have an iPad, you’ll buy the Amazon version and read it on your iPad because it’s cheaper.

If a book is $12.99 on Amazon and $9.99 on iBooks and you have a Kindle, you’ll also buy the Amazon version because Amazon doesn’t support the iBooks version.

The only way for Apple or any other tablet platform to sell eBooks given Amazon’s price dumping is for the publishers to set the price and sell at the same price on all platforms.

Obama’s DOJ is trying to eliminate the agency model in publishing, the last hope of the publishing industry from an Amazon take-over.

Anti-trust action by the Department of Justice is supposed to protect consumers. Protecting the monopoly player’s ability to sell at a loss until all competitors have been eliminated is not protecting consumers.

Worst of all, this isn’t just about a product. It’s about democracy, freedom of thought and censorship.

For the government of a democracy to side with a book monopoly to help them burn publishing to the ground is something no citizen should stand for.

Related
  • Brianna Wu

    Wonderful article, and I totally agree. I do think the justice department is being very short sighted in this matter. Thanks for making such a reasoned argument.

  • Ryan Simmons

    Great article.

  • Brandon Dillon

    Quality article. Thanks for the in-depth elaboration.

  • iBrittBlair

    This article is really helpful and insightful but I don’t know that the DOJ’s decision is all the president’s fault. I don’t buy books Amazon anymore.

  • MacsFuture

    I totally agree with Mike. And take a look at paragraph 30 of DOJ’s complaint. The Complaint says Amazon has been profitable selling e-books at $9.99 and in the same paragraph says Amazon buys those ebooks from the publishers at the $9.99 wholesale price. That means Amazon is losing money when you count overhead. To me, that is predatory pricing designed to drive other retailers, both e-book retailers and paper book retailers, out of business. Amazon already has monopoly power in the e-book business, and as Scott Turow points out, this antitrust lawsuit will make Amazon into a bigger monopoly.

    Make, all your points are spot on!!!

  • Dolly Charles

    “Obviously trivial information is being favored over the substantial, not only because of TV and the Internet in general, but a phalanx of cultural forces Bradbury didn’t consider when he wrote Fahrenheit 451 in 1953 — blogs, social networking, online videos, video games, Internet memes and many others.”

    Res ipsa loquitur. It would’ve been better if you’d skipped all the outrage, Mike, and headed straight to the bullet points, where you were largely on target.

    You might also have pointed out that the Obama administration and its DOJ have been disasters on several fronts, with the Obamas trying to pick winners in countless fields, including green tech and motorized vehicles, and supporting Internet controls.

    Books will be with us whether the Random Houses and Macmillans of the world exist or not. It’s not the DOJ that’s causing them to lay off editors and copyeditors and designers and publicists, et al; it’s the digital universe that, ironically, Steve created with iTunes.

    And by the way, there are more crap books published by the above-named pros than there are quality books. See: Sturgeon’s Law.

  • EnzymeX

    I am a stockholder of Apple, Google and Amazon.  In my view, this article misses the obvious:  Amazon can’t sell below cost forever.  

    End of story.  I’m not crying over the demise of old school publishing magnates who have been screwing content creators for generations, and in my view the government certainly doesn’t need to step in to protect poor little Apple and awkward cousin Google against big, bad Amazon.  

    The fact is all three companies are building diverse content ecosystems and each have different competitive advantages that will make them all winners in the long haul.

    Folks seem to forget that these companies are not primarily in the business of selling books, movies, or other e-content to us.  Those products are just the window dressing for selling their core products.  

    Namely, Apple sells the world’s most loved personal computing devices and has the best supply chain bar none to deliver them.  Amazon is the best generic e-commerce marketing and distribution company in the world.  Google is the worlds most successful internet advertising company.  

    So, here is my prediction:  Politics will continue, patents will be bought, lawsuits will be advanced, and yet somehow through all that noise these three companies will continue to win. 

    Yes, publishing as we know it will be different, as will video and movie distribution.  But all these creative arts will continue to exist with greater diversity, accessibility, and opportunity for independent content creators than ever before. 

  • silly_mac

    Comparing Bradbury’s Fahrenheit451 to our current ebook situation might be a hot topic, but it is absurd. Eagan is not reasoning, but filling a word count with inflammatory demagogy.

    Cult of Mac often provides great insights and tips on new innovations. It gains no credibility with pathetic online defenses of Apple’s corporate greed by non-legal field professionals.

    Tell me about Mountain Lion compatibility issues, or release dates, but don’t waste my time with sophomoric analogies better left in the high school lunchroom than in a national publication.

  • imajoebob

    Well reasoned, but ultimately flawed. The DOJ isn’t trying to “end” agency publishing, and they’re not pursuing Apple and the publishers for their pricing model. The alleged anti-competitive behaviour was the publishers “conspiring” to use Apple’s minimum pricing stipulation as a way to maintain minimum pricing. Had the 5 or so publishers just agreed to the pricing rule independent of each other there would be no case. But when they formed their “pricing cartel” they ran afoul of the law.

    Coke and Pepsi didn’t negotiate a “minimum price,” but they still sell at nearly the same price at every retailer, from Walmart to Ralph’s to 7-Eleven, to Subway. That’s because they’re willing to forgo any retailer that demands they violate their economic model. You can still buy Sam’s Cola for about 1/3 less than Coke, if you’re willing to settle. The publishers didn’t have the courage to tell Amazon they’d have to settle for Sam’s-quality books for the price they’d pay, and then conspired to create an artificial contractual pricing scheme to hide behind. Had Apple created the contracts independently from the publishers they wouldn’t be in trouble with them.

    Make no mistake, Amazon is also engaged in anti-competitive behaviours (see Marketplace for their next step to domination http://www.marketplace.org/shows/marketplace/marketplace-friday-april-13-2012), but the DOJ is addressing the larger and more blatant violation first.

  • Ronald Stepp

    You seriously think people will be more likely to let the government burn their Kindles, iPads, and iPhones instead of their paper books?

    Really? I don’t think so.

  • Sdreed91

    I think the current scenario consumers are facing is not a valid comparison to “Fahrenheit 451″.

  • technochick

    I would argue that you are slightly wrong about #2. No Apple isn’t setting prices but their ‘most favored nation’ clause could still be a violation of such rules. And it’s very likely unneeded anyway if the publishers are setting the price and not letting the retailers change them.

  • DavidJVallieres

    You said, “There are many ways price fixing can occur. But all of them involve a conspiracy to raise, lower or set prices.”


    A conspiracy? 

    A key element of antitrust is that if you’re the creator or manufacturer and you sell your product to a retailer you can’t tell the retailer what to sell your product for. You an “suggest” a price, but you can’t enforce it. That’s why you see “suggested retail price” being used on packaging of products. As the creator/distributor or manufacturer you can sell it to a retail outlet at any price you want but they are free to sell it at a profit or a loss – their choice.

    What you have totally ignored in your article is something much more powerful at work here. It’s not the potential conspiracy angle you’re suggesting- it’s market forces.

    The market will ultimately decide prices it’s willing to pay for ebooks, not Amazon, not Apple, not the government and not the publishers. The market.

    Market forces have changed the way music and movies are sold – they will do the same for books – pbooks or ebooks.


  • ApplePr0n

    Nice article. I couldnt agree more

About the author

Mike ElganMike Elgan writes about technology and culture for a wide variety of publications. Follow Mike on Google+, Facebook and Twitter.

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