Apple was found guilty in July of conspiring with publishers to fix the price of eBooks. As punishment, Apple must delete existing contracts with publishers and negotiate new ones, one at a time to avoid new conspiracy. The government is also pushing for Apple to let Amazon and others sell their books from Apple’s iPhones and iPads.
The whole story is framed like this: Apple and publishers are the bad guys, conspiring against victim Amazon to screw readers out of reasonably priced eBooks. So government, the hero, steps in and sets it right. Everyone lives happily every after.
It sounds like a bad fairy tale. Unfortunately, the true story that nobody is telling is actually something of a Shakespearean tragedy.
Here’s the true and tragic story of how Apple ended up helping Amazon become the Mother of All Monopolies.
eBooks: To Be or Not to Be (Cheap)
Shakespearean tragedies typically involved a flawed hero, such as Hamlet or MacBeth.
In the eBooks tragedy, of course, the protagonist is the late Steve Jobs, a great man who alone was endowed with the will and means to battle the northern eBook monopolist Amazon, a company that before Apple entered eBooks owned as much as 90% of the market. Something was rotten in the state of Seattle.
Jobs was right to try and disrupt Amazon’s monopoly-creating pricing system, its policy of selling books at a loss in order to suffocate the competitionand thereby gain monopoly powers.
But Jobs erred by conspiring with a few publishers, his star-crossed partners, to fix prices. He compounded his mistake by leaving behind a trail of emails useful by the government in its case against Apple.
Both Amazon’s and Apple’s actions in this were anti-competitive in the sense that they both harmed consumers by screwing competitors. Some believe Amazon’s actions were as illegal as Apple’s. As Philip Elmer-DeWitt said in a brilliant piece about the case recently, the verdict makes us wonder “why the Justice Department chose to prosecute the new entrant in the e-book market and not the monopolist.”
It’s also possible that Amazon did nothing illegal, but is merely pursuing its own financial gain within the law.
The real villain in all this is the US Department of Justice, which has aggressively sought to eliminate the only competition Amazon ever had from the market and return Amazon to its position of total dominance of an industry that will determine what people read. Another villain is U.S. district judge Dense Cote, who is going along with the DOJ’s whole program, including the outrageously over-reaching penalties, for the most part.
Big deal? What’s the harm if Amazon loses money on eBooks until every competitor is eliminated?
The truth is that we’ve already caught small but telling glimpses into what the world will be like when Amazon alone decides how much books cost, how all books are to be sold and what we all read.
There’s the curious case of author James Crawford. Amazon’s policy is to undercut price found on any other site. The company mistakenly believed Crawford’s zombie novel was free on other sites (in fact they were offering free chapter previews), so Amazon dropped its own price to zero. Some 5,100 people downloaded Crawford’s book without paying for it. When Crawford asked to be reimbursed for lost royalties resulting from Amazon’s blunder, they sent him the following note: “We’re sorry, we’re unable to pay royalties for your sales when your title was listed at $0 on our website. As per our KDP Terms and Conditions, we retain discretion over the retail price of a Kindle book.”
Just wait until they retain discretion of the price of all eBooks. At that point, they won’t be free. Or cheap. They’ll be super expensive. (That’s the whole benefit of a monopoly — you can charge what you want.)
The New York Times reported recently that in small markets where Amazon has actually achieved total monopoly, the company has raised prices.
From the story: “When the University of Nebraska Press brought out a bibliography of the novelist Jim Harrison four years ago, Amazon charged $43.87. The price this week: $59.87.” The story gave several other examples.
Amazon says it’s lowering prices overall, and that the Times’ conclusions were based on anecdotal evidence. But hard facts are impossible to come by because Amazon plays a shell game with prices, raising them and lowering them for different people for reasons it refuses to discuss with the press.
Ultimately, Amazon’s position appears to be: It doesn’t matter what publishers, writers, readers or the media want. We control book prices and are accountable to no one.
Amazon has also raised concerns about the question of ownership. Who owns the books you have paid for?
To Amazon, the answer is clear: They do. Kindle’s own terms, which you agree to if you buy books from Amazon, specify that Amazon, not you, own the books. You only “license” them as long as you obey Amazon’s rules.
A Norwegian woman fired up her Kindle last year and discovered that all her eBooks had been deleted. She contacted Amazon customer relations, which informed her that her account had been closed. Amazon’s control over both the books, the device and also the file format — their own proprietary, locked down format — means they alone decide whether you are allowed to read your own books.
The woman was informed by Amazon: “We have found your account is directly related to another which has been previously closed for abuse of our policies. As such, your Amazon.co.uk account has been closed and any open orders have been cancelled. Please understand that the closure of an account is a permanent action. Any subsequent accounts that are opened will be closed as well. Thank you for your understanding with our decision.”
After going back and forth for some time, Amazon finally emailed to the woman this note: “We regret that we have not been able to address your concerns to your satisfaction. Unfortunately, we will not be able to offer any additional insight or action on these matters. We wish you luck in locating a retailer better able to meet your needs and will not be able to offer any additional insight or action on these matters.”
Yeah. Good luck finding another retailer.
In another more famous case, not to mention a delicious irony, Amazon reached into the Kindles of its customers and deleted from their tablets George Orwell books after discovering that the publisher was not authorized to sell them.
Note that Amazon apologized for both incidences, and has specified that their intent is that customers will always be granted permission by Amazon in the future to access the books they paid for.
Act 5: The New eBooks Market
The reason the whole fiasco is a tragedy and not a fairy tale is that it will result in the industry’s best hope for real competition being remove from actually competing effectively.
During the next few years while Apple is shackled, Amazon will be able to eliminate more competitors and gain more control over eBooks. And during this same period, the book market will continue its swing away from paper books and toward eBooks, which Amazon will control with a breathtaking totality.
Like any Shakespearian tragedy, this one is ending in a way that nobody should want it to — with hopes dashed and our heroes poisoned by their own errors.