The publishing industry is in a tight crack. Its product can be distributed for virtually nothing as a stream of ones and zeros. Finding, paying, editing and promoting authors’ work costs money but average consumers (half of whom think they could write bestsellers themselves) do not see that. And the dominant distributor, Amazon, is prepared to sell the product at a loss to gain share, reinforcing the drooling public’s idea that the product should be cheap.
The crack got tighter still on Wednesday, when the US Department of Justice sued Apple and five of the six largest American publishers for price fixing. At issue is the “agency model” in which publishers set ebook prices and forbid distributor discounts. The DoJ says that the publishers and Apple colluded when agreeing en masse to enforce the model. Some defendants have settled; others (including Penguin, a subsidiary of the parent company of the Financial Times) are headed to court.
The importance of the settlements and even the court case should not be exaggerated. Those that settled will be able to enter agency agreements again in two years, provided they do not collude, and will be permitted to enter agency deals now, as long as the distributor is allowed to discount individual books consistent with not selling all of each publisher’s products at an aggregate loss.