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Apple is not part of the settlement talks with DOJ

The U.S. Department of Justice (DOJ) could sue Apple this week over allegations regarding raised prices of e-books via an agency sales model.

Last December, the European Commission opened a formal antitrust investigation into whether five international e-book publishers had been partaking in anticompetitive practices with the help of Apple and its e-book store iBooks. The five e-book publishers include Hachette Livre (Lagardère Publishing France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp., U.S.A.), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).

Traditionally, publishers sell physical books to retailers for about half of the cover price, which is considered a wholesale model. Retailers then had the ability to sell those books to customers for a lower price if they wanted to.

But when e-books came along, this model was challenged. Amazon started selling best sellers for as low as $9.99 to encourage its Kindle e-reader sales. Publishers were not happy.

Apple then came along with iBooks, and publishers began to worry that it would take over the book industry the way Apple's iTunes took over the music industry, where customers would choose to purchase cheap, digital books instead of physical books.

However, Apple struck a deal with publishers in 2010. An agency model was implemented, where publishers were allowed to set the price of a book and Apple would take a 30 percent cut. The only restriction was that publishers were not allowed to let rivals sell the same book at a lower price.

This model helped Apple because its original iPad launch occurred in 2010, which was coupled with iBooks. To assure a successful launch of the device, DOJ believes Apple cut the agency model deal with publishers, which turned out to be an anticompetitive move.

After the European Commission opened an investigation of this agreement, DOJ climbed aboard as well. After looking further into the situation, DOJ threatened Apple and the five publishers with a lawsuit just last month for allegedly conspiring to raise prices, which violates federal antitrust laws.

Now, DOJ may sue Apple as soon as today while still working to reach a potential settlement with the five publishers, according to Reuters. Nothing has been set in stone, but DOJ does plan to pursue Apple.

Source: Reuters

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RE: Who is best for books?
By lightfoot on 4/11/2012 12:03:05 PM , Rating: 2
Amazon is killing a lot of traditional retailing and is trying to (or merely will in passing) kill most traditional book publishing with it's sales model.

Amazon is killing book retailers, not book publishers with their retail model of sales.

With this model (as it always has been) book publishers set a wholesale price and sell books at that price to all resellers. The resellers can then sell the book at any price that they choose - they now own the book and the publisher has already been paid in full. Amazon selling the books at or near cost hurts other resellers, but from the publisher's perspective it doesn't matter. If they sell a million books it doesn't matter if Amazon sold all of them or only a fraction of them. Either way the publisher sold a million books and got paid for them.

RE: Who is best for books?
By Solandri on 4/11/2012 2:19:46 PM , Rating: 3
Actually, the old book publishing model needs to die too. Basically it's a few dozen publishers deciding what millions of people will want to read. The authors have to pitch their books to a publisher, where a couple people read it and decide on behalf of millions of readers if it will/will not sell. If they say no, the author has to shop around with a different publisher. If they say no, shop around some more. Until either one says yes or the author gives up. Books which might appeal to niche markets rarely get past this process (though they tend to be more flexible than niche music or movies).

The new reality is that authors will self-publish and people on the Internet at large will decide what is/isn't "publication-worthy" via word of mouth. The publisher's job (editing, proofreading, formatting/typesetting, and some marketing and publication) all will be spun off into a la carte services. Authors will hire an editor to proofread/edit, a graphics artist for illustration and cover art, and optionally a marketer to increase the odds of their book becoming a "hit" via word of mouth. The traditional publisher is dead, they're just zombies who are gonna fight it until they run out of money and influence over the copyright laws.

It's the same thing that has to / is happening in music and video production. The power of the publishers / studios as gatekeepers to media is evaporating. Due to the internet, there's no longer any barrier preventing any joe in some random house in the world from reading / listening to / watching something created by another joe in some other random house.

The next big gatekeeper is going to be the shared, verifiable (to minimize astroturfing) review services which use algorithms to tailor their recommendations to your individual tastes. Amazon does this - it will make new suggestions based on your past purchases and browses. This is exactly what's needed to steer customers to new books / songs / movies they may like when faced with tens of millions of choices from wanna-be authors, singers, and directors. If the company providing this service is also the one selling your books, it's a service for which authors will gladly pay 30% of their revenue.

If the publishers/studios had been smart, they would've been dumping their money into researching this customer preference classification and prediction in the 1990s. But they weren't. They were so convinced their old business model had to survive that they dumped that money into researching DRM instead. So now they're gonna lose their status as gatekeepers to the companies which did work on this.

"We’re Apple. We don’t wear suits. We don’t even own suits." -- Apple CEO Steve Jobs

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