Rare Book Monthly

Articles - March - 2012 Issue

Electronic Book Pricing Under Attack


The Kindle edition of the Jobs' biography, for sale on Amazon.

The electronic book and publishing world is anxiously watching legal actions that may affect the profitability of this form of an over 500-year-old business. Allegations have been raised by private parties, and unconfirmed reports indicate the U.S. Department of Justice may be looking into the claims. We do not know what, if any, action the DOJ will take, but a look at a lawsuit filed last summer, and updated about a month ago, gives us a glimpse at what is at issue.

The complaint was filed by Hagens Berman, a large law firm that likes to take on class action suits. These are generally suits where a lot of individuals' claims, often each of which is relatively small, are combined into one large action against a much bigger foe. That foe is often a large corporation, or what is known in the trade as a “target” defendant, or one with “deep pockets.” If the suit is successful, the defendant is stopped from committing further wrongdoing, the damaged individuals get a little compensation, and the law firm makes a whole lot of money. Some people are understandably offended that the law firm is the only one that gets seriously paid, but if something like price fixing is taking place, and the government doesn't act, this may be the only way private citizens can stop the practice.

This class action suit was brought against five publishers – MacMillan, Hachette, Penguin, Simon & Schuster, HarperCollins (a division of Rupert Murdoch's News Corp.), and one very deep-pocketed target defendant, the most valuable company in the world – Apple. With $100 billion (yes, billion) in cash sitting on its balance sheet, who wouldn't like to sue Apple?

When Amazon started selling e-books, a primary part of their strategy was to make them cheap. The $9.99 book was created. Amazon didn't make much on selling these e-books, at times even taking a loss. Amazon, unlike Apple, is not a massively profitable business, but there is a reason. Amazon is more focused on building their business for the future than making a lot of money now. By selling e-books for much less than printed ones, Amazon figured (correctly) it could wean a lot of readers over to electronic reading. On top of this, Amazon, with its Kindle e-reader, dominated the e-reader business, with something like 75% of the business. Selling cheap e-books encouraged readers to buy a Kindle e-reader. And ultimately, Amazon even started selling the Kindles cheaply, foregoing profits on them to get you hooked into the process of buying your e-books from Amazon to read on your Kindle electronic reader. The idea was to get people into the habit of fulfilling all of their book reading needs through Amazon. If it wasn't enormously profitable short term, in time that huge customer base would become a large source of revenue and profits for Amazon.

The publishers didn't much like this. Sure, they were getting paid their price for their e-books, but they did not like the long term implications. If Amazon established in consumers' minds that a book is worth only $9.99, and no more, it would make it very hard for them to ever raise prices, and it would make it very hard to sell traditional, printed books for typically established prices. Publishers seriously wanted Amazon to charge more.

So, according to the allegations in the lawsuit, the publishers decided to set the retail price for electronic books. A typical price appears to be $14.99.

Meanwhile, someone else became interested in selling electronic books – the aforementioned Apple. Apple was interested in encroaching on Amazon's e-reader market, selling books to be read on their iPad tablet computers, portable devices which can function as e-readers. Since Amazon is starting to morph their Kindle e-readers into being tablet computers as well, to go after Apple's dominant iPad market, Apple was more than willing turn the tables and go after Amazon's e-reader market. To this end, Apple was willing to go along with what is called the “agency model,” the complaint alleges. In this model, the publisher sets the price, and the seller gets a fixed commission, like 30%. However, while Apple did not seek to garner market share by undercutting the competition, they did not want to charge more than others either. Therefore, to get Apple to sell their e-books, and have them charge higher “agency model” pricing, the publishers had to force up Amazon's retail pricing, or so the complaint alleges.

In their complaint, the e-book consumers, as represented by law firm Hagens Berman, claim the publishers “conspired with Apple to force Amazon to adopt a new agency model in which publishers set prices directly, effectively ending Amazon’s ability to provide consumer-friendly pricing for e-books.” After the new pricing model was unanimously adopted by the publishers, the complaint further alleges, “the price of e-books shot up 30 percent.” The law firm describes this as a “price-fixing conspiracy,” and as “illegal,” which, if their allegations are true, is probably correct.

The law firm cites various alleged statements as evidence of the conspiracy. It cited a statement by Hachette CEO David Young in the New Yorker that if the consumer comes to believe a book is worth “ten bucks,” then “to my mind it's game over for this business.” It says Macmillan CEO John Sargent wrote on a blog that the previous market was “fundamentally unbalanced,” but that the agency model is “stable and rational.” The law firm also claims a Hachette executive met with Amazon and said that a price increase would solve the industry problem. Finally, they cite the Walter Isaacson biography of the late Apple CEO Steve Jobs, with Jobs reportedly saying that Amazon “screwed it up,” and that Jobs described his request that no other retailer be allowed to sell e-books for less than the price Apple charged.

By the way, if you want to read Isaacson's biography of Steve Jobs, you can buy a copy on Amazon. The price is $14.99.

Rare Book Monthly

  • <b>Old World Auctions (March 21-28):</b> Lot 7. Ritter's unusual sun-dial world map, 1607. Est. $3500 to $4500
    <b>Old World Auctions (March 21-28):</b> Lot 16. Fascinating Japanese satirical map published prior to WWII, 1932. Est. $1400 to $2000
    <b>Old World Auctions (March 21-28):</b> Lot 30. Newton's 2" miniature terrestrial globe, 1833. Est. $3500 to $4500
    <b>Old World Auctions (March 21-28):</b> Lot 318. Braun & Hogenberg's first plan of Moscow in contemporary color, 1575. Est. $2750 to $3500
    <b>Old World Auctions (March 21-28):</b> Lot 346. One of the most decorative 18th century maps of Malta, 1680. Est. $1200 to $1500
    <b>Old World Auctions (March 21-28):</b> Lot 412. The first printed map devoted to the Pacific in full contemporary color, 1589. Est. $8000 to $10000
    <b>Old World Auctions (March 21-28):</b> Lot 425. Rare set of celebrated explorers of the New World, 1592. Est. $1900 to $2300
    <b>Old World Auctions (March 21-28):</b> Lot 436. Two superb miniature atlases bound in one volume with 98 maps, 1682. Est. $5500 to $7500
    <b>Old World Auctions (March 21-28):</b> Lot 445. Part IV of de Bry's "Grand Voyages" by Girolamo Benzoni, 1613. Est. $2000 to $2500
    <b>Old World Auctions (March 21-28):</b> Lot 447. Tallis' "History of the United States of America" in six volumes, 1850. Est. $1500 to $1800
    <b>Old World Auctions (March 21-28):</b> Lot 448. Mallet's miniature military masterpiece, 1672. Est. $1400 to $1700
  • <b>Swann Auction Galleries Mar 29: Printed & Manuscript African Americana</b>
    <b>Swann Auction Galleries Mar 29:</b> Malcolm X, Autograph Letter Signed, from prison, 1950. $20,000 to $30,000.
    <b>Swann Auction Galleries Mar 29:</b> Letter from Moses Walker, an enslaved Georgia man, to his mother at another plantation, 1854. $12,000 to $18,000.
    <b>Swann Auction Galleries Mar 29:</b> Signed cabinet card of Frederick Douglass, albumen photograph, Boston, circa 1879. $10,000 to $15,000.
    <b>Swann Auction Galleries Mar 29: Printed & Manuscript African Americana</b>
    <b>Swann Auction Galleries Mar 29:</b> Placard from the Memphis Sanitation Worker's strike, 1968. $10,000 to $15,000.
    <b>Swann Auction Galleries Mar 29:</b><br><i>The North Star,</i> volume 1, issue 27, Rochester, NY, 1848. $8,000 to $12,000.
    <b>Swann Auction Galleries Mar 29:</b> Hand-tinted tintype of John Brown, circa 1860. $4,000 to $6,000.
    <b>Swann Auction Galleries Mar 29: Printed & Manuscript African Americana</b>
    <b>Swann Auction Galleries Mar 29:</b> Poster signed & inscribed by Huey Newton, circa 1967. $4,000 to $6,000.
    <b>Swann Auction Galleries Mar 29:</b> Album of aerial views of the march on Montgomery, taken by federal troops, 1965. $3,000 to $4,000.
    <b>Swann Auction Galleries Mar 29:</b> Poster for the SNCC, photograph by Danny Lyon featuring John Lewis, circa 1962. $3,000 to $4,000.
  • <b>Bonhams: Fine Books and Manuscripts. March 9, 2018</b>
    <b>Bonhams, Mar. 9:</b> BEETHOVEN, LUDWIG VAN. Autograph Manuscript sketch-leaf part of the score of the Scottish Songs, "Sunset" Op. 108 no 2. [Vienna, February 1818]. Inscribed by Alexander Wheelock Thayer. $80,000 to $120,000
    <b>Bonhams, Mar. 9:</b> Violin belonging to Albert Einstein, presented to him by Oscar H. Steger, 1933. $100,000 to $150,000
    <b>Bonhams, Mar. 9:</b> EINSTEIN, ALBERT. Autograph Letter Signed ("Papa") to his son Hans Albert, discussing his involvement with the atomic bomb, September 2, 1945. $100,000 to $150,000
    <b>Bonhams: Fine Books and Manuscripts. March 9, 2018</b>
    <b>Bonhams, Mar. 9:</b> HAMILTON, ALEXANDER. Autograph Letter Signed, to Baron von Steuben, with extensive notes of Von Steuben's aide Benjamin Walker, June 12, 1780. $10,000 to $15,000
    <b>Bonhams, Mar. 9:</b> NEWTON, ISAAC. Autograph Manuscript in Latin, being detailed instructions on making the philosopher's stone. 8 pp. 1790s. $200,000 to 300,000
    <b>Bonhams, Mar. 9:</b> 1869 Inauguration Bible of President Ulysses S. Grant. $80,000 to $120,000
  • <b>19th Century Shop:</b> Charles Darwin on sexuality and the transmission of hereditary characteristics: Autograph Letter Signed to Lawson Tait. Down, 17 January [1877].
    <b>19th Century Shop:</b> MILTON, JOHN. <i>Paradise Lost. A Poem written in ten books.</i> London: 1667. A very rare example with the contemporary binding untouched and with a 1667 title page.
    <b>19th Century Shop:</b> Hamilton secures the ratification of the Constitution: <i>The Debates and Proceedings of the Convention of the State of New-York, assembled at Poughkeespsie, on the 17th June, 1788.</i>
    <b>19th Century Shop:</b> The social contract “Man is born free, and everywhere he is in chains”: ROUSSEAU, JEAN-JACQUES. <i>Principes du Droit Politique [Du Contract Social]</i>. Amsterdam: Michel Rey, 1762
    <b>19th Century Shop:</b> “The first English textbook on geometrical land-measurement and surveying”: BENESE, RICHARD. <i>This Boke Sheweth the Maner of Measurynge All Maner of Lande…</i>
  • <b>Forum Auctions: Fine Books, Manuscripts and Works on Paper. March 22, 2018</b>
    <b>Forum Auctions, Mar. 22:</b> Jenner (Rev. George Charles). <i>The Evidence at Large...Respecting Dr Jenner's Discovery of Vaccine Inoculation,</i> presentation copy from Edward Jenner to Rev. Rowland Hill, 1805. £4,000 to £6,000
    <b>Forum Auctions, Mar. 22:</b> Houdini (Harry).- Maggi (Girolamo). <i>De tintinnabulis liber postumus...de equuleo liber,</i> Harry Houdini's copy, Amsterdam, H. Wetstein, 1689. £600 to £800
    <b>Forum Auctions, Mar. 22:</b> Meyer (Henry Leonard). Coloured Illustrations of British Birds, and their Eggs , 7 vol. in 2 plus Illustrations of British Birds, 4 vol., 1842-50 and [1835-51]. £5,000 to £7,000
    <b>Forum Auctions: Fine Books, Manuscripts and Works on Paper. March 22, 2018</b>
    <b>Forum Auctions, Mar. 22:</b> Dickens (Charles). <i>An Entirely New Romantic Drama, in Three Acts, by Mr. Wilkie Collins, called The Frozen Deep,</i> 1857. £3,000 to £4,000
    <b>Forum Auctions, Mar. 22:</b> Lighthouses and Islands of Ireland, c. 125 drawings, 1867. £6,000 to £8,000
    <b>Forum Auctions, Mar. 22:</b> Shelley (Lady Jane). Diary, 1853 & 1860. £1,500 to £2,000
    <b>Forum Auctions: Fine Books, Manuscripts and Works on Paper. March 22, 2018</b>
    <b>Forum Auctions, Mar. 22:</b> Scottish Binding.- The Holy Bible, Containing the Old and New Testaments, bound in contemporary brown polished calf decorated with the figure of a Chinese spearman, by ?James Scott of Edinburgh, 1778. £2,000 to £3,000
    <b>Forum Auctions, Mar. 22:</b> Greene (Graham). <i>The Man Within,</i> first edition, signed by the author, 1929. £4,000 to £6,000
    <b>Forum Auctions, Mar. 22:</b> Mellan (Claude, 1598-1688). The Holy Face, or the Veil of St Veronica, [c. 1649 and later]. £800 to £1,200
    <b>Forum Auctions: Fine Books, Manuscripts and Works on Paper. March 22, 2018</b>
    <b>Forum Auctions, Mar. 22:</b> Desaguliers (John Theophilus). <i>A Dissertation concerning Electricity,</i> W. Innys, and T. Longman, 1742. £2,000 to £3,000
    <b>Forum Auctions, Mar. 22:</b> Le Jeune (Paul). <i>Relation de se qui s'est passé en la Nouvelle France en l'anné 1636 enuoyée au R.Pere Provincial de la Compagnie de Iesus en la Province de France,</i> 1637. £2,000 to £3,000
    <b>Forum Auctions, Mar. 22:</b> Stumpf (Johann Rudolph). <i>Gemeiner loblicher Eydgnoschafft Stetten, Landen und Völckern Chronicwirdiger thaaten beschreibung, </i> Zurich, Froschauer, 1586. £3,000 to £4,000

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