Macmillan Settles With DOJ

A letter from Macmillan CEO John Sargent is here and is an interesting read, especially regarding why Macmillan has chosen to settle.

By all means add your thoughts in the comments. But read the letter first, please.

65 thoughts on “Macmillan Settles With DOJ

  1. So that’s that. I figure they’d eventually settle, particularly with the other publishers settling.

    I haven’t seen those cheap e-books prices yet from Amazon, though. Or the credit I’m supposed to get (Amazon sent an e-mail a while back). Does that only kick in now, or soon?

  2. Its a good letter. It was only a matter of time when all the other publisher’s abandoned ship. MacMillan (through Tor) has already started what should be the end of Amazon’s strangle hold: namely, the ending of allowing DRM. Now consumers can buy it from B&Ns and put it on a Kindle. Its unfortunate publishers began following the same failed path of the music industry: Amazon never should have been able to lock consumers to a particular device.

  3. I find it… staggering that those who did not settle had the damages minus settlement of all other defendants added to their potential payout if they lost. That seems strange. Even with the claims of conspiracy.

  4. Oh, I’d like to point out that when the Kindle first hit the scene, I actually wrote a letter to Amazon stating their policy of a proprietary DRM wasn’t good for the consumer or the publishers. They did give me a nice reply of thanks for your feedback, but this is the route we have chosen to go. I also wrote Random House. They never actually responded.

  5. Hopefully the sudden upswing of sales they’ll get from pricing their ebooks to reasonably compete with the prices on trade paperbacks will make them realize that it’s stupid to try to drive people away from ebooks. (Someone send Game Newell in to talk some sense about digital distribution to these people.)

    I, for one, have a long list of Macmillan (Tor) ebooks on my Kindle’s “wishlist,” because when faced with the option of paying 50% more for the ebook than the available trade paperback version, my decision thus far has been to *not buy the book,* and get my Sci-Fi fix from some other publisher that has proven more friendly to both science and fiction.

    Welcome to the future, Macmillan. It’s a shame it took a court to drag you screaming from your hole, but I think you’ll find it’s nicer here. There’s, like, money, and people who want to buy your products from you, and near-zero distribution fees and good stuff like that.

  6. Does anyone believe that Amazon has good intentions long-term? They are selling the Kindle at a loss. They are fighting for the ability to sell the media at a loss. They are not a charity are are conspicuously absent in any conversation about the long term sustainability of the book business.

    And every time they post a loss or a barely break even quarter their stock price goes up. Up and up and up. The market obviously knows exactly what they are up to. Every quarterly loss is actually an investment in a future where they can gouge anyone and everyone because all alternate avenues have been crushed.

    I mean, unless you truly believe that Jeff Bezos is actually running a stealth charity with a decades long plan to trick wall street into subsidizing media? There is no other explanation that is not long-term malicious.

  7. That’s pretty common, Patrick. And not entirely unreasonable when you think of it.

    Consider if it was a less abstract offense – say, going after 4 roommates who hadn’t paid their rent for the last three months. You file eviction papers and a suit against all 4 for the $400 (it’s a cheap place) they owe you.

    The first one offers to settle but only has $70. He’ll give that to you, along with any keys to the property and a signed agreement to vacate and waive any rights to residency right now. It’s not the 1/4 responsibility maybe you think he should be responsible for, but you agree because suing people is expensive and maybe he won’t have even that much when you get to court.

    You could say it’s unfair to ask the other 3 people to come up with the remaining $330, but on the flip side it’s STILL the amount of money you’re allegedly owed. Perhaps that person who settled claims he’d actually moved out by then and the others agreed to cover his rent. Maybe he says he never paid a full 1/4th because he had a smaller bedroom.

    True, you made an agreement to take less. Should you be forced to write that off rather than continue to go after it? Maybe. That’s an argument that the last remaining roommate could make when damages are assessed. Macmillan could have done the same. But the risk exists and there’s some basis for saying that the people who didn’t accept culpability should be on the hook once a trial determines they are, in fact, guilty of the supposed offense.

  8. I really have very little sympathy for the publishers in this. The whole “we need to charge the consumer more because it is in their long term best interest” really isn’t terribly compelling to us as consumers. I also find it fairly suspect that the letter acknowledges that the agency model doesn’t work when the rest of the field is not utilizing it – that seems a tacit admission that the only way for the agency model to have been viable in the first place is if multiple publishers “coincidentally” adopted it at once.

    What *is* compelling, and functional to the publishers’ stated goals, has been the removal of DRM. Amazon has a lot less incentive to undercut B&N and co. if the ebook can be read on rival platforms – much of their plans for selling at a loss were centered on eventual platform dominance, with DRM being the crucial enabler in that. It just so happens it is also in the interests of the consumers to ultimately pay a bit more to be liberated from the technical hurdles that prevent us from properly owning our purchases (of course there are still the legal hurdles – with the whole “you only license IP” BS).

    Finally, I never understood why book publishers actually believed Apple would be the lesser evil for them. Are they completely ignorant of how Apple conducts their business. It’s telling that Amazon *aspires* to be like Apple.

  9. ‘ I like to believe that we would win at trial.’

    I like to believe they would NOT have won at trial, since they are in the WRONG.

    Talk about apologies that aren’t, admissions that aren’t, and no conceding that they 1) price fixed, and 2) conspired to do so.

    A WRITER must have crafted that nuanced letter. Nice work. Weasel words. ‘I am not a crook.’

  10. @Chupageek:

    Finally, I never understood why book publishers actually believed Apple would be the lesser evil for them.

    I’m guessing for the same reason that music companies believed Amazon would be the lesser evil compared to Apple, when they were trying to force Apple to raise prices on individual tracks and albums: play two large content distributors against each other and you may get your way with the one who first pissed you off.

    Apple said “the cost of an album is $9.99, the cost of a track is $0.99, end of story.” Music publishers wanted the right to charge anything for an album, and to have different ‘tiers’ of track pricing so that new/hot songs could cost more than $0.99. Apple wanted DRM-free music, so they yielded enough to say ‘you can charge a bit more, but you have to offer the track in super-high-quality without DRM.’ (A.k.a. ‘iTunes Plus’ tracks.) The music companies didn’t initially like this, so they decided to pressure Apple by going to Amazon and offering their music there as DRM-free tracks for $0.99. Since people went and bought DRM-free tracks from Amazon to load into iTunes, Apple yielded and said ‘Fine, you can charge what you want, we surrender, but on the condition that ALL the music has to be DRM free because you offered that deal to Amazon.’

  11. Publishers are between a rock and a hard place. Therefor i understand that they tried, but as a consumer i’m glad they failed. I don’t think this will be bad for the book market, quite the contrary.

  12. @ABE, I think you are being unfair. Mr. Sargent would be using “weasel words” if he tried to apologize without really apologizing (e.g. “I’m sorry that you are offended”), but he isn’t trying to do that. He’s explicit and upfront that he thinks his company didn’t do anything wrong, and that he isn’t sorry for its behavior. The point of this statement is to explain why the company has settled, not to apologize for the behavior that triggered the lawsuit.

  13. (1) Read the letter.
    (2) Posted link to it for my 5,000 Facebook friends.
    (3) “Our company is not large enough to risk a worst case judgment.” — Nobody in publishing is ‘Too Big To Fail’, not Random House, not Bertelesmann (Global media conglomerate engaged in publishing, music, magazines, TV and radio production and distribution, as well as Internet services), not Hatchette [see hotlink], not Disney…

    http://www.digitalbookworld.com/2011/leaked-hachette-explains-why-publishers-are-relevant/

  14. I don’t know enough to be sure whether Macmillan were in the wrong, though if I had to guess, that is the way I would guess at present.

    However, whether they were “right” or “wrong”, that does not seem to me to justify damages so large that it is not safe, for Macmillan, to examine the case in court. That seems to me as a sort of legalised shakedown.

  15. I hate the system that so heavily punishes not settling, but I also despise price fixing and other monopolistic behavior. As I’d like Tor to continue to exist (though honestly, I have more emotional investment with Baen’s continuance) I’m glad they settled as from everything available they were perfectly guilty, that they don’t see what they did as wrong is disturbing.

    I do hope any matching terms they may have with Apple or other platforms don’t get triggered when Amazon goes back to near 0 margin via non agency model, as much ‘hung by the noose you tied’ is viscerally satisfying, in this case those terms could hurt the authors as well. (I don’t specifically know that Macmillan is in any of those, I just remember some of the ones floating around the net looked like suicide pacts if you took the assumption that the agency collusion would be successfully done away with).

  16. “We settled because the potential penalties became too high to risk even the possibility of an unfavorable outcome.”

    Completely aside from my personal opinion about the merits of this case, I find the trend to “settle or risk ginormous financial penalties” to be highly disturbing. The vast majority of cases in the US never go to trial, and although a lot of it might be good and efficient, I fear that much of it is also because during the pretrial process, the prosecutorial or-else gets bigger and bigger until people settle out of sheer terror. (Most recent high-profile case: Aaron Swartz, who was offered a plea bargain of six months imprisonment, but threatened with 35 years if he insisted on his day in court. Where is the sense?)

    Anyway, interesting (and disheartening) to see that this tactic works on large companies as well as on individual citizens.

  17. @ ABE

    Talk about apologies that aren’t, admissions that aren’t, and no conceding that they 1) price fixed, and 2) conspired to do so.

    What are you talking about? That letter didn’t include any apologies or admissions at all. All it did was state that their main reason for settling instead of going to trial was that they weren’t sure they could win and it was their company on the line if they lost. I hate to be the one to break it to you, but being in the right is no guarantee of winning a legal battle. Personally, I think they were in the wrong in that they price-fixed. But I don’t share your one-sided fervor. Amazon is far from defender of the righteous. Amazon is being allowed by lazy consumers to obtain a virtual monopoly over the e-book market, and if you thought a trust among publishers was bad news for the reader, what do you think a distribution choke-hold will be?

    The publishers and Apple did something stupider than break the law; they tried to fight the technological recasting of the marketplace. They weren’t the first to fight the wind and they won’t be the last, but that doesn’t mean they don’t have a valid point. At least initially this will mean publishers taking fewer risks on fresh authors or authors with smaller readerships. In the long run I have confidence that the marketplace will realign itself to the new realities of electronic publishing and open up alternative avenues and business models. But until then, this will be to the impoverishment of content diversity.

    So no, I don’t think what Macmillan and the other Big Six did was smart or legal, but I’m not quite ready to march to their doorstep pitchfork in hand. And I find the reality that a company cannot even contemplate going to court without risking total bankruptcy to be a reprehensible statement on the entire US justice system. From the wrongful prosecution of defendants of convenience, to doctors’ inability to fight malpractice suits driving up malpractice insurance and thus medical care costs, to publishers that can’t even challenge the DOJ, our country has hiked penalties so outrageously high that very few individuals or companies can afford their day in court that is theoretically their just and constitutional right. It makes me sick.

  18. “…estimate of the maximum possible damage … was much more than the entire equity of our company.”

    That is what scares me most, as I don’t see Macmillan as a small mom & pop shop with the kids working the counter, so to speak. The school yard bully says, “You can politely give me your lunch money, or you can fight me after school, where I will very likely pummel you to next summer. If it does look like you’re getting the upper hand, my friends will jump in, of course.” If any bully ever talked like that, anyway.

    If those damages were levied in court, I suppose there are ways to allow the business to remain in some form, rather than just closing up shop. It would seem more likely to me that the business would be immediately set upon by anyone else still standing (polite merger or not).

    Just an all-around raw deal.

  19. I have followed this with interest since last April, reading a number of the legal documents and many of the related articles, letters, statements, etc.

    Overall, having read the DoJ documents, my impression (though I am not a lawyer and do not play one on TV) is that DoJ had all of the defendants dead-to-rights for the alleged collusive price-fixing and anti-trust violation, including emails and acts that appeared to constitute a deliberate intent to violate federal law. It was my impression that the publishers that settled early did so because they and/or their legal counsel recognized they’d been caught red-handed. It was also my impression the publishers that initially chose to fight the case did so because they were in denial and/or were badly advised by counsel. (And I thought Apple chose to fight because its pockets are very very deep and it has its own tech-comm-giant agenda.)

    I also thought that every argument put forward by the publishers and their supporters (ex. AAR and the AG), whether in open letters to the DoJ, or in statements to the press, or in legal documents (such as the motion they filed for a dismissal, which I read) kept reiterating a deplorably lame argument: We “needed” to violate anti-trust law because it was The Only Possible Solution to being faced with stiff new business competition, new business models, and disruptive new technology (ebooks) threatening our long-established hardcover business model.

    Note that a new mass market paperback is typically priced identically to its new ebook edition. It’s only in the hardcover realm, where a print edition’s list price is around $25, that ebook pricing was at issue. When two midlist books of 100K words are released in the same genre by the same house, in which the authors were paid similar advances with similar contractual terms, the cost of the physical print edition is the reason that one of these authors’ books (the hardcover) is priced about 4X higher than the other’s (mass market paperback). When the physical model is identical (ebook)… what explains the pricing differential publishers sought to impose on ebooks, a difference of 100% in some cases, between one title and another? Protecting the pricing of hardcover editions was the core of this mess–and the argument of publishers and their advocates was that they should be exempt from anti-trust law and get a pass for the allegedly collusive price-fixing because of this new price structuring problem in their industry.

    There was another possible solution that never seems to have occurred to these companies: Become innovative and competitive, and update your business models. These are corporations with large staffs, substantial resources, thousands upon thousands of books under contract, decades of experience in publishing… And their Very Best Solution to a changing marketplace, disruptive new technology, and new competition… was allegedly to violate federal anti-trust law; and the Very Best Legal Argument presented in this debacle was “we’re SPECIAL, so we should be allowed to get away with it.”

    I do not say any of this as someone drooling lustfully over the “downfall of major publishing.” I’ve been making my full-time living as a writer by licensing my work to major publishers for over 20 years. I still do so. I want to continue doing so. What’s best for me as a writer is to have access to as many thriving markets for my work as possible, including innovative new opportunities and business models, healthy strong presses, -and- thriving major houses. Therefore, I have a pony in this race; I believe it’ll be good for -me-, as a full-time writer, if major houses adapt successfully to the changes sweeping through our industry. And IMO, collusive price-fixing and federal anti-trust violations are strategies of failure and defeat, rather than of shrewd innovation and smart adaptation.

  20. Kat, this is the way of cybersquatters and patent trolls. They contribute little, if anything, to the value of what they are sitting on, but are very dog-in-the-manger about owning it. I have yet to decide if this is a good thing (in this instance), a bad thing, or simply a thing.

  21. @Gulliver

    …they tried to fight the technological recasting of the marketplace

    Except I don’t think this is a technology fight. It’s a good old fashioned business fight. One of their major distributors is selling everything below cost in a pretty blatant bid to drive the rest of the market out of business.

    These types of business tactics were old news long before digital anything was even a science fiction idea. Applying them to digital goods doesn’t make them something new.

  22. Laura Resnick’s take on this is close to mine, but better expressed. Again, my son’s the IP attorney in this home, but the positions of the parties has been quite clear. This is much more about the proven nature of competition/cooperation between transnational corporations than it is narrowly about Intellectual Property. IMHO, as someone who’s done $100,000+ consulting to IP Law Firms, and was EmCee of the Writers Rights in the age of Electronic Publishing event gadzillions of years ago. Well 1993 anyway.

    http://magicdragon.com/EmeraldCity/Nonfiction/WritersRights.html

  23. @ RyanTH

    I meant not pricing e-books to compete with paperbacks. Publishers have relied on the value-added sales of hardcovers to maintain their business model. The technology of e-books undercuts that because readers are more reluctant to pay a premium without a clear product difference. The tactics are indeed old news. The reason for them in this case is new technology. Without e-books upsetting their business model, this wouldn’t even be an issue.

  24. I’m not sure how to feel about the whole thing. Price fixing is bad, but at the same time, the last decade in particular has brought about a radical, tectonic shift in how content producers and consumers interact, across most media. The ever-increasing ease to duplicate content combined with ever-increasing bandwidth and devices offering vast interconnection choices are having often difficult to predict effects.

    I don’t want to pay unreasonable prices for content, but I want content producers to make a profit. Is it a problem that most webcomic artists make their bread and butter from selling t-shirts and licensed items as much as from advertising or collections? I don’t know. How do issues of piracy affect comic books, video games, anime, TV shows and more? Does Netflix and Amazon help or hurt their industries? How about Gamestop or B&N?

    I’m pretty sure smarter people than I are asking these same questions, but I don’t know if they’ve got any better answers. But someone is going to have to find them…and soon.

  25. “If you want justice, go to church; if you want decisions, go to court.” — old saying. When the DoJ comes after you, you’re going to court, unless you can escape. There is no reasonable chance you can win. All you can do is attempt to minimize damage (sometimes that path is actually going to court, but not often, and even then you can lose by winning.)

  26. The publishers and Apple did something stupider than break the law; they tried to fight the technological recasting of the marketplace.

    “It was worse than a defeat: it was a blunder.”

  27. I read the letter. I read the comments. I don’t do ebooks, only print books. I understand price-fixing conspiracies conceptually. But I do not understand what this is all about. What evil thing were they doing? What prices were they trying to fix? Were they trying to restrain trade in some way to drive up prices? Someone please explain what this is all about to a non-ebook reader.

  28. @WizarDru: thank you for expressing my thoughts, concerns, and emotions more eloquently than I’ve been able to.

    I also find the timing of this amusing, coming on the heels of yesterday’s discussion, here on the Whatever, about the resale of ebooks. No, I don’t think Amazon’s patent filing has anything to do with this settlement directly–I’m not that paranoid–but the implications of the patent filing is what (allegedly) drove these publishers to this in the first place. Amazon’s business practices (selling at a loss, etc.) are pretty clearly aimed at monopolizing the ebook distribution market, but I guess the government/DoJ won’t step into that battle until after they actually have the monopoly.

  29. Here’s what confuses me, and it’s probably because I haven’t done enough reading on the underlying contracts and price schemes: why are the people that make the things (publishers) involved with the price charged by the retail business, unless they’re directly selling themselves? Why the consignment model in the first place?
    IE, if I’m a coffee shop, and I buy a pastry from a wholesaler for a dollar, I can sell that pastry to the customer for whatever I want. I’m having a slow day, I need to move items, I can even cut up that pastry into samples and give it away – as long as the wholesaler gets a dollar, they don’t care.
    Alternatively, same coffee shop, we offer some items on consignment. We get 30% of the price, but the original vendor sets the price. If they want to offer their item for $100, they do, and if it doesn’t sell that’s their problem. With a physical store, that creates a problem when the vendors overcharge and can’t sell anything and we run out of space, so we switch to a vendor that sells better.

    What I can’t understand is why ebooks are on consignment model in the first place, which as far as I can tell is why this fight is happening. Physical books are sold like normal goods: bookstore pays, say, $4 for that $7.99 MSRP paperback, but if they want to discount it for whatever reason no one cares as long as the publisher gets that $4.
    Instead they seem to have setup a weird consignment system which causes the weird situation where end-consumer stores can’t control how they sell things, which means, for instance, my barnes and noble membership card cannot give me a discount on ebooks.
    Why are we even IN this situation? I know this is probably a question that will end up being stupid for some reason I just don’t see right now, but I’m honestly curious.

  30. I am also not a lawyer, but I agree with Laura that the DOJ presented a compelling case. It’s worth remembering that Macmillan were also being sued by 33 individual states, a class action group, and the European Union. The DOJ might have had a weak case and Macmillan might have been smarter than all those people. But I tend to doubt it.

    The problem, though, is that the DOJ’s settlement reads like Amazon’s Christmas letter to Santa. I don’t think DOJ struck a fair and balanced agreement that would have ended collusion AND been in the consumer’s best interest.

  31. With all due respect to Mr Sargent and his company’s outside counsel:

    One must remember that a sane villain does not think of himself/herself as evil, or as doing anything wrong. When OJ Simpson and his cronies broke into a hotel room in Las Vegas to retrieve memorabilia that Simpson believed were properly his because he had been ripped off in the initial sales and other transfers, they were still guilty of felony breaking and entering (leaving aside the various weapons charges). In principle, there is no difference between Simpson’s “self help” and the publishers’ (and Apple’s) regarding Amazon.

    It’s frustrating as hell to see someone getting away with what the British call “sharp dealing” (and that’s the nicest thing I can say about Amazon’s conduct). The temptation to respond in kind is tremendous, especially when it is quite clear that those who do have the legal authority to respond will not, for whatever reasons. That, in turn, leads to “civil disobedience” and taking the law into one’s own hands. If one does so, one must be prepared to accept the consequences… and that last step is the one that Macmillan (et al.) were trying to avoid thinking about until now.

    Perhaps if Mr Sargent had even read any of the serious nonfiction for laypeople histories of the labor movement in the late nineteenth and early twentieth centuries put out by various imprints of Macmillan, he would have had a glimmering that there might be something wrong in what his company was doing. (Note: A couple of those histories are both well written and exhaustively researched, and are frequently used in graduate-level seminars on labor history.) That does not appear to be the case… or, at least, not the case for public consumption.

    The rule of law sometimes leads to unfair results. It sure as hell beats any alternative that has been tried.

  32. “Note that a new mass market paperback is typically priced identically to its new ebook edition. It’s only in the hardcover realm, where a print edition’s list price is around $25, that ebook pricing was at issue. When two midlist books of 100K words are released in the same genre by the same house, in which the authors were paid similar advances with similar contractual terms, the cost of the physical print edition is the reason that one of these authors’ books (the hardcover) is priced about 4X higher than the other’s (mass market paperback). When the physical model is identical (ebook)…”

    One of the problems I have with this, is that this simply isn’t the case. When the big 6 initially announced that they were imposing their “sale by agency” model on Amazon, they justified it in terms of this model: that an ebook would be priced initially to match the cost of the hardcover, and then as time went on, the price would drop in order to make the ebook cost about the same as the least expensive physical edition.

    Over the last couple of years, this has been shown to be complete nonsense. They aren’t price-matching to the less expensive physical editions, they’re just charging an arm and a leg for ebooks. I can only assume that this is due to incompetence, or ignorance, fear of change, or the usual sluggish reaction times of large corporations, because it’s bad for them, it’s bad for authors, and it’s bad for readers.

    Macmillan is particularly bad for this. Picking the first of their books off my Kindle wishlist (where it will stay), Larry Niven’s Fate of Worlds:

    Hardcover: $17.15 ($15.85 new from a third party, $14.75 used)
    Mass Market Paperback: $7.99
    eBook: $16.47

    This is typical for Macmillan’s ebook pricing, and I’m not playing along.

  33. @ Gary Willis

    Someone please explain what this is all about to a non-ebook reader.

    Quick and dirty version. Amazon wants to cap how much publishers can sell their e-books for at well below most hardcover prices. Publishers make a lot of their profit on hardcovers, and are thus able to afford advances, overhead and agent fees. Paperbacks turn a profit, but not as much and not as soon, whereas advances, agents, artists, marketing and other overhead all has to be paid for up front. Publishers want to sell e-books at hardcover prices until paperback release date (typically six months after a book’s intial launch), and resent Amazon not letting them do it through Amazon where everyone and their uncle goes for e-books. So the Big Six publishers got together with Apple and agreed not to cave to Amazon, with the idea that they could sell through Apple as an alternative. The problem was that the publishers formed a de facto industry trust by agreeing to fixed e-book prices. DoJ sued them for it. Dozens of other states and assorted jackals smelled blood and piled on. Everyone but Macmillan settled. Macmillan decided they liked living and gave in.

    @ Beej

    Amazon’s business practices (selling at a loss, etc.) are pretty clearly aimed at monopolizing the ebook distribution market, but I guess the government/DoJ won’t step into that battle until after they actually have the monopoly.

    Possibly not even then. Realize that monopolies are not themselves illegal, nor would it be practical to make them so. There’s no reasonable way to make customers not all buy from a single distributor. Remember that what Microsoft and others have been slapped with is not obtaining a monopoly, but rather anticompetitive practices that limit customer choice. In Microsoft’s case the company made it difficult for alternative web browsers to operate on their near-ubiquitous operating system, much as Apple has done in the smart phone market. Android was, in at least one key regard, the best thing that could have happened to Apple as it probably saved them from an antitrust action (in the US anyway, the EU courts having somewhat more latitude in cracking skulls).

    If Amazon can build a “natural” monopoly without anticompetitive practices, they shouldn’t run afoul of the law. Even with DRM, while Amazon definitely benefits from it through platform lock-in, it’s ultimately a feature on the publisher’s product and the publisher, as Tor has demonstrated, decides whether to use it or not. Basically, antitrust laws exist to dismantle coercive business practices. If the customers willingly march to the conveniently positioned slaughterhouse of their own accord, Amazon isn’t culpable.

    Small side note. Yes, Amazon is clearly out for market dominance and the power to dictate to content providers, and their low-margin stock-driven business model is part of that long game. But even they would not be so foolish as to count on the complete implosion of all or even most of the major book publishing houses to get them there. That would be like counting on your enemy to shoot himself in the foot so you could win the war.

  34. The drawback to waiting until someone has attained a monopoly before siccing the DoJ on them is that it doesn’t help the other companies who were run out of business. We have a fairly small market for regional airlines here, with only 1 significant player now (used to be 2). Every time someone attempted to break into the market, the big boys lowered prices on their flights until the upstart folded, then it was back to pricing as usual if not a little higher. If Amazon thought they could do this, they’d be gleefully stomping all over teh Intarweebs.

  35. Matt F
    The kindle edition is 12.99. The mass market paperback comes out July 2 2013. These things come from your link. Not sure where you got the 16.47 from. The ebook price will go down when the mmp comes out. Whether 12.99 is fair or not is a matter for debate.

  36. @Dana
    The issue arrises purely from Amazon and it’s dominance. The situation is that Amazon has been selling ALL e-books at a loss. They are paying more to the publisher that they are charging to the customer.

    Now, short term the publisher should be happy with this. Amazon is subsidizing paying readers! Hoorray! Except there are massive and obvious problems with it long term. First, Amazon is not a charity. They are a massive publicly traded company and significant profits are expected at some point.

    So, maybe Amazon suddenly raises all its prices one day. This is a huge PR nightmare for the publishers because the customer base will not understand why the price has changed. Everyone will have spent years getting used to paying one price for e-books and now it is suddenly much higher, despite the publishers keeping their prices constant. At best this would be a massive shock to the industry caused by Amazon hiding their actual costs for so long.

    But the bigger problem is that Amazon’s competitors are smaller than Amazon. In the book market even Apple is small potatoes. And with Amazon taking a loss every year at some point all their competition will go out of business. So there is a huge worry that five years from now when Amazon is the only significant distributor left they will do something like go to the publishers and announce that going forward they will only be paying half as much for books. And the publishers will have the choice of accepting that or else effectively not selling e-books at all because all the other distributors are long gone. So prices for consumers would stay the same but suddenly the amount of cash flowing back into the publishing industry is drastically reduced in favor of Amazon’s stockholders. It’s classic monopoly playbook action, just applied to e-books instead of grain or oil or whatever.

    And everyone knows what Amazon is doing. Every quarter they post a loss, their stock goes up. Their investor reports are less about showing how heavily they are squeezing the rest of the industry.

    So the publishers did some rather desperate a dumb moves along with Apple. And there were huge obvious problems with them. But I think this is a situation where looking back everyone is going to be amazed at how much the ‘victory’ here costs consumers in the long term. Amazon is going to get paid some day.

  37. In principle, there is no difference between Simpson’s “self help” and the publishers’ (and Apple’s) regarding Amazon

    When someone says “In principle,” I reach to protect my wallet.

    The rule of law sometimes leads to unfair results. It sure as hell beats any alternative that has been tried.

    Only Wilford Brimley would have any hope of selling this line.

    Hardcover: $17.15 ($15.85 new from a third party, $14.75 used)
    Mass Market Paperback: $7.99
    eBook: $16.47

    The list on this is 25.99 and the ebook is 12.99. So the publishers are selling you the book at half the price of the hardcover. That’s some evilness right there, that is.

  38. @Ron Mitchell/Matt F – Another thing companies such as Macmillan like to do is charge different prices for different countries. Likely the price is $16.47 for Matt, just as, currently, the ebook version of “Redshirts” is $17.98 for me (in Australia, despite the Australian dollar being at parity with the US dollar).

    Macmillan is particularly bad at this variety of price-gouging (which has nothing to do with taxes, or exchange rates and everything to do with “because they can”) and is a primary reason why I have a Goodreads shelf called “waittillnotludicrouslyoverpriced”.

    As for the settlement, Laura Resnick has already said everything so clearly there’s little I can add.

  39. @RyanTH
    Oh, I understand why what Amazon’s doing is crappy – but the publishers didn’t try any moves like this with physical books, even though they did the exact same sell-at-loss moves with the physical books, causing a lot of the indie stores to close.
    I’d rather see more of the publishers fight against the DRM, so that Amazon can’t trap everyone into using their hardware and buying only from them. That’s the part of the ebook/amazon issue that seems like the largest problem, larger than price setting.
    Alternatively, I’d love to see more go the way of Baen, where they sell ebooks directly and I can get my money directly to the publisher.

  40. Andrea K Host-
    The link he provided went to a page with the price of the kindle book at 12.99. As I understand it from previous discussions about this, some think the publisher does it, some think Amazon tacks on the surcharge because they can. From things John has said about the prices of his books, it is Amazon who tacks on this surcharge. Since he is published by Macmillian as well, I tend to believe it is Amazon.

  41. @Ron Mitchell – No, you’re conflating two different “surcharges”. Amazon has a “Whispernet charge” of $2 (which is outrageous and stupid) which it uses in countries where it has not made a deal with the local telephone companies for wireless delivery (it charges it even on non-wireless-delivered books). However, Australia has not faced this stupid charge for several years.

    The price of $17.98 for Australians is purely and totally because of Macmillan’s choice. As for the link to the book of $12.99 – that’s because Amazon looks at where your computer is before showing you a price. The price it displays is different because of the country you are in, even though the link is the same.

  42. The price of $17.98 for Australians is purely and totally because of Macmillan’s choice. As for the link to the book of $12.99 – that’s because Amazon looks at where your computer is before showing you a price. The price it displays is different because of the country you are in, even though the link is the same.

    That doesn’t obviate the fact that he is not noting Macmillan’s list price, which is substantially higher than its ebook price no matter where you are.

  43. @RyanTH… virtually all of the bad effects you note re: amazon can be obviated by the publishers dropping DRM. What gives Amazon power is not only their current dominance, it’s lock-in. If someone has bought dozens of books on a Kindle and they’re DRMed that person is VERY likely to keep buying from Amazon. If their books were all non-DRMed epubs that they could read anywhere and all of the books they were buying from stores were likewise DRM-free then they wouldn’t be tied to Amazon.

  44. “Quick and dirty version. Amazon wants to cap how much publishers can sell their e-books for at well below most hardcover prices.”

    No. Amazon’s position is that it wants to be able to sell books for whatever it wants to. The publisher gets a fixed dollar value for every book Amazon sells, even if Amazon sells it for less than the publisher’s cut. (In which case, Amazon eats the loss, which they consider worthwhile to drive broader acceptance of the platform. If they lose $1 on selling book A at a loss, but get you using a Kindle and buying books B & C for $1 profit each, they profit from the relationship they’ve created with you by selling you some books at a loss.)

    Several publishers reacted to this by colluding in order to force a sale by agency model on Amazon. They set the book prices, and Amazon gets a % cut from sales made on their storefront. This allows them to jack up the prices of ebooks in order to push customers towards hardcovers, which they want to do because the margins are higher.

    “That doesn’t obviate the fact that he is not noting Macmillan’s list price, which is substantially higher than its ebook price no matter where you are.”

    That just underscores how out of touch the publishers are: they have *no idea* how much people are actually selling their books for, which is why their ebook prices are stupid. They’ve taken control of ebook pricing, but not dead-tree pricing, and are pricing ebooks to be inline with their mythological list prices which are entirely inapplicable to the book market.

  45. “The kindle edition is 12.99. The mass market paperback comes out July 2 2013. These things come from your link. Not sure where you got the 16.47 from. The ebook price will go down when the mmp comes out. Whether 12.99 is fair or not is a matter for debate.”

    Hmm, you’re right, I hadn’t realized that the Paperback wasn’t out yet. Fortunately, I have other examples for which that isn’t the case, because the ebook edition is significantly more expensive than hardcopy editions for pretty much everything Macmillan publishes. Here’s the next one down on my “would like to buy, but won’t because of stupid pricing” list:

    “A Fire Upon the Deep” by Vernor Vinge

    http://www.amazon.com/Fire-Upon-Deep-Zones-Thought/dp/0812515285/ref=tmm_mmp_title_0

    Mass Market Paperback: $7.47 ($3.94 new from a third party, $0.01 used.)
    Kindle: $11.46

    The Mass Market Paperback edition was released in *1993,* and Macmillan still hasn’t brought the price down to where they said it would be.

  46. Matt F -
    Are you in a country other than the US. Because, again that price you are quoting is not the list price for that ebook. It is in fact, $8.99 the same as the list price for the mmp. As Andrea pointed out, I have not got a very good grasp on international pricing, and if you are being asked for a premium price simply for being in another country, that isn’t right.
    I buy a lot of ebooks. I’ve never personally had a problem with the prices. I understand and appreciate that others do, however. From Googling around last night, I can see lots of things, and especially publishing, that still need to catch up with the reach of the internet. However, Macmillian/Tor has standard list prices for it’s books, in America at least.
    They are
    Hardcover list price $24.99 or $25.99/ ebook list price $11.99/$12.99
    Trade paperback list price $15 ebook $9.99
    Mass Market paperback list prices are the same for physical and ebooks.
    A Fire Upon the Deep is in print as a trade paperback as well. However, the list price of the ebook is set at the mmp level. This is all consistent with my experience of buying ebooks. Publishers tend to set the prices based upon the lowest in print physical book price.
    Again, this all goes out the window outside the US, and I’m not going to speculate about why again. I have never had any objection to these prices. They seem fair to me. Publishing definately needs to catch up internationally, and it comes back the other way as well. There are books published in England and Australia, and not here, that I would love to buy, even at a premium price. We can all see what is being published in countries other than ours thanks to the internet. I don’t know what the answer for this is. Authors have their interests. Publishers have their interests. Retailers have their interests. None of these seem to align to a perfect situation for we consumers who, of course, have our own interests.
    Who knows where it is all going. I will welcome lower prices, if this settlement really means that. Just as I will continue to pay the current prices if it doesn’t. I love books and I usually buy them.

  47. @ Matt F

    Cap was the wrong word to use. My bad. I understand Amazon’s game plan and how price-controls factor into it, but I’m fuzzy on the publisher’s end of things. My only publications are a couple of industry-specific nonfiction through a technical publisher owned by O’Reilly Media; but since I was approached to write them as an expert in the field, I never dealt with an agent. Can’t say as I enjoyed the experience even without the middle-man. Writing nonfic is a lot of work for relatively small rewards, even when you know the material forwards and backwards.

    Personally, I have no problem with any given publisher stipulating the terms under which they will allow an etailer to resell their products, provided authors and customers can go somewhere else if they don’t like the terms. It’s the industry trust that went beyond the pale. I have the same problem with a distribution monopoly, but in that case I blame the publishers and customers for not giving market share to another distributor. Yes, there are infrastructure costs, but nothing like the costs of publishing itself, and really an Amazon monopoly would boil down to laziness.

  48. Excellent news for consumers!

    Gotta laugh at all these defenders of legacy publishers and their price fixing. Somehow the imaginary potential monopoly that amazon may some day hold excuses any law breaking in the present.

  49. A number of separate issues tend to get conflated in discussions about the DoJ case (which, as has been noted above, is echoed in other major lawsuits against these publishers over the exact same practices; one is a class action suit filed together by 30+ US states and another is a European lawsuit).

    The publishers and their supporters tried to frame the case as being about Amazon rather than being about 5 major publishers breaking federal law. The justifications presented by the publishers (and the AAR, the AG, etc.) were always, “Amazon is such a tough, successful, and rapidly evolving business competitor that our businesses are substantially threatened by its growth and practices, so we should be exempt from federal law.”

    But the question of whether or not Amazon is positioned to become or could become a monopoly is a separate question from whether or not five major publishing corporations colluded on price-fixing.

    Facing tough new business competition and disruptive new technologies, which are the problems these publishers (and their supporters) have described themselves as facing… Are not viable justifications for violating federal antitrust law at the expense of consumers.

  50. Criticism of Amazon’s business practices should not automatically be taken as support of the publishers. Shockingly, sometimes neither side are saints.

  51. @ Guliver: “Criticism of Amazon’s business practices should not automatically be taken as support of the publishers. Shockingly, sometimes neither side are saints.”

    Absolutely. That old saying “the enemy of my enemy is my friend” is simplistic and naive. Very often, BOTH of those parties are flawed and untrusthworthy.

    In spring, when tempers were running high about the DoJ case, I was annoyed by how many less-than-shrewd writers automatically assumed that since didn’t support publishing corporations committing antitrust violations, I must therefore be madly in love with Amazon. Um, no. Far from it. I saw this as not supporting corporations presenting lousy rationales for price-fixing and breaking the law, rather than as “choosing side” between publishers and Amazon.

  52. The enemy of my enemy is my enemy, and sometimes my temporary ally, said the scorpion to the frog. What’s that saying about you can protect yourself against your enemies, but God save you from your allies? Metaphors not just mixed, puréed :)

  53. @Gulliver: “What’s that saying about you can protect yourself against your enemies, but God save you from your allies? ”

    There are probably a number of similar examples, but the instance I know well is from Sicily. The mountain bandit-turned-freedom-fighter Salvatore Giuliano, whose life and mysterious/brutal death were both very controversial, was known for the saying, “I can take care of my enemies, but God protect me from my friends.” (He had this saying carved into his rifle butt. Or maybe it was his belt buckle. Memory fades.) Giuliano had VERY dangerous friends.

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