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Wednesday, April 11, 2012

DOJ's E-book Pricing Lawsuit: What's at Stake?

Posted by Paul Constant on Wed, Apr 11, 2012 at 2:30 PM

This morning, the Department of Justice sued Apple for e-book price fixing. Slate has more information, and The Verge does a great job of explaining what the lawsuit's all about:

Although Apple is listed as the first defendant, the bulk of the case is really about the publishers involved: Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster. According to the government, these publishers greatly feared Amazon's $9.99 Kindle book prices, which they called "wretched," and worked for years on a scheme to raise prices and limit competition. They also feared that consumers would get used to paying $9.99 for bestsellers and ultimately decrease publishing profits.

This isn't a big deal for Apple. E-books are an insignificant portion of their income. This is a medium-large deal for Amazon—they'll sell e-books no matter what, but they'll sell more e-books if they can set the prices lower. It's a gigantic deal for the publishing industry, because $14.99 and $15.99 e-books are the only way they can sustain the business model that they've lived under for the last century. If this lawsuit forces down e-book prices, publishers will suffer great losses and many bookstores will go out of business. Most people would probably argue that inflated e-book prices were just holding off the inevitable, in any case.


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