The Worst Article About The eBooks Anti-Trust Suit

It comes from the New York Times today — Book Publishing’s Real Nemesis — and is manufactured by David Carr, who has a shocking ignorance of eBook history, recent history, and is plainly biased towards the status quo.

The Justice Department finally took aim at the monopolistic monolith that threatened to dominate the book industry. So imagine the shock when the bullet aimed at threats to competition went whizzing by Amazon — which not long ago had a 90 percent stranglehold on e-books — and instead, struck five of the six biggest publishers and Apple, a minor player in the realm of books.

That’s the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ’N’ Groceries on Route 19 instead.

What the hell is this guy talking about?

First sentence:

The Justice Department finally took aim at the monopolistic monolith that threatened to dominate the book industry.

Does he even know what the anti-trust suit was about? What “monopolistic monolith”? This is the first of his cheap shots by implication at Amazon. There was no “Standard Oil” that was being aimed at. It was Apple and the Big Six (who became the Big Six by gobbling up all the other publishers in NYC that once existed!).

Next:

The suit has its roots in 2007, when Amazon released the Kindle and began selling some of the most sought-after books for $9.99 in order to bolster sales of its device. Not surprisingly, booksellers and publishers hated this price with the force of 10,000 suns because it made physical books sold for $25 or more seen outrageously overpriced.

A $9.99 eBook makes expensive hardcovers “seem” expensive — but what about all those eight-dollar mass-market paperbacks the Big Six publish themselves? It’s like they don’t exist. Because this is propaganda, not a dissection of a screwed-up business that’s hellbent on destroying itself.

Next:

Under the wholesale arrangement with Amazon, the publishers received half of the list price, which yielded better money, but gave them no control over the pricing of their product.

Did you see that important bit whizz by in the words? Let me highlight it for you:

which yielded better money

Wait. The Big Six were actually pulling in more money from Amazon under the Wholesale Model that had been in existence for several decades? Yet they wanted to control their prices so they could make less money?

Yes, publishing is that screwed up.

And notice how, again, the eight-dollar mass-market paperbacks they publish are never mentioned. They can make profits on eight-dollar paperbacks but not $9.99 eBooks? How stupid do they think people are? How stupid does Carr think we are?

Next:

(Why the crumbling book business is worthy of so much attention from Justice while Wall Street skates is a broader question we’ll leave for another day.)

Wall Street — whose perversion of the capital markets drove the creation of the Big Six — gets a mention. But not eight-dollar paperbacks the Big Six publish! Because this is propaganda.

Next:

Let’s stipulate that there may have been some manner of price-fixing here…

That’s a smarmy way of saying, “Stupid Government! Let’s just pretend those incompetents actually had a case…” Right, like the DoJ complaint didn’t have dates and times and reference phone records. He is really spitting on the amount of fine work that went into that complaint.

Next:

From the very beginning and with increasingly regularity, Amazon has used its market power to bully and dictate.

From the “very beginning”? You mean, like when Amazon was less than a dozen people and their desks were doors on sawhorses? Who are you trying to kid with that crap? It’s like those guys pulled a heist to get where they are now. At any time any publisher could have stopped selling their books to Amazon. And they can still do that today.

Next:

It leaned on the Independent Publishers Group in recent months for better terms and when those negotiations didn’t work out, Amazon simply removed the company’s almost 5,000 e-books from its virtual shelves.

He brings that up but never mentions when Amazon actually banned eBooks from the Kindle Store, which is actually a more pressing issue than a contract dispute. And what did he expect Amazon to do when IPG refused to sign the contract? Keep their eBooks in the Kindle Store? Amazon had to pull them because there was no legal way to continue selling them!

And he leaves out that IPG can still sell its books via Barnes & Noble, Kobo, Apple, Sony, Google, and others. Amazon does have competition — IPG does still have large sales outlets — and some of those companies are as formidable as Amazon.

Next:

The deal struck with Apple also allowed other players into the e-book business, including independent bookstores.

What the hell is he talking about? Name one! There are none. This is propaganda! If he’s thinking of all those local print bookstores that were tied into another giant “monopoly” — Google — then once again he’s showing his ignorance. While Google’s eBookstore opened December 2010, post-Agency — it had been in planning for several years, prior to Agency. Had Agency never happened, Google would have still entered eBooks. Agency led to no new eBookstores at all. What was the point of having one when your competitive hands were tied due to price-fixing?

What Agency did lead to was new publishers forming. Because they understood the Big Six were pricing themselves out of their own market.

Next:

Previously, Amazon’s $9.99 subprofit price was a virtually impenetrable barrier to entry for anyone who couldn’t afford to lose millions in order to gain market share.

Wait. What about all those eBooks available at Amazon from other publishers that were far less than $9.99? How can those make a profit? How can the eight-dollar mass-market paperbacks from the Big Six make a profit? And what about the eBookstores that already existed prior to Amazon? Did Fictionwise drop dead? Did Sony pull out of eBooks? And why did Kobo, Barnes & Noble, and Google enter eBooks if Amazon was the entire market and no one could compete? The only company afraid to compete was cash-rich Apple. Such irony. And more Carr propaganda.

Next:

Remember that it was only after agency pricing went into effect that Barnes & Noble was able to gain an impressive 27 percent of the e-book market.

This is the biggest Big Lie of the entire piece!

First, the Nook was introduced October 2009. That’s three months before the introduction of the iPad. Three months before anyone knew Agency was happening. And Barnes & Noble had to have been planning the Nook for at least a year. So back in 2008 Barnes & Noble thought it could make a go at eBooks.

Second, he dismisses the fact that Barnes & Noble had a huge advantage over Amazon: storefronts. People could actually see, touch, and try the Nook. They couldn’t do that with the Kindle. (At some point Amazon had “Kindle ambassadors,” Kindle owners who volunteered to meet potential customers in their area so they could actually see a Kindle in person!) It wasn’t Agency that helped Barnes & Noble gain market share. It was having storefronts. And it was also having a good eBook device.

And does he even know the Nook is Barnes & Noble’s second shot at eBooks? They sold the Nuvomedia Rocketbook back in 1998 and its other partner with Nuvomedia was Bertelsmann, one of the Big Six.

Further, Barnes & Noble might have died in the early 2000s had it gone through with this.

Next:

Now Amazon has the Justice Department as an ally to rebuild its monopoly and wipe out other players.

Really, anyone believing that stark lie is beyond help. Especially at this point in this post. Let me spell it out if your mind is exhausted from this long post: Do you really think Apple, Kobo, and Google will exit eBooks? As for Barnes & Noble, more in the next section.

Next:

Borders is long gone, and the possible loss of Barnes & Noble would be bad for consumer choice, online or off.

Again he implies that Amazon crushed someone out of business: Borders. That company was a victim of its own incompetency. And the Big Six refused to cut it any slack so it could continue to exist. So we’re supposed to cut Barnes & Noble and the Big Six slack so they can continue to exist? Why?

Further: Tower Records, Virgin Megastore, and just about all record/compact disc stores are gone. Tell me again how we’re not getting any new music because those stores are gone. Oh, you can’t. If Barnes & Noble drops dead and the Big Six have to cut their yearly output to accommodate minuscule shelves at Wal-Mart, Kmart, drug store and supermarket chains — well, that’s too damned bad. That’s what happens in business when you do it wrong.

eBooks will continue to be published and writers will continue to write and there will be thousands and thousands of eBooks to buy.

There are some ironies here. Amazon views e-books as cheap software sold to animate device sales, in this case, the Kindle. And who does that remind you of? Ah yes, Apple, which shrank music to a 99-cent single business to propel the sale of iPods.

The point being what? And he neglects to mention that Apple buys its music from the giant labels under the wholesale model!

Next:

Peter Kafka at AllThingsD dug out a throwaway line in the middle of the complaint from the Justice Department…

Is this Carr’s admission that he didn’t bother to read the complaint? Or that he couldn’t understand it?

Next:

But Richard Epstein, a professor at the New York University School of Law, pointed out, “it is not clear that lower prices are necessarily in the long-term interests of the public at large.”

So we should have, what, protected industries? What would you have told Henry Ford when he wanted to price his Model T so low, Professor? And what about those eight-dollar mass-market paperbacks the Big Six still publish today?

Next:

Robert F. Levine, a lawyer with an extensive practice in publishing, said there’s a practical reason for all that uniformity. The book business is both hermetic and dwindling.

And so it should be protected from the mean cruel world it’s in — that being the world of business? I say No.

Next:

“There is not a drop of new capital coming into this business,” he said.

Wait a minute. These aren’t start-ups. These are global corporations! They can issue corporate bonds at any time! Who are you trying to kid? And publishing isn’t dying from any lack of capital. It’s dying due to lack of leadership and thinking.

Scott Turow of the Authors Guild isn’t even worth addressing again. See here.

Finally:

Maybe I’ll order it [“Fifty Shades of Grey”] at my local bookstore instead.

Really? The one that had its Google eBookstore storefront shut down recently? Yeah, you go ahead and try to do that. Then you’ll go buy it at Amazon. And never mention that fact to anyone.

It’s shocking that no one at the New York Times questioned anything in the above article. Are editing and fact-checking dead too?

Bottom line to always, always, always remember: The Big Six want you to forget that they publish eight-dollar paperbacks that make them money. So when they cry about $9.99 eBooks, don’t even bother to lend them a tissue!

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31 Comments

Filed under Books: General, Digital Overthrow, eBooks: General, Stupid

31 responses to “The Worst Article About The eBooks Anti-Trust Suit

  1. There is the issue that the eight-dollar paperbacks appear nearly a year (in most cases) after the hardcover is released. That people have been saying to themselves for decades, “Oh, I’ll just wait for the paperback.”

    But consumers are demanding the ebook be released at the same time as the hardcover, and Amazon set the expectation that the ebook would be $9.99.

    A better trade model would be to do the simulpub, price the ebook somewhat lower than the hardcover ($19.99, for example, with a $25 hardcover), and then drop the ebook price when the hardcover becomes a paperback. This way people who want early access to the book pay more for the privilege, people who want hardcovers can still get them, and publishers still rake in a ginormous margin when the book first comes out.

    • mikecane

      >>>There is the issue that the eight-dollar paperbacks appear nearly a year (in most cases) after the hardcover is released. That people have been saying to themselves for decades, “Oh, I’ll just wait for the paperback.”

      You know better than that! SF, for example, has always been a primarily MMPB genre. Same for mystery and romance. And in the 1970s many pubs promoted paperback originals, things never published before — especially in true crime (what made serial killers “popular”!). And, these days, it’s foolish to ever expect something from hardcover to migrate to MMPB. If they migrate, it’s to more expensive trade paper. If you wait for paperback — and how I remember doing that! — you wait to be disappointed these days.

      • Robert

        You are really comparing apples to oranges with your $8 paperback novel release argument. When one of these big six publishers release a novel right to paper back for that price then it’s the publishing equivalent of releasing a movie directly to DVD. Arguing that they should release the latest James Patterson novel as an eBook for 9.99 because a no name staff employee wrote a trashy romance novel that went right to paper back for $8 is like saying Toy Story should have been released in the theaters simultaneously with a $12.99 DVD because the Land Before Time 11 was released straight to DVD at that price point.

      • mikecane

        >>>When one of these big six publishers release a novel right to paper back for that price then it’s the publishing equivalent of releasing a movie directly to DVD.

        You know nothing about book publishing then. Entire genres were entirely paperback-based before they ever saw hardcover publication by a few writers: Mystery, True Crime, SF, Fantasy, Romance, and more. MMPBs started as cheap reprints and rapidly became original lines of their own.

      • Robert

        >>>>Entire genres were entirely paperback-based before they ever saw hardcover publication by a few writers: Mystery, True Crime, SF, Fantasy, Romance, and more.

        Entire genres of movies go straight to DVD (or TV) without ever seeing theaters. Documentaries come to mind. They too have a large niche following (A few do make it to theaters, but the vast majority do not). My point was not that all publishing Projects should or do take the same path. My point was that not all publishing projects are equal. When was the last time you saw a TV commercial for $8 MMPB book, or even heard a radio ad? You don’t, you seem them for the latest Alex Cross novel by James Patterson or the lasted Dan Brown or Steven King novel. Every publisher has their A list authors that they spend significant amounts of money fact checking, editing, marketing and co-marketing, book tours etc. These Authors are not going to make the Publisher any money at $8 a book or even $10 an ebook. Its these authors that the big publishers are fighting over. The publishers see a real danger in:

        1) Increased dependence on Amazon as a channel as traditional channels like Big Chain Booksellers and potential Hard Covers disappear

        2) The disappearance of the “Block Buster” novel. The removal of predictable “best seller” type novels in favor of a Social Darwin Model may be better for readers, but its not a great system for people who have to report projected earnings to share holders.

        (If you would rather have this debate VIA email than clog up your comments board with it, you have my email, If you would rather not have this debate at all, just delete this comment and I will stop posting)

      • mikecane

        >>>When was the last time you saw a TV commercial for $8 MMPB book, or even heard a radio ad?

        Nope, you’re still wrong. In the 1970s, there were TV commercials for MMPBs originals. “After Claude” had a *huge* TV ad spend.

        How publishing looks today is due to it being run by moneymen, according to the rules of money, not the rules of publishing that prevailed before they entered.

    • The above blog was largely TLTR, but I agree with this comment. Let ebook pricing be variable, depending on consumer demand for the product. There are plenty of people who are willing to pay top dollar for their favorite authors’ latest release, because people want that type of immediate gratification. As for me, I love my Kindle, but I’m not about to pay more for the digital version of a book than I am for the hard copy. Nuh-uh.

    • Can’t believe I’m reading $19.99 for an ebook vs $25 for a hardcover. Really dude? A $5 discount for something that requires no physical production, no transportation, just a delivery over the net? I could maybe see $15. Anything over that is ridiculous.

      • And no returns. Do not forget that. Publishers sell p-books on sale or return, which means 50 percent of books are returned and pulped. So the profit margin on an e-book is considerably higher.

  2. Pingback: Mike Cane Says It Better « LJNDawson

    • mikecane

      Saw that. Tx.

    • Most $25 best-selling hardcover books sell for $15 or less at Costco, Target, etc. Moreover, the OP merely touched on the issue between a book sale and an e-book license. You can loan out a hardcover five times and then sell it at, among other places, a market Amazon created. LOL Considering the limits of an e-book license, $10 does not look so cheap. Finally, although this agency nonsense with the kibosh on a lot of Amazon’s plans to innovate with hardcover/e-book combo discounts, some social media stuff and read aloud for blind people and others who had limited access before. And an the e-book never goes out of print– the royalties just keep on rolling in. With no e-book used book market, authors no longer see a book sold over and over with nothing going to them. These are just the high points.

  3. Mike, thanks for that spot-on post. Especially the devastating “what about the $8.00 mass markets you all make money on?” rejoinder.

    Best,
    Barry

  4. Michael Shermer, “Skeptic,” uses what is essentially the same publisher boilerplate ‘thought’ at http://www.latimes.com/news/opinion/commentary/la-oe-shermer-apple-collusion-lawsuit-20120416,0,5516332.story

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  6. Peter

    Excellent destruction of the absurd Amazon fear-mongering.

    The problem is this nonsense “Amazon is an unstoppable monopoly” logic didn’t began with the Amazon haters, it began with Amazon’s own promoters in the financial world. Every freakin’ day the motley fool comes out with increasing unbelievable articles about how Amazon is going to bankrupt everyone from Barnes and Noble to Research in Motion to Best Buy to Walmart- yes, they are now trying to sell the idea that Amazon will somehow put even Walmart out of business- simply because that is the ONLY way Amazon’s current stock price makes any sense.

    Then the publisher’s reading the nonsense used to justify the stock price start to actually believe it, the writers at the NYT… now we get this mess.

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  10. Joe

    I’m surprsied you didnt pick up on this quote “Amazon views e-books as cheap software sold to animate device sales, in this case, the Kindle” – how wrong can you be, he is exactly 180 degrees wrong!
    Amazon price Kindles low in order to drive eBook sales,not teh otherw ay round, its been well publicised that they barely break even on the Kindle !

    • Martin L. Shoemaker

      And don’t forget the Kindle Reader apps that are available for practically everything but your toaster!

      Amazon wants you buying and reading ebooks. Devices are a bonus.

  11. Reblogged this on According To Hoyt and commented:
    I was going to write about this, but really there’s nothing I can add to Mike Cane’s thoughts. Yeah, the 8.99 paperback is the refutation of all the “but we can’t sell for that price.” Beyond which, ebooks aren’t shipped, so they’re cheaper, and for most of the large companies, ebooks are DRMed and on-only, so you end up buying them for everyone in the family — thereby paying 4x what you’d otherwise have paid. (Okay, I only do that for Terry Pratchett and F. Paul Wilson, but…) So the disconnect in David Carr’s “reasoning” is stunning.
    I know I’ve said this before, but I just wish people would THINK.

  12. This sort of discussion always reminds me of Jim Baen, and it’s always surprising that so few people ever heard of him.

    Baen Publishing is an SF/F house, and for most of its existence was almost entirely MMPB with an occasional trade paperback. In that form it made a decent, though not spectacular profit. As the years went by, Jim Baen noticed that printing was included in the remarkable reduction in cost to manufacture that everything else did, and began issuing his most popular writers in hardbound because it was more profitable. Note that if you just went by inflation, a hardbound book would be $50-$75 instead of $25.

    When ebooks came along, he did the numbers and decided that ebook would replace MMPB (eventually) and possibly trade paper — hardbounds are art objects and will continue to be in demand. That being the case, correct pricing for an ebook starts with the MMPB price. Keep the cash amount to the author and the publisher the same, deduct the cost of producing, shipping, &ct. the physical book, and Baen figured the right price for an ebook was around 2/3 that of the MMPB; that is, if the MMPB is $8, the ebook should be around $5.

    And looking ’round the net at pricing discussions, it looks as if people are iterating in on a “sweet spot” for ebook pricing: $5 or so. What an amazing thing.

    Regards,
    Ric

  13. What galls me about this is the idea that, just because something is digital, it is *licensed* rather than *purchased*. I think that is the really the bigger fish to fry. All these publishers, distributors, etc, are very much anti-consumer. None of them are really pro-creator, in spite of their posturing. I look forward to the point when I can just pay the person who made the work I want.

  14. A lot of good points. One stone I WILL throw at B&N, for those that don’t know. B&N purchased Fictionwise back in 2009 range or thereabouts, but they almost immediately cut off signing on new publishers with the excuse that they had to make a “new contract.” That held water for the first 6 months or so, but today? Not a chance. I imagine B&N erroneously believes that Nook can take the place of Fictionwise, but it can’t, because it’s not multiformat or friendly to all platforms. Here we are, three years later, still locked out of Fictionwise, where I personally make the most money with any book that is “allowed” by B&N to sell there. Almost half my personal backlist is not at FW today, because the relevant publishers can’t get listed at FW, despite years of waiting for “the new contract” that never comes. Clue arriving for B&N… If you really want to make money on ebooks, use Fictionwise to its fullest extent. That means having new publishers not only at B&N PubIt! but also at Fictionwise. Purchasing FW to get an automatic backlist for Nook was good. Now do one better and use the source you purchased.

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  16. I write. I have also run a small retail business since 1985. I buy merchandise from the producer or from a wholesaler. They may have a “suggested retail price assigned to the item, but anyone who has sold anything knows, the price is set based upon what the market will bear, and what the competition is doing. It’s a fluid thing. In the ancient foggy past, that’s what “sales” were — price reductions made to generate more volume. I still don’t understand why the publishing industry thinks they alone should have some kind of right to control the retail price of an item all the way down the chute to the consumer. They created the Royalty System for paying the actual creators of their product because it worked in their favor, and now it’s going to eat their lunch. It just flies in the face of current economic reality. If Amazon has emerged as a power in the book retail playing field, it’s because they figured out how to corner distribution and save lots of money doing so. IMHO, it’s all moving towards improved choices for readers, and improved income for writers. The direction and frequency of the waves changed. The Publishing Industry (I mean the BIG GUYS THAT CRY THE LOUDEST) should have seen it coming.

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