What Were They Thinking? – A Department of Justice Misstep
The Department of Justice’s anti-trust action against Apple and five publishing houses was a serious misstep. The action was pursued because of apparent collusion by the defendants in setting the prices for digital books. However, it appears that the DOJ did not carefully consider all the ramifications before instituting this suit. Lower e-book prices for consumers are not the only issue. The muscle that Amazon currently possesses in the e-book market was not properly taken into account.
DOJ essentially acted as an agent for Amazon in this action, enhancing its unbridled power in the publishing industry. Amazon currently has 60% of the e-book market, versus only 15% for Apple. By assisting Amazon in its quest to sell books from more publishers at lower prices, competition will actually be reduced in this market.
If Amazon were a foreign company selling goods in the US below cost, as they are now doing with many e-books, they would have been accused of dumping by the federal government instead of getting support for their marketing strategy. Amazon promotes e-books on its Kindle at $9.99, including best sellers and new releases. Most new releases through the Apple ibookstore sell at $12.99 to $14.99.
Unfortunately, the DOJ action may doom many independent bookstores, impotent in trying to compete against Amazon’s prices. The more e-books purchased on the Kindle, the fewer actual books the small bookstores will sell. And publishers will now be unable to set the prices for their books in an electronic format, with Kindle’s very low prices undercutting sales of more profitable hard copies. In all likelihood, this means that some major publishers will fail and many smaller publishers will also go out of business. With publishing companies already hurting, did it make sense for the DOJ to bring an action against them for trying to protect themselves against Amazon, a predatory marketer that already ruled the electronic book market?
Writers will also be harmed by the DOJ suit. With the number of publishers declining, those remaining will be less willing to take chances on unknowns or literary works, instead concentrating on acquiring blockbusters from authors with proven sales potential, or celebrities and politicians with a public following, cookbooks and how-to books. Many lesser known writers will lose the means of earning an income, and top writers may earn less. Though self-publishing and self-marketing is being increasingly utilized by writers, there are no editors to assist in the creative process or knowledgeable marketing people to help.
Barnes and Noble, which now has about 25% of the e-book market, will also be hurt, unable to offer the same breath of choices as their digital competitor, Amazon. In addition, as with independent booksellers, sales of hard copies of books in their bookstores will drop and they will offer fewer services to authors and publishers.
Jobs will be lost as bookstores and publishers go out of business and the number of titles is reduced. Salespeople, editors, copy editors, administrative personnel, warehousemen and clerks will all have to find new employment.
This failure of judgment by the DOJ is reminiscent of the decision made three years ago to bring Khalid Sheik Mohammed to trial in New York. Security issues, cost and impact on local business were not properly considered, and eventually the DOJ had to back down. However, in this current case, three large publishers have already settled with the government and will change their pricing model, also agreeing not to block any retailer from discounting their digital books. Macmillan and the Penguin Group did not settle and will challenge the government in court. Perhaps their resistance will be rewarded.
It’s hard enough for small retailers and big box stores to compete with the online giant Amazon. With publishers and independent bookstores, this difficulty is being compounded by the Department of Justice taking Amazon’s side in the selling of e-books. At this point, it appears that the genie is out of the bottle and corrective action for this DOJ misstep can only come through legislative measures. The chances of this happening in the current political environment are remote.
A VietNam vet and a Columbia history major who became a medical doctor, Bob Levine has watched the evolution of American politics over the past 40 years with increasing alarm. He knows he’s not alone. Partisan grid-lock, massive cash contributions and even more massive expenditures on lobbyists have undermined real democracy, and there is more than just a whiff of corruption emanating from Washington. If the nation is to overcome lockstep partisanship, restore growth to the economy and bring its debt under control, Levine argues that it will require a strong centrist third party to bring about the necessary reforms. Levine’s previous book, Shock Therapy For the American Health Care System took a realist approach to health care from a physician’s informed point of view; Resurrecting Democracy takes a similar pragmatic approach, putting aside ideology and taking a hard look at facts on the ground. In his latest book, Levine shines a light that cuts through the miasma of party propaganda and reactionary thinking, and reveals a new path for American politics. This post is cross posted from his blog.