The Shakedown Behind The DOJ Apple/Publisher eBook Antitrust Lawsuit

Money Versus ParagraphsThe Department of Justice filed an antitrust lawsuit against Apple and the major publishers for conspiring to force Amazon to sell ebooks at higher price points than $9.99 USD. This is ironic—and moronic—for several reasons.

Until Apple introduced the agency model for letting publishers set their own ebook prices and keeping 70% of each sale, Amazon had a 90% market share as it sold the bestsellers as lost leaders to sell more Kindle devices and the publishers kept 35% of each sale. After those changes went into effect, Amazon’s market share dropped to 60% as Apple, Barnes & Noble, Sony and other ebook retailers expanded their market share.

The DOJ may have a better antitrust case against the publishers for maintaining higher ebook prices than it does against Apple. The publishers are still stuck in the traditional brick-and-mortar world of printed books. If the ebook price of a new printed book is substantially less, the consumers will favor the cheaper alternative. Higher ebook prices are necessary to maintain an unsustainable business model.

Why does the ebook version of a 50-year-old science fiction novel, “Starship Troopers” by Robert A. Heinlein, have to be priced at $9.99 USD like a premium paperback?

But the antitrust lawsuit isn’t really about ebook prices. It’s about Apple sitting on $100-billion-dollar in cash reserve and not sharing the wealth with the Washington lobbyists, who in turn wine and dine the political establishment.

The DOJ Shakedown

When Microsoft had a multi-billion-dollar cash reserves, it spent nothing on lobbyists. After the DOJ filed the antitrust lawsuit in 1998, Microsoft spent millions of dollars each year on lobbyists thereafter. The antitrust lawsuit failed to quash Microsoft’s twin monopoly in operating systems and office suites, but it was a significant boon for Washington lobbyists.

As Silicon Valley companies acquire huge market share and cash reserves, they have to spend more money on Washington lobbyists as the DOJ and other regulatory agencies threaten various legal actions, and entertain presidential candidates when they stomp through Silicon Valley for campaign fundraisers. As Willie Sutton once said about banks, it’s where the money is.

If that wasn’t ironic enough, lobbyists are complaining about a new rule that would prevent them from wining and dining the two million federal workers who are not politicians but often wield indirect influence on the government.

Investigate Amazon

Being a writer who publishes ebook, the antitrust lawsuit is a concern but doesn’t impact me as my short story and essay ebooks are priced from $0.99 USD to $2.99 USD. I doubt I will ever put out an ebook priced at $9.99 USD or higher .

Like many things in life, I have the opposite problem. When I released my writing blog compilation ebook, I priced it at $0.99 USD on Amazon and, because it was listed for FREE on Smashwords, there was a “technical glitch” regarding the pricing info that made it unavailable. I subsequently had to unpublished the ebook from Amazon.

If the DOJ wants to get serious about ebook prices, they should investigate Amazon for stifling FREE ebooks.

UPDATED 04/16/2012 — Looked like it was a technical glitch. My writing blog compilation ebook is available at Amazon—for $0.99 USD. I’m pestering them to make it free. Probably won’t happen until the ebook appears on the Smashwords third-party distribution network (i.e., Apple, Barnes & Noble, Diesel, Kobo, Sony, etc.).

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