Publishers also objecting to DOJ's 'draconian' settlement proposal for Apple

By Rene Ritchie
last updated

The Department of Justice's settlement proposal for Apple was called punitive and draconian by Apple itself, but now the ebook publishers who previously settled with the government are also objecting to the terms. According to Chad Bray of the Wall Street Journal:

"The provisions do not impose any limitation on Apple's pricing behavior at all; rather, under the guise of punishing Apple, they effectively punish the settling defendants by prohibiting agreements with Apple using an agency model," lawyers for the publishers said in papers filed in federal court in Manhattan.

Basically, it sounds like the DOJ wants to stop Apple from making more agency-model deals with publishers, and publishers want to make just exactly those kinds of deals again with Apple. So, it's in the publishers' self interest to object on Apple's behalf. No surprise there. They're businesses, they need to do what they feel is best for their business.

Once again, I think simply striking the most favored pricing clause from Apple's deals and forcing them to compete against Amazon, deep discounts or not, would be a better solution for everyone.

We'll see how this plays out.

Source: Wall Street Journal

Rene Ritchie
Rene Ritchie
Contributor

Rene Ritchie is one of the most respected Apple analysts in the business, reaching a combined audience of over 40 million readers a month. His YouTube channel, Vector, has over 90 thousand subscribers and 14 million views and his podcasts, including Debug, have been downloaded over 20 million times. He also regularly co-hosts MacBreak Weekly for the TWiT network and co-hosted CES Live! and Talk Mobile. Based in Montreal, Rene is a former director of product marketing, web developer, and graphic designer. He's authored several books and appeared on numerous television and radio segments to discuss Apple and the technology industry. When not working, he likes to cook, grapple, and spend time with his friends and family.

10 Comments
  • I'm with you, Rene. Voiding the existing contracts and preventing new ones isn't going to help anyone. Removing the MFN clause will, in effect, get the DOJ what it wants (assuming, of course, the DOJ wants what is in the best interest of citizens, and not just to punish). Sent from the iMore App
  • Yeah assuming.
  • As with most things, garbage usually collects at the bottom. Partners in crime until the end.
  • Please tell us all, why Apples agreement was bad. I'm waiting.....
  • Because collusion leads to higher prices for consumers. Think cell phones and cable.
  • Price fixing. Violation of anti-trust provisions.
  • I think that the publishers did collude and that was a clear no no, and Apple may not have been the true ringleader in person, but it is clear they have been found to be an accessory to the collusion by "playing their hand brilliantly." This doesn't make complete sense since I think the fatal flaw in the whole thing was the determination that the "market" price of a bestseller e-book to the consumer was $9.99. If you have 90% of a market, the price you set cannot be considered a true market price if it is below cost and serves to prevent others from entering the market by making the economics terrible. You may have the scale and scope of an operation to mitigate the losses, but as a de facto monopoly, such behavior should also be a no no. Still, since the issue here was using the Apple agreement with an MFN to force other retailers to move away from a wholesale model (by threatening windowing), why not just tell publishers that they have to maintain a wholesale model, without windowing, for at least 5 years for all e-books that they also provide to a retailer with whom they sign an agency agreement. The wholesale price of the e-book should remain where it has always been for those retailers who choose to keep it, and the publishers can then retail price e-books within the framework of whatever agency contract they have with other retailers. Even the MFN can survive in these agreements if they want, but it would only serve to reduce the publisher's margin if Amazon continues its thing, thereby actually favoring the publishers sticking with a wholesale model for most retailers. This does nothing to really create a competitive market for e-books, but am I missing anything?
  • Only that the wholesale/retail model reflected another time, when physical bookstores (or any store) had to pay rent, stock warehouses, and otherwise needed 50%+ of the full price due to the cost of running the business. A lot of that changes in a digital model, as does publishing in general. As an author, I made 10% under the wholesale model, after publisher and retailer took their cuts. With the agency model, if I self-publish, I can make 70%. That's a huge difference. A potentially transformative difference.
  • Agreed. The wholesale model works well for physical inventory that must change hands to go from publisher/manufacturer to retailer to consumer. The agency model works much better for digital goods since if Amazon sells 1,000 copies of a particular book, they are not taking inventory of 1,000 digital copies on their servers to sell one at a time; they have 1 copy they license to 1,000 end consumers. However, since many want to maintain such a model for digital goods, I think they should then commit to it fully. If I have a copy of a music album, a Blu Ray movie, or a book, I can resell it to someone. Why not give me the right to resell my digital copy as well? If I want to donate my copy of said album, movie or book to my local library so that they can lend it out, I should be able to do so. Of course, I would have to delete my copy, and we know this doesn't work. No copyright holder is going to allow this in their license. Hence the problem with sticking with a selling model that works better for physical goods and forcing it onto digital goods. Plus, add in your example of the actual creator's potential under agency and it starts to look pretty good. The only long term losers are likely to be the middlemen, but I am willing to bet that a whole new market of service provider will flourish to give creators support which they may have previously received by an intermediate company.
  • Well I can say the publishers can bitch all they want. They did the crime and Apple was the lynchpin that allowed them to do it.
    The DOJ has targeted the lynchpin and took that way from them so damn straight they should suffer for it. Easies way to solve the mess they they (publishers and Apple) created is to remove the key piece and guess what that is Apple. This needed to happen. They caused prices to go up accross the board.