In fact, the government’s case is so compelling that the judge in the trial has already said she thinks it will prevail, despite Apple’s protests to the contrary. In pretrial comments, U.S. District Judge Denise Cote said she believes the government “will be able to show at trial direct evidence that Apple knowingly participated in and facilitated a conspiracy to raise prices of e-books, and that the circumstantial evidence in this case will confirm that.”

Apple: Amazon made us do it

Not surprisingly, Apple has complained that this amounts to pre-judging the case, but it’s not hard to see how the judge arrived at that conclusion: Emails sent from Steve Jobs and other Apple executives to various publishers as they tried to strike a deal make it obvious that the computer company wanted to see a united front from the book industry before it agreed to any terms, and that it essentially pressured publishers to collude in order to achieve that.

In the run-up to the antitrust trial, Apple and the Big Five publishers who were named in the lawsuit tried to make their case in the court of public opinion, and their argument was that while their behavior may have looked an awful lot like collusion, they needed to do so in order to blunt the effect of Amazon’s virtual monopoly over e-books — which they suggested was a far worse danger than cutting a deal with Apple, the underdog in the market.

In an open letter about the case published a year ago, Macmillan CEO John Sargent denied that his company colluded with anyone when it decided to move to what is called the “agency model” of pricing (in which the publisher gets to set the price for e-books, rather than the retailer), and argued that doing this was necessary to blunt the force of Amazon’s hold on the market. At the end of the letter, he quoted Authors’ Guild president Scott Turow:

“The irony of this bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition. This would be tragic for all of us who value books and the culture they support.”

Were consumers harmed?

Very little of this is likely to be part of Apple’s legal arguments in the current trial, for the simple reason that it would never fly as an excuse for encouraging or facilitating collusion and price-fixing. If the major players in an industry get together and effectively agree on a strategy for keeping prices artificially high, it’s not enough to say “But your honor, we had to do this because our competitor is too large and it was the only way we could compete with them.”

As we’ve tried to point out in posts about the accusations against Google for its behavior, antitrust law in the U.S. isn’t designed to help prevent competitors from being squashed by a large player in an industry — even if that player has what amounts to a monopoly position. The key point is whether that particular company’s behavior alters or damages the marketplace in a way that harms consumers. And when it comes to that, the DoJ is on rock-solid ground.

As the Justice Department pointed out in its opening statement, the price of e-books climbed by as much as 50 percent in the weeks following Apple’s agreement with the Big Five publishers. Those two groups can — and have, on many occasions — make the argument that keeping prices higher than they would have been otherwise is in the long-term interests of the publishing industry (although that is also debatable), but that’s not what the DoJ or the court is interested in.

Apple took a risk, and it lost

Apple’s only argument is that while e-book prices rose and stayed high for some time as a result of its actions, they eventually came back down — but the judge is unlikely to find that persuasive either. In effect, Apple would be saying: “Yes, we colluded with publishers, but our attempt to keep prices artificially high eventually failed due to other market conditions we were powerless to affect.” That’s admitting guilt, but hoping to get a pass anyway.

So why is Apple bothering to fight this case, even though it knows that it will probably lose? Some of it could be sheer bloody-mindedness, but the company may also be worried about the potential implications of the ruling as it pertains to what are called “most-favored nation” agreements, which give partners the right of first refusal when it comes to pricing. As Zach Seward notes at Quartz, these agreements are everywhere in the entertainment business, and if they amount to collusion then Apple could find it harder to strike deals in other areas.

The bottom line is that Apple engaged in risky behavior with publishers because it felt it had to do so in order to break Amazon’s iron grip on e-books, and offering higher prices to publishers if they cut a deal with the company seemed like the best way to do that. Apple may even have been correct in that assessment — but collusion is still collusion. The only question now is how large the judgement against the company will be in terms of damages.

Post and thumbnail photos courtesy of Shutterstock / tlegend

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As we tried to point out in our post, Flipboard’s new version is more than just an evolution, it’s a significant departure from what the service was all about. Until now, it has been about making it easy to discover and consume content from multiple sources, but the new features are all about turning readers into publishers — by giving them curation tools like those used by Flipboard’s own editors.

When advertisers become publishers

Flipboard’s move may seem like an obvious step, and one which combines some of the appeal of services like Pinterest or Tumblr. But depending on how Flipboard decides to proceed with these features, they could be very disruptive indeed. Here’s a couple of ways they could do that:

1) Advertising: Flipboard’s curation and publishing tools are not just for individual users, but corporations, existing publishers and brands — and one overlooked element of the launch is that Flipboard is building e-commerce functionality into the app. Chief technology officer Eric Feng said some advertisers are already creating their own magazines using both their own ads and content from other sources. Those magazines could then be selected and highlighted by Flipboard’s algorithms just like any other effort by a Flipboard user.

We’ve written a lot about the phenomenon of “native” advertising (and will be talking more about it at our paidContent Live conference on April 17 in New York) as well as related concepts like sponsored content and what some call “brand journalism.” The idea is that brands and advertisers now have all of the same tools that traditional publishers used to have a monopoly on — that is, the ability to create and distribute interesting content and reach audiences directly. If a brand can curate content itself, and have its own ads with e-commerce features built in, why does it need a traditional magazine?

Revenue sharing with curators

2) Revenue: Flipboard already has some partnerships with media companies in which it gets to use more of their content directly in the app (instead of showing just short excerpts and then a “web view” in a browser) in return for a share of advertising revenue. When I asked Eric Feng whether Flipboard might consider doing a revenue share with individual users if they create compelling magazines from curated content, he said “that is something we are thinking about doing at some point in the future.” That’s not a promise, but it’s still an interesting idea, and potentially very disruptive in a number of ways.

If Flipboard provides the content and the tools, and the users who curate that content are generating a lot of value in terms of pageviews or “likes,” or whatever metric you want to use, shouldn’t those users get some benefit? Where this gets problematic is how Flipboard decides who gets what share of the revenue. If the ads come from a traditional media outlet, do they get the largest share or does Flipboard? And if media companies don’t want to play ball, does Flipboard just monetize their content anyway, the way Huffington Post and other aggregators do?

The idea that advertisers now have many of the same tools as publishers and traditional media companies do, and that readers and consumers of content also have much more power over that content than they used to, are two pretty inescapable facts about the new media landscape — and Flipboard has just staked a claim to some significant territory on both of those fronts.

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And with every deal it strikes, Google makes it harder to argue that paying publishers for excerpts is unnecessary and even counter-productive — or that there is something to be gained by allowing even large companies to engage in the “fair use” of content for the larger good.

As my colleague David Meyer has reported, Germany’s lower level of government, the Bundestag, passed a bill on Friday known colloquially as the “Google Law.” It doesn’t officially become legislation until it is approved by the second chamber, the Bundesrat, but it has already caused a firestorm of criticism — much of that stoked by Google and its “Defend Your Internet” campaign. The law was promoted by most of Germany’s major media companies, who believe Google News is stealing their content by including excerpts of news stories.

Is it a victory for Google? Not really

In its original form, the bill would have required Google and others who use even a single word of a publisher’s copyrighted content to pay for the privilege. After what appears to have much lobbying and late-night pressure from the search company, the German legislature tweaked the bill so that the use of a single word or a “small snippet” by services such as Google News would not require licensing or payment — which Google says is a victory.

As David notes, however, on closer inspection this doesn’t really look like much of a victory at all: it’s not clear that Google News has been absolved of anything, in fact, since the wording of the bill doesn’t specify what a “small snippet” consists of. The legislation also clearly gives publishers the right to control what a third-party site or service does with their content, and in effect it leaves it up to them to determine what constitutes unfair use.

Germanys Bundestag just said goodbye to modern digital society with a lobby made law from day-before-yesterday's times. #lsr

—
anke domscheit-berg (@anked) March 01, 2013

In a similar way, Google tried to argue that its deal with French publishers — which involved the payment of $82 million to set up a “digital innovation fund,” as well as a commitment by Google to help publishers with their digital advertising — was a victory, when what it really looks like is hush money or an extortion payment. As in Germany, the search giant might protest that it could have been much worse, but to other publishers and media players in Europe it looks a lot like Google is willing to cave in on its core beliefs if you push hard enough.

Has Google lost the will to fight?

Some publishers — even those in the United States — would probably argue that this is a good trend rather than a bad one, and that Google should be paying publishers for their content, even short excerpts (I happen to believe that they are wrong). And Google has obvious corporate reasons for being expedient and cutting deals, even if that involves backing down on its principles, because it needs to do business in these countries.

While Germany's new ancillary copyright is confusing, I am worried more about how much social capital the publishers have lost in this.#lsr

—
Wolfgang Blau (@wblau) March 01, 2013

Despite all that, however, it still feels as though something has been lost, or is in the process of being lost. In the past, Google’s argument in cases like these — or other cases on similar issues, such as the Google Books lawsuits launched by publishers and authors — has always been that a) the principle of “fair use” should allow it to use short excerpts of both books and news articles, and b) that there is an exchange of value involving the users that Google News drives to a publisher’s content that many media companies fail to appreciate.

Of course, the U.S. principle of “fair use” doesn’t exist in the same way in most European countries. And perhaps it’s unfair to expect Google to try and somehow force other jurisdictions to see the value of such a principle. But if Google doesn’t do it, then who will? So much of its success has been based on it that it seems a little churlish to just cut a deal with whoever comes along, regardless of the long-term effects that might have on the open web.

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So far, the only publisher participating is Hearst. There’s no set standard for how early a look each Newsstand issue will offer, Hearst told AllThingsD. The same report notes that Apple suggested this feature to Hearst, which leaves the possibility open that other publishers will eventually sign on.

Newsstand doesn’t have the widest selection of titles, nor the best reading experience for reading magazine titles on iOS. But the option to read some titles early is a good way to differentiate Apple’s own offering from competitors like the Zinio and Kindle apps.

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According to antitrust experts speaking at a New York book event this week, books should be treated like any other good in the market.

“There’s never been a defendant sued for antitrust who didn’t think their market was special,” said Chris Sagers of Cleveland State University, adding that “agency pricing” (a commission-style pricing system used by the publishers to check Amazon) is just another word for price-fixing.

And according to Ariel Katz, a law professor at the University of Toronto, publishers have been engaging in cartel-like behavior for more than a century. In 1908, for instance, a publisher sued the department store Macy’s for disobeying notices that required books to be sold for at least $1 (the publisher lost and the Supreme Court established copyright’s first sale doctrine).

The recent price-fixing charges, in which publishers allegedly ganged up with Apple in order to stop Amazon, also appear to be classic cartel behavior — meaning the government was justified to sue them to protect the free market. Yet, it also feels intuitively wrong to equate book publishers with oil barrons, AT&T or other antitrust villains.

This is because books are not oil or boots or buttons. They are the repositories of our collective knowledge and exemplify what is best about humanity. Nina Elkin-Koren of the University of Haifa, who also spoke at the event, questioned the antitrust experts about whether it is appropriate to leave something as important as books to the whims of the market.

In the language of economists, the question is whether books are a big enough “cultural externality” to justify interfering with the market through corporate protectionism or government regulation.

Sagers suggested that governments can indeed make economic policies to favor cultural and intellectual activities but that the right way to do is by favoring cultural creators directly — and not through intermediaries like publishers.

The antitrust experts make a compelling case for regarding publishers as just another cartel. It will be interesting to see if the theory continues to hold up as Amazon expands its ever-growing influence on the nation’s reading habits.

The experts spoke at “In Re Books,” a two-day conference on law and the future of books held at New York School.

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Although the Guild says that it is still steadfastly opposed to a deal, the agreement with the AAP means that Google might finally be able to start moving forward with its plan, which stands to make book searching and buying a lot easier — something that would theoretically benefit just about everyone, with the possible exception of Amazon.

There is much that is still unknown about the latest agreement: Neither side is saying much about the details, including whether Google will be able to scan books without having a prior deal in place with the owner of the rights, and what will happen with respect to the contentious topic of “orphan works,” or books whose publisher and/or author cannot be found. Both of these aspects — among others — were what helped to torpedo an earlier settlement agreement Google had made with the publishers’ organization and the Guild, which was eventually struck down last year. That deal also involved the payment of $125 million by the search company, but the latest arrangement has no financial terms associated with it, or at least not any that have been made public.

From world-changing dream to never-ending lawsuit

It’s hard to remember now, but when Google first announced in 2004 that it planned to scan and digitize the world’s books (a project that used to be known as Google Books, before the search giant started actually selling books, and then became known as Google Print and finally the Google Library Project) it sounded like another one of the company’s awe-inspiring and somewhat futuristic attempts to create a better world — along the lines of robot cars and Google Street View. Google even had partnerships with some of the world’s most famous universities, including Harvard, which provided access to their massive archives of historical texts and journals (although Harvard has since shelved its partnership and put its efforts into the Digital Public Library of America project instead).

It didn’t take long for reality to set in, however: within a year, the publishers group and Authors Guild had sued the company, arguing that scanning their books without permission amounted to copyright infringement — even though Google only showed users a small excerpt or “snippet” of the book when they searched for it, and also linked prominently to sites where someone could buy a copy. To the Guild and the AAP (although not to some of their members, who supported the project) scanning amounted to illegal copying, and they launched an all-out legal attack on the search company. Google offered a settlement in 2008, which wound up in court until it was rejected last year.

One of the things we don’t know is why the publishers decided to accept an agreement with Google now, especially one that sounds very similar — at least on the surface — to the one that the company has been offering in various forms for almost four years now. Did Google cave in on the “orphan works” clause that the court said gave the company too much power over these books once they were scanned? Or did the publishers’ group simply come to the conclusion that this was a war that would never end, and possibly one that should never have begun?

“The publicly described terms sound indistinguishable from the terms Google has offered to its print partners for years. If that’s all, it’s hard to understand why this deal took so long.” — New York Law School professor James Grimmelmann

Publishers and readers both benefit, and so do authors

As more than one legal scholar has pointed out (not to mention Google itself), there is a case to be made that scanning of books — with or without prior approval from the rights-holder — fails under the “fair use” principle in copyright law, which allows for others to make use of copyrighted material under certain circumstances. There’s no question that Google’s scanning would likely qualify as a “transformative use,” which is one of the four factors the courts look at when it comes to determining such cases.

And not only does Google’s plan not impair the rights-holder’s ability to market their books (another of the four factors for fair use), it arguably improves it substantially by making them easier to find and buy, something publishers could clearly benefit from.

Did the publishers come to see that they had more to gain from a Google deal than they had to lose? Their position in the industry has certainly changed dramatically in the past seven years — at one time, they were the dominant players in the book business, but the rise of Amazon and the Kindle platform has destabilized things to the point where publishers are now struggling to remain competitive, especially as the focus increasingly turns to mobile and digital books. And the Google arrangement could help them to some extent, since the search giant has said that part of the deal is providing publishers with a digital copy of any books they agree to have scanned.

In fact, the Google deal appears to benefit just about everyone (even authors, although the Guild doesn’t want to admit it). Readers get to search for and buy books more easily, and Google gets to get more content that could bring in users and keep them searching, which pays the bills. The only one who probably doesn’t benefit is Amazon — since it increases the supply of digital copies that Amazon doesn’t control or get a share of the revenue from. And it may help publishers become better at selling their own digital content, instead of relying on the digital-book giant to do so.

Post and thumbnail images courtesy of Flickr users Eric Mueller and Stefan

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Inkling’s interactive ebook publishing platform, Habitat, also now supports iPhone.

Inkling is based in San Francisco and backed by Sequoia Capital as well as major textbook publishers like McGraw-Hill and Pearson.

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The DOJ is suing Apple and five of the big-six publishers for allegedly colluding to set ebook prices. Three of the publishers — HarperCollins, Hachette and Simon & Schuster — have agreed to settle. The proposed final judgment on the settlement is set for August 3. The public had sixty days, ending June 25, to comment on the settlement, and the DOJ received at least 150 letters during that time.

Kohn’s full letter is here (PDF). “The DOJ has told the Court that it has received hundreds of pages of hundreds of comments,” he writes. “The public had a statutory right to see those comments 14 days ago. When a member of the public fails to meet the statutory deadline for submitting comments under the Tunney Act, there are consequences: participation by matter of right becomes participation at the Court’s reasonable discretion. There should be no less serious consequences when the government fails to meet its statutory deadlines.” The court already granted the DOJ a concession by allowing it to post the public comments to its website rather than printing them in the Federal Register.

In addition, Kohn says, the government is over two weeks late in filing its response to the public comments, which it was also supposed to do by June 25. “I respectfully ask the Court to order the DOJ to publish the comments by Friday, July 13 and to publish their response to the comments by July 27 (a full 7 days prior to the date its motion for entry of  judgment is due),” Kohn writes. “In addition, the Court should order such other relief as would befit the Justice Department’s flagrant noncompliance with federal law.”

I asked the DOJ for a comment yesterday and will update this post if I hear back.

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We have already seen Kickstarter, the popular crowdfunding platform, used to finance some fairly interesting media experiments, including books from authors like Seth Godin, record albums by artists like Amanda Palmer and even an entire magazine in the case of Matter. But could a publisher use the service to crowdfund its way out of the advertising-revenue trap in which many media companies find themselves? Penny Arcade, which publishes online comics and puts on related events, is trying to do exactly that with an ambitious Kickstarter campaign aimed at replacing the revenue it currently gets from advertising with funding from fans. But will it work? And could it provide a model for other media companies?

Penny Arcade is anything but a traditional publisher: It began as a simple video-game-oriented webcomic that writer Jerry Holkins and artist Mike Krahulik posted semi-regularly online in the late 1990s, and it has become a regular series with a number of associated real-world products (including several video games) and its own gaming conference called PAX. It is one of the longest-running webcomics around, and Holkins and Krahulik have made their living by publishing it for the past several years — in part by running advertising on the site where the comics appear.

Returning to a reader-centric model

In the early days of the comic, Holkins says the two founders managed to run everything through direct donations and sales of related products, but as the site grew bigger they figured they had to sell out and offer advertising in order to survive. But in the description of the Kickstarter campaign and a related blog post, he said eventually he and Krahulik wondered whether the platform would allow them to raise enough money to go back to a fully reader-funded model:

I think we had assumed it wasn’t possible to do it that way anymore — to operate a site at this scale without advertising dollars — but it occurred to us that we’d never actually asked. People often want to know how they can support the site in a way that doesn’t involve t-shirts or looking at advertising, and I think we may have a way. What I’m saying is that we want to sell out, and we would love to sell out to you.

The initial goal for the campaign, which ends on Aug. 15, is to raise $250,000, which the two founders say will allow them to dispense with banner advertising. If more money is raised, Holkins says the two will “restore old services we used to offer, convert the entire site to a Creative Commons license, and ultimately remove every ad from the site for an entire year.” The Penny Arcade founder says the larger idea behind the campaign is to become a company “that succeeds by making things, specifically things for you.”

The two co-founders have also made it fun for participants in the Kickstarter fund-raising effort by including bizarre or unusual offers as part of the different tiers of funding. So the $1 pledge says one character “will shout out your name as he chases a duck” and for $25 or more, another “will name your pet.” Higher pledge amounts come with a chance to be one of 50 people on the set when Penny Arcade films a movie version of the comic, and for a $5,000 donation a fan gets to come to Penny Arcade headquarters and hang out for an evening of pizza and games with the creators and other staff.

Could other publishers follow this model?

One of the people watching the campaign is Rob “Commander Taco” Malda, who founded the online community Slashdot and is now working on digital projects for the Washington Post and mentioned it on Twitter and his Google+ page. Could a Kickstarter campaign have saved Slashdot from having to be sold multiple times to different companies as it tried to keep the servers behind the community running? It’s an interesting question. Crowdfunding seems to have become so well established that it could theoretically give website publishers a lot more financial freedom.

Penny Arcade is doing a Kickstarter to remove all ads from the site for a year. This sort of thing really excites me. kickstarter.com/projects/57510…

—
Rob Malda (@cmdrtaco) July 10, 2012

The Penny Arcade experiment has a humorous tone, but the intent behind it is a serious one. By turning to its readers, Penny Arcade wants to become a totally reader-centric business that answers only to its fans and supporters. In some ways it’s the ultimate extension of the model the New York Times and other traditional publishers have taken with paywalls and other subscription plans, except Penny Arcade has come at it from the opposite direction: Instead of hitting readers with a paywall when they try to read something, it is asking for funding up front before the content has even been created.

Targeted publications like the Financial Times and the Economist seem to already be on the road toward this kind of model, with subscriptions surging ahead of advertising to make up more than half of the revenues at the FT in a recent period. Is this a model other media entities could pursue? Perhaps. But they would need to have as devoted a fan base as Penny Arcade, which by late Tuesday had already come up with almost a third of the amount the site was looking for in less than 24 hours.

Post and thumbnail images courtesy of Flickr user Christian Scholz

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The most important thing for a publisher to know is that their shares data “could” be wrong, and they should tread carefully. Many services have been built around tracking social for larger brands and publishers, but everyone seems to be turning a blind eye to this problem.

As the CEO of Parse.ly, I’ve worked with some of the Web’s best publishers to help them solve their data problems. In the first post of this series, I discussed the serious problems associated with shares data. In this post, I’ll address the flip side of the coin and explain how we can reconcile the shares data problem. Over the past three years, it’s become increasingly evident that publishers’ data challenges are steadily increasing. More, now than ever, data accuracy is a top priority in these organizations.

Existing “solutions” to the shares data problem are non-solutions and stopgap at best. Publishers are relying too heavily on shares data from widgets and link shorteners to get a proxy of what’s happening. These tools do churn out data, but it’s inaccurate beyond a reasonable margin of error, because widgets and link shorteners do not include the various iterations of the content.

Before shares data existed, publishers would just look at the referral source to understand how much traffic a social network was driving to their site. This is a deadfall trap that leads to poorly informed decisions. Let’s take a quick look at few ways this problem is being tackled.

Twitter Analytics (which is still in beta) is trying to reconcile the problem by consolidating various URLs for an individual piece of content and tying them all to one URL. It’s a good start but far from a true solution yet. On the other hand, Google Analytics is looking to the social networks themselves to tie into its social data through its data hub activities module. However, relying on social networks isn’t efficient enough for publishers — they are time and resource-constrained enough as is.

Outside of third-party vendors, and from a technology perspective, the obvious solution is to fix the URL structure on the publishers’ side. Unfortunately, it’s not as easy a task as it looks. You could attempt to consolidate and closely control the number of URL aliases that an article has. But in many cases (such as multi-page articles), this is nearly impossible to do. After all, if you change the URL in the browser address bar, that URL is very likely to be shared (via copy/paste) by your readers.

The next obvious solution is to look to the major social networks for a fix. However, the social networks only provide the most basic API for tracking share counts. To date, no social network offers historical information about share counts. Further, none performs any significant normalization logic to ensure multiple URLs pointing at the same “logical piece of content” are treated identically. We should all rally around this issue to get a solution on the social network side, but don’t expect a solution to happen anytime soon.

Parse.ly’s product team works closely with publishers facing these issues to gain insight into large-scale traffic, content and social network trends. The company is working rigorously to solve the problem by approaching it internally — empowering publishers to group URLs around a piece of content from within their site using link aliasing.

No matter the approach, accurate social data is incredibly important to publishers now, and it will become even more important moving forward as better data and tools shape the future of journalism.

The shares problem is solvable. As awareness of this issue spreads, vendors will demand better tools from the networks — this amelioration will mirror what we saw develop around search engines in years past (e.g. SEOMoz, Google Insights for Search) — and the margin of acceptable error will improve. With accurate data at publishers’ fingertips, the possibilities are absolutely invigorating. And the first publisher to realize the opportunity will reap the massive upside and potentially reinvent how editorial decisions in the newsroom are made.

Sachin Kamdar is an entrepreneur and the co-founder and CEO of Parse.ly. Parse.ly provides insights to online publishers through its flagship product, Dash. Dash captures publisher specific data to present the best opportunities for engagement and to improve key metrics for publishers. 

Image courtesy of Flickr user KungPaoCajun.

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