The Authors Guild weighs in on the news that the Department of Justice is investigating Apple (NSDQ: AAPL) and five of the big-six publishers for allegedly colluding on e-book pricing: “Our government may be on the verge of killing real competition in order to save the appearance of competition,” writes Guild president Scott Turow.
In his letter to Guild members, Turow writes:
We have no way of knowing whether publishers colluded in adopting the agency model for e-book pricing. We do know that collusion wasn’t necessary: given the chance, any rational publisher would have leapt at Apple’s offer and clung to it like a life raft. Amazon (NSDQ: AMZN) was using e-book discounting to destroy bookselling, making it uneconomic for physical bookstores to keep their doors open.
Turow outlines the history of e-book prices pre-agency model, noting “By the end of 2009, Amazon held an estimated 90% of the rapidly growing e-book market. Traditional bookstores were shutting down or scaling back. Borders was on its knees. Barnes & Noble (NYSE: BKS) had gamely just begun selling its Nook, but it lacked the capital to absorb e-book losses for long. Enter Steve Jobs.”
Turow also says that the existence of bricks-and-mortar bookstores is critical for new authors, downplaying self-publishing platforms like Amazon’s KDP: “The high royalties of direct publishing, for most, are more than offset by drastically smaller markets.”
Agency pricing has caused Amazon to “[lose] its chokehold” on the industry, Turow concludes, and notes, “Direct-selling authors have also benefited, as Amazon more than doubled its royalty rates in the face of competition.” His implication: If that competition vanishes, Amazon’s high royalty rates for self-published authors may vanish as well.