The Department of Justice Settlement Against Apple And The Traditional Publishers: A Victory For Readers

You may (or may not) have heard about the U.S. Department of Justice case against Apple and most of the Big 6 Publishers, as they’re often called, for collusion to fix prices for ebooks. While our justice system certainly has its share of flaws, I think this time they got it right.

If you’re not familiar with the case, it basically boils down to this: Apple and several (five by my count, but it’s early and I suck at math) of the major publishing companies were charged with getting together and fixing prices that retailers could charge for ebooks based on what has been called the agency model, with the net result that consumers were forced to pay more for many ebooks than they would have in a free market environment where retailers can set their own prices, independent of the wholesale price (Amazon was doing this with select bestselling titles, discounting some of them at $9.99 retail while the wholesale price was actually higher). If that sounds shady, it is: price fixing is illegal, and that’s why DOJ got involved.

A lot of other folks have commented on the case itself, but what I wanted to do was focus on one of the recurring themes in the comments that the DOJ received from supporters of the agency model and its attendant price fixing: that the real evildoer is Amazon.

The people who supported the price fixing and railed against the DOJ’s proposed settlement against the plaintiffs are, not surprisingly, tied into the legacy publishing industry. They claimed that fixing the prices through the agency model would “level the field” (that came up a lot in the comments) and would encourage competition.

Hogwash. All it does is preserve the status quo. Listen, I’m not saying Amazon is heaven or Jeff Bezos is an angel, but the reason why they’re the 800 pound gorilla in this game is, first and foremost, because they’re consummate innovators. Accuse them of whatever evil you wish, but very few companies out there work as hard to evolve their goods and services to better serve their customers. And that – not fixing prices to “level the playing field” – is the essence of competition.

As an author, I would like nothing more than for Barnes & Noble, Apple, Sony, Kobo, Smashwords, and any other contender in the ebook market to step up to the plate and out-innovate Amazon. Why? Because that offers readers like you more choices, and it offers me more potential markets for my books. And make no mistake: the major book retailers and the publishers themselves have had ample opportunity to adapt to the emerging reality of digital reading. In fact, they should have been the driving force of change (and, for them, profit), setting the standard that Amazon would have to match if Amazon wanted to compete.

But they didn’t. They buried their heads in the sand and let Amazon sail right past them. Right now the only serious competition I’m seeing in terms of my royalty figures is from Barnes & Noble, which has grown from a fistful of dollars to about 15% of what I get from my Amazon Kindle sales. What I make from all the other ebook platforms like iBooks, Sony, Kobo, etc., falls far short of that. The sad thing is that, among self-published authors, I’m probably doing extraordinarily well at Barnes and Noble, with royalty figures having grown over the last year to over $2,000 per month.

The unfortunate thing is that the vast majority of sales I get from Barnes & Noble are by customers I’ve taken there myself, primarily through Twitter. What I mean by that is that I tweet about the free books I offer, like “Hey, if you own a Nook, check out these free novels!” People decide to snag a copy, and those who enjoy the freebies go on to buy the others.

But if I don’t tweet about it, Nook book sales drop off like a rock. That tells me that, unlike on Amazon, my ebook sales on Barnes & Noble aren’t self-sustaining at all. I’ve greatly reduced my Kindle-specific tweets and other promotions, because Amazon does a good job of keeping my books in front of customers who might be interested in them. With Barnes & Noble, I have to lead people by the hand into their store with direct links to the books. Otherwise, I don’t see any sales, because their search engine is horrible and their cross-promotion engines don’t seem to work very well. While I haven’t looked at the other retailers as closely, I suspect the same is largely true.

Another factor that many suspect is the case, at least with Barnes & Noble, is that their “also bought” and popular books engines favor traditionally published books. Again, I can’t say for certain if that’s true based on my own limited experience, but from the number of self-published authors who have said that Barnes & Noble, for one, has been a dead end for them in terms of sales (although there are other authors who have done very well there), I suspect the theory has some merit.

So, back to innovation: the other ebook retailers ought to be taking a very close look at Amazon to see how they’re pleasing their customers, and then get their own innovations in gear. Apple, in particular, ought to be waaaaay out in the lead. Apple is almost synonymous these days with innovation, but they did a face plant with iBooks. Regardless, I would love, love, love to see these other companies give Amazon a good run for the money, because that’s great for me, the self-published author, and it’s great for you, the reader.

As for the big publishers and their price fixing schemes, shame on you. Stop bleating like a bunch of spoiled toddlers about Amazon being mean to you. We’re still only a few steps into the digital reading age, and it’s not too late to reinvent yourselves so you can survive and thrive, assuming you really put the interests of your readers first. If you let that guide you, you won’t go wrong. Otherwise, you’re going the way of the dinosaurs, and, I have to say, deservedly so.

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13 thoughts on “The Department of Justice Settlement Against Apple And The Traditional Publishers: A Victory For Readers

  • thewriter

    Well thought-out blog, I believe, but in my limited experience, I’d say the chances of the major book publishers changing the way they do business any time soon is slim to none. They are still, primarily, concerned with the status-quo, and how to make that work for them, as opposed to readers and writers. Just my two cents’ worth, but I think they will lose much more, and maybe some will go the way of the T-rex, before someone in their midst stands up and says “we have to change!”

    • Michael Hicks Post author

      Unfortunately, I think you’re right. If they haven’t awakened by now, they probably aren’t going to as an industry. I suspect one, maybe two of the major publishers will survive after all the dust settles. Maybe. It still just boggles my mind that they haven’t grabbed a clue!

  • R. E. Hunter

    That’s an interesting data point, that you’re able to pull in $2K/month from B&N with regular tweeting (I see you have 37K twitter followers, which no doubt plays a role), but it drops off if you don’t keep at it. I’ve read posts from a number of other indie authors saying their sales on B&N and other platforms were so small KDP Select was an easy decision for them (I believe Joe Konrath was one of them). This may explain the difference.

    • Michael Hicks Post author

      I had some of my books in KDP Select since its inception until this month, when I pulled the last ones out. The program was GREAT at the beginning, but now I have a hard time justifying the exclusivity now that post-free sales get very little push from the freebies compared to what they used to. Some authors are still doing great, and that’s fine, but I finally decided that it made more sense to spend some extra time on the other retailers, especially after B&N sales began moving upward.

  • Crystal Lee (@CLeeAuthor)

    Thanks for sharing this. I’ve been wondering if it’s even worth putting my self published book, Canopy, on others sites outside of Amazon. I’ll have to do some more research but I’m kinid of thinking it’s not going to bring in much sales either. Hmm…

    • Michael Hicks Post author

      Well, Amazon is where my bread and butter comes from, but the increase in sales from B&N is one of the two reasons I pulled my book out of KDP Select (the other reason being that the “updraft” effect of post-free sales has largely dissipated). I think you can make some money with the other retailers, but it requires a fair bit of focus and effort to lead people there.

  • Don McGowan (@LegalMinimum)

    Interesting analysis. In one of the comments submitted to the DOJ on the proposed settlement, an indie author (David Gaughran) talked about how he felt that the publishers and Apple shouldn’t be allowed to punish Amazon because by creating the Kindle and KDP and facilitating lower price points Amazon had created the self-published author market. Your comment dovetails with that nicely by showing that Amazon is where the self-published authors have the best chance of success. Watch for arguments like that to become very prominent as the case goes on, because it shows that the Kindle is increasing the supply of books for consumers. That’s one of the stated goals of antitrust law – increasing the supply of lower-cost goods to consumers – and so it’ll be a really important argument.

    • Michael Hicks Post author

      And as a number of folks have pointed out regarding the complaints leveled at Amazon in many of the comments, Amazon isn’t “on trial” in the case! These folks just gloss over the allegations that these companies got together and broke the law! “But it’s all Amazon’s fault!” Good heavens…

    • Michael Hicks Post author

      Well, I know that some authors are using KDP to good effect for their own purposes. But in my case, borrows fell off drastically after February, and the impact of free giveaways on paid sales was marginal, at best, after the boon we experienced in December through February. I know Amazon is looking at adding some additional features to the program, but I’ll think long and hard about putting any titles in KDP Select again…unless they change the algorithms back to what they were initially! 😉

      And thanks for the nice words about the cover of First Contact!

  • Michael V. Smith

    Thanks Michael for bringing this to light. If I hadn’t read this in your e-mail, i wwould not have kown about it. Kudos M. V. Smith

  • Jena johnson

    This may seem completely unrelated but I just wanted to make a comment on how this reminds me of the situation I’ve been dealing with in my profession as a professional photographer. I’ve been in the business for 16 years and made the conversion from film to digital. I’ve watched my industry become totally saturated with an influx of new photographers jumping on the digital bandwagon. Everyone with a digital camera is now a professional photographer. I’ve seen so many old school photographers close up shop because they’ve been either unwilling or unable to adapt to the new photography market. In this new digital age, from ebooks to digital photography, it’s become a situation of adapt or die. The publishing companies have yet to face the fact that their business has changed dramatically and if they don’t get their heads out of the sand they will fade into nonexistence. Amazon has embraced the new age of digital books and hopefully other book markets will follow their example to give readers more options to purchase and authors more ways to reach potential customers.