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Apple, DoJ May Settle Over Ebook Pricing Soon

By - Source: Tom's Guide US | B 19 comments

Retailers like Amazon and Barnes & Noble may be allowed to sell ebooks at wholesale prices again real soon.

Although negotiations between Apple, book publishers and the Department of Justice are still "fluid," insiders close to the talks told Reuters that Apple's "most favored nation" status with publishers may be eliminated soon. This could possibly allow rivals like Amazon and Barnes & Noble to regain control of pricing using the "wholesale model," providing ebooks at lower prices rather than overinflated, fixed prices established by the Apple-driven "agency model."

"It would be a positive for Amazon because the company's greatest strength is as a high-volume, low-price retailer and the wholesale model plays into that," said Jim Friedland, an analyst at Cowen & Co.

As previously reported, publishers in the dispute include Simon & Schuster Inc, Hachette Book Group, Penguin Group USA, Macmillan and HarperCollins Publishers Inc. The Justice Department is still trying to figure out what's going on, investigating the agreements Apple made with the five publishers back when the company was gearing up to launch its first iPad tablet.

Prior to the "agency model," retailers like Amazon were able to charge for ebooks at wholesale prices, charging $9.99 or less. But publishers believed their books were worth more, and feared that Amazon would gain too much market power. Thus, Apple and the publishers came up with the "agency model" that allowed the publishers to set the price, but give Apple a 30-percent cut in the process. The publishers loved the idea, but Apple reportedly wouldn't agree unless they forced the model on everyone else.

Now consumers are paying more for ebooks than traditional paperbacks sold on physical retail shelves. While the agency pricing is indeed legal, both the Department of Justice and the European Commission are examining whether the way that Apple reached its agreements with the publishers rose to the level of violations of antitrust law. The Justice Department even suspects that publishers "may have colluded to implement it with e-book retailers."

Unfortunately, Apple may have no way out of the legal mess. Former CEO Steve Jobs, who died last October, seemingly confessed that Apple took advantage of publisher woes and their fear of Amazon. "So we told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30 percent and yes, the customer pays a little more but that's what you want anyway.' ... So they went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books,'" he said via Walter Isaacson's biography.

When Apple essentially created the tablet market with its iPad, Amazon owned 90-percent of the ebook market. Now Amazon only claims 65-percent while Barnes & Noble commands 20-percent and Apple has only 10-percent.

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Top Comments
  • 16 Hide
    frozonic , March 31, 2012 4:33 PM
    feel me up with negatives but i rather download ilegally ebooks than pay for that overpriced crap.
  • 12 Hide
    Delengowski , March 31, 2012 4:46 PM
    Not that this affects me because I'm one of the few that likes physical media, but I hope CrApple gets thats coming to them, poor Tim Cook has to clean up Jobs mess.
Other Comments
  • 16 Hide
    frozonic , March 31, 2012 4:33 PM
    feel me up with negatives but i rather download ilegally ebooks than pay for that overpriced crap.
  • 12 Hide
    Delengowski , March 31, 2012 4:46 PM
    Not that this affects me because I'm one of the few that likes physical media, but I hope CrApple gets thats coming to them, poor Tim Cook has to clean up Jobs mess.
  • 7 Hide
    Draven35 , March 31, 2012 4:53 PM
    Most of my Ebooks come from Baen Books' web store. Many of them are $6, and the authors get a considerably larger segment of that $6 from Baen then other authors get from the 'big' publishing outfits that are just trying to protect their print books by charging almost as much for books with, relatively speaking, zero 'printing' costs after telling us for twenty years that the only reason the cost of paperbacks was going up was the increased cost of printing them.
  • 7 Hide
    Maxor127 , March 31, 2012 6:08 PM
    I thought the software world in general revolved around overinflated prices.
  • 6 Hide
    Marcus52 , March 31, 2012 7:18 PM
    First Apple agrees to a shady deal, then they blame the publishers for it. Nice.
  • 4 Hide
    becherovka , March 31, 2012 7:37 PM
    DelengowskiNot that this affects me because I'm one of the few that likes physical media, but I hope CrApple gets thats coming to them, poor Tim Cook has to clean up Jobs mess.


    So true Tim Cook is doing a lot of good tho, fixing foxcon, paying dividends, settling on stupid lawsuits (including the ones with Samsung). +1 for Tim Cook
  • 8 Hide
    thomaslompton , March 31, 2012 7:49 PM
    Now if only they could get itunes to charge normal prices for their tv shows and movies instead of the at $1 more per episode.
  • 6 Hide
    computernerdforlife , March 31, 2012 11:21 PM
    Sorry Apple, my bookshelf is already established and I have paid for the physical copies that will always rightfully belong to me. For tonight's read: Stephen Hawking - A Brief History of Time. 1 price, 1 book, no conditions.
  • 5 Hide
    blazorthon , April 1, 2012 12:09 AM
    Here's to hoping that Tim Cook doesn't get caught up in this trash like Jobs did.
  • 2 Hide
    house70 , April 1, 2012 12:34 AM
    seelsEverytime my family or myself sign on to iTunes on our iPhone's, iPad's, or Mac's, we feel so rewarded purchasing our apps and books through iTunes. When the price of the book goes up, we purchase it anyway. My Apple stock is flying upward. It's safe to say, I'm in love with Apple, and they can do no wrong.

    Lemme get this straight: you feel rewarded for paying more for some stuff? And you acknowledge that you are being ripped off, but still feel great about it?
    It's safe to say, you have a self-destructive trait that I hope you don't pass on to your kids. Hope you enjoy your few pennies worth of dividends that Apple paid you, that should be enough to buy the first page of a book from Apple. Through iTunes, no less....
  • 3 Hide
    dark_knight33 , April 1, 2012 5:58 AM
    house70Lemme get this straight: you feel rewarded for paying more for some stuff? And you acknowledge that you are being ripped off, but still feel great about it? It's safe to say, you have a self-destructive trait that I hope you don't pass on to your kids. Hope you enjoy your few pennies worth of dividends that Apple paid you, that should be enough to buy the first page of a book from Apple. Through iTunes, no less....


    He's trolling you. It's sarcasm.
  • 0 Hide
    stoogie , April 1, 2012 6:25 AM
    Apple should have no right to control what price others wish to sell their products for. Go burn in hell Apple you fool.
  • 4 Hide
    Draven35 , April 1, 2012 7:09 AM
    its not apple's "fault" its the publisher's fault for wanting as much or more for eBooks as they get for dead tree books, you'd LOVE to hear some of the excuses that the publisher tell authors as to why a paperback is $8 and yet the eBook version is $9.99...
  • -5 Hide
    Anonymous , April 1, 2012 1:23 PM
    "providing ebooks at lower prices rather than overinflated, fixed prices established by the Apple-driven "agency model."

    Prices were not "overinflated", they were realistic based upon publishers overall costs of bringing books to market, both print and e-book editions. Amazon, to bolster its position in e-book sales sold books at a loss. Does anyone think that once they had commandeered the ebook market they would have continued to sell books at a loss or, more likely, would they not have gone to publishers and said, "we are now going to pay you based on our discount off our selling price and not your list price for the book." Take it or leave it.
  • 0 Hide
    aftcomet , April 1, 2012 8:48 PM
    Apple is evil and all, but they're evil geniuses. Seriously. How many people would do what they're doing if they had the chance. If not Apple, it'd be someone else. They're a business person's dream.
  • 2 Hide
    Anonymous , April 2, 2012 7:38 AM
    lol price collusion, anti-competitive, and anti-trust going to bite deep in apples azz now.
    can count on Europe to stick it to them :p 
  • 4 Hide
    Vladislaus , April 2, 2012 7:57 AM
    Draven35its not apple's "fault" its the publisher's fault for wanting as much or more for eBooks as they get for dead tree books, you'd LOVE to hear some of the excuses that the publisher tell authors as to why a paperback is $8 and yet the eBook version is $9.99...

    Apple also has blame since they colluded with the publishers to bring the price up.
  • 1 Hide
    gm0n3y , April 2, 2012 5:14 PM
    The pricing model actually makes sense and is common on websites. The site just hosts the products and allows the seller to set the price. Ironically, this is exactly how Amazon works for most of the products they sell. The issue here is just that Apple worked with the publishers to change their policies with other companies. That is firm grounds for an anti-trust suit.

    Either way, I really hope that e-book prices go down. I bought my first e-reader about 4 years ago and have seen prices double or triple since then.
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