Tuesday, April 17, 2012


From Through the Looking Glass:
Alice meets the twins
"I know what you're thinking about," said Tweedledum; "but it isn't so, nohow."

"Contrariwise," continued Tweedledee, "if it was so, it might be; and if it were so, it would be; but as it isn't, it ain't. That's logic."
And so to publishing, economics (aka, "the dismal science"), public policy, and Through the Looking Glass (aka, world-class) examples of  (il)logic.

Today's post deals with what must be for any author among the biggest news items of recent days. To wit: the federal lawsuit brought against Apple and five major book publishers (including MacMillan, the publisher of many of my books) alleging price fixing and collusion in the market for ebooks. This explanation of the lawsuit (like many you can Google) is detailed and evenhanded -- and (IMO) ignores the two biggest flaws in the complaint:
  • Book titles even within one store aren't interchangeable like, say, gasoline and green beans are interchangeable across competing sales outlets. Suppose that publishers A and B improperly discussed pricing (and no publisher has conceded to that behavior). They're discussing pricing of separate and distinct items. As a WSJ columnist recently put it, "Nobody walks into a store and says, 'Toni Morrison looks expensive today. Give me some Stephen Hawking.'"
  • From the opposite end of the opinion spectrum, the NYT points out that the real monopolist in the story -- untouched by the DOJ lawsuit -- is Amazon. When Apple and several publishers switched to a new business model, they ended the practice of allowing electronics distributors (read: Amazon) to use books as loss leaders to sell more ebook readers (read: Kindle). 
Before Apple upended the market by introducing a new business model for ebooks, Amazon had a 90% market share. Fast forward two years, with Justice suing to "help" consumers, and we find that Barnes and Noble has clawed its way to 27% share and Apple to 15%. The NYT editorial describes the treatment of Amazon as "That’s the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ’N’ Groceries on Route 19 instead.")

Do I consider Amazon evil? No (and, in fact, they sell a lot of my books). "Monopolist" and "monopsonist" (more on that term soon) aren't epithets, merely possible characterizations of a very successful entity's market position. But Amazon's best interests and the overall society's best interests are not the same. That divergence has consequences. 
    The storm on the horizon
    Monopsony (a single buyer) is as unhealthy for a market as monopoly (a single seller). I opined as much a bit more than a year ago -- when Borders Books bit the dust -- in the post The monopsony cometh.

    Barnes and Noble, owner of the last significant brick-and-mortar bookstore chain, saw its stock hammered last week. Why? Because if DOJ prevails -- and the feds have already gotten three publishers to settle out of court -- Amazon will once again be free to sell ebooks as loss leaders.

    Suppose that happens. What ebook pricing strategy do you anticipate will be in Amazon's best interests once BN's Nook store and Apple's iBookstore have been driven from the market? 

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