The Nameless Horror

Apple, Amazon, and all that

There are numerous opinions of the Apple ebooks trial verdict. This one by Adam Engst is well worth reading as a summary of Cote’s ruling. Equally worth reading is Philip Elmer-DeWitt’s look at its strengths and weaknesses for CNN, linked to in that piece.

What is not worth reading is this one in the Guardian by Dan Gillmor. Gillmor is clearly a massive fan of Amazon’s, to the point that he’s able to eat up inaccuracies and bizarre personal interpretations.

So, [publishers and Apple] decided to work together against their common enemies: Amazon and genuine competition.

… The way they eliminated competition – for a time – was to insist on changing the terms of bookselling online. Before, publishers had sold digital rights, mostly to Amazon, as it was by far the biggest online retailer, based on the wholesale model that physical bookstores have used

There was lengthy testimony from B&N making it readily apparent that the agency model for ebooks was not an Apple invention. B&N had used it themselves for the Nook store in 2009, before Apple. (And, as far as I’m aware, the flat 30% charge has been standard iTunes practice for music and apps since the year dot.) The reason B&N used it was the same reason Apple used it: it was more attractive to publishers feeling squeezed by Amazon. Apple had also originally intended to use a wholesale model, according to Eddy Cue at least, but publishers, led by HarperCollins, wanted an agency model.

[Publishers wanted to get away from the wholesale model because] Amazon was going to monopolize the ebook market.

It already was. Most pre-iBookstore estimates had Amazon with 90-95% of the market.

They agreed with Apple to do things this way – and to a contract that forbade them from working with retailers that sold books at lower prices. Hence, Amazon had to go along or not get its books in the first place.

No, they didn’t. There was an abandoned draft terms sheet requiring publishers to use agency pricing on all accounts used in negotiations between Apple and the publishers, and a never-sent (presumably because LEGAL ADVICE), email from Steve Jobs saying they could sell with Apple only if they forced Amazon to switch to an agency model. The actual sent email said nothing of the sort, and the terms draft was dropped fast as being unenforceable. What replaced it was a ‘most-favoured nation’ clause allowing Apple to price-match regardless of what publishers had set prices at - which is standard; Amazon has one, Kobo has one, etc. etc. Apple were seeking to protect themselves from being priced out of the market by Amazon. The MFN did that, and they were happy.

The publishers, who come off a lot worse in the trial than Apple do, went to Amazon after agreeing to the iBookstore terms and demanded Amazon offer them a similar deal. But not because they were forced to. They did it because it would mean they could raise prices, as they were deeply concerned about the public’s perception of ‘fair’ ebook price levels and Amazon’s discounting often to the point of loss leading.

(And it worked. Prices went up. Amazon, ironically, earned more under the agency model. Publishers, equally ironically, earned less. People bought less because ebooks became more expensive. But it allowed publishers to keep the perceived average cost of an ebook up for a time.)

Apple and Amazon use draconian DRM (digital rights management) to restrict how buyers can use what they’ve bought – namely, by restricting which devices will display them. If the publishers ditched the DRM and sold directly to the public, they could charge a fair (that is, lower) price and make more money.

Oh dear. Publishers can choose with both sellers whether to protect their books with DRM. (See Tor for an example of a publisher who’s gone DRM-free.) DRM policy is not set by the retailer, but by the publisher. I agree that publishers are nuts for using it, and that it doesn’t achieve its stated aim, but they are under no compulsion to use it outside their own paranoia.

Amazon’s DRM has no device restriction; it has a software restriction. You can only view DRM-protected Kindle books in your Kindle app. But since they’re free and cross-platform, there’s no device limit per se. (Technically the same is true for iBooks, but since that’s limited to iOS devices only, until OS X 10.9 brings Macs to the still-Apple-only party, it’s more or less the same thing.)

There is also nothing stopping them from selling directly to the public, and this has nothing to do with DRM. Penguin, I know, actually used to do so for a time years ago. Why they haven’t built their own online selling brands for ebooks is one of the things about publishing that I least fathom.

(Other than, these days, Amazon’s willingness to instantly stop selling a publisher’s books as a bargaining tactic. See Hachette, Macmillan, et al.)

Second, Apple might consider backing off its “my way or the highway” view of the world. This is even less likely, but worth a mention anyway.

One might say the same for Amazon.

I have no particular dog in this race, though I’m not a fan of the Amazon approach to doing business, but, y’know, be choosy what you read on the subject.