U.S. DOJ unwittingly causes further consolidation, strengthens Amazon’s domination of ebook industry

“A federal judge ruled on Wednesday that Apple had illegally conspired with five of the six biggest publishers to try to raise prices in the budding e-books market,” David Streitfeld reports for The New York Times. “The verdict in the Apple case might have been a foregone conclusion, telegraphed by the judge herself, but it emphatically underlined how the traditional players in the book business have been upended. ‘We’re at a moment when cultural power is passing to new gatekeepers,’ said Joe Esposito, a publishing consultant. ‘Heaven forbid that we should have the government telling our entrepreneurs what to do, but there is a social policy issue here. We don’t want the companies to become a black hole that absorbs all light except their own.'”

“he Apple case, which was brought by the Justice Department, will have little immediate impact on the selling of books. The publishers settled long ago, protesting they had done nothing wrong but saying they could not afford to fight the government. But it might be a long time before they try to take charge of their fate again in such a bold fashion. Drawing the attention of the government once was bad enough; twice could be a disaster,” Streitfeld reports. “‘The Department of Justice has unwittingly caused further consolidation in the industry at a time when consolidation is not necessarily a good thing,’ said Mark Coker, the chief executive of Smashwords, an e-book distributor. ‘If you want a vibrant ecosystem of multiple publishers, multiple publishing methods and multiple successful retailers in 5, 20 or 50 years, we took a step backwards this week.'”

Streitfeld reports, “Some in publishing suspected that Amazon had prompted the government to file its suit. The retailer has denied it, but it still emerged the big winner. While Apple will be punished — damages are yet to be decided — and the publishers were chastened, Amazon is left free to exert its dominance over e-books — even as it gains market share with physical books… ‘Amazon is not in most of the headlines, but all of the big events in the book world are about Amazon,’ said Paul Aiken, executive director of the Authors Guild. ‘If the publishers colluded, it was to blunt Amazon’s dominance… The Justice Department’s guns seem pointed in the wrong direction.'”

Read more in the full article here.

MacDailyNews Take: While appealing this witch hunt, Apple should go thermonuclear by unleashing a massive promotional campaign for iBookstore — found on every iOS device, of which over 600 million have been sold to date, and very soon to be appearing on tens of millions of Macs running OS X Mavericks — that shakes Amazon and its whiny little bitch Bezos to the core.

Related articles:
Where’s the proof that Apple conspired with publishers on ebook pricing? – July 10, 2013
U.S.A. v. Apple ruling could allow U.S. government to monitor, interfere with future Apple negotiations – July 10, 2013
Judge Denise Cote likely wrote most of her U.S.A. v. Apple ebooks case decision before the trial – July 10, 2013
U.S.A. v. Apple: NY judge rules Apple colluded to fix ebook prices, led illegal conspiracy, violated U.S. antitrust laws – July 10, 2013


    1. Judge Cote to Amazon: “Me suckee, me fuckee, me love you long long. Fifteen dollar. Oh all right, how about ten dollar? No? Ok, I’ll take five dollar. Five dollar, me suckee, me fuckee. Me love you long long.”

      Amazon: “Take the five dollars bitch.”

  1. An massive promotional campaign will fail because smart buyers will do comparisons between apple’s iBooks bookies and amazon’s ebook bookies and conclude that ebook is much cheaper.

    1. Lower, below cost prices to kill your competitors is legal now. Just ask Amazon. Giving books away for free could hurt Amazon big time. Apple spends a couple Billion dollars screwing Amazon big time. DOJ will not say a word.

      1. Exactly. If that’s the game Amazon (and the DOJ) want to play, Apple is the wrong one to mess with. Apple has the deepest pockets in the world. They can sell every book for $1 and destroy Amazon.

        But then the DOJ would probably bring more anti-trust charges against them.

      2. I don’t see how.

        Raise ebook prices overall, get charged with collusion.

        Underprice ebooks (i.e. sell for less than what that paragon of virtue Amazon does), get charged with antitrust and monopoly abuse.

        Some Amazon lobbyist sure earned their promotion.

    1. That’s what I’ve been thinking for a while. Apple needs to call Amazon’s bluff and offer a price-matching guarantee plus another 10% discount. Apple actually has the cash in the bank to afford this, Amazon does not.

      It would absolutely destroy Amazon with their -1% margins.

  2. “…took advantage..”

    The publishers were thankful that Apple came into the picture and offered them an opportunity to raise prices. “Got them into trouble” would be a better way of phrasing it, but the whole premise is myopic.

    At this point the question becomes: is it worth it for Apple to keep pursuing this course? This question is way above my pay grade, but I think they should consider giving in as long as no dangerous precedent is set. In that case, this is probably going all the way to the Supreme Court.

    1. Apple can’t give in now. It is committed to go all the way to the Supreme Court. The losses that will be piled on by the various states for penalties haven’t even been assembled yet, but the will be in the tens of billions of dollars before it’s all said and done. Apple’s best chance is to win this one, instead of fighting 30 others.

      1. Are you nuts?!?

        “Tens of billions of dollars”?!?

        How many ebooks do you think Apple sold? You multiply the number of books sold by the average differential, then multiply by 3. The average differential at most was $3. We know it was much less, but even at $3, for your hyperbole to be true, Apple would have had to have sold a couple billion ebooks, and we KNOW that’s not the case.

  3. MDN take, NOT!

    And what if the big push doesn’t work??? What the heck does Apple have to gain in selling books below cost, because that’s exactly what Apple would have to do. Everyone has done it, Microsoft, HP, etc. Apple by forcing itself to innovative has avoided jumping into selling loss leaders. That just doesn’t work for premium brands.
    Big lesson learned so far is:
    Don’t pick a fight that your not sure you can win. Apple is mired in legal issues and I’m sure it is taking a toll. No one is writing about it, but could the significant legal proceedings be having an impact on Apple’s ability to deliver new products and redefine other markets?

    1. Where in the MDN take did they even mention that Apple sell books at below cost?

      No… that’s not what Apple would have to do.

      Low pricing is the first thing (and pretty much the only thing) that people who don’t know anything (about promoting, marketing, and advertising) come up with in regards to promoting, advertising, and marketing.

      It’s a strategy (actually race to the bottom) that doesn’t really work long-term. It’s what Apple doesn’t do… and it’s why they have the financial resources (profits) they do.

      As for legal proceedings having an impact on Apple’s ability to deliver, that would only be true if Apple were a low margin company and their developers, engineers, and other staff were also Apple’s lawyers.

  4. Apple perhaps should pull Amazon’s trick and offer new books at $5.99 (or less) causing Amazon to have to further discount and lose lots more money it can not afford to lose more than Apple. Surely the DOJ would have no problem with that if Apple should want to subsidize ebooks (if for no other reason than revenge against Amazon)? Would love to see the look on Jeff Bozo’s face if they did that. You want a price war, well, you got it!

    1. Yes, Tim Cook needs to exploit the situation by engaging in a vicious price war with Amazon. It’s not like Apple ever gave a crap about the price of books. If publishers have failed in stemming the downward slide of book prices then there’s no reason why Apple shouldn’t ride that tidal wave. And when authors and the publishing houses get upset, they will have Amazon and the Obama DoJ to blame.

    2. The problem is that Amazon will make up the price difference by bumping up the price on the gazillions of other things they sell. They are e-WalMart and sell so many things they can take losses on one item without you noticing you are paying more for the others.

      This is an issue that needs to be sorted out in the law, and the law needs to be properly applied. The Government was able to intimidate the publishers into turning tail and running. Apple really should have funded their defense costs so they could afford to stand up to the abuse of power by Holder and company. Maybe we all should have.

      1. 1. Amazon doesn’t bump up their prices. Everything is a loss-leader!
        2. The Kindle is supposedly Amazon’s future promise of reaching that 3000 year p/e ratio. If Apple destroys the Kindle, it is lights out for Amazon.

      2. Apple should perhaps lobby harder to implement/enforce interstate taxes on ecommerce.

        That may annoy and anger consumers and smaller e-retailers, but it’s in line with what the feds want to do anyway, and it’ll hurt Amazon.

        1. Forget it, that battle is lost and Amazon has used state vs state competition for jobs as a means to get legal sales tax holidays and other tax breaks for opening Amazon warehouses. Amazon is now fine with paying sales taxes.

      3. Don’t get me wrong, I think Apple could crush Amazon, just not on the basis of e-book pricing alone. And Apple definitely knows how to hit where it hurts, But it’s still wrong for the Government to bully smaller players into a plea bargain, while supposedly not admitting guilt, then using that plea bargain as de facto indication of guilt. The Government players here need to be brought into line and the case needs to get to the Supreme Court while Holder is still in office. Let John Roberts open a big can of whup-ass on him.

    1. Agreed -dont think there was anything unwittingly about this….just like why was apple brought up on tax evasion….and not the countless others that do it more agreesively, like Amazon….

  5. Agree 100% MDN. Apple should take ebooks very seriously henceforth and come at Amazon guns blazing. To do that, I think they need two more devices for the iOS ecosystem.

    For one, they need a real good capacitive touchscreen black & white e-ink ereader. This may seem like a thing of the past to some of you but the regular Kindles are still Amazon’s bread and butter in terms of hardware, just like search for Google. They sell millions more Kindles and Kindle Paperwhites than they do tablets. For serious readers (and I count myself among them as a Paperwhite owner), ereaders are still matched only by actual books. Apple can call it the iBook.

    For two, they need the 5 inch iPhone Plus and its companion the iPod touch XL. They would increase iBook sales when reading on the iPhone and iPod becomes a more delightful experience, especially for childrens books. Amazon will enter the smartphone market soon, with a 5 inch phone I suspect, but until then it would become a key advantage for Apple to exploit.

    Those two devices would pull me permanently into the iBook ecosystem but, until I get an e-ink ereader that allows me to do things such as read under the sun, I will remain a buyer of Kindle books. The Kindle ecosystem, including its iOS apps mind you, is more versatile and attractive to bookworms.

    1. Please cite source for sell millions more Kindles and Kindle Paperwhite’s. The only thing I have every seen regarding sales is the Kindle Fire as a top selling Amazon product.

    1. Pretty good. I noticed the Professor being interviewed said the Judge “renditioned” the actual testimony in her opinion. Isn’t renditioning what you do when you take something to an unknown location and torture it until it says what you want?

      1. I think this one:

        rendition – an explanation of something that is not immediately obvious; “the edict was subject to many interpretations”; “he annoyed us with his interpreting of parables”; “often imitations are extended to provide a more accurate rendition of the child’s intended meaning”

  6. 1. Amazon sells books for a low, but unsustainable, price, effectively stopping any newcomers to the market, while simultaneously destroying brick & mortar stores, making publishers even more reliable on Amazon.

    2. Apple decides to come into the market. Apple says, “prices will be a little higher, but the model is sustainable. We can all make a profit, and therefore we can all stay in business”

    3. DOJ (to Apple): “Anti-competitive! We’ll see you in court!”

    4. Judge: “Guilty. Raising prices is bad, even if the lower price is unsustainable. Pay up, bitch.”

    5. Meanwhile, Amazon suddenly becomes the only distributor in the eBooks market. Border is out of business. B&N isn’t far behind. The DOJ has effectively built a monopoly.

  7. Some one above almost got it right…. Apple should create an oPad for outdoor use that competes with the paperwhite readers but does all of the iPad apps in b/w except action apps due to the slow response time of the technology. Then we could all by them for reading and other uses in the bright sunshine.

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