In May, Apple and three of the Big Six lost the first round in what looks like­ly to be a long and cost­ly fight (two of the oth­er three had reluc­tant­ly set­tled and one, Ran­dom House isn’t involved). What’s at stake is, not to put too fine a point on it, the future of pub­lish­ing. So here, very briefly, is the sto­ry so far.

When Ama­zon began sell­ing ebooks through their Kin­dle in 2007, the price they charged for them was a lot less than for actu­al phys­i­cal books. For one thing they did­n’t cost as much to pro­duce. But much more impor­tant­ly, ebooks were a com­plete­ly new idea, and peo­ple had to be encour­aged into try­ing them out. So fre­quent­ly, Ama­zon would sell their ebooks at a loss, for even less than they had pur­chased them from the pub­lish­er in the first place.

Cul­tur­al­ly then, this dis­count sell­ing was both wel­come and nec­es­sary. Eco­nom­i­cal­ly how­ev­er, it meant that Ama­zon quick­ly estab­lished a stran­gle­hold on a rapid­ly expand­ing mar­ket. Not only that, but the rise of ebooks threat­ened to ren­der the tra­di­tion­al book­store and indeed the con­ven­tion­al pub­lish­ing world redundant.

Nobody want­ed to let what had hap­pened in music take place in pub­lish­ing. So when Apple entered the ebook mar­ket with the iPad two years lat­er (fol­lowed by Barnes & Nobles and their Nook), a new pric­ing sys­tem was put in place; the agency mod­el.

Instead of pub­lish­ers sell­ing at a dis­count to retail­ers, who would then take their cut from the price they sold it on to the pub­lic for, pub­lish­ers would set the price that the pub­lic would pay for a book, and the retail­er (whether Ama­zon, Apple or who­ev­er) would get a flat 30%. This is what Apple did in music.

But Apple would only agree to enter the mar­ket in the first place if a min­i­mum of four of the big six (see image below) agreed to imple­ment their new agency mod­el. In the end, five of them did, and the sixth Ran­dom House joined in a year later. 

So Ama­zon had no choice but to play along. But they were as the Amer­i­cans say pissed. They made more mon­ey from the books that they sold now, but their share of the still grow­ing ebook mar­ket had gone down from 90 to 60%. And cul­tur­al­ly, they were being forced to sell books for more than they might have liked. Or to put in anoth­er way, they were being pre­vent­ed from so dra­mat­i­cal­ly under­cut­ting their rivals. 

So they went to the courts, and in May the US Depart­ment of Jus­tice found in their favour. After all, as Ken Aulet­ta says in his much more in-depth piece in the New York­er here, the let­ter of the anti-trust leg­is­la­tion is crys­tal clear. Did­n’t Apple say that they would only go ahead if they got agree­ment from at least four of the big six? And hadn’t the cost of books to the pub­lic gone up once their agency mod­el had been put in place?

But wait a minute. The cost had gone up, but the pub­lish­ers were now receiv­ing less. So how can it be a car­tel, if the peo­ple orga­niz­ing it end up mak­ing less mon­ey? What’s more, Ama­zon was now get­ting more. And was­n’t the whole spir­it of the anti-trust leg­is­la­tion designed to curb the likes of Ama­zon, and pre­vent them from putting the much small­er pub­lish­ing com­pa­nies out of business?

Of course Ama­zon could afford to sell its books at a loss. Books make up just a tiny frac­tion of what Ama­zon sells. But books is all the big six do.

All of this has been bril­liant­ly chart­ed by pub­lish­ing (and now dig­i­tal pub­lish­ing) guru Mike Shatzkin, whose blog (here) is a must for any­one inter­est­ed in the world of pub­lish­ing. But what it all seems to boil down to is this: 

The pub­lish­ing world allows for a wide vari­ety of books to be pub­lished by using the mon­ey it makes from the few books that sell huge­ly, to fund a pletho­ra of books that might, but almost cer­tain­ly won’t do any­thing like as well.

And the phys­i­cal book­store is the best and only place for some of those small­er titles to get noticed. And who knows, maybe even take off.

By sid­ing with Ama­zon against them, the DoJ is seri­ous­ly putting that whole eco sys­tem in grave dan­ger. And there is a very real pos­si­bil­i­ty that the only thing that will result is a sig­nif­i­cant­ly nar­row­er choice of books to read from, with sig­nif­i­cant­ly few­er writ­ers mak­ing a liv­ing from it. 

And the ques­tion then is, if Ama­zon is the only play­er left stand­ing once book­stores and the world of pub­lish­ing have been dis­man­tled, will they have any inter­est in try­ing to do any­thing about that? Or will they just be far too pre­oc­cu­pied in hav­ing to com­pete with rival mono­liths Apple, Microsoft, Google and Face­book for an ever-nar­row­ing choice of prof­itable content?

Oh, and for all of you who still think that e‑readers are a fad, have a look at this one year old try­ing to oper­ate a mag­a­zine, here.

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