Salon’s Laura Miller has written this great primer on the main issues involved in the U.S. Department of Justice’s anti-trust suit being brought against Apple. But I still think she may be missing a pretty important piece of the puzzle.
It’s a complex case, but the gist of it is: did Apple collude with the major publishers against Amazon, when Apple convinced them to move from the traditional wholesale model to an agency model in the distribution of e-books?
In the wholesale model, the publisher simply sells the book to the distributor at usually half the suggested price. In an agency model, the distributor is selling on commission and everyone–publisher, writer and distributor(Apple,Amazon)–takes a percentage of the sale.
The problem started back when Amazon, using the wholesale model, was selling kindle books across the board at $9.99. Since Amazon bought the books at more than $10, Amazon was obviously taking a loss. Was there a longterm/longtail marketing plan afoot?
Miller lists Amazon’s possible motivations. Were they trying to draw readers to Kindle? Were they simply trying to lure customers to Amazon.com for other stuff. Or, the most popular conspiracy theory, were they trying to drive smaller distributors out of business?
Apple stepped in to “save the day” with its agency model, back when everyone was mostly a subscriber to the last theory.
One important theory is, however, missing from her list. The cost and effort involved in the mechanics of publishing are now a fraction of what they once were. Was it possible that Amazon intended to become a major publisher?
A friend of mine has recently been working with an Amazon editor on a Kindle Single. Amazon seems to have a pretty generous deal going with its new writers. I don’t know of any writer with a big publisher who gets 70% of the profits.
With Amazon taking advantage of the New York publishing industry’s revolving door of editors, all it has to do is poach a few mega selling authors, and the gates will open.
Publishers are essentially banks. They loan writers money based on how likely it is the writer will be able to pay the advance back, and expect to write off many of those first few loans. Anti-trust, or no anti-trust case, the biggest bank is going to win this one.
Now does anyone want to start speculating on why Google has been selling its Nexus tablets under cost?