Just A Moment
Publishing spent the 2010s fighting tooth và nail against ebooks. There were unintended consequences.
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At the beginning of the 2010s, the world seemed to lớn be poised for an ebook revolution.
The Amazon Kindle, which was introduced in 2007, effectively mainstreamed ebooks. By 2010, it was clear that ebooks weren’t just a passing fad, but were here lớn stay. They appeared poised khổng lồ disrupt the publishing industry on a fundamental level. Analysts confidently predicted that millennials would embrace ebooks with open arms và abandon print books, that ebook sales would keep rising to take up more and more market share, that the price of ebooks would continue to lớn fall, and that publishing would be forever changed.
Instead, at the other kết thúc of the decade, ebook sales seem khổng lồ have stabilized at around trăng tròn percent of total book sales, with print sales making up the remaining 80 percent. “Five or 10 years ago,” says Andrew Albanese, a senior writer at trade magazine Publishers Weekly và the tác giả of The Battle of $9.99, “you would have thought those numbers would have been reversed.”
And in part, Albanese tells giaoducphanthiet.edu.vn in a phone interview, that’s because the digital natives of gen Z and the millennial generation have very little interest in buying ebooks. “They’re glued lớn their phones, they love social media, but when it comes lớn reading a book, they want John Green in print,” he says. The people who are actually buying ebooks? Mostly boomers. “Older readers are glued khổng lồ their e-readers,” says Albanese. “They don’t have lớn go to the bookstore. They can make the fonts bigger. It’s convenient.”
Ebooks aren’t only selling less than everyone predicted they would at the beginning of the decade. They also cost more than everyone predicted they would — và consistently, they cost more than their print equivalents. On Amazon as I’m writing this, a copy of Sally Rooney’s Normal People costs $12.99 as an ebook, but only $11.48 as a hardcover. & increasingly, such disparities aren’t an exception. They’re the rule.
So what happened? How did the apparently inevitable ebook revolution fail to lớn come to lớn pass?
To figure out the answers, we’ll have to dive in deep to a lawsuit filed by the Department of Justice in 2012 against táo bị cắn dở — newly entered into the ebook market with the advent of the ipad — and five of what was then the Big Six publishing houses. The Department of Justice accused Apple and the publishers of colluding to fix ebook prices against Amazon, và although the DOJ won its case in court, the pricing mã sản phẩm that Apple and the publishers created together would continue to dominate the industry, creating unintended ripple effects.
The case of US v. Apple encapsulates the dysfunction of the last decade of publishing. It’s a story about what we’re willing to pay for books — & about an industry that is growing ever more consolidated, with fewer và fewer companies taking up more & more market share. What happened to the ebook in the 2010s is the story of the contraction of American publishing.
“To my mind it’s trò chơi over for this business.”
When the Kindle entered the marketplace in 2007, Amazon had a simple sales pitch: Anyone with a Kindle could buy all the ebooks they wanted through the online marketplace, và many of those ebooks — in fact, all thủ đô new york Times best-sellers — would cost no more than $9.99.
$9.99 is a steal for a new book. At the time, most hardcovers were averaging a list price of about $26, & many cost more. But for Amazon, this price point was an apparent no-brainer. The first generation Kindle was expensive, & value conscious customers needed some incentive lớn buy into it. Why would anyone spend $399 on an e-reader if they couldn’t expect to make up at least part of the cost in a discount on ebooks?
And while this point is often glossed over, Amazon was actually following a precedent phối by publishers in its pricing model. In her opinion for US v. Apple, Judge Denise Cote noted that before 2009, most publishers discounted ebooks by 20 percent from the price of a hardcover, which often led khổng lồ a suggested danh sách price of around $9.99.
But by 2009, publishers had changed their minds. Now they considered the idea of $9.99 ebooks to lớn be an existential threat. Printing and binding và shipping — the costs that ebooks eliminated — accounted for only two dollars of the cost of a hardcover, publishers argued. So the ebook for a $20 hardcover book should cost no less than $18. & according to lớn publishers, by setting the price of an ebook at $9.99, Amazon was training readers khổng lồ undervalue books.
“The big concern — & it’s a massive concern — is the $9.99 pricing point,” David Young, the CEO of Hachette Book Group USA, told the New Yorker in 2010. “If it’s allowed lớn take hold in the consumer’s mind that a book is worth ten bucks, lớn my mind it’s trò chơi over for this business.”
Here’s where book prices come from
Before we delve further into the weeds here, a quick primer on how book prices are set. Print books are generally sold under a wholesale model, which works lượt thích this: First, the quảng cáo trên internet will phối a suggested danh sách price for a book; say, $20. Then it will sell the book lớn resellers và distributors for a discount off that suggested menu price. So if Simon & Schuster wants lớn sell a $20 book to Amazon, Amazon might negotiate a discount of 40 percent for itself và end up paying Simon và Schuster only $12 for that book.
But once Amazon owns the book, it has the right lớn set whatever price it would like for consumers. The $20 list price that Simon & Schuster set was just a suggestion. Under the wholesale model, Amazon is không lấy phí to decide to lớn sell the book lớn readers for as little as a single dollar if it chooses to.
Until 2010, ebooks were sold through the wholesale mã sản phẩm too. So if Simon & Schuster was publishing a $20 hardcover, they could choose to lớn set a suggested menu price of $18 for the ebook — two dollars less than the hardcover — and then sell that ebook to Amazon at a 40 percent discount for $10.80. And Amazon could, in turn, feel không tính tiền to sell that ebook for $9.99 and swallow a loss of 81 cents.
To be clear, the numbers we’re using here khổng lồ get a handle on how pricing works are imaginary. (Amazon negotiates different discounts for itself at different times from different publishers, sometimes around 40 percent, but at other times higher và at other times lower.) But we vì chưng know that Amazon was making very, very little money off ebook sales in 2010, và was in fact probably losing money on most of them.
For a company as big as Amazon, it’s perfectly reasonable to đại bại money on a new initiative if that will help them dominate the market space. But publishers were terrified of what would happen once Amazon had established itself as the only trò chơi in town, ebook-wise.
Would Amazon keep pushing prices ever further down? & once publishers had nowhere else khổng lồ sell their ebooks, would Amazon start demanding lower & lower discounts from them to subsidize those low prices? Would Amazon start to lớn demand that publishers sell them ebooks for $5 so that it could maintain that customer-facing $9.99 price point but now make a profit?
It was in the midst of this tense and paranoid atmosphere that táo apple made its entrée into the ebook market.
Publishers hoped that iBooks would vì for books what iTunes did for music. It didn’t quite work out that way.
In 2010, hãng apple launched the iPad, and with it, the modern tablet computer. And part of what made the máy tính bảng ipad so exciting was that it contained iBooks, an phầm mềm that publishers were hoping would vì for ebooks what iTunes had done for music: be so convenient và easy lớn use that consumers would flock to lớn it rather than turn to lớn piracy. Crucially, publishers hoped that iBooks would be so streamlined & sleek that it could undermine Amazon’s book-selling dominance.
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Apple was offering publishers an incentive khổng lồ root for it over Amazon. With its ứng dụng Store, táo bị cắn dở had established a resale mã sản phẩm that worked differently from the wholesale mã sản phẩm publishers were used to. It was called the agency model, và it worked lượt thích this: publishers would decide on what the danh mục price for their book should be, & then put it up for sale at that price in the iBooks store. Táo bị cắn dở would take a 30 percent commission on every sale.
Apple wasn’t willing lớn sell ebooks for $18, but it thought a cap of $14.99 was perfectly reasonable. Và if publishers decided lớn go along with Apple’s plan, they could set a danh mục price of $14.99 for an ebook và be sure that no one in the iBooks store would ever discount it without the publisher’s express permission. Apple, meanwhile, would pocket $4.50 from each sale.
But táo apple couldn’t enter the ebook market while charging consumers five dollars more per unit than its biggest competitor was. It needed some assurance that no one would have a cheaper product than it had. So it made a khuyễn mãi giảm giá with five of the Big Six publishers (Simon và Schuster, Penguin, HarperCollins, Hachette, and Macmillan; Random House, then the biggest trade publishing house, abstained): They could all sign on to Apple’s agency model, as long as they guaranteed that they’d also use that same agency model with every other retailer they worked with. That way, Amazon, too, would be forced to lớn sell its ebooks for $14.99 — and if it refused, publishers could withhold their ebooks from Amazon & make them exclusive to Apple.
Publishers agreed to the deal. & just lượt thích that, everything changed.
“That’s the kind of thing that’s very clearly illegal”
“Overnight, because of this conspiracy, ebook prices went from $9.99 to lớn $14.99,” says Albanese. “That set the tone for the future of the ebook right there.”
The word “conspiracy” is important here. As far as publishers were concerned, they weren’t conspiring; they were just acquiring the leverage they needed to khuyến mãi with a company they considered an existential threat to their business. They were preventing Amazon from forming a monopoly, & thus they were promoting a healthier economy for books và for the American book-buying public, too.
According lớn the Department of Justice, however, publishers were conspiring. They were colluding with táo to fix prices.
“They
In 2012, the Department of Justice sued both the five publishers who had agreed lớn Apple’s agency mã sản phẩm plan và Apple itself. And the presiding judge, Denise Cote, was not impressed by the argument that Apple and the conspiring publishers had only acted lớn prevent a monopoly. “Another company’s alleged violation of antitrust laws,” she wrote in her opinion, “is not an excuse for engaging in your own violations of the law.” She imposed sanctions of $166 million on publishers lớn compensate those who bought ebooks at inflated prices.
But while Cote’s sanctions required publishers khổng lồ briefly modify the agency model so that resellers could phối their own prices, within a few years, those sanctions expired. Today, the agency mã sản phẩm that táo developed is once again the standard sales mã sản phẩm for ebooks.
“The Department of Justice suit in hindsight was corporate squabble,” says Albanese. “It hasn’t done much khổng lồ address Amazon’s market position. Would the ebook trajectory have continued to lớn grow had that suit not happened? Probably we would be in about the same place.”
“The answer is khổng lồ sue both of them”
Ironically, by winning when it comes lớn ebook pricing, publishing seems khổng lồ have hurt its ability khổng lồ convince readers that print books are worth spending money on.
“Amazon can still discount whatever they lượt thích on the print side,” explains Jane Friedman, a publishing consultant & the author of The Business of Being a Writer. On the ebook side, however, Amazon now lists publisher-mandated prices, often with the petulant italic addition “Price set by seller.” “So the market is very weird, and often the ebook costs more than the print,” Friedman says. “Sometimes it feels lượt thích Amazon is trying to lớn make the publishers look ridiculous.”
In this new market, high ebook prices make it harder than ever for young authors in particular lớn survive. “The split has really hurt debut novelists,” says Friedman. “It’s hard to lớn ask readers lớn take a chance on someone unproven at that high price point, & since the ebook market does lean towards fiction, it’s hurting the new people.”
Self-published authors, meanwhile, are flourishing. They’re allowed khổng lồ set their own ebook prices just lượt thích publishers are — & consistently, they mix their prices very, very low. “It’s a shadow market,” Friedman says. “Novelists with huge backlists go and put them out as ebooks independently. & if a reader has a choice between reading this great series at $2.99 a pop or a $12 novel, what are they going khổng lồ pick?”
Antitrust law professor Christopher Sagers argues that the outcome of the DOJ’s ebooks case shows that the real problem with the industry is not just that Amazon has a monopoly. The big trade publishers, he says, have a monopoly too.
“There used to lớn be hundreds of publishing companies. They’re now mostly owned by five,” Sagers says. (After that Department of Justice lawsuit, Penguin merged with Random House, và the Big Six became the Big Five.) “Why are ebooks expensive? It’s not because Amazon is vicious. It’s because there’s no competition at the wholesale level.”
For Sagers, the solution lớn the ebooks problem was not to lớn let publishers fix prices khổng lồ prevent an Amazon ebook monopoly. He thinks that instead, the government should have prosecuted everyone involved. “Critics of the case all said, ‘It’s terrible to lớn sue the publishers và not let them have a cartel if you’re going to let Amazon have a monopoly,’” he told giaoducphanthiet.edu.vn over the phone. “I say that’s crazy. The answer is to sue both of them.”
The Big Five publishers “are huge, & they have been able to put in place practices that are kind of unfair and that authors have lớn put up with,” Friedman allows. “That said, they need that kind of kích cỡ to be able to lớn effectively khuyến mãi with something lượt thích Amazon. If you look at an indie publisher, I wouldn’t want to be one of them.”
Friedman points lớn the way the entire book market has contracted and consolidated itself, so that nearly every phase of a book’s life is dominated by a tiny subset of companies. “People complain about Ingram’s terms, too, because nobody can compete with Ingram,” Friedman says.
Ingram is a distributor, & it’s one of the only companies that currently exists to lớn handle book distribution: It’s the Amazon or the Penguin Random House of this portion of the process of putting books out into the world. In December 2018, Publishers Weekly reported that Ingram had begun putting out feelers on buying Baker & Taylor, one of its competitors; this May, Baker và Taylor stopped selling to lớn bookstores. Ingram now faces virtually zero retail competition.
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Ingram benefits from an industry that has consolidated lớn the point that there is almost no competition, and entering the marketplace as a new and independent player is nearly impossible, along every single level. In that, it’s in a position almost identical to that of both Amazon and the Big Five.
“You have to lớn accept them, because who else are you going to go to?” Friedman says. “It’s hard to get around these last men standing.”
