By launching a pilot program to bring their publications back to libraries through OverDrive competitor 3M, Penguin has taken a step back toward serving its customers. At least so long as those customers don’t like reading on their Kindle. One of the notable shortcomings of the new system, and likely one reason that it is so appealing to Penguin, is that it completely lacks Kindle compatibility at this time.
The ongoing disputes between Amazon and the Big 6 publishers have provided any number of inconveniences for readers over the years now, but the library system has been hit particularly hard. While demand for eBooks, especially those compatible with the Kindle platform, has been rising at an ever increasing rate, publishers have been doing their best to make sure that eBook borrowing is as inconvenient as possible when it is available at all.
If that sounds horribly over the top, it is. Just not in the way you might think. The appeal of the 3M system for publishers, when it last made big news in library lending, was that it would force customers to both be in the library building to load their eBook and to wait in line as kiosks to get their chance. The OverDrive system, which often allows borrowers to download their titles over WiFi, allows for too little friction. Penguin, along with others, is concerned that if they don’t find some way to make using an eReader less simple and hassle-free then it will result in lost sales.
The argument is simple enough to follow, but seems to demonstrate how thoroughly these publishers understand their customers. By this logic, the only reason that book stores are able to stay in business is that libraries took too much of a drive or had longer lines.
To be fair, 3M has gotten better since those planning stages. Users are now able to browse and borrow from wherever they like, it seems, and there is even a fair selection available. The originally mandatory kiosks have been changed into promotional tools within the library itself and the program now includes branded eReaders meant specifically to be lent out to library patrons. It’s possible this explains why Penguin is only tentatively on board with the whole program even now, as well as why they will only be offering titles that are at least six months old.
Supposedly there will eventually be some degree of Kindle compatibility with the 3M lending network. Reportedly Amazon broke off earlier talks with a request that they resume in June, so at least things are still being discussed. It is unlikely that 3M will allow things to go the same way that OverDrive did, however, in shuffling their users through an Amazon store page. Given the customer base that Amazon already has, as well as the internal Kindle Owners’ Lending Library being used as a promotional tool for the Amazon Prime subscription service, this might become something that takes quite a while to come to terms over. Kindle owners probably shouldn’t be holding their breath waiting for Penguin, 3M, or Amazon to come around.
The Kindle line basically started the digital reading revolution. They were neither the first nor the best when they appeared, but Kindles were the driving force behind it. Amazon got too powerful, customers likes affordable eBooks too much, and publishers freaked out to the point of getting involved in what seem to be fairly illegal activities while trying to counter all that. We’ve been over all that before. The big question now is “Why are Kindle eBook prices still so ridiculously high?”
I’m not just talking about the results of the DOJ suit against the publishers over their adoption of the Agency Model. I’m glad that’s happening, and I wish them all the luck in achieving a decisive conviction, but even those publishers who have chosen to settle already will not have had much of an effect just yet. I’m more concerned with common sense.
The most obvious side of this is the obvious dislike of the format. Publishers want physical media to be favored because it is more easily controlled. eBooks are too convenient and most especially too easily pirated, so we have to expect these publishers to try to persuade people to stick to proven methods, right? Some variation on this argument is likely to come up in any defense of the Big 6.
I’ll be honest, I’m not even going to address it at length here beyond saying that it flat out ignores the facts. Study after study demonstrates that piracy either increases or fails to affect overall spending as a trend. It’s unintuitive, so I don’t blame them for being slow to catch on, but surely somebody employed by these companies could do some research that goes beyond ominous warnings of the dangers of piracy like those thrown around by the MPAA. Maybe I’ll go into more detail on that another time.
Even assuming that was too hard to grasp, however, there is plenty of easy to understand information about adapting to a market that does away with the concept of limited supply. The most dramatic example comes from the video game industry where Valve CEO Gabe Newell explained a while back that briefly discounting media by 75% had unexpectedly resulted in sales numbers jumping by a factor of 40. I’m not saying the two industries are directly analogous, but clearly there are signs that digital distribution needs to be approached a bit differently.
There have been a few signs that publishers were tentatively trying to figure all this out. Some short-lived discounts have popped up, and last summer’s Kindle Sunshine Deals promo comes to mind as a large effort to feel out the market. It still seems like the biggest motivator for these publishers is a desire not to change.
They have a good thing going and can basically control the entire publishing landscape when they work together. The Kindle, along with its eReader competitors, is an unknown. If it were embraced, somebody else might figure out how to do things better and that would be bad.
I have no idea when this will change, but it can’t come soon enough. All that publishers have managed to accomplish with this ridiculous behavior is temporarily setting back Amazon by shooting both themselves and their customers in the foot.
Nobody really wants traditional publishing to be completely out of the picture, but lately they’re doing more harm than good. One of these days they will have to realize this and Kindle owners everywhere will breathe a sigh of relief while stocking their digital libraries.
The first major change in eBook pricing to come about since the launch of the iPad is at hand. The U.S. Department of Justice has already negotiated settlements with three of the six major publishing houses implicated in a DOJ price fixing investigation only shortly after the filing of the lawsuit. Kindle owners can expect to see an almost immediate drop in many eBook prices, once the court has had a chance to approve the settlement terms. Amazon has already declared this a big win for consumers and announced plans to drop prices on affected titles.
For those who have not been keeping track, the early days of the Kindle brought significantly lower eBook prices than we are now used to. This was the result of Amazon being able to buy their stock wholesale and price things as low as they wanted from there. Publishers were rather unhappy with this arrangement since it meant that customers might well become used to seeing affordable prices on their reading material and cause paper copies of books to lose perceived value.
When Steve Jobs approached the Big 6 publishers with the idea of moving to the Agency Model, wherein publishers would set prices and retailers get a fixed percentage for each unit sold, they jumped on it. As soon as the iBooks store opened, Kindle Edition prices began to rise. There was some drama when Amazon attempted to hold out in protest and pull titles from their store, but without those publishers it is hard to operate a major bookstore.
Since then, prices have remained high and those involved in the Agency Model arrangement have come under investigation in both the US and EU. The biggest being raised by the DOJ, aside from alleged secret meetings and clandestine correspondence between heads of supposedly competing publishers in the days leading up to implementing the Agency Model, is the Most Favored Nation Clause. Apple managed to get this introduced in their agreement with every publisher.
Typically, a MFN is put in place to prevent favoritism from allowing a wholesaler to sell more cheaply to another retailer at a lower price. In this case, since publishers were setting the price, the DOJ is arguing that it was meant to “protect Apple from having to compete on price at all, while still maintaining Apple’s 30 percent margin.”
The result of all this has been artificially inflated eBook prices meant to turn customers away from things like the Kindle. That last point is more fact than opinion, as any look at publisher comments regarding the “troublesome” convenience of eBook borrowing at libraries that has gone along with Penguin dropping out of the library system altogether.
So far we know of settlements with HarperCollins, Hachette, and Simon & Schuster. These will prevent use of the Agency Model for a number of years and create various other consumer protections. Apple, Macmillan, and Penguin are all still denying wrongdoing at the moment, but it remains to be seen how well they can hold out. Even if all three remaining defendents get off somehow, Kindle pricing will be completely altered for the indefinite future. The Agency Model could only be forced on Amazon through solidarity across every major player in the publishing industry. With that gone thanks to these settlements, things can’t help but improve.
Not much is known at this time about what options are being discussed by the publishers under attack by the Justice Department. We do have good information that there are settlement options on the table and that the Agency Model pricing model currently to blame for high Kindle Edition eBook prices will be on the chopping block regardless.
Reports from unnamed informants close to the matter have indicated that there is reason to expect a settlement within the next several weeks. Neither Apple nor the publishers have responded to any requests for comment at this time. The Justice Dept declined to say anything.
Whether this is a sign of consensus among the defendants or merely that one or two are feeling the pressure and wanting to end what they see as a losing battle should not matter much in terms of the outcome. In the event of one publisher involved in the price fixing scheme reaching a settlement, the terms would undoubtedly involve release of evidence necessary for ensuring a successful prosecution of the rest.
Basically, assuming the news is true, this means that the end of the Agency Model is at hand and that the Kindle has made it through possibly the most harmful barrier to eReader adoption without so far becoming irrelevant. A return to the wholesale model, even temporarily, will mean more affordable reading material for Kindle owners. This in turn should spur sales of the eReading line. Amazon’s willingness to take a loss on bestsellers to promote their product line is what game them over 90% of the eReading market before the Agency Model was imposed and there is no reason to see this practice changing overly much if the Agency Model is destroyed.
The big question will be what comes next. Settlement or unfavorable ruling aside, publishers are not going to give up on their position that readers have no right to expect inexpensive books. It is incredibly unlikely that they will all pull out of Amazon in reaction to this, but they’re going to have to find some new way to prevent Kindle customers from being too happy with digital books.
The case at hand is all about how the defendants collaborated to impose the Agency Model on Amazon. The means to achieve this goal is in question, not the model itself. Depending on the terms of the settlement, publishers could be permitted to go back to it in time. They could also turn to something even more unpleasant for potential customers. It is hard to tell at the moment.
In the short term, the clear winners will be customers. Prices on eBooks should drop abruptly, especially in the Kindle Store, following official announcement of the deal being made. In reality, expectations may need to change with regard to how profitable a new bestseller should be per unit sold. Big 6 publishers will be forced to come to terms with this. Beyond the immediate benefits to Kindle customers there is little that can be asserted reliably about the effects of this situation. It will be interesting to see how the situation evolves. Any thoughts or predictions?
Since the rise of the Agency Model that Apple made possible for publishers in a partnership surrounding the release of the iBooks application and store for the original iPad (a partnership now awaiting trial in an anti-trust case), there has been serious talk about how Amazon has set out on a crusade to utterly destroy traditional publishing with the Kindle. This isn’t news, exactly, but it has become an important and popular topic after the recent contract dispute that the company had with the Independent Publishers Group that has resulted in the ongoing absence of IPG titles from the Kindle Store.
There can be no question that Amazon is acting like a bully in this dispute. They want a lot and are in a position to demand rather than ask or negotiate. What has risen up in response to this anti-Amazon sentiment has been shocking to say the least, however. Scattered around popular blogs, we can now see any number of authors and publishers coming out against Amazon and claiming that publishers were somehow right to have engaged in price fixing and that even if it was technically illegal they should be allowed a pass because otherwise Amazon will win.
On the one hand, it is understandable sentiment. Thanks to the Kindle, Amazon controls around 75% of the eBook market already. Without their platform, the rise of eReading as we now know it would slow to a crawl. Nobody else has the resources, or seemingly the interest in customer satisfaction, that Amazon is willing to put into keeping such a platform going.
On the other hand, this is insane. Publishers were unhappy with how poorly the old business model applies to new media and so their potentially illegal activities should be excused. It makes no sense to me, somehow.
This is made to seem like it is a one-sided arrangement. I believe that to be a mischaracterization. If publishers lacked power, they could not have compelled the adoption of the Agency Model in the first place. They were just too concerned at the time with short term profits to be willing to take a stand and risk losing Amazon as a storefront. It was a move that only made sense for every individual company if they knew that none of the competition would be capitalizing on their threatened withdrawal.
Amazon’s acting like a bully aside (because in the matter of the Agency Model and its potential legal implications that that does not apply) they have built the simplest and most usable way for readers everywhere to access eBooks. Nobody else has come close, despite competing efforts from Barnes & Noble’s Nook line, the Kobo, and more. This does not mean that anybody has been compelled to use it.
There would be no case against them if the Big 6 Publishers had come out with their own Kindle competitor and started offering all of their titles through it. The Kindle would still be there attracting self publishers and generally making itself useful in various ways, but it wouldn’t have the content to be so important.
These publishers don’t want to have to deal with building new distribution channels, though. They also don’t want to have to adapt when other people build them. The fact that there is a power disparity is undeniable, but that doesn’t mean that these publishers were ever powerless. Nobody compels them to use the Kindle platform. To say that they should be able to get away with their own anti-competitive and manipulative actions because otherwise the Kindle line will make people start seeing books as more affordable and ruin their profits is just ridiculous.