News update:

Future of e-books muddled

Everyone’s jockeying for the best position in the complex, brave new world of e-book marketing.  And it appears that future book buying details, including the prices readers pay for books and the amount authors get paid, will be determined by corporate lawyers and judges.

Last month a federal judge ruled that Apple conspired with five of the leading publishers to raise the going price of e-books.

Reuters reported that U.S. District Judge Denise Cote in Manhattan found “compelling evidence” that Apple violated federal antitrust law by playing a “central role” in a conspiracy with the publishers to eliminate retail price competition and raise e-book prices.

Apple was accused of trying to erode Amazon’s dominant position in e-book sales causing some e-book prices to rise by $3 to $5 each.

The U.S. Justice Department hailed the verdict as a victory for book buyers.

At issue are “agency model agreements” where publishers set the price of books, rather than retailers.

In the “wholesale” model, publishers offer books to booksellers at roughly half the price the publishers set as the recommended retail price of a book.  Then the retailer is free to sell the book at any price, even below the wholesale price paid for the book.

Graham Spencer, writing in Macstories.net, explains that Amazon decided to sell some e-books below wholesale to gain a larger percentage of the market and to speed the sales of Kindles.  When Apple launched its online bookstore, Spencer says, it contracted with publishers using the “agency” model that authorizes publishers to set retail prices.

(This is an oversimplification of a complex process and Spencer has a detailed explanation of the e-book sales models in his article. )

The recent court decision overturned Apple’s agreements as a conspiracy with publishers to drive up prices.  The five publishers involved in the suit, HarperCollins, Hachette, Penguin Random House, Simon & Schuster, and MacMillan settled prior to the Apple verdict and were told by the court they would have to wait two years before entering into agency model agreements.

Presently the court is considering what form of penalty to impose on Apple.  Suggestions include forcing Apple’s bookstore to provide links to competitors.   A final resolution is in the works and Apple promises an appeal.

“Used” e-book sales

Although fraught with possibilities for the future of books and e-books, the Apple case is just a bump in the road compared with the likelihood that a market for “used” e-books will materialize.

According to Publishers Weekly magazine, a German district court recently ruled that digital books can’t be resold by purchasers.  The authoritative trade journal said the court ruled that books are not subject to “exhaustion of the rights of the author.”  Apparently the ruling means that e-books can only be resold with the permission of the author.

Earlier this year a U.S. federal judge ruled that ReDigi, a Massachusetts company, infringed on the rights of Capitol Records by facilitating the resale of digital music.  Regardless, according to Boston Magazine, Redigi is reportedly moving forward with plans to sell previously owned e-books in the U.S.

Reports Boston Magazine, “Legal issues aside, many analysts feel these markets are almost inevitable.”

Hyperlinks:

Reuters: Ruling says Apple violated antitrust law

Graham Spencer in Macstories.net  

Publisher’s Weekly

Boston Magazine