April 2012

Government Failure by Gordon Tullock, Arthur Seldon, and Gordon L. Brady
Government Failure by Gordon Tullock, Arthur Seldon, and Gordon L. Brady

Michael Stackpole, a traditionally published author who was one of the early champions of self-publishing ebooks, has an interesting post analyzing the settlement agreed to by three of the Big Six publishers — Hachette, HarperCollins, and Simon & Schuster — involved in the alleged ebook price fixing flap. If he’s right, the Department of Justice is going to be imposing more injustice than just preventing a little self-destructive collusive fixing of high prices. This is yet another among so many many many examples of the state stepping in to prevent something only to impose that very thing itself. Yes, it looks like the DoJ is going to prevent price fixing of one sort only to impose its own brand of price fixing. But hey, it’s only a bad thing when non-state entities do it, right?

Here is Stackpole’s breakdown of the settlement  provisions:

  1. For a period of two years,
  2. Publishers will not be able to set a restricted retail price for their product.
  3. Retailers will be able to set their own price for an ebook, but they cannot discount the bookbelow their own discount. (In short, the retailer cannot sell ebooks at a loss.)
  4. Publishers cannot “retaliate” against retailers during this time.
  5. The “favored nation” status that prevented a publisher from selling at a lower price to one retailer over another is gone.
  6. The Agency Pricing discount of 30% off the top that retailers pay publishers can remain in place.
  7. There are compliance procedures being set in place (that I don’t bother discussing) so the government can make sure that the publishers are complying with the agreement.

That’s right. Provision #3 fixes an arbitrary minimum price —a price floor. Retailers like Amazon will not be allowed to sell ebooks below the price they pay publishers for them; they will not be allowed to sell at a loss. For two years. And apparently there is yet more intrusive bureaucracy being set up to monitor compliance with these new regulations for the ebook market. It’s another shovel-ready Obama jobs program!

The federal government is also going to prevent publishers from requiring retailers sell their ebooks for a certain price. In other words, it bans the agency model. Now, I’m no fan of the agency model, and I think it’s self-destructive for publishers to adopt it in order to screw their customers with high prices so that they can prop up their dead-tree book business model for a while longer. But I don’t think they should be prevented by law from doing so.

Stabilization is Chaos: “Monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.”
— F.A. Hayek, 1932

The federal government is also going to prevent publishers from retaliating against retailers for the prices they set. Also, no more contracts that stipulate publishers can’t sell to other retailers at a lower price. In other words, the state is going to short circuit the market process by preventing publishers from putting any kind of meaningful pressure on retailers and vice versa. No jockeying for position in the ebook market. Forget letting consumers decide and the best business model win. The United States federal government prefers stasis — the maintenance of a status quo of its own making.

But wait, there’s more. Stackpole does the math and argues that far from preventing publishers from fixing high prices for consumers, the settlement will actually disincentivize both publishers and retailers from setting lower prices:

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Sharis Pozen

DoJ Assistant AG Sharis Pozen

Sharis Pozen
DoJ Assistant AG Sharis Pozen

Jeffrey Tucker recently discussed the Department of Justice’s decided to launch antitrust litigation against Apple and five of the Big Six publishers — Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, but not Random House — for alleged price fixing. Three of them — Hachette, HarperCollins, and Simon & Schuster — decided on the same day to settle straight away. The alleged sin was that Apple and the publishers decided to go with the agency pricing model in which the publishers get to set the prices for their books in the iBooks Store, while Apple takes a 30% cut.

As you’d expect, I’m with Jeffrey Tucker in believing that price fixing, collusion, cartels should not be illegal. In a free market, these practices are not stable and will end up harming the companies in the long run if they dissatisfy customers. What I want to highlight in this news post is not what so much what libertarian justice has to say about the matter but some bad economic-tech journalism about the business side.

I recently read this article on Mashable by Lance Ulanoff, the site’s Editor-in-Chief:

How Steve Jobs Got Apple Into Trouble Over Ebooks.”

Wow, is this guy clueless.

And if Steve Jobs really thought Amazon screwed up in alienating major publishers by not adopting the agency model, he was clueless as well. Amazon is WINNING.

Jobs pushed the agency model on the publishers? I don’t think so. They preferred that model but couldn’t get Amazon to go along with it without Apple’s help. It’s the screw-your-customers model and it wouldn’t have been good for the publishers over the long haul. They want high ebook prices so that they can hang onto their outdated IP-dependent business model of selling paperbacks and hardcovers in big-box brick-and-mortar stores for as long as possible.

That antiquated business model is particularly insane in the United States. The origin of the current wasteful publisher/brick-and-mortar bookstore relationship is fascinating. The strip-and-return system has its origin in the Great Depression (thanks Fed!).

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Sharis Pozen

DoJ Assistant AG Sharis Pozen

Sharis Pozen
DoJ Assistant AG Sharis Pozen

Get this: The federal bureaucrat who last month started the litigation against Apple and book publishers for ebook pricing is the same person who, back in the stone age, represented Netscape in its lawsuit against Microsoft.

Recall that Microsoft was trying to give away its Internet Explorer to computer users for free. Netscape went nuts and got the government to clobber Microsoft for being so nice to consumers. It put the company through litigation hell and even demanded that Microsoft change its operating system code to untie it from IE.

The person’s name is Sharis Pozen, and she is acting head of the Justice Department’s antitrust division and a political appointee of the Obama administration. She claims that she is threatening state violence against Apple and publishers for pricing collusion — and that it’s her job to protect consumers.

Interesting. She began her career trying to protect the rights of an old-line company to rip off consumers. To her, a price of zero was unfair competition. She was sure that a browser should be a paid product. The progress of history flattens that argument. Today, dozens of companies beg you to download their browser for free. Browser use is all over the place, sort of like a free market. There is no Microsoft monopoly, contrary to the overheated predictions.

Given that history, one might suppose she would retire from public life and maybe go into flower arranging or something. Instead, she is still at it. Last year, she denied a proposed merger between T-Mobile and AT&T that would have improved your cell service. This year, she says that a deal between publishers and Apple is harming consumers, so she has to act.

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Books

Earlier this month I floated the idea of starting a reading group or book club feature called The Lightmonthly Read. I think we’ve received enough interest to justify going ahead with it. The more the merrier — so if you are among those who expressed interest,  please spread the word, bring a friend.

To refresh everyone’s memory, the idea is that every month we’ll read and discuss a book that we selected the previous month. Generally I think we’ll have a nomination phase starting on the first of every month and then hold a vote, allowing a week for each phase. That should give everyone at least two weeks to acquire a copy of the book after voting is closed.

This time around, however, since next month will be the inaugrual Lightmonthly Read and we’re already 10 days into April, we’ll skip the nomination phase and go straight to voting on a short list.

Since the Prometheus Award finalists were just recently announced, we’ll choose our May read from the list of finalists — sans The Children of the Sky, because Matthew Dawson has already reviewed it, and The Restoration Game, because we’ve received a copy from Pyr that Matthew Alexander is going to review soon. That leaves the four finalists listed at the end of this post.

Discussions will take place mostly in the Prometheus Unbound forums. I’ve created a set just for the Lightmonthly Read: one forum for discussing the current month’s read, one subforum for voting on future reads, and another subforum to archive the discussions of previous month’s reads. Old threads on previous reads won’t be closed; this setup is meant to place focus on the current month’s read. To create and maintain a reading group or book club atmosphere, the Lightmonthly Read forums are members-only; you’ll have to register an account on Prometheus Unbound and be logged in to read and post in them. Anyone can register, and it’s easy.

We may occasionally hold live voice and video discussions using Google+ Hangouts or Skype.

One of the participants may be invited to write an official review of the selected book for Prometheus Unbound at the end of the month. If you’re interested, let us know at some point before the month is out. Otherwise, one of the staff will write the review.

We hope eventually to get authors involved in discussions of their work, whether they can only spare an hour in a Google+ Hangout or have time to participate in the forum over the course of a few days or even the entire month.

Authors, this is a great way to promote your work and to interact with your current and potential fans. It’s also a good opportunity for book giveaways. If you’re interested in participating in the Lightmonthly Read, let us know.

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The Children of the Sky by Vernor Vinge
The Children of the Sky by Vernor Vinge

Back in February, the Libertarian Futurist Society announced the 2012 Prometheus Hall of Fame Award finalists. Over the weekend, on March 31st, they announced the 2012 finalists for the Prometheus Award for Best Libertarian Novel.

Below is the most of the press release.

io9 picked up the press release as well; the comments offer up a predictable ton of FAIL, so you might want to read them for a good laugh or avoid them if you have a low tolerance for stupidity and ignorance.

The first finalist on the list, The Children of the Sky by Vernor Vinge, was reviewed by Matthew Dawson back in February. But we still need reviews of the rest of the finalists, preferably before the winner is voted on.

As a reminder to our readers, we are open to submissions of reviews (as well as news, articles, interviews), whether you’d like to contribute regularly, irregularly, or just once.

So if you’d like to read and review one of the finalists, nominees, past winners, or another piece of fiction, we’d be happy to consider it for publication.

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Books
to-read pile

We’re thinking of launching a new feature here at Prometheus Unbound and want to gauge reader interest before doing so.

The feature will likely be called The Lightmonthly Read — a geeky name for a rather familiar concept: a reading group or “book of the month” club.

The idea is that each month readers of Prometheus Unbound will nominate stories and vote on the one they want to read in the following month. We’ll all read and discuss the story, including Prometheus Unbound staff, in one of our forums. We might also make use of Google+ Hangouts on occasion. At the end of the month, someone (either one of you or one of us) will get a chance to officially review the story for Prometheus Unbound.

That’s just for starters.

If The Lightmonthly Read proves to be a success, we plan to solicit author involvement. We could get authors to participate in the forum discussions for a day, or a week, or even the entire month — whatever the author is up for. You might get a chance to participate in a Google+ Hangout or Skype chat with your favorite author. We might even be able to coordinate some book giveaways.

Does this new feature interest you? Let us know in the comments.

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EDITORIAL | Why Space Is So Important Thumbnail
Robert Zubrin

The answer: freedom and opportunity.

Dr. Robert Zubrin has long been a strong proponent of Mars colonization and he has put forth a strategy for doing so with existing technology on the (relative) cheap. Hint: We don’t need to build big spaceships in orbit or colonize the moon first. If you’re interested in this subject, I recommend you check out his books Entering Space, The Case for Mars, and How to Live on Mars. These books are understandable to the layman but also include enough nitty-gritty details and formulas to satisfy the more mathematically inclined enthusiast, and they make excellent resources for science fiction authors.

In the brief video below, Zubrin is answering a question about his book, How to Live on Mars, at the 28th Annual International Space Development Conference, held March 28-31, 2009. Watch it and then continue on after the break for my thoughts on what he had to say.

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