It’s been a news-heavy month. Here are a few more tidbits:
Yesterday, Tor/Forge announced that it will make all of its ebooks completely free of DRM by early July 2012. This is a momentous and welcome change. Tor/Forge is a genre imprint of Macmillan, one of the Big Six publishers. It’s the first of these publishers to cave to author and cusotmer pressure on DRM. It may have helped that Macmillan is not a publicly traded company. Cory Doctorow believes more Big Six publishers are sure to follow; he’s “had contact with very highly placed execs at two more of the big six publishers.”
Last month, James Cameron promoted private deep-sea exploration. He’s also partnered with Google’s Larry Page and Eric Schmidt, and Ross Perot Jr., to back private space company Planetary Resources. Immediate plans are to design and build low-cost robotic spacecraft for survey missions. The firm, founded and chaired by Peter Diamondis (creator of the X-Prize Foundation) and Eric Anderson, hopes to then build on this technology and begin mining Near-Earth Asteroids (NEAs) within the next ten years. For an extended explanation of how and why Planetary Resources can succeed, read Phil Plait’s post on the Bad Astronomy blog. We live in exciting times for the exploration and exploitation of space.
Publish and Perish – Clueless Publishing CEO’s Enjoy an Intimate Dinner (The Passive Voice) — Did you know 16 states also filed antitrust suits against Apple and the Agency Five (as they are apparently being called)? Hey, those AG’s gotta do something to get re-elected! Look below the excerpts for PG’s advice to CEO’s on how to meet without risking an antitrust lawsuit. Utterly ridiculous the obstacles and waste forced on the market by the state.
Absent stringent government protection or physical boundaries that protect the monopoly, the long-term effects of overly-dominating a market tend to weaken the company or companies involved. If competition is permitted, the bloated and inefficient monopolist can present an easy target for an innovative and flexible competitor.
PG’s conception of monopoly is not rigorous, however, and he overlooks the fact that what made Microsoft an aggressive monopoly is intellectual property, that government grant of monopoly privilege that has no place in a free market.
Cut in E-Book Pricing by Amazon Is Set to Shake Rivals (The Passive Voice) — The NYT article PG quotes is worthless, but read his observation at the end as well as the first comment on the post; they highlight an important characteristics of leftist critics of Amazon.
The Agency Model Sucks (A Newbie’s Guide to Publishing) — J.A. Konrath does the math to demonstrate that authors make less money under the agency model. It’s bad for customers and authors.
The biggest problem facing book publishing (The Domino Project) — Perfect for the publishers, not for anyone else, not even the authors they publish. Otherwise, I tend to like what Seth Godin has to say about publishing.
Jeff Bezos’s Top 10 Leadership Lessons (Forbes) — Big Publishers in particular, take note of how customer-centric Bezos’s leadership lessons are, and also how focused on adaptability and innovation.
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:
For a period of two years,
Publishers will not be able to set a restricted retail price for their product.
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.)
Publishers cannot “retaliate” against retailers during this time.
The “favored nation” status that prevented a publisher from selling at a lower price to one retailer over another is gone.
The Agency Pricing discount of 30% off the top that retailers pay publishers can remain in place.
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:
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:
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!).
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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