Apple Guilty of Price Fixing Ebooks

On 7/10/2013, Apple was found guilty of being the ring leader of a price fixing scandal on ebooks. They colluded with these major publishing groups, Hachette, Macmillan, Penguin, HarperCollins, and Simon & Schuster, which all quickly gave in to the accusation and agreed to settlements – leaving only Apple to be the only company that went to trial. Apple made sure that the main publishers all agreed to sell their ebook at the $14.99 price, which would make Amazon eventually raise their ebooks from the $9.99 price point up to $14.99 too.

You can read the full article here.

Related to this price fixing scandal were the previous concerns that many consumers had of why some ebooks are priced higher than hardcovers. Understanding the context of how the prices of books are decided will paint the picture for why Steve Jobs’ “Agency Model” was a scheme to fix the prices. While you can read the full article here, I will provide a short synopsis to explain what is going on behind the scenes with book prices.

If a printed book is listed for $25, half of that goes back to the publisher (which then gets divided among author, agent, and publisher), and the other half goes toward the retail chain. This allows a profit buffer for the retailer to discount the book and still make money (because the publisher will still make half of the original list price no matter what the book gets discounted to). Then Amazon came onto the market and started selling ebooks for $9.99 on the kindle… they were actually selling the books at a loss. The consequences of this is that they were changing consumer’s expectations of the value of what a book should be.

So when Apple launched the iPad, they changed the way ebooks were sold. Publishers got to set the price, they get 70% and Apple gets 30%. They raised the price of ebooks to $14.99 because at that price, even with keeping 70%, publishers were still making less per book sale than selling a hardcover.

If Amazon were to adopt this model, dubbed the Agency model, then they would no longer be losing money per book sold. In addition, since Publishers choose the price in this scenario, the prices would all be set at $14.99, and that’s how Apple led a price fixing scandal.

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Shifting Focus and Changing Plans

For most authors in search of traditional publishing, it is only after diving into the deep end head first that you realize that you can barely tred water among all the other authors in the pool. It is only then that you might decide to take a step back and survey the landscape so that you can find a more likely path. In my case, that’s exactly what happened, and now I’m changing course toward calmer waters. It’s not the shortest journey, but it’s become more apparent to me now more than ever that an author must have patience and, in my opinion, layout a series of stepping-stone goals.

It has been my goal to get my novel published. However, the path that I chose to get there was to submit to literary agents (the gatekeepers to the publishing industry). My reasoning was that I knew they could educate me on the process, negotiate for a fair deal (so I would know whether I am being taken advantage of), and sell my manuscript better than I could. However, submitting to literary agents as a new author is like trying to take a shortcut in the publishing world. Literary agents generally look to get their clients that highly desired hardcover deal which is not often achieved by first time authors.

So it is time that I “start small” and choose the other path. I’m going to submit directly to some of the smaller, more focused publishing houses that usually deal with paperback and ebook deals. This was somewhat difficult for me to wrap my mind around as any self published author can achieve those same things via Amazon’s Create Space or other similar venues. However, a publishing house does more than just publish. It’s the editing, the marketing, the recognition amongst the consumers of a quality product, the brick-and-mortor store distribution, and the commitment of a team that is involved in your success as much as you are.

I feel that now, with my short story published, my query letter will exhibit more confidence, and with my progress into book two, it’ll demonstrate my dedication. If successful, I’ll have to negotiate the terms of my own deal and manage my own career, but it’s all about the journey, and it will all be worth it in the end.