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Business News/ Opinion / Online-views/  Ourview | Justice for the reader
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Ourview | Justice for the reader

Ourview | Justice for the reader

Photo: BloombergPremium

Photo: Bloomberg

The ongoing rumpus in the American e-book market could set landmark precedents for the future of the digital distribution of not just books, but all content.

Currently, the US justice department is suing Apple and a number of publishers for coming together to fix the prices of e-books sold on Apple’s iBookstore. It is tempting to look at the big names involved in the suit—Hachette, Penguin, Macmillan, Apple—and to root for the underdog—in this case the justice department that is seeking to protect consumer welfare by reducing e-book prices. After all, everyone likes the large corporate being shown its place once in a while.

Photo: Bloomberg

The allegation is that the publishing companies came together to agree on a pricing strategy—called the agency model—whereby they sell their books to Apple at whatever price they wanted and Apple takes a 30% cut. This is what Apple does for every type of content it sells. The model was partly to push back against Amazon which sought to pay publishers wholesale, and then sell books to customers at one very low price. (It is still not clear how much money Amazon makes, if at all, from the Kindle device and ecosystem.)

Now, the agency model does not imply price fixing. Publishers are still free to sell books for whatever price they want. However, the justice department, it appears, finds the collective push for the agency model suspicious. Ruling the model unlawful will only help to strengthen Amazon’s bargaining power, thereby reducing prices but also, eventually, competition. Therefore, the justice department now finds itself in a situation where doing the “right" thing—lowering prices—might actually cripple an emerging business that no one really understands well.

There is plenty of ambiguity in the e-book business. Right now price discovery may be a much greater problem than price fixing. The justice department is trying to mend something that still hasn’t been completely made.

How should e-book pricing be decided? Tell us at views@livemint.com

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Published: 24 Apr 2012, 08:31 PM IST
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