Who Should Set the Price for eBooks – Publishers vs. The Retailers

On March 10, 2012 by

The DOJ announced this week that they may bring a lawsuit against Apple and 5 of the “Big 6″ publishers. The DOJ is asserting that Apple and the publishers colluded to establish a system which created price fixing in the eBook market.  This is a very important topic for authors who have eBooks placed at retailers like Amazon and the Apple iBookstore.

The basic argument boils down to who should set the price for eBooks. Amazon, when it began selling eBooks maintained that they, as the retailer, should be able to set the price for eBooks.  Amazon originally established a system similar to the print book system where they bought eBooks from a publisher at a certain discount (usually 50% of the list price) and then sold the eBook at whatever price Amazon felt was best for Amazon’s sales.  This is also known as the “Wholesale Model”.  Before Apple launched the iBookstore they contacted the biggest publishers in the eBook market and created a system by which the publisher could sell their eBooks in the Apple iBookstore and set whatever price for the book they wished. Apple would act as the publishers “agent” for that book and take a percentage of the sale of the book but would not offer price discounts.  This is known as the “Agency Model”.  Once Apple had established the “Agency Model” for eBook pricing, Amazon (and B&N), were forced to do the same.

The DOJ lawsuit against Apple could mean the end of  the “Agency Model” for eBook pricing.  Below are a few links for further reading on this important development.

A background article from The New Yorker

From Teleread 

From Mike Shatzkin