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e-publishing « Previous | |Next »
April 30, 2012

As we know the digital revolution is disrupting the music industry, photography, newspapers, television and book publishing. With respect to the latter the e-book looks to become the publishing market's primary engine. Authors will go digital-first and the most successful will land a traditional book deal with legacy publishers.

Jason Epstein, in an interesting post on the US government's Justice Department’s suit against Apple and several major book publishers for conspiring to fix retail prices of e-books on the New York Book Review blog, highlights how digital technology is a disruptive technology for book publishers. His succinct observation is that:

The revolutionary process by which all books, old and new, in all languages, will soon be available digitally, at practically no cost for storage and delivery, to a radically decentralized world-wide market at the click of a mouse is irreversible. The technologically obsolete system, in which physical inventory is stored in publishers’ warehouses and trucked to fixed retail locations, will sooner or later be replaced by the more efficient digital alternative.

Amazon is leading the way. It set out to charge $9.99 per e-book download, considerably less than it was paying publishers for their e-book inventory. Amazon’s own pricing strategy—which, unlike Apple’s and the publishers’--- is to sell e-books below cost to achieve market share and perhaps a monopoly.

Amazon’s competitors could not afford such a costly strategy. Publishers wanted to be able to set the price of titles for sale on the site, not Amazon and ensure DRM to prevent piracy. Publishers have countered Amazon’s pricing policy by adopting the agency pricing model, in which inventory is not sold to retailers, but consigned to them as agents who are compensated by a fee. The retailer in this model does not purchase content but acts only as the publishers’ representative, and so they has no right to determine the retail price.

The publishers’ move has triggered ongoing antitrust investigations in Europe and Washington, D.C., over whether book publishers and Apple illegally colluded to raise e-book prices. We have shifted t from the near-monopoly we had before the agency model, via the oligopoly we have today. What we don't have is a truly competitive retail market that also supports midlist sales.

There have been are lots casualties on the information highways, and no doubt, there will more. The traditional music industry, for instance, was devastated by the onslaught of the digital economy and also refused to adapt and went into all sorts of legal battles trying to protect their traditional market. Ultimately they failed. Apple then became one of the largest players in the digital music market with 220 million iTune users.

| Posted by Gary Sauer-Thompson at 9:32 AM |