Enterprise Mobility & Connected Devices Blog

Justice Department Sues Apple, Publishing Houses for Collusion on E-book Prices

Given the heinous prices of books – and especially textbooks – these days, as well as the growing adoption of mobile devices (from netbook to smartphone); we would logically expect strong traction in the e-book market.  And yet, invented in the mid-1960s, the e-book has yet to truly take off and own its position as a disruptive technology.  No doubt the leading publishing houses have foreseen the potential for e-books to threaten their margins and sales.  What is it, then, that has impeded the rise of the e-book?  

Well, there are several factors; while present times see tablets flying off the shelf, and smartphones in the hands of everyone from children to grandparents, this has not always been the case.  The lack of widespread adoption of these technologies has limited the available market for e-books.  Secondly, pricing of the e-book has remained a barrier to its natural growth.  Amazon has represented an early advocate of e-books and even subsidized these products (to spur Kindle sales), pricing them below wholesale value. In 2010, however, Apple allegedly worked with several of the top publishing houses, working up a deal whereby the publishers would be able to set the price of the e-book, and Apple would receive a 30% cut.  The publishers then forced others, such as Amazon, to abide by this “agency model,” ensuring that Apple’s e-book prices would not be undercut.  

The DoJ has brought Apple and five major publishing companies to court for colluding to raise the price of e-books.  According to Reuters, we may see a settlement in the next few weeks.  If, as is expected, this “agency model” with Apple as a “most favored nation” is overruled, we may finally see the e-book exposed to free market forces, driving – at last – the market to establish a fair price and value for the e-book.  We expect this ruling will favorably affect e-book prices, and the growth of this market.  For educational institutions working to bring these technologies into the classroom, this may be a big step forward. 

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