This Publishers Weekly Writer Wrote an E-Book on the E-Book Pricing Wars

The Thin Reads Interview with Andrew Richard Albanese


If you’ve ever purchased a long-form e-book – and chances are if you’re on this website you have – you may have noticed that the price of the product has changed over the years.  That dramatic shift is at the heart of Andrew Richard Albanese’s powerful, fact-packed e-book single “The Battle for $9.99: How Apple, Amazon and the Big Six Publishers Changed the E-Book Business Overnight.”  Albanese, a senior writer for the Publishers Weekly, the bible of the book publishing industry, has probably spent more time covering the June trial pitting the U.S. Department of Justice against Apple than any other reporter.  He took some valuable time out of his rigorous schedule to reply via email to our questions regarding his work covering the epic power struggle among Apple, Amazon and the big six publishers. 

Thin Reads:  So what's it been like covering the Justice Department's suit against Apple?  Are you overwhelmed and possibly bored with the avalanche of tiny details or has it been a fascinating behind-the-covers look at one of the great struggles in the history of book publishing?

You know, oddly, I'm not at all bored. My friends will tell you that I've always loved this kind of stuff. I'm the kind of guy who talks about copyright at parties, so this was kind of in that vein. And, the details are all very interesting to me, and I would hope to make them somewhat interesting to the general reader. I felt lucky to have had the chance to cover this whole episode, even though it was a situation I'm sure everyone would have preferred to avoid. In the end, I learned a lot, and I also had the chance to see two very, very skilled teams of litigators work.

Thin Reads:  When you started your career as a journalist, did you ever imagine that you'd acquire a very deep working knowledge of the intricacies of the Sherman Anti-Trust Act?  (And maybe if this writing thing doesn't quite work out, you'll become a lawyer...?)

Funny, at one point, while deeply involved in reporting on the Google Book Scanning litigation years back, I actually did consider going back to law school, at age 40. A law professor wisely counseled me against that kind of late career move, reminding me that I'd be paying off student loans until I retired, and besides, in my job I get pretty deep in these cases without all the pressure. I certainly do spend a lot of time reading legal briefings, these days. This is one of many suits I'm covering closely for Publishers Weekly. There are still two Google-related suits from the Authors Guild, a suit over e-book rights between Open Road and HarperCollins, another Amazon suit filed by indie booksellers, and a self-publishing class action against Author Solutions, for example.

As for the Sherman Act, I am still probably a hundred miles from having even a passable knowledge, and from what I am told, I am not alone. Antitrust law is very complex, and to this moment I could not even venture a decent guess as to how the verdict in this case will turn out, but for the fact that Judge Cote certainly appears to believe that, based on the record, something other than normal, robust competition led to the rise of e-book prices.

Thin Reads:  Why should the Justice Department's case against Apple matter to consumers?

I think the case matters, but maybe not as much as one might think. While consumer prices were at issue here for the Department of Justice, what this case really boils down to is control. You know, back in the 1990s, Barnes & Noble was seen as killing independent booksellers and using prices to gain leverage over publishers, much to the publishers' dismay. But what's different with Amazon this time around, is that Kindle is a platform for reading, not just for retailing. That is a fundamental shift, and this battle over price is just one border skirmish of many to come.

Of course it matters very much to consumers that big companies do not band together to take control of retail pricing, if that is indeed what Cote finds happened here. But price control is just one concern in an e-book market that is still pretty brand new, and there are much larger issues in the way e-books are developing. Unlike print books, e-books are licensed access products, for example. Users don't own them, and already we're seeing fault lines emerge as to what that portends for our literary future. Libraries, the rock on which our literary culture was built, are increasingly unable to buy, own, and collect e-books, and when they are able lend e-books, they are subject to higher prices and restrictions. There are a host of technical issues around DRM (digital rights management), standards, and platforms that make e-reading complex. How do I know I'll be able to access my e-book collection, which exists entirely in the ether, a decade from now, especially given how quickly hardware and browser technology advances? And of course there are privacy issues and restrictions. I used to buy a book, finish it, and hand it over to my wife or brother. I generally can't lend or re-sell or give my e-books away. And when I die, my e-book library goes with me. There are also equity-of-access issues. My e-book, for example, is digital only, and there are millions of Americans who lack access to the basic technology to access it, whether that's an e-reader, or access to the Internet, or even a credit card. When is the last time you paid cash for an e-book? Author royalties for e-books are also a flashpoint.

As a writer, and a former publisher, I certainly can understand that the foremost concerns for many right now are about how creators are paid for their work, and how we nurture a vibrant, sustainable digital publishing industry. But the rights of readers are also being fundamentally changed, and mostly by big corporations. So I'm not as fired up by what e-books cost, right now, as I am about the broader issues, and how the public's interest is being factored in. Certainly, price is part of that. But I'd like to see a larger conversation about what our digital reading future should look like. So far, fear has largely dominated that conversation from the corporate side: fear of piracy, disintermediation, low prices. But there are so many incredible opportunities for reading, and for writers, thanks to technology, including the ability to hear many new voices in new formats.  My hope is that this case begins to turn public attention to the broader issues, and the great opportunities, in the developing e-book market. There is more at stake than any conglomerate's margins.

Thin Reads:  Should other content companies who have regular dealings with Apple and Amazon pay close attention to the trial?

That is very difficult to say. For most content companies, this clash of the titans probably has little impact on their dealings with Apple, or Amazon. And, the publishing industry is such a different beast in many ways, even from other digital content businesses, like music, apps, movies and games, it is almost impossible to draw comparisons. I can say this much, if you're a content company, it is impossible not to pay attention to Apple or Amazon! And, throughout the course of this case, and the trial, there are a lot of lessons and insights about how each company approaches content markets. But, I'd also say, there is a lot that we didn't learn. Frankly, I was surprised and disappointed that the Department of Justice did not dig down into the profitability issue. We learned that Apple netted "low single digit" margins on e-books under agency, but what are the true economics of e-book publishing? In a trial where prices were at issue, that could have been very enlightening.

Thin Reads:  Was the iBookstore the first true competitor to Amazon's bookstore?  From your book, it appears that you don't hold similar efforts from Sony, Kobo and Barnes & Noble in the same league.  Why is that?

They are not in the same league, and really, neither is Apple, yet. The fact is, those smaller companies simply could not afford to run with Amazon. As a $60-billion-plus company, Amazon had the financial muscle to invest in building a digital reading market, and it approached that market "holistically," that is, in terms of devices and content for those devices. As an illustration of how Amazon was in a league of its own, look at Barnes & Noble. When the Nook was launched, it was very successful; there was a healthy uptake. But because the Nook had to compete on Amazon's $9.99 price point, the Nook's success was literally killing them. The more e-books they sold at $9.99, the more they lost, and without the resources of Amazon, Barnes & Noble was in quite an unsustainable spot. What Apple did was say no to that kind of price competition. Unfortunately, its grand plan to enter the e-book market on a level playing field may have involved some illegal conduct.

Thin Reads:  Are you surprised at the relative success of the iBookstore on the iPad given the glare of the screen in outdoor settings and the weight of the device?  

I think the tablet reading market is about where I expected it to be, and that includes the Kindle Fire. And, this week (June 24), we learned that Barnes & Noble is looking to depart the increasingly crowded tablet battlefield. I have always looked at reading as something you can do on the iPad, or any tablet, but that isn't why you buy one. And that, actually, more than anything else, is probably why the iBookstore is lagging behind Amazon.

I have to admit, when the first Kindle came out in 2007, I thought the whole idea of a dedicated e-reader was foolish. I mean, how many devices do I have to own, right? I have my phone, my company-issued PDA, my iPod, and now my $400 e-reader? I was like a walking Radio Shack. But I think we now see that a sizable portion of digital readers prefer dedicated E-Ink devices, and the cost of them has come down so much that they can have one, and have their iPads, too. And now, I think the idea of a dedicated reading device makes a lot of sense, because they are light, and convenient, and there is now a real desire, even a preference, to read digitally and carry your library and a bookstore or newsstand with you, even to the beach.

As for the tablet? Different beast. I confess that I did wonder at one point whether the tablet would end the dedicated reading device, but I think you can just add the tablet to the list of options, along with print (which is far from dead) that readers now have at their disposal. You know, it's counter to Apple's thinking, but if Apple really wanted to grow the iBookstore market share, it really needs an E-Ink reader, because I don't think they are going away as quickly as some have thought, and they are still a sizable portion of the digital reading market. Apple largely succeeded in its attempt to change the e-book business, legally or not, but competitively speaking, the iBookstore basically caters to only one segment of the ever-evolving digital reading market. Eddy Cue and Steve Jobs believed the iPad would fundamentally change the e-book game, but, as of now, it has not.

Thin Reads:  "The Battle for $9.99" hit the Kindle Single best-seller list immediately after it was released.  Were you surprised at the brisk sales?

Yes, I really was. First and foremost, because we'd never done an e-book at PW before. And it all happened rather by accident. After the last pre-trial conference on May 23, I started cramming, just doing my homework, really, reading and re-reading every shred of the public filings so I would understand the game plans both sides would use at trial. But as I read through the filings, it struck there was really quite a story here, if I could tease out the narrative. So, after a week of sleepless nights, I finished the first pass and dropped in on my editor's desk. He laughed. We had no idea what to do with something of this size. We don't publish 15,000 word essays. Eventually, our digital guy hit upon a Single, using Vook. I was thoroughly impressed with how quickly and efficiently this worked. I'd always been a fan of the Kindle Singles program, and think one of the greatest opportunities of digital is that you can write to length. And, that this was accepted into every major e-bookstore, despite the perhaps touchy subject matter, was gratifying.

Still, this is kind of an inside baseball story. While the trial made some headlines, it was mostly because this was seen as an Apple story, not a publishing story. Publishing isn't a sexy industry, like music, Hollywood or tech. There is no cult of Steve Jobs equivalent in publishing, for that matter. So, I've been happily surprised to see how many readers really are interested in the back story here. It's been quite an experience. And, in a few weeks perhaps, we'll have a verdict, and an update.

Buy “The Battle for $9.99” at:  Amazon, Barnes & Noble, iBookstore

Posted 6-28-13

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