As the book industry gradually moves into online and digital formats, regulators have begun looking into the newly forming market. According to the Wall Street Journal, Apple and five major publishers in the U.S. market are now under scrutiny from regulators over allegations of entering an agreement to raise electronic books prices.
Joining Apple in the possible lawsuit and investigation are five of the present day’s U.S. profile market: Simon & Schuster Inc of CBS, Hachette Book Group with Lagardere, Penguin Group of Pearson, Macmillan of Verlagsgruppe Georg von Holzbrinck and HarperCollins Publishers with News Corp.
Wall Street Journal writes that according to several sources familiar with the matter, U.S. regulators have evidence strong enough to initiate a legal action against them for entering an agreement to raise electronic books prices. The sources add that some of the big names involved in the matter have already made steps to handle the issue outside the court and away from the mass media’s spotlight.
It seems that Apple is at the core of the agreement, as it all started two years ago when it released its first iPad. Apparently, Apple has tried and succeeded in changing the way publishers used to sell their books to retailers. As Wall Street Journal points out “publishers sold books to retailers for roughly half of the recommended cover price”.
After Amazon introduced into the market its affordable and popular Kindle e-book readers, the company issued his famous $9.99 discount as incentive for customers. Obviously, the campaign was a success, but traditional publishers and competitors disagreed with Amazon discount strategy, fearing customers will get too accustomed with affordability when it came to buying their e-books. In comparison with their own prices, Amazon was giving a bargain that without a doubt would have resulted in less revenue for themselves.
So, the publishers at fault joined forces with Apple to form a sort of “agency model” that would allow them to sell books at their own prices. Apple would just cut of the final price a 30 percent cut that will remain their own. The matter is even published in Steve Jobs biography, by Walter Isaacson: “We told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway”.