The Department of Justice vs. the Publishers: Nobody Wins

If Apple and publishers are found guilty of collusion, it could mean lower e-book prices — for now — but the future is much scarier

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(Lev Grossman writes about books here on Wednesdays. Subscribe to his RSS feed.)

This week I’m posting from the road, “the road” meaning San Francisco, where I’m touring to promote the release of my most recent novel in paperback.

One already feels like an anachronism, writing novels in the age of what-ever-this-is-the-age-of, but touring to promote them feels doubly anachronistic. The marketplace is showing an increasing intolerance for the time-honored practice of printing information on paper and shipping it around the country. (In the first quarter of 2012, revenues from e-books surpassed those from hardcovers for the first time in history. I’m glad Maurice Sendak didn’t live to see this.) Which makes it all the more incredible that publishers are willing to ship the aging bones of an actual flesh-and-blood author around the country. I guess personal presence — actually being there — is still worth something.

It’s certainly worth something to me! Being a writer can be isolating. It’s good to be among readers and booksellers. Being a writer is about them, not you (and by you I mean me). If you spend too much time in your little writing hobbit-hole, you can lose sight of that.

I had a few different plans for this week’s column, but they were all derailed when I read this piece by Ken Auletta in the New Yorker about the lawsuit filed by the Department of Justice against Apple and five major publishing houses, and got a bit upset.

(READ: War and Peace E-Book Readers Find a Surprise in Their Nooks)

I’m totally unqualified to talk about the legal merits of the lawsuit. I know as little about the law as it is possible to know and not actually be in prison. I’m only slightly more qualified to talk about the business aspects of the matter. I do know enough to know that the lawsuit is insanely complicated. Auletta explains it better than I ever could, but very sketchily, the suit turns on publishers’ efforts, successful so far, to find an e-book retailing partner, specifically Apple, that would allow them to set the prices at which e-books are sold. This is opposed to Amazon, which wanted to set its own prices for e-books (as retailers traditionally do), generally $10. Publishers thought that price was too low.

Low prices = win! The problem, as publishers saw it, was that it takes more than $10 to produce an e-book, so that price doesn’t make for a sustainable business model. (I find the whole e-book pricing issue fundamentally hard to understand. How much does it cost to produce an e-book? Can we not sell them for slightly more than that and be done with it?) The low price isn’t hurting them in the short term, because Amazon is willing to absorb the losses as a way of building market share for its Kindle business. But publishers fear an apocalyptic scenario in which Amazon swallows a huge percentage of the marketplace by under-selling other outlets. The competition — print bookstores and other e-book retailers — dies off, and Amazon controls the marketplace and can pay publishers what it likes, and charge consumers what it likes. If I were an Amazon shareholder, that’s certainly what I’d want Amazon to do. If I were Amazon, that’s what I would do. (For a powerful argument about this scenario, which invokes the excellent word “monopsony,” see Charlie Stross’s blog.)

In that scenario, low prices in the short term lead to high prices in the long term. Also in that scenario, conventional publishers are in danger of dying off, because they’re not making a profit on their products. Which is why — the lawsuit contends — they colluded with Apple to sell e-books at higher prices.

(MORE: DOJ Brings E-Book Antitrust Lawsuit Against Apple, Publishers)

But doesn’t Amazon need publishers, which produce the books that it sells? It’s not clear whether Amazon believes that it does. Amazon’s self-publishing business would survive the apocalypse, as would Amazon’s own increasingly impressive conventional publishing arm. Amazon buys from publishers, but it also competes with them, and sometimes it necessarily treats them as competitors rather than wholesale partners.

There’s a lot of ambiguity in this situation, and a lot of possibly unanswerable questions. Such as: if publishers can’t survive except by breaking the rules, maybe they shouldn’t survive at all? (Personally this requires more faith in capitalism and technology as forces for good, especially in the cultural realm, than I can muster.) And: maybe a world without crusty, snobby East-coast elitist gatekeepers would be a better one? Certainly a world where publishers, and chain bookstores, and Apple (Apple!) are the ones playing the damsel-in-distress is a topsy-turvy world. But over the years I have become increasingly aware of the positive roles publishers and big-time retailers, for all their flaws, play in the literary ecology. Publishers employ art directors and type designers and such, who make books beautiful. As a lover of physical books, I don’t look forward to a world of e-books and crude, author-designed print-on-demand books. Publishers and chain stores also invest in and promote innovative and challenging writers who might not otherwise find a voice and an audience in the more chaotic, uncurated self-publishing marketplace. That’s one of the things that allows our literary culture to evolve, and as yet no alternative mechanism has arisen that would serve that purpose. With nobody ploughing time and money into supporting radical writing, I worry that a self-published literary world would tend to stagnate as a result.

Which is the healthier kind of literary diversity: an un-gate-kept self-published book world, run substantially through Amazon? Or our current book world, which is part-gate-kept, part-not, with many different publishers and retailers and platforms? I’m not smart enough to figure it out, but if I had to guess I’d guess the latter.

I should add, as a caveat, that I could not possibly be more compromised as a commentator on this subject. I’m on record as having problems with e-books on purely readerly grounds. I’m also in the small, annoying minority of people who has wangled his way past the gatekeepers and published books (though believe you me, I racked up a lot of rejections first). And conversely I’ve benefited incalculably from Amazon’s support. I’ve been to Amazon’s campus as their guest. I’ve drunk Amazon’s free Diet Coke. Nothing makes more sense to me than a company trying to make bookselling into a profitable business. I’m not anti-Amazon, and I’m not pro-publishers either. I’m pro-books.

(READ: A Book Lover’s Guide to Reading and Walking at the Same Time)

At this point I don’t know whether the publishers and Apple colluded to set prices for e-books, and I don’t even really care, because there are more important things in play here. What I care about is the long-term health of book culture. Books have wandered out of their hushed little paper world into a much larger, much colder digital marketplace that’s trying to remake them on its terms, and we’re letting it, and I find that scary. Higher prices suck for consumers, but a damaged book culture? That would be fatal. My fear is that if the DOJ suit goes forward, successfully, we could end up with the worst of both worlds: both a drastically altered book culture, and higher prices for consumers, because Amazon won’t have meaningful competition to force prices down.

Probably it won’t come to that. But I’m going to go hug a bookstore owner just in case.

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