News Column

Cost of e-Books Could Tumble After Probe

April 11, 2012

Jon Rees, Financial Mail

The cost of electronic books could plunge as investigations into alleged price-fixing by Apple and leading publishers near a conclusion.

Apple and the five publishers under investigation by both American and European Commission authorities are believed to be close to reaching a settlement with the U.S. Department of Justice.

This is likely to end their present sales arrangement where they set the prices for ebooks while Apple, and other online retailers, take a 30 percent cut of the price.

A deal by the publishers to avoid an anti-trust lawsuit by American authorities would be likely to return pricing power to online retailers, which would set the price rather than publishers.

Brussels has been working in parallel with Washington and has recently indicated that it would be open to reaching a settlement, although only if all of its concerns were met.

After the present arrangement with Apple was introduced in 2010, it is estimated that the price of ebooks rose by up to 50 percent. There is often little difference between the price of a printed book and its electronic equivalent despite the huge reduction in cost to the publisher of an ebook.

After the launch of Apple's iPad, which offered its iBooks ebooks service, Apple's then boss Steve Jobs set up an agency deal with leading publishers that saw publishers set an ebook price while Apple, acting as the agent for the sale, took a 30 percent cut of it.

Some of those close to the situation say a cut in Apple's percentage take on ebook sales is also still being considered, as well as its outright abolition.

Previously, online retailers such as Amazon operated on a wholesale model, with publishers selling ebooks to retailers at a discount and stores free to set their own prices.

The agency model itself is not illegal, but U.S. and E.C. investigators are understood to be concerned that the publishers collude to force the arrangements on other retailers.

The publishers are Simon & Schuster, a unit of CBS Corp.; Lagardere's Hachette Book Group; Pearson's Penguin Group; Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck; and HarperCollins Publishers Inc., a unit of News Corp.

Source: (c) 2012 the Daily Mail (London)

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