So, you're a publisher, you've been sued by the Department of Justice -- based on allegations that you colluded with Apple and other publishers on an ebook price-fixing scheme -- and you're wondering what to do next.
Some of you are going to fight it out, some of you have settled, and pretty much everyone seems to think that this means Amazon has now been armed with destructive monopoly power.
The logic goes something like this:
Before Apple entered into an "agency model" agreement with the major publishing houses, Amazon was routinely selling books below cost. Because Amazon had already locked-up a significant portion of the ebook market, it was next to impossible for anyone else to compete, unless they too could afford to (or wanted to) take a loss on every book they sold.
The agency model seems to have worked, to some degree, because we now have an industry in which Amazon, Apple, and Barnes and Noble all have a respectable chunk of the market, even though Amazon is still far and away leading the pack.
The Department of Justice lawsuit, however, seems to be handing much of the power back to Amazon, who can once again lower the price on ebooks in order to lock in more of the market. I don't think it's a stretch to say that this move could put Barnes and Noble out of business.
[The settlement] is a big win for Kindle owners," Amazon said in a statement. "We look forward to being allowed to lower prices on more Kindle books.
What's less clear is how Nook owners, Sony ereader owners, or even iBooks enthusiasts, should feel about it. Seems like less of a win, when you look at it from their perspective.
Setting aside the validity of the lawsuit -- because it's not particularly important for what I'm about to suggest -- what options, if any, do publishers have, in a situation where Amazon regains the ability to sell books below cost?
Plenty, but they're not going to like them, because they're stodgy, and old-fashioned, and timid.
Publishers don't want Amazon to lower prices because they fear that doing so will "devalue" the industry. They also think, as I do, that Amazon's ability to do so stands a real chance of putting competitors out of business, and without competitors, they fear they'll have to jump when Amazon says jump.
What they don't seem to be doing is innovating their way out of this mess.
If you, dear publisher, don't want to see books devalued, add value to your books. Negotiate terms with Apple and Barnes and Noble that are consumer friendly. Give me an incentive to want to pay more for ebooks.
If Amazon offers DRM-laden ebooks for $7.99, and I can't do anything interesting with those books, that $7.99 price-point is only intriguing to me if iBooks or Nook books are priced at $9.99, or higher, are still DRM-laden, and I still can't do anything interesting with them.
On the other hand, if I can pay Apple, or Barnes and Noble, $14.99 for a book that is $7.99 on Amazon, but it is DRM-free, has generous social-lending options, I'm provided an option to resell those books once I'm done reading them (at the original price, earning discounts on future purchases), and it appears as though extra care has been taken with typesetting, guess what?
I'm paying $14.99 instead of $7.99.
I think with the right balance, most people would be in the same boat.
If you can't force Amazon to compete on price, force them to compete on quality.
Or, sit back and watch your industry whither and die at the hands of a mega-corporation; what do I care?
I own a Kindle and an iPad capable of buying super-cheap Kindle books.