The Okob Imperium, the Six Towers, and the Marble Horses

1st Day – The Neverending War & The Old Man

The Okob Imperium could not be defeated. It had stood for as long as the people could remember.

The old gaunt man stood looking upon the Six Towers that comprised the capital city of the Okob Imperium. There were three walls circling the capital. The walls had never been breached. There were 11 Gates scattered along the three walls. Each Gate was well guarded and fortified with special metal alloys blessed by the spells of the grand magicians of the six towers.

The old man thought back to what his father had said when he had set out on his journey.

The Okob Imperium cannot be defeated.

It had taken the old man 17 years to build up his army of free men and women. His father and brothers weren’t part of it – he suspected even 100 years wouldn’t be enough to convince them his war was winnable.

The old man turned back towards his army and spoke. The words flowed out with the weariness of age and the magic of hope. His blind faith and charisma turning them into sounds more melodious than the songs of angels.

His soldiers had been ravenous – the days of marching and adrenaline setting them on edge. His words stoked the fires in their hearts. The old man looked upon them one last time and then gave the command.

The army rushed forward, pouring upon the capital like the darkness of eternal night.

227th Day – The Neverending War & The Decision

The meeting of the Grand Wizards had been hastily arranged. Two of the walls were down. The gates of the third wall were at breaking point.

How long would one solitary wall protect the six towers?

The Imperium Council sat behind their ornate desk. The five of them resplendent in robes built upon the blood of millions of peasants.

There’s no other way. We have called upon the Dark Wizardesses. The Marble Horses have been readied.

A shudder passed through the hearts of the Grand Wizards. They were as children in front of the Dark Wizardesses. They had given up something, perhaps their souls, for powers that exceeded the imagination. The Dark Ones would win them the Neverending War … but at what price?

We have no other choice. We have no other choice at all.

253rd Day of Battle – The Neverending War & The Marble Horses

The old man had just lopped off the head of an Imperium Soldier. The third wall was there for the taking. Its southern gate was beginning to crack.

A slow smile flitted across the old man’s face. The Neverending War was about to end. As the old man envisioned what it would feel like to tear down the Towers, a screech pierced the air and stilled the fighting.

Soldiers from both sides stopped and looked back towards the outer fields. There were 7 great marble horses there. The Old Man had tested them – they were all solid marble. No seams. No surprises.

Nothing for a few moments. Then the marble horses shook themselves.

The giant marble horses had come alive. The old man crossed himself. What manner of cursed magic was this?

The ground around the marble horses began to move. Ghastly dark soldiers dug their way out of the ground and stood by the marble horses. Then, without warning, the marble horses and the dark soldiers started rushing towards the battlefield.

578th Day of Battle – The Neverending War & The Horn

Two of the marble horses still stood. Thousands of the dark soldiers were still fighting. The Imperium had hardly any soldiers left. The old man’s army was almost gone.

The old man stood by the southern gate, which still stood. His army was surrounded on all sides and defeat crept ever closer.

This is what it had come down to. The Six Towers and the Imperium would win. The old man felt the last gasp of hope leave his body as one of the remaining Marble Horses brushed aside his guards and approached him.

Then a horn sounded.

The Old Man looked towards the South. Everything stood still for him. The Marble Horse stopped … taken aback by the change in the old man’s eyes.

The horn sounded again.

The old man looked more carefully. A dark line was forming in the South. It grew from something amorphous into a line of people. It stretched as far as his eye could see. He smiled. The people. The idiots. What could they do against dark soldiers and Grand Wizards? Yet he smiled wider.

They could not stand against the swords and shields of the Imperium. They could do nothing against the Dark Soldiers. If his army, trained painstakingly and equipped magnificently, had lost – what hope did some peasants have?

Then he saw the second line. Then the third. Then the fourth. Slowly despair crept into his soul. It would be a massacre. The peasants could not hope to take on the Imperium and survive. Yet, the never ending lines of peasants and villagers kept marching forward.

The End of the Neverending War

The old man’s army, the little of it that remained, the dark soldiers, the last two marble horses, and the few remaining Imperium soldiers – all stood and looked upon the endless rows of peasants.

The first line stopped 80 paces from the edge of the battle. 4 young girls stepped out of the first line. They were dressed in black, faces painted white. The mark of the angels were carved into their dresses.

The old man thought back to the legends and shivered. Surely, those were old wives’ tales.

The girls raised their hands and started chanting. Lighting bolts started raining out of the sky.

The old man knelt down and wept. He had lost. Yet, the Six Towers would be defeated. He looked back as the southern gate cracked and fell. Then cries rang out and the endless lines of peasants rushed towards the Towers.

Publishers’ Ace against Amazon – Remove DRM & Make their own eReaders

There are a lot of theories regarding what Publishers can do to reduce the massive and constantly increasing influence of Amazon and other Platforms in Books and Publishing.

Perhaps the most effective move would be removing DRM and making their own eReaders. This would allow them to create their own pipeline and also to weaken the pipelines of the existing Platforms. Without DRM there’s no lock-in any more.

The Digital Reader discusses the success of the Tolino eReader in Germany. It’s an eReader made by a group of book retailers, which can access books from any of the stores. Apparently, it’s selling well.

Why don’t Publishers make an eReader of their own?

There’s literally nothing stopping them. Amazon doesn’t own the screen technology, eInk does. The various parts are easy to make. Foxconn, Pegatron, and a few other manufacturers would gladly make eReaders for Publishers.

It would take very little effort and comparatively little money. Publishers could even take preorders and figure out demand.

Why do Publishers need DRM?

People who pirate books aren’t stopping because of DRM. It’s trivial to remove DRM. The only thing DRM is doing, is allowing Amazon to create lock-in and gain more and more power. If Publishers remove DRM then Amazon’s lock-in disappears.

Amazon’s lock-in is the Big thing allowing Amazon to dominate the ebook market. If readers were able to buy books from any store and read on their Kindle, they would. It would allow hungry new startups to emerge that would offer Publishers and Readers better terms. It would allow Publishers to Divide and Conquer – shift the balance of power away from the Platforms and back to the Content Providers.

It’s all about the Books right now. Publishers need to wake up and realize that if they don’t do something it’ll shift to being all about the Platforms.

Publishers need to leverage what they have – 50% of Content and 75% of the Books people want to read

Remove DRM, release your own eReader, and make it easier and more convenient for readers to read books on the Publishers’ eReader or any eReader.

There are only two points of power – the store, the device.

There are only two sources for books – The Big 5 Publishers, Smaller Publishers and Indie Authors.

The longer Publishers wait, the less power and leverage they have. If they move quickly, they can build up their own ecosystem (jointly owned by the Big 5 Publishers), their own eReader base, their own customers. Then they aren’t at the mercy of B&N and Amazon and Kobo and Apple.

They have their own pipeline and their own Platform.

Publishers must leverage what they have BEFORE they no longer have it. Because Publishers’ share of ‘Books People Want to Read’ and ‘Authors People Want to Read’ is gradually declining. Once it falls below 49%, they are toast.

Stores are weakening Publishers by building up Smaller Publishers and Indie Authors

Publishers need to look at what Google did to newspapers. It distributed traffic between blogs, smaller newspapers, and larger newspapers. Soon, people stopped going as much to the larger newspapers. Revenues fell and the newspapers started dying. While Google prospered by running ads against all the searches.

The same thing is happening in books. In 2007 you would have 80% of the Top 100 covered by Big 6 Publisher books. Perhaps a bit less.

Now, in 2013, we are seeing Indie Authors take up 25%, Amazon Publishing take up 10%, smaller Publishers take up 15%. That’s means the Big 5 have just 50% of the Top 100. This process is going to continue until the Big 5 Publishers have been weakened so much that they are at the mercy of the Platforms (Amazon, Apple, B&N, Kobo).

The Big 5 Publishers still have 75% of the ‘Books People Want to Read’. But they only have 50% of the Top 100 Spots. What’s wrong with this picture?

The Big 5 Publishers have to be delusional if they -

  1. Don’t see what the stores are doing i.e. weakening the Big 5 Publishers.
  2. Think that they have some great ‘Quality’ or ‘Branding’ advantage. People can only buy your books if they can see and find your books.

The store gets Brand X Ketchup and Brand Y Ketchup. People flock to the store. The Store introduces its own Ketchup. It puts its own Ketchup on the easy-to-get middle shelf, and the other ones on the hard-to-reach top shelf. After a few years, it puts them in the last aisle where only 25% of shoppers shop. Then soon it has 55% market share and it dictates terms to Brand X and Brand Y.

That’s EXACTLY what Amazon and the stores are doing. Publishers seem to be in some sort of Reality Distortion Field where they think they are still the Gatekeepers and that no one else can write and publish good books.

Good $1 Books will beat Great $13 Books – Every Single Time

Publishers seem to be completely oblivious to the fact that Good is the Enemy of Great. Good $1 and $3 books will, sooner or later, destroy Great $13 Books.

13 times more expensive. There are not very many markets where the high-end is 13 times more expensive than the low-end. There’s definitely no market where the high-end is 13 times more expensive and also sells more.

Perhaps even more dangerous is the possibility of the Rise of Great $1 and $3 Books.

It’s already happening to an extent. What happens when there are lots of Great $1 and $3 Books available?

Publishers seem completely oblivious to this possibility. Perhaps they are assuming that everyone else has their legacy costs.

Why removing DRM is a Smart Move

In any Pipeline, every step-owner in the pipeline tries to outwit every other step-owner. It’s a constant battle to grab 90% of the profits while making the other participants work for peanuts.

In Books we had a good arrangement. Publishers had the books and Distributors had the distribution channels and Stores had the shelves. It worked well – everyone profited.

Now, Amazon and B&N have too much power. They will do Divide and Conquer. Pit Publishers against Smaller Publishers and pit Published Authors against Indie Authors. They will build their in-house teams and publish themselves.

Their goal is to make Publishers redundant. Then to replace Publishers as the gatekeepers. Then to replace all other books by their books. This is crazy out of control ambition. Delusional too. Just as Publishers are under the delusion that only they can publish great and good books, the Platforms are under the delusion that they can train readers to buy only their published books.

Everyone wants to play God. Until they get struck by lightning.

What can Publishers do? Divide and Conquer back.

Equalize the Platforms. If it’s currently 65% Amazon, 15% B&N, 10% Apple, 10% everyone else, then Publishers need to get it to 40% Amazon, 25% Apple, 15% B&N, 20% everyone else.

What’s the best way to do this? Remove DRM. Standardize Prices (which has failed already). Lock out Amazon (a very bold move but worth a shot). Build their own stores. Sell their own eReaders.

Think of the pipeline. Why are Publishers at the mercy of Amazon and B&N and Apple? Because they don’t own the eReader or the Reading App or the eBook store.

When we had Brick & Mortar stores it made sense to not own stores. What’s the excuse now? Same for eReaders – what’s the excuse?

Readers buy eReaders for Books. The Big 5 Publishers have 75% of the books that people want to read. Why do they need stores or eReaders they don’t control?

This is the equivalent of Russia and Saudi Arabia saying – Hey Greece. We have all this oil. Would you build pipelines and ships and carry them to North America for us? We’ll let you control the entire trade if you save us the hassle of building our own ships and pipelines.

What is it all about? The Books.

Who has the Books people want to read? The Big 5 Publishers.

Then why are they letting themselves be turned into pawns in the eReader and eBook Wars? Perhaps they genuinely are that naïve. Perhaps they vastly overestimate the amount of effort required to build an ebook store and reading apps and eReaders. Perhaps they just don’t get it.

All of Books and Publishing is up for grabs. Publishers can either replace stores and distributors and ereader companies OR they can get replaced.

Publishers just have to do two things -

  1. Build a pipeline to readers and control it 100%.
  2. Price books at prices that let readers buy and read the books they want to read, without forcing readers into the arms of indie authors.

It’s absolutely unbelievable that Publishers are doing absolutely everything they can to hand over all control to the Platforms. To push readers into the arms of indie authors and smaller publishers.

Perhaps Amazon and B&N planted spies into the Big 5′s Strategy Departments. Perhaps the Big 5 are under the misconception that ‘eBooks will just go away’ and/or ‘eBooks will never go above 25%’. Whatever the reason, it’s painful to watch the Big 5 Publishers be played for fools by the Platforms.

Think about it – The Platforms are using Books published by the Big 5 Publishers to attract readers to their ecosystems and get locked into their pipelines. They are then, gradually, training those users to buy books from other sources. Eventually, they would have used the Big 5 Publishers’ product (books) to replace Big 5 Publishers. It’s absolutely crazy that the Big 5 Publishers still don’t get it. The Platforms are going about the process of REPLACING you. What part of that is not clear?

It’s baffling to me why Publishers are so miserly and mean-spirited when it comes to readers who just want to pay them money to read their books. It’s even more baffling that Publishers are so large-hearted with Platforms that want to weaken them and replace them. Shouldn’t it be the other way around?

eBooks will overtake Paper Books in 201X

There seems to be a strong belief among the old guard in the Book Publishing industry that ebooks will stop growing at some point of time in the near future.

Publishers and Published Authors and Paper Book Bookstores envision a stable future world in books, where -

  1. eBooks are approximately 35% of unit sales and approximately 25% of revenue.
  2. Paper Books are still dominant.
  3. Lots of people prefer paper books and pay more for them.
  4. Publishers and Published Authors can continue to call the shots and get the lion’s share of the earnings and sales.
  5. Bookstores will continue to exist.

These are very interesting assumptions. However, that is exactly what they are – Assumptions.

eBooks are growing really, really, really fast

In 2007, when Kindle was launched, eBooks were 2.87% of total book sales. I’m not sure whether that 2.87% was revenue or unit sales. Let’s be generous and assume it was revenue.

In 2012, in the Era of Kindles and Nooks and iPads, eBooks were a whopping 25% of total book revenues.

That’s a jump of 8.7 times.

  1. The rise from 2.87% to 25% of revenues happened while Publishers were fighting ebooks tooth and nail. Measures such as The Agency Model. Tactics such as delaying ebook releases. Extreme steps like not releasing ebook versions of lots of back list books and even some new books.
  2. The rise from 2.87% to 25% happened with eReaders sold to approximately 25 million to 35 million people.
  3. The rise happened in just 5 years. 5 years is a really small amount of time given how long books have been around.

No matter how you interpret it, it is a massive rise. A very impressive one given the amount of resistance and the high barriers to entry (buying a dedicated eReader, leaving the comfort of paper books).

Note: Statista predicts eBooks will outgrow Paper Books by 2017. Wired has its own thoughts on why Publishers are dragging their heels on ebooks.

I LOVE how Statista takes ebook revenues. which have grown from almost nothing to $5 billion in 5 years, and shows them growing to only $10 billion over the next 4 years. Are we to believe that after growing 8.7 times in 5 years, ebook revenues will grow only 2 times in the next 4 years?

There’s absolutely no reason for the growth of ebooks to stall

The Publishing Dinosaurs assume eBooks will stall at the current 25% figure.

It’s a strange assumption given the reality -

  1. Hundreds of Millions of Tablets are being sold every year. Tablets are much more suited to reading ebooks than Desktop computers and Laptop computers. At the minimum tens of millions of Tablet owners each year are adding Kindle, Kobo, Nook reading apps.
  2. Tens of millions of dedicated eReaders are being sold every year. eReaders are really good for reading. They also tend to lead to more reading. Not only do eReader owners read ebooks, they tend to read more ebooks than paper books AND they tend to read more books than they used to.
  3. eReader companies are growing their customer base very fast. Kobo added 3.5 million registered customers just in the last 3 months.
  4. Lots of companies are making aggressive moves. Whether it be device makers and ebook sellers like B&N and Amazon and Kobo. Whether it be new Publishers like Open Road, RosettaBooks, and Vook. Whether it be startups pushing for reading app improvements and reading advancements. All these moves are going to lead to GAINS for eBooks.
  5. More and more indie authors are rising. Most of them are ebook focused. Many of them only sell ebooks.
  6. eBook prices are going down relentlessly. If they stabilize, which seems unlikely, it’ll be in the $1 to $5 range. That instantly makes eBooks far more attractive than $10 to $15 hardcovers and $5 to $10 paperbacks.
  7. Every eReader sold leads to more people seeing people reading on eReaders. Every eBook sold to Tablet owners leads to people seeing people reading on Tablets. There is an in-built viral marketing mechanism.
  8. eReaders and eBooks are just beginning to expand properly to all parts of the world and to languages other than English.
  9. eReader prices are now approaching the range where emerging markets like China and India can buy them.
  10. Tablet prices are also dropping. This too will lead to more Tablet sales and more ebook sales to Tablet owners.
  11. The biggest roadblock is people’s assumption that reading on an eReader or Tablet is terrible. That nothing can be as good as reading a paper book. Gradually, more and more people will realize that the ‘shell’ isn’t important – it’s the words and the story and the book itself that matter. People resisting ebooks is akin to customers who refuse to use MP3s and CDs and instead listen to music only on their Walkmans.
  12. eReaders are improving slowly but steadily. We now have HD screens which make the text really crisp and sharp. We have lighted screens that allow convenient reading at night. In the next few years we might see flexible eReaders and color eReaders.
  13. Authors are realizing (both published authors and indie authors) that with ebooks they can go direct to customers. This allows them to cut out most of the middlemen. Which means better prices for readers and more sales for Authors who venture bravely into eBooks. It also, rather surprisingly, means more money for Authors.

We could go on and on.

There are a LOT of things going on that are positive for ebooks and neutral or negative for paper books. Perhaps the biggest single thing in favor of ebooks is convenience.

  1. You can get ebooks instantly. No need to wait for a book to reach you via FedEx or UPS. No need to go to a store.
  2. You can carry around as many ebooks as you like.
  3. You can find more books to read quickly and easily.
  4. You can browse the ebook store from your couch.
  5. You can read anywhere and everywhere. At any time of the day or night.
  6. You never run out of space to store ebooks.

eBooks aren’t just cheaper. They are also more convenient.

eBooks are the Path of Least Resistance

The rapid rise in ebooks i.e. a jump from 2.87% to 25% in 5 years, is due to eBooks being the Path of Least Resistance.

  1. eBooks are the Path of Least Resistance for Authors since they don’t have to wait 1 year for the print version to be ready, they don’t have to get a Publisher’s approval, they can ‘print’ as many ebooks as they like, they get a larger share of the sales.
  2. eBooks are the Path of Least Resistance for readers since they are cheaper, more convenient, and more immediate.
  3. eBooks are the Path of Least Resistance for Stores and Platforms as they can stock an infinite amount of ebooks with infinite copies of each.

Paper Books just can’t compete with that. If they could, we would not have seen eBooks jump to 25% revenue share in just 5 years.

eBooks will overtake Paper Books in 201X

If we consider the current growth trajectory of eBooks, we arrive at some interesting figures -

  1. eBooks are growing at a rate of 51.47% per year. That would suggest eBooks will be 38% of revenues in 2013 and 59% of revenues in 2014. eBooks will overtake Paper Books towards the end of 2014.
  2. If we assume eBook growth rate will slow down to 25% per year. That would mean eBooks will be 31.25% of revenues in 2013, 39% in 2014, 48.8% in 2015, and 61% in 2016. At a relatively conservative 25% growth rate (conservative given that current growth rate is 51.47%), eBooks will overtake Paper Books early in 2016.
  3. For eBooks to stabilize at approximately 25% of book revenues (which they already reached in 2012), eBook growth would have to go from 51.47% a year to 0%. When you put it that way it sounds really absurd. What product/format goes from a 54.17% growth rate to a 0% growth rate? Something truly catastrophic would have to occur for eBook sales to stabilize at the 2012 revenue share of 25%.

Realistically speaking, eBooks will overtake Paper Books sometime between early 2015 and early 2016. This isn’t just number of books sold, it’s revenue from ebooks becoming greater than revenue for paper books.

2016 is a very safe bet. I wouldn’t be surprised if it happens by mid 2015.

What happens if eBooks overtake Paper Books by mid 2015?

It would be a cataclysmic change.

The current Publishing world is built around hardcover and paper back sales. It’s built around $10 to $15 prices.

If eBooks become 50% of book revenues by mid 2015, and if ebooks are selling in the $1 to $7 range, we’ll see the current Publishing industry go up in flames. It simply can’t survive on average selling prices of $3 to $7.

The really scary thing is that eBooks create infinite competition. Anyone can publish. Anyone can sell. We go from the world of paper books where Publishers and Book stores had huge advantages and control, to a world where they only have high overhead costs and a lack of understanding of the Internet. We go from a world where indie authors couldn’t even get their books to readers, to a world where indie authors are nimble Velociraptors and Utahraptors hunting down lumbering Sauropods.

Mid 2015 – Mark your Calendars. You’ll see two pieces of data then -

  1. It’s mid 2015 and eBooks have overtaken Paper Books in total revenue.
  2. It’s mid 2015 and Indie Authors now account for 25% of total book revenue.

Of course, it might happen a bit earlier (early 2015) or a bit later (early 2016). However, 2015 certainly seems to be the year that we’ll see Publishing shift from Paper Books and Publishers to eBooks and Free Authors.

Kindle, eBooks, Nook give Publishers $2.753 billion revenues in 2012

After all the hand-wringing about the dangers of ebooks and Kindle and Nook, it’s funny to see the actual figures. New York Times points out that Publishers made a whopping $2.753 billion in revenues in 2012 from eBooks.

  1. Fiction eBook sales rose 42% and brought in $1.8 billion.
  2. NonFiction eBook sales rose 22% and brought in $484.2 million.
  3. YA & Children eBook sales rose an impressive 117% and brought in $469 million.
  4. Sales of Harcover and Trade Paperback books were relatively flat. Hardcovers contributed $5 billion in 2012 (they had contributed $4.9 billion in 2011).
  5. Mass market paperbacks decreased in sales.
  6. Downloadable audiobooks increased 22%. 2012 revenues were $240.7 million.
  7. eBooks now account for 20% of Publishers’ revenues. In 2011 they were just 15%. In 2007, when Kindle was launched, they were just 2.85%.
  8. Publishers’ net revenues in 2012 were $15 billion. Up from $14 billion in 2011.

These figures are from the BookStats Survey.

NY Times points out, quite correctly, that consumers’ preferences are shifting -

  1. Print formats were flat or decreased.
  2. eBooks and downloadable audiobooks boomed.

Very interesting to see the shift from brick and mortar to online -

  1. Revenue from Bookstores dropped 7% to $7.5 billion.
  2. Revenue from online bookstores increased 21% to $6.9 billion.
  3. 2012 was the first year that factored in the bankruptcy and liquidation of the Borders chain in 2011.

Laura Hazard Owen at Paidcontent has made some charts that nicely illustrate the shift.

Where do Indie Authors fit in?

Well, here are my questions -

  1. 20% of revenues translates into what percentage of unit sales? Is it safe to assume ebooks were sold for less than physical books? If so, then ebook sales might be 30% or more of total book sales.
  2. Where do indie authors fit in? What market share did they have? I’d hazard a guess of 10% to 20%.
  3. Were eBook sales for indie authors 90% or more of total Indie Author sales? Meaning did indie authors sell a lot of ebooks and hardly any hardcovers and paperbacks. That certainly seems possible.
  4. At what point are we going to start counting indie author sales? Surely, we can’t keep ignoring them.
  5. Are we going to be stuck in the current situation – Where all indie author sales are ebook sales because it’s too expensive for indie authors to print and distribute paid books? Would that mean that the shift from physical to ebook is accelerated even more?

My suspicion would be that Indie Author sales are at least 5% to 10% of what Publisher sales are (in revenue).  Perhaps $750 million to $1 billion a year. That this will increase over time because indie authors are providing a lot more value for money and are gradually understanding marketing and branding and customer relationship-building.

Was Apple the Sole Architect of the Agency Model?

The Justice Department is painting Apple as the ringleader of the Agency Model. So says The New York Times.

Quick Reminder of the Agency Model.

  1. 5 of the Big 6 Publishers and Apple got together to introduce something called ‘The Agency Model’.
  2. It was seen by some as an attempt to exploit ereader owners and make them pay a ridiculous price for ebooks ($12.99 to $14.99).
  3. It was seen by others as an attempt to slow down the rise of eBooks and eReaders. Perhaps it was both.
  4. Update: From the articles today it seems it might have been Apple’s attempt to stall Amazon’s rise in eBooks.
  5. It led to a long stretch where we had really ridiculous prices for newly released ebooks.
  6. It led to a lot of pain for readers as they either didn’t buy the over-priced ebooks or waited until they were below $9.99. Those that did pay also suffered as they had to pay really high prices.
  7. It has also led to the current situation – Where lots of Publishers think it’s OK to introduce new releases at $12.99 and $13.99 and $16.99.

The Agency Model, in short, was the biggest threat to the rise of eBooks and eReaders. It’s only due to the fact that eBooks had already gathered too much momentum that it failed. Also helping it fail was the strong resistance by readers. Measures by readers such as the $9.99 boycott – which boycotted any books over $9.99 – played an important part.

Now, based on the picture The Justice Department is painting, it seems the architect of all of this malarchy may have been Steve Jobs and Apple.

Here’s an email from Steve Jobs to James Murdoch of News Corporation -

“Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”

It’s pretty clear that, at least in this case, it’s Apple that’s trying to convince a Publishing Company into the Agency Model.

The Justice Department certainly thinks so -

According to the Justice Department, that e-mail is part of the evidence that Apple was the “ringmaster” in a price-fixing conspiracy in the market for e-books

It’s also quite clear that Apple wanted to block Amazon’s rise -

the government said that Apple and the publishers conspired to fix e-book prices as part of a scheme to force Amazon to raise its e-book price from a uniform $9.99 to the higher level noted by Mr. Jobs in the e-mail, which publishers wanted. That, the department said, resulted in higher prices to consumers and ill-gotten profits for Apple and its partners.

The Justice Department is really going after Apple. It’s settled with The Evil 5 Publishers and now Apple is the sole defendant -

Apple is the only defendant left in the lawsuit after five publishing companies — Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster — agreed last year and earlier this year to settle the charges.

This is really interesting. Wonder why Apple didn’t settle.

Power Corrupts? Apple strong-arming Publishers?

The Justice Department paints a really crazy picture – One where Apple is not only sweet-talking Publishers into joining the Agency Model Mafia, it’s also threatening and coercing them.

Here’s a gem -

In July 2010, Mr. Jobs, Apple’s former chief executive, told the chief executive of Random House, Markus Dohle, that the publisher would suffer a loss of support from Apple if it held out much longer, according to an account of the conversation provided by Mr. Dohle in the filing. Two months later, Apple threatened to block an e-book application by Random House from appearing in Apple’s App Store because it had not agreed to a deal with Apple, the filing said.

After Random House finally agreed to a contract on Jan. 18, 2011, Eddy Cue, the Apple executive in charge of its e-books deals, sent an e-mail to Mr. Jobs attributing the publisher’s capitulation, in part, to “the fact that I prevented an app from Random House from going live in the app store,” the filing reads.

Who would have thought that Steve Jobs set up the Agency Model. All this time we might have been accusing Publishers of being greedy – they might just have been Apple’s Puppets. If all this is true, and that’s an IF at this stage, then it pretty much means the Publishers got conned/threatened/cajoled/blackmailed into joining the Agency Model. That they were just Apple’s puppets to use against Amazon.

Also, remember when Publishers and Amazon were engaging in feuds and books were going missing. Well, Apple had its hands in that too.

the documents quote Mr. Dohle as saying that an Apple executive counseled him that the publishing company could threaten to withhold e-books from Amazon to force Amazon to accept the higher prices.

This is very different from what I had thought the situation was.

Are we to Believe that Publishers were merely Sheep? Being used as Pawns by Apple to fight Amazon’s lead in eBooks?

That’s certainly the picture that The Justice Department is painting.

If this happens to be true, then my (non-legal) thought would be -

Couldn’t every single person who

  1. Had to pay more than $9.99 for a book.
  2. Had to wait for months for a book’s price to drop to $9.99.
  3. Had to skip a book because it was $9.99.

Couldn’t every single person in these three categories sue Apple for money lost and anguish caused?

Surely, if we waited 1 entire year to read a book by our favorite author because we weren’t willing to pay $13.99. Then we wouldn’t be very happy with Apple if Apple were the ringleader. Apple who hatched this entire plan? Apple who convinced Publishers and even threatened them into joining? Apple was the cause of our wait and discomfort?

Apple, inadvertently, tried to destroy the entire rise of eBooks and eReaders.

This bit from Reuters clearly shows Steve Jobs and Apple didn’t care about readers -

 the Justice Department said that Steve Jobs, Apple’s CEO at the time, “conceded the price-fixing conspiracy” when he told his biographer that Apple had “told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.’”

‘Yes, the customer pays a little more’. Who cares about the readers?

Who cares if readers have to shell out more money. Who cares if some person has to wait an entire year to read a book they really, really would have loved to read when it was released.

Amazon might come out smelling of roses. Consider this part from The Washington Journal -

Apple said Amazon also considered the agency model and spoke in detail to publishers who at one point offered an exclusive arrangement that would cut out Apple.

Wonder what happened there. Did Amazon not take the exclusive arrangement because it wanted to do the right thing? Because it thought the Agency Model would kill eBooks?

Summary of What we Might or Might Not know about the Agency Model

So, it’s all a bit convoluted -

  1. Apple may or may not have started the idea of the Agency Model.
  2. Apple seems to have played go-between and facilitator between Publishers.
  3. Apple threatened at least one Publisher and perhaps that played a part in that Publisher joining the Agency Model.
  4. Steve Jobs’ solution involved ‘the customer paying more’. If true, it shows a striking lack of empathy for readers. Which would make sense given Steve Jobs though ‘people don’t read any more’.
  5. Amazon was offered something akin to the Agency Model and an ‘exclusive’ and either declined (for what reason?) or something else happened.

If the accusations made by The Justice Department are correct, then it paints a really bad picture of Apple as ‘Instigator of the Agency Model’, ‘Bully that threatened Publishers with dire consequences, including not approving Apps, if Publishers didn’t join’, ‘A company that doesn’t care about readers and customers, which suggested price increases for customers that went beyond reasonable prices for ebooks’.

It’s not a pretty picture. If The Agency Model really does turn out to be Apple’s brainchild, that would mean a lot of trouble for Apple. Beyond the obvious PR damage, it might open up Apple to a lot of lawsuits from a lot of people very upset about having to pay extra for ebooks. From people angry they had to skip/delay reading books they really wanted to read. It’s also not the right thing to do. Perhaps Apple’s moral antenna was not receiving the right signal. You’re just holding it wrong, Apple. It’s supposed to point to Heaven, not Hell.

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