The Battle of $9.99: How Apple, Amazon, and the Big Six Publishers Changed the E-Book Business Overnight

Andrew Albanese, my editor at Publishers Weekly, has been tracking the antitrust action the DoJ brought against the big six publishers and Apple over price-fixing very carefully, and he's written a great-looking, DRM-free ebook about it called "The Battle of $9.99: How Apple, Amazon, and the Big Six Publishers Changed the E-Book Business Overnight." Here's what he had to say about it:

It is mostly about the backstory of the case, how publishers' antipathy to $9.99 led them to what turned out to be a pretty fateful decision. It is also available in all the major e-book stores, Sony, B&N, Apple, and Amazon. Amazingly, Amazon is featuring it on their Singles home page here in the U.S.

So one note that might be of interest to you, I was surprised to learn in writing this essay how little the publishers negotiated their initial e-book retail terms back when the e-book market was just beginning. And, more to the point, that the thought they did put into e-books was all related to the negative aspects of digital: how to stop piracy, DRM, controlling unauthorized use. This is kind of where this whole legal saga begins. When Amazon came to launch the Kindle in 2007, the publishers were so focused on the bad things that digital might bring that they never really considered, hey, what if this e-book thing really works? What if this Kindle thing takes off?

Remember, at the time Amazon launched the Kindle, the publishers were stumping for the Google Settlement, so their attention was focused more on stopping the digitization and indexing of long out-of-print books that were making money for no one. As a result, they barely negotiated their initial financial terms with Amazon. Amazon officials testified that, in some cases, they just accepted the financial terms publishers had already proposed for e-books, while publishers mostly sought to address DRM, and security concerns. No one apparently stopped to ask Amazon, “Oh, by the way, how much are you planning to charge consumers for our e-books?”

It is easy to say in hindsight, but the major publishers’ fear of digital piracy had kept them from considering the prospects of digital success. And, of course, all of this was exacerbated by the fact that the Kindle was a closed platform, so, the more successful the Kindle became, the more power the company had over the publishers' customer. As you once wrote, the DRM and security they'd insisted on became a whip to beat them with. Another interesting chapter in the way DRM has impacted the publishing industry.

The Battle of $9.99: How Apple, Amazon, and the Big Six Publishers Changed the E-Book Business Overnight


  1. I’m going to show my ignorance here: Why would the publishers care how much Amazon will charge the customer for an e-book? I would think that all the publisher would care about is how much they’ll charge Amazon.

    1. How much Amazon charge decides how many copies of the ebook are sold.  And often affects print sales hugely.  There are a lot of dirty tricks Amazon’s now in a position to pull on publishers.

      1. What sort of dirty tricks? Presumably Amazon wants to price e-books to make as much money from them as possible. If you’re saying that Amazon is deliberately underpricing in order to drive publishers out of business… well Joe Buck below seems to be saying the opposite. Is Amazon evil because their prices are too low or because they’re too high? :)

    2. What several authors and publishers have said is that they live in fear of the $9.99 e-book price doing two things: cannibalizing $30 (or whatever) hardcover sales, and driving down the perceived value of books in general, that is to say convincing people that only suckers would ever pay cover price for a book.

      For no reason that anybody has been able to explain to me, publishers didn’t want to go with the “windowed” model (release the $35 hardcover, then if it sells release the $9.99 e-book and $7.95 paperback), they wanted to release the e-book at the same time as the hard-cover, but at or close to at hardcover price. Amazon told them that their research showed that customers just wouldn’t go for that.

      Along comes Apple, desperate to shaft Amazon (and sell iPads by hoping to get publisher exclusives) who says, “We’ll let you set e-book retail prices to whatever you want” and all the publishers jump ship, threaten to boycott Amazon if Amazon doesn’t let them do the same. Brief fight, Amazon caves.

      Justice Department steps in and asks (if not in so many words), “Where did you get the idea that it was in any way legal for manufacturers to conspire together in order to dictate retail prices? Where did you ever get the idea that it would be legal to prevent retailers from competing against each other on price? Don’t any of you companies have anybody on staff who knows even word one about anti-trust law?”

      Publishers consult the attorneys they should have consulted in the first place, find out that everything they just did was illegal six ways from Sunday and there is no plausible defense, freak out, and cave. Apple, instead, says to Justice Department, “Screw you and your outmoded silly ‘laws,’ we’re right and you’re wrong. All you self-proclaimed ‘government’ types need to sit down and shut up and do what shareholder corporations tell you to do.”

      Case goes to court; Apple flat-out denies whole rafts of things that the publishers have already plead guilty to conspiring with Apple to do. Case goes to jury.

      Did I miss anything?

      1. Even the publishers weren’t too keen on windowing. From the book that this article is plugging:

        Windowing, however, was widely acknowledged by publishers to be a flawed tactic. Macmillan’s John Sargent noted in an e-mail that the practice was not economically favorable to publishers, nor was it likely to change Amazon’s behavior. And it was likely to increase piracy, as frustrated consumers would look to rip windowed books from the Internet. In a blunt assessment, Sargent said windowing “actually made no damn sense at all” and predicted disaster, “if we keep doing it.” 

        Ultimately, the four publishers combined delayed the e-book releases for just 37 books.

        Albanese, Andrew Richard  (2013-06-18). The Battle of $9.99: How Apple, Amazon, and the Big Six Publishers Changed the E-Book Business Overnight (Kindle Single) (Kindle Locations 383-388). Publishers Weekly. Kindle Edition.

    3. You could pay $2 to read the e-book and find out? :) It’s worth the money.

      Effectively, publishers were 1) concerned that the $10 price was undermining paper bookstores, and 2) worried that after Amazon had hypnotized consumers into thinking $10 was what e-books were “supposed” to cost, Amazon could come to the publishers and tell them to charge less wholesale so they could sell them that cheap at a profit or else Amazon would stop carrying their books altogether.

  2. In the traditional world, the publisher has to predict the number of books needed, physically print the books, distribute them to bookstores where they will be kept until sold or returned, and deal with returns. In the digital world, all that expense goes away. The publisher (or the people they hire) still take care of editing the manuscript, preparing it for publication, and paying royalties, but it’s only appropriate that the publisher should get less money, as the publisher is doing a lot less work for a lot less expense.

    Meanwhile, an e-book is worth far less to the customer.  It’s typically locked to a device and it can’t be sold or donated.

    Despite this, e-books for newly published best sellers often cost almost as much as a hardback, despite the almost zero marginal cost. It seems that the main reason for this is that Amazon and Apple are making windfall profits based on their control of the platform (Kindle or i-device).

    1. Paper is the least expensive part about a book.  

      The fact that an eBook generally locks the content behind a gate ruins it for me, but if it didn’t, the eBook would be far more valuable and worth paying more.

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