Charles Schumer is not pleased. The Democratic senator from New York wrote an impassioned op-ed in the Wall Street Journal earlier this week decrying the U.S. government’s antitrust lawsuit against Apple, which accuses the company of colluding with publishers to raise the prices of e-books. But wait: Wouldn’t cheaper books be good for consumers? What’s the big deal?
First, some background. In case you haven’t followed the story, the Department of Justice filed a lawsuit against Apple and five book publishers in April that basically accused them all of secretly meeting up at fancy Manhattan restaurants and agreeing to stick it to Amazon by raising the prices on e-books by a few dollars. The agency pricing model that was agreed to would effectively allow the publishers to gang up on Amazon and force it to raise e-book prices above the $9.99 price point that was then common for Kindle titles.
A few of the publishers settled with the DOJ out of court, but Apple and the other defendants have remained defiant. In late May, Apple filed a formal response to the DOJ’s claims, in which the company denied wrongdoing.
Schumer: Lawsuit is Anti-Innovation
In his op-ed, Senator Schumer echoes Apple’s sentiments at certain points, claiming that the lawsuit “empowered monopolists and hurt innovators” and that it “could wipe out the publishing industry as we know it.”
At the heart of Schumer’s argument is a concern that forcing Apple to change its ways would put Amazon back at the top of the e-book market, where it had previously maintained a 90% share. Then Apple came along, argues Schumer, and introduced some competition into the marketplace, thus eroding Amazon’s market share.
The result has indeed been increased competition in the e-book market, but at higher prices for newer books. It’s this price increase that got the DOJ’s attention in the first place, but Schumer argues that the short-term desire for cheaper new releases should be balanced with “a more pressing long-term interest in the survival of the publishing industry.”
In other words, the publishers’ ability to charge a few dollars more for new releases has allowed them to grow revenues enough to pre-empt the kind of catastrophic demise seen in the music and newspaper industries.
Interestingly, Schumer doesn’t attempt to discredit the DOJ’s core claim against Apple and the publishers, which he says “sounds plausible on its face.” Instead, he asks readers and the DOJ to consider the broader implications for the publishing industry if the companies that make money from book sales are forced to sell new releases at a lower cost to consumers.
E-book sales have been surging, thanks in part to the proliferation of devices including Amazon’s Kindle and Apple’s iPad. Yet while digital books are growing in popularity, they’re a long way from outselling more profitable hardcovers, whose sales have been declining. Like other traditional mass-media industries, publishers are trying to build a sturdy enough bridge to the digital future without cannibalizing their legacy business model.