Apple, Publishers Sued for eBooks Price Fixing

A Seattle-area class-action lawsuit alleges that iPad maker Apple colluded with six of the biggest book publishers to artificially raise the price of ebooks and harm consumers. Previous to Apple's 2010 entry into the ebook market with its iBooks service, the typical selling price of new ebooks in a market still dominated by the Amazon Kindle was $9.99. But today, thanks to an Apple-backed price hike, the suit says, the average price of new eBooks has risen dramatically.

"Apple facilitated changing the ebook pricing model and conspired with the Publisher Defendants to do so," the suit alleges. "As a direct result of this anticompetitive conduct as intended by the conspiracy, the price of ebooks has soared. The price of new bestselling ebooks increased to an average of $12 - $15, an increase of 33 to 50 percent."

This price hike flies in the face of economic norms. With more companies offering ebooks across more platforms and increasing competition, the average price of ebooks should have fallen, not risen, over the past two years. Since Amazon formalized the ebook market with its wide-reaching Kindle platform, Barnes & Noble has seen great success with its similar Nook platform, leading Apple to jump in and enter yet another content market.

(Apple CEO Steve Jobs infamously dissed ebooks two years before releasing iBooks, claiming, "The fact is that people don't read anymore. The whole conception is flawed at the top.")

Before Apple allegedly colluded with publishers to raise prices—and those prices absolutely did go up across all ebook services when iBooks was first released in January 2010—Amazon was working to lower the price of content that could be distributed so much more cheaply electronically than with traditional, paper-based books.

The suit claims that Kindle had "the potential to massively reduce the distribution costs historically associated with brick-and-mortar publishing," but that "publishers were particularly concerned that Amazon's pro-consumer pricing of ebooks would negatively impact their moribund sales model, and in particular the sale of higher-priced physical copies of books."

Total revenue from ebooks have risen 1,274 percent since 2008, when Steve Jobs made his ill-informed quip about reading habits. Today, ebooks account for 6.4 percent of all books sold, up from just 0.6 percent in 2008. However, some book genres perform even better in ebook form: 14 percent of adult fiction is now sold in ebook form.

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