Boost for Amazon as Penguin agrees to end Apple e-books deal

Penguin has agreed to terminate its e-book agreement with Apple and to allow Amazon to set its own prices for electronic books in a settlement of a European Union antitrust case.

The European Commission accepted the deal with Penguin on Thursday after more than a year of investigations into allegations of cartel price fixing in the e-book market.

Four other e­book publishers -- Simon & Schuster, HarperCollins, Hachette Livre and Macmillan -- together with Apple were originally included in the investigation, but they agreed to terms with the Commission last December.

The Commission concluded that an infringement had probably taken place when the five publishers and Apple jointly switched from a wholesale model to an agency sale model. Under a wholesale model, the retailer is free to set the price, but with an agency model, the retail price of e­books is determined by the publishers.

It appeared that the alleged cartel wanted to limit retail­price competition, particularly with regard to Amazon, which was the uncontested leader in the retail market for e­books at the time of the change to the agency model, said the Commission.

Like Apple and the other publishers, Penguin has agreed to terminate the current agency agreements and will not hamper e-book retailers, such as Amazon, from setting their own prices for e­books or from offering discounts and promotions for the next two years. Penguin first offered these commitments in April, but they will now become legally binding.

E.U. Competition Commissioner Joaquín Almunia said the deal would restore "a competitive environment in the market for e-books."

Apple should lead the move to DRM-free ebooks

I like books. I also own a lot of them. When moving recently, I realized just how many: Even after disposing of a third of my collection, I still have a couple of thousand. And boy, do they take up a lot of space—it’s one of the things that makes ebooks so attractive.
On the other hand, those dead-tree books are free from one of ebooks’ most onerous encumbrances: digital rights management. That lack of DRM means I can read them wherever and whenever I want—well, as long as I have light. For ebooks with DRM, though, the publishers and retailers get to dictate how they can be used, read, and shared.
I’ve embraced ebooks, in part to save on buying more shelving. But because DRM prevents ebooks from having the same flexibility as print books, I’m loath to buy them for anything more than books I only plan on reading once. But that doesn’t have to be the way it is, and Apple could lead the way to change—it’s done so in the past.
It seems at times unbelievable that we’re all now used to having music without DRM, but still have books that depend on what platform we use.
Granted, not all publishers or authors sell their books with DRM. As an author of several Take Control ebooks, I’m very happy that these books are not locked down. Users can purchase these books in PDF, ePub, and MOBI format, and read them on just about any ebook reader, tablet or computer. While some well-known authors and publishers sell unrestricted ebooks, such DRM-free titles remain just a drop in the ocean of ebooks.
The publishing industry’s road to digital has been rocky. Amazon has long sold ebooks at a loss; in the long run, that’s changed the perceived value of books and it’s coincided with a drop in the sales of hardcover fiction. Apple’s not without blame either: the recent antitrust decision against Apple found the company guilty of colluding with five major publishers to set ebook prices, part of what seems to be a concerted effort to bite into Amazon’s market-dominant status.
Though we can’t change the past, it’s not hard for me to imagine a way that this might have gone differently. In February 2007, Steve Jobs penned Thoughts on Music, an open letter to the music industry about DRM and digital music. If I take an excerpt from that text and change a few of the key words, it might instead read like this:
“Imagine a world where every online store sells DRM-free books in open licensable formats. In such a world, any ebook reader can display books purchased from any store, and any store can sell ebooks which are readable on all ebook readers. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat. If the big publishers would license Apple their books without the requirement that they be protected with a DRM, we would switch to selling only DRM-free books on our iTunes store.”
(As an interesting experiment, read the entire open letter, mentally substituting “books” for “music.”)
Of course, one of Jobs's points in that letter was that it was incumbent upon the record labels to make it possible for Apple to sell DRM-free music. Apple can’t unilaterally decide to sell ebooks DRM-free without the publishers agreeing. But Apple can—and should—apply pressure and make the case to publishers, because in the long run it will benefit Cupertino’s own customers.
I can listen to my digital music files on just about any device; I want to do the same thing with my books. I can lend my music to my friend; why can’t I lend her a book I bought on my Kindle or iPad? (Amazon, to its credit, offers a lending option, but it’s so crippled and feature-limited as to barely register above “useless.”) Above all, why can’t I read any ebook on any device of my choice?
I use two types of devices to read ebooks: I have a Kindle Paperwhite and two iPads (one full-sized and one mini). These devices aren’t interchangeable.
But I can’t read all of my ebooks on the Kindle Paperwhite because of DRM; I can only read books purchased from Amazon or those rare DRM-free books sold in the MOBI format that Kindles support. Likewise, I can’t easily take my iBookstore-purchased ebooks outside to read, because they aren’t compatible with my Kindle. (The iPad, though, does have a leg up, in that it supports apps for reading ebooks purchased from Amazon, Barnes & Noble, Google, and other stores.)

Because of these limitations, I consider two variables when I want to buy an ebook: If a book is a lot cheaper in the iBookstore, I’ll get it there. But because Kindle books offer the option to be read on multiple devices—including outdoor-friendly e-ink Kindles, I generally pick Amazon’s offering, unless I’m certain I’ll be reading exclusively on the iPad.

Music has lost its DRM fetters; it’s time for ebooks to do the same. But in order for that to happen, consumers need to be the ones to demand that this DRM, and the platform lock-in it engenders, be eliminated.

Apple could take the lead, as the company did with DRM-free music, and help change another market that needs it. This could be good for Apple itself, too, given the perception of the company in the wake of the ebook price-fixing ruling.

But above all, what should matter to Apple is that ending ebook DRM would be good for consumers. It would lead to true competition among ebook retailers, since any retailer could sell books that could be read on different devices, just as any bookstore can sell dead-tree books that anyone can read. We would be able to choose the device we want to use to read a new book. We wouldn’t have to worry about being able to access our digital libraries in the future.

And the next time I move, I wouldn’t have to worry as much about how many books I’m schlepping from one home to another. 

Fallout From Apple’s Loss on E-Books

A federal judge on Wednesday said that some of Mr. Jobs’s words helped persuade her that Apple had violated antitrust law in conspiring with publishers to raise prices of e-books. Although it appears unlikely that the ruling will have an immediate effect on the book-buying public, it could affect how Apple cuts deals with media companies that provide the music, books and movies that help make its iPhones and iPads compelling.

Charles E. Elder, an antitrust lawyer at Irell & Manella, said that the ruling could lead Apple and other technology companies negotiating with media companies to “proceed with extreme caution” to avoid any appearance of collusion.

On Wednesday, Apple continued to assert it had done nothing wrong, and said it would appeal the decision. A trial to determine damages will follow.

“Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations,” Tom Neumayr, an Apple spokesman, said. “When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon’s monopolistic grip on the publishing industry.”

In her ruling, Denise L. Cote of United States District Court in Manhattan said Apple had taken advantage of the publishers’ “fear of and frustration” over Amazon.com’s control of e-book pricing, and the tight window of opportunity in the weeks leading up to the iPad’s introduction in 2010, to get the publishers to agree to its terms. “Apple seized the moment and brilliantly played its hand,” she wrote.

Five major publishers had also been named in the suit, but they all settled before the trial. Apple continued to fight the charges despite what increasingly looked like uphill odds. Publicly, the company said it refused to settle as a matter of principle because it had done nothing wrong.

The Justice Department said the judge’s decision was a victory for people who buy e-books.

“Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so,” the Justice Department said in a statement. “This decision by the court is a critical step in undoing the harm caused by Apple’s illegal actions.”

The main reason e-book prices will probably not move sharply in the near term is that the publishers who settled are operating under the settlement’s terms, which prohibit publishers from restricting a retailer’s ability to discount books.

“The changes to the industry have already happened,” said Mike Shatzkin, the founder and chief executive of the Idea Logical Company, a publishing consultant.

Since those settlements have gone into effect, prices on many newly released and best-selling e-books have gone down. One New York Times best-seller, “And the Mountains Echoed,” by Khaled Hosseini, is sold on Amazon.com for $10.99. But other e-books seem to have held closer to presettlement prices: “The Ocean at the End of the Lane,” by Neil Gaiman, is listed for $12.80 on Amazon.com.

The antitrust suit underscored the turmoil in the book industry as readers shift from ink and paper to electronic devices like tablets and smartphones, where they can buy books with the push of a button. The publishers want to embrace new media, but they are also trying to protect their profits and retain control of their businesses.

A recent survey of the publishing industry revealed that in the United States, e-books account for 20 percent of publishers’ revenue, more than $3 billion, up from 15 percent the year before. Amazon.com dominates the e-book market.

The outcome will probably inflict some damage to Apple’s reputation. The judge’s decision casts Apple as a cold and manipulative bully whose actions have harmed consumers, contrary to the way the company markets itself, as a maker of products that improve people’s lives.

Amazon Patents 'DVD Extras' for E-Books

As far as media delivery goes, e-books are pretty flat. You get the book and maybe some notes or background info from the publisher, and that’s pretty much it.

That’s not good enough for Amazon. The company was just awarded a patent, which it originally applied for on November 24, 2010, describing a way to enhance your electronic reading experience with more personalized content — not just from publishers, but from your friends as well.

The online retailer was granted a patent today outlining a “Customized Electronic Book with Supplemental Content” (Patent #8478662). It describes a way to enhance Kindle e-books by tacking on supplemental material provided by publishers or reputable sources. The e-books would be personalized by adding additional content within the specific interests of individual readers, or reader types. So, you could be reading A Game of Thrones and an additional story line or illustration (for example, a map) could be accessed from within the book, sort of like a DVD extra.

The additional material could come from the publisher, or from “trusted contributors.” For example, a book that has been made into a TV series or movie could have additional story lines from those mediums, and this would allow the rights-holder to add them to the book. And while fan fiction writers would have a field day adding additional story to their favorite books, readers will only see suggestions about that additional content if they follow the creator of the extra material — either as an Amazon author or contributor, via a friend relationship on social media, or if the reader has expressed interest in similar content created by similar contributors.

In other words, you’re not going to be served random Brony fan fiction in your copy of Black Beauty. Unless you’re down with that.


Fan-fic aside, this could be a great way for educators to add additional content to texts. A teacher could annotate an assigned bit of textbook reading or a piece of literature with notes that their entire class can access. Or, an expert in a field of study could add notes to a textbook that puts the material in a new perspective.
The patent outlines a way to manage this extra content via a multi-level e-book framework to be built by Amazon. The core content would live on one portion of the framework while secondary content would be added to other portions. Only the extra content relevant to your interests would be delivered to your copy of the e-book.

According to the patent, “content providers are looking for ways to enhance an individual’s experience when reading a media item.” If this is true, be on the lookout for enhanced e-books in the future from Amazon’s Kindle store.