Apple’s Growing eBook Problem

Melissa Crossman
22 May, 2012
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With the eBooks industry rapidly evolving, one of its foundational businesses is embroiled in a lawsuit that could further change the future of digital book reading. The United States Justice Department has filed an antitrust lawsuit against Apple Inc. and five of the country’s largest publishers on grounds that the companies conspired to increase the price of eBooks.

According to the lawsuit, several of the CEOs in the allegedly involved companies were meeting regularly at upscale restaurants to discuss the steep discounting of eBooks committed by online retailers like Inc. The publishers, along with Apple, decided to raise the prices of their eBooks from the US$9.99 price point to as much as US$14.99 while also requiring online retailers to honor that price.

In response to the lawsuit, Apple and the publishers noted that if the government strikes down their ability to set price points for their digital products, which include digital textbooks, novels and other publications, it will yield too much power to online retailers like Amazon. As it stands, the lawsuit has already thrown into flux the entire publishing industry, which has yet to stabilise amid the drastic shift from print publications to eBooks.

Ensuring profit in the eBook era

The named publishers in the lawsuit contend that their concern is not maximizing their profits through price gouging, but ensuring profitability through prices that allow the businesses to remain viable.

But three of the five publishers named in the lawsuit have opted to settle with the Justice Department and will allow online retailers to discount their eBooks. A separate lawsuit settlement could result in tens of millions of dollars in restitution being paid to consumers by the publishers.

But the bigger implications for publishers lie beyond the immediate consequences of the lawsuits. With the Justice Department essentially restricting their profit margins and giving greater latitude in setting prices, publishers will have to tighten their belts. The result will likely be reducing overhead through some layoffs, fewer printed copies of books, and less money put toward marketing efforts.

The lawsuit also marginalises Apple’s future in the eBook market while opening the door for Microsoft to steal a share of the market from its biggest competitor.

Changing Players in the eBook Industry

With its deal with publishers scuttled by the government, Apple will have a hard time competing with Amazon while scoring profits for itself and publishers. Apple’s iBookstore may not enjoy the clout it seemed destined for, but Apple will still remain relevant in the eBook industry as its iPad tablets continue to be one of the preferred eBook reading platforms.

Unlike Amazon’s Kindle and Barnes & Noble’s Nook, Apple will sell iPads regardless of what happens to the eBook industry. And, since it can continue to sell eBooks at the same price points offered by Amazon, the only real losers are the publishers themselves.

But with Apple’s vested interest greatly reduced, Microsoft now has an opportunity to cash in, and it has staked its investment in Barnes & Noble and its Nook e-reader. Microsoft has put $300 million into the Nook, giving the platform a huge boost against the deeper-pocketed Kindle and iPad. Microsoft will also be able to incorporate the Nook eBook store into its new Windows 8 operating system, presenting the eBooks to millions of new consumers — a proposition that both Microsoft and Barnes & Noble expect to yield lofty profits in the years to come.



Melissa Crossman is a professional writer living in the Indianapolis area with her two dogs. She writes extensively about education and technology. Melissa writes on behalf of Colorado Technical University.

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