Hmm.  $5.7 billion sounds like a lot, actually. Enough to drop the company’s value to about 3% of Apple’s.

Sony is the company that brought you the Walkman and the PlayStation. And the Sony eReader.  What is going to become of our poor dear Sony eReader?

Though it never remotely competed with Amazon’s Kindle and has been surpassed in popularity by the B&N Nook, Apple’s iPad and even Kobo’s eReader, it has held steadfast for the six years since its introduction and remains a viable electronic reading device.

The company has a new chief who is giving 10,000 employees pink slips and implementing other cost-cutting measures which have emboldened him to predict ¥8.5 trillion in sales in the next two years, according to Reuters.  Now that sounds pretty impressive.  Surely there will be a few yen of profit to sustain Sony’s eReader.

We hope so.  We’re fond of it, and we need someone to compete with the big boys.

Richard Curtis

This blog post was originally published by Digital Book World as Sony on the Ropes. Will eReader Survive?

In showrooming, customers enter a retail store and, when they have located the product they’re shopping for, walk out, go home and purchase the item on the Internet at a lower price.  Some shoppers simply scan the barcode of the production in the store and order it online on the spot. This in effect makes the brick and mortar store a mere showroom for customers to examine products they have no intention of buying there. Last Christmas Amazon actually promoted the practice, outraging alarming and outraging many stores and store chains. We know of at least one publisher that fought back by discontinuing distribution of its books on Amazon.

The latest objector is Target, the giant retail store chain. Executives, reacting to what they perceived as showrooming of Amazon’s Kindle e-book reader, informed Amazon they would no longer carry it.

Though Amazon sells most of its Kindles on its own website, many customers like to examine them physically, just as they may now do with Kindle’s rival, Barnes & Noble’s Nook, which may be “road-tested” by customers in B&N’s brick and mortar bookstore.  Recognizing consumers’ natural impulse to touch, Amazon began distributing Kindles in big retail chains.

It’s hard to predict what impact Target’s action will have on Kindle sales.  With nearly 1,770 stores in 49 states and gross revenues of $65 billion, boycott of a product by Target can have some seriously detrimental impact on any supplier. More ominously, if Staples, Best Buy and Wal-Mart, which also sell Kindles, see themselves as showrooming victims and follow Target’s lead, it could put a crimp in Amazon’s sales – and its image.

For the complete story read Target, Unhappy With Being an Amazon Showroom, Will Stop Selling Kindles by Stephanie Clifford and Julie Bosman in the New York Times.

Richard Curtis

This blog post was originally published on Digital Book World as Target Targets Amazon as Showrooming Enabler

In showrooming, customers enter a bookstore, browse, then select (or scan the barcode of) the book they want to purchase, walk out of the store and order it from an online bookstore. Which makes the independent store a mere display space for customers to order books from its competitors. Last Christmas Amazon actually promoted the practice, outraging indy stores. One got so mad it stopped doing business with the behemoth. (See Can You Survive without Amazon?)

Barnes & Noble, the highest-profile target of showrooming, is now in a position to fight fire with fire. Microsoft’s investment in B&N’s Nook business gives the bookstore chain the potential for a showroom that loops back to its own inventory via the Nook.

“B&N CEO William Lynch says that the company plans to embed NFC (near field communication) chips into Nooks,” reports Owen. “Users could take their Nook into a Barnes & Noble store and wave it near a print book to get info on it or buy it.”

It’s an interesting concept, but there’s a big flaw in the reasoning.  Showrooming enables customers to scan a high-priced book in a brick and mortar store, then buy it at a discount on an Internet store.  In other words, if you scan a $20.00 book in a Barnes & Noble bookstore, then go to B&N’s online store, you’ll be able to buy it for, say, $16.00.  Then why, you will ask, can’t I pay $16.00 inside the bookstore?

For a showroom to work properly you need two components: a physical space with physical books to browse; and a virtual space to actually buy them. Think of a library where physical books are on display for browsing only. Customers choose the titles they want, swipe a credit card, and wait a short time while the book is printed on an Espresso-type printer.

We’ve been buttonholing readers with this mad scheme for years, and you can see some of our postings about kiosks here.

Richard Curtis

This blog post was originally published on Digital Book World as Showdown for Showrooms

What does the settlement mean for customers? Here’s a summary:

1. Let the Discounting Begin. “Readers are likely to see lower prices on e-books published by HarperCollins, Hachette and Simon & Schuster — at least at Amazon, which expressed its glee over the settlement. But you won’t see those lower e-book prices until at least June…I wouldn’t be surprised to see some shockingly cheap bestsellers from those publishers — think massive summer promotions where big titles by authors like James Patterson, Jodi Picoult and Nicholas Sparks are $1.99.”

2. Amazon rivals will discount too. “Other e-book retailers, like Barnes & Noble and Kobo, are likely to want to enter into new contracts quickly as well so that they are on a more even playing field with Amazon.”

Owen points out that Amazon competitors “may not be able to afford to discount a wide range of e-books as deeply as Amazon can.” But that has not prevented Barnes & Noble, Kobo, and even the struggling Sony from maintaining a healthy market share of the e-book retail business.

3. Bundling of e-books, and e-book/p-book combo packages. “Justice notes that agency pricing ‘prevented e-book retailers from experimenting with innovative pricing strategies…such as offering e-books under an ‘all-you-can-read’ subscription model where consumers would pay a flat monthly fee,’ bundles or buy-one-get-one-free promotions. The settlement opens the door for those types of promotions on Hachette, HarperCollins and Simon & Schuster titles.”

4. Less predatory loss-leader pricing. “When it comes time for Simon & Schuster, HarperCollins and Hachette to negotiate their new contracts, the settlement allows them to ‘negotiate a commitment from an e-book retailer that a retailer’s aggregate expenditure on discounts and promotions of the Settling Defendant’s e-books will not exceed the retailer’s aggregate commission under an agency agreement in which the publisher sets the e-book price and the retailer is compensated through a commission.’”

5. Will Apple now sell e-books at a discount? “If it simply removes Simon & Schuster, Hachette and HarperCollins titles from its shelves without negotiating new contracts — yes, this would mean Walter Isaacson’s Steve Jobs biography, published by Simon & Schuster, would no longer be available through iTunes — it will be losing a large part of its catalog. If Apple agrees to negotiate new contracts that don’t require agency pricing, it could also make agreements with the many publishers who have not been able to sell their books in the iBookstore before. That would mean a much wider book selection for iBookstore shoppers.’

Read details in What the DOJ e-book lawsuit means for readers now

Richard Curtis

This blog post was originally published on Digital Book World as E-Book Prices Must Come Down

It looks like it was no joke.  The Justice Department’s brief against five publishers and Apple, accusing them of colluding to fix prices, alludes to “private meetings”. “Prior to the formation of and throughout Publisher Defendants’ agreement,” states the DoJ filing, “their CEOs and other high-level executives frequently communicated with each other in both formal and informal settings. From these communications emerged a pattern of Publisher Defendants improperly exchanging confidential, competitively sensitive information.” (If you’re a trial junkie you can read the complete brief here).

Though three publishers have settled with the government and two are fighting back, Apple’s role may hinge on whether Steve Jobs or another representative of Apple actually attended that dinner or any other group meeting of publishers to discuss pricing.  The legal principle seems to be that setting the same terms for everybody is fine if you deal with them unilaterally, but dealing with them as a group is conspiracy.

Says Bloomberg News: “Apple Inc.’s best defense against accusations it conspired to fix e-book prices may turn on its absence from meetings in Manhattan restaurants where publishing executives allegedly worked out the scheme.”

Details in Apple e-books defense may hinge on absence from dinner meetings

Richard Curtis

This blog post was originally published on Digital Book World as Was Steve at the Table? If Not, DoJ Case against Apple Could Crumble

And yet book publishers themselves are not wholly innocent of the practices that attracted the attention of the Justice Department. The scale of their malfeasances may be infinitely smaller (a Wall Street Journal writer described publishers as “plankton”) and the issues more prosaic, but there are occasions when “C” might stand for something more ominous than Coincidence.

Did you ever wonder for example where it is written that the “standard” hardcover royalty for a trade book is 10% of the retail price on the first 5,000 copies, 12 1/2% on the next 5,000, and 15% on all copies sold thereafter?  Why the “standard” e-book royalty offered by all major American publisher is 25% of net receipts?  Why the “standard” division of territories in the English-speaking publishing market is US and Canada for American publishers and the United Kingdom for British publishers?  Is it not wonderful how the same terms just seem to pop up on everybody’s boilerplate, and if one publisher changes its terms, the changes magically spring up overnight on everybody else’s, like mushrooms?

Of course, we recognize that boilerplate is made to be negotiated, and though almost all major publishers seem to be marching in lockstep, we know that many of their standard terms are flexible if you ask and if you have the clout to alter them. Nevertheless, a conspiracy theorist with a taste for the flesh of publishers (stringy fare at best) might be tempted to go after some if he thought a cabal was afoot.

In fact this very thing happened in 1974 when our old friend the United States Department of Justice brought suit again against twenty-one American publishers for their tacit consent to what appeared to be an unwritten treaty among British publishers to carve up the English-speaking book distribution market.

As the University of Chicago’s Library Quarterly explains it, “Claiming a group of about seventy countries as their ‘traditional market,’ signatories agreed to neither buy nor sell publication and distribution rights to American publishers unless the rights for that market remained intact in British hands. In effect, the worldwide English language book market became divided into two spheres, the British and the American. While this division worked reasonably well for many years, by the 1970s the system was crumbling under the pressure of worldwide changes in book production, distribution, and consumption.”

As a result of the DoJ’s antitrust suit, the so-called Traditional Market Agreement was ended.

Or was it?  Though the Consent Decree will be found in the legal archive of the 21 American publishers that signed it, if you negotiate a book deal with an American publisher today and ask for the traditional territory, I guarantee it will be identical to the one that prevailed until the DoJ threw a spanner in the works in 1974.

But maybe that’s just a Coincidence.

Richard Curtis

This blog post was originally published on Digital Book World as C for Coincidence?  Or Conspiracy?

If Amazon’s policy holds true the books will be carried exclusively on the Kindle e-reader.  As Publishers Lunch‘s Michael Cader points out, however, the news “brings attention again for Barnes & Noble, and whether they will carry the print editions. Since Amazon says the ebooks will be Kindle exclusives at the outset, and BN has already declined to carry titles from Amazon Publishing in their physical stores, the policy is unlikely to change.”

B&N has stated its position about Amazon Publishing’s books in no uncertain terms.

Richard Curtis

This blog post was originally published on Digital Book World as Amazon’s Fleming Acquisition May Not Bond with B&N

But first the epigrams:

“Publishing is not evolving,” he says. “Publishing is going away.” As for the act of publishing itself, the complex and costly enterprise that brings books to readers,  “That’s not a job anymore. That’s a button.” That act “doesn’t take any skills. It takes a WordPress install.” Given that digital technology enables us to print out the PDF of a book in our home or office, the only raison d’etre for the publishing industry today is to save its own jobs. “Publishers are in the business not of overcoming scarcity but of manufacturing demand.”

Shirky is at his most interesting in addressing social reading, which stems directly from the universal need for readers to talk to somebody after reading a book. Until now, if you noted a thought-provoking passage in a book, your underline or highlight or marginal exclamation held no interest to anyone else – because it was unlikely it would ever be seen by anyone else. But now digital technology empowers us to communicate our response to scores, hundreds, thousands of people by simply enabling the social default on your e-book reader so that others reading the same e-book can see what captured your attention.”By switching to default public,” he says,”the aggregate value of that information is so much larger than anybody believed it would be in the 1990s.”

It’s on this point, however, that the thrust of Shirky’s bon mot engine starts to sputter. For, in order for a publicly shared comment to mean anything it’s vital to know the source of the comment. Take “Miles to go before I sleep”, an iconic line that is undoubtedly on every poetry lover’s bucket list.  If it was highlighted by undergraduate Joe Shmoe does that tell me anything about Frost’s poem? About Joe? Does it make me think differently about Robert Frost?

But if I were to learn that line was highlighted by, say, Dick Cheney or Angelina Jolie or Mike Tyson, I would certainly pause to wonder about the association.  “Cowards die many times before their death” is a Shakespearean cliche, yet when we learn that while imprisoned in South Africa Nelson Mandela wrote his name beside it we utter a thoughtful “Hmmm.” In March 2011 a symposium on “association copies” of books owned or annotated by famous authors provoked many such utterances when we learned what Abraham Lincoln said about Alexander Pope, or Walt Whitman about Henry David Thoreau. (See Book Lovers Fear Dim Future for Notes in Margins.) It’s only because it’s Lincoln or Whitman that the marginalia makes us sit up and take notice

But all in all Shirky is right: by making your own responses to a passage visible to all readers, you are “extending the radius and the half-life of its value.” Another gem of an epigram to take away from a thought-provoking interview.

How We Will Read: Clay Shirky

Richard Curtis

This blog post was originally published on Digital Book World as NYU’s Clay Shirky: “Publishing is Going Away”

Something Fishy Served Up at Picholine?

Is this a joke?

A Melville House posting by Kelly Burdick has allegedly unearthed email exchanges among executives of some Big Six Publishers plus Steve Jobs of Apple setting up a dinner to discuss “the $9.99 problem”. The email thread comes from “From deep inside the files of the Justice Department”, says Melville, and if verified will explain why the Department of Justice pressed its collusion case – and why at least three of the accused settled.

Clearly, the interchanges didn’t pass DoJ’s smell test. Does it pass yours? Here is the email that allegedly started it (reproduced, deletions and all, from the Melville House posting):

From: Makinson, John (jMakinson@us.penguingroup.com)
To: jSargent@macmillan.com, xxxx@hachettebookgroup.com, xxxx@harpercollins.com, xxxx@simonandschuster.com, dShanks@us.penguingroup.com, xxx@xxxxxxxx.com
cc: steve@apple.com
Date: Monday, September 22, 2008, 10:46am
Subject: the $9.99 problem

Let’s get together again and keep discussing the “the $9.99 problem.” Where and when works?

For the complete thread read The Collusion Files: how it really happened by Kelly Burdick. Is this true or have we been punked?

Richard Curtis

This blog post was originally published on Digital Book World as On the Dinner Menu: Fishy Discussions about “$9.99 Problem”

Richard Curtis

Here is a summary of the compliance requisites for the parties that settled (from Publishers Weekly):

Compliance:
This is the most onerous part of the settlement, and helps explain why Macmillan and and Penguin have decided to fight. Under the Settlement, each publisher will have to engage in a number of compliance measures including:

The appointment of an “Anti-Trust Compliance Officer,” reporting directly to the company’s general counsel.

In addition, the publishers must provide at least “four hours of training” for relevant staff delivered by an attorney and conduct “an annual compliance audit.”

The Settling Publishers must also furnish to the DoJ “on a quarterly basis” electronic copies of any non-privileged communications containing allegations of noncompliance and must “maintain and furnish to the Department of Justice on a quarterly basis, a log of all oral and written communications, excluding privileged or public communications,” between the publishers “officers, directors, or employees” involved in the development of the Settling Defendant’s plans or strategies relating to e-books.

Under the Settlement, the DoJ can also inspect the publishers’ offices, and “require Settling Defendants to provide to the United States hard copy or electronic copies of all books, ledgers, accounts, records, data, and documents in the possession, custody, or control of Settling Defendants, relating to any matters contained in this Final Judgment.”

DoJ officials can also interview “either informally or on the record” the Settling Defendants’ “officers, employees, or agents.” But, if you’re tabbed, you do get to bring your an attorney.

And, upon request, the Settling publishers must submit “written reports or respond to written interrogatories, under oath if requested,” relating to any of the matters contained in the settlement.

This blog post was originally published on Digital Book World as Compliance Requirements for Publishers That Settled: Everything But Ankle Monitors

Harper’s press release below.
Richard Curtis
*******
Contact:
Erin Crum
Vice President, Corporate Communications
HarperCollins Publishers
(212) 207-7223
Erin.Crum@harpercollins.com
FOR IMMEDIATE RELEASE
HarperCollins Publishers Settles e-Book Pricing Dispute with the Department of Justice
New York, NY (April 11, 2012) — HarperCollins Publishers today announced that it has reached an agreement with the United States Department of Justice to end its investigation into HarperCollins’ contracts for the distribution of e-books. HarperCollins did not violate any anti-trust laws and will comply with its obligations under the agreement. HarperCollins’ business terms and policies have been, and continue to be, designed to give readers the greatest choice of formats, features, value, platforms and partners – for both print and digital.
After HarperCollins adopted the agency model in 2010, the e-book market exploded, giving consumers more choices of devices, formats and prices that would never have existed but for the agency model. Some examples include:
 The iBookstore, which offers iTunes customers a storefront to buy HarperCollins’ books
 The launch of Barnes & Noble’s NOOK Book Store, which grew faster than any other platform for HarperCollins’ titles over the last two years
 Prices for dedicated e-readers declined from almost $400 to under $100, and competition exploded in the device market, making the e-book reading experience less expensive
 Dynamic pricing of HarperCollins’ e-books, including some titles priced under $2, was introduced to maximize the sales and reach of our authors and their books
 The introduction of color tablets with native e-book stores led by Apple and Barnes & Noble, which are now the fastest selling devices for e-book consumers
 The introduction and rapid development of enhanced e-books with audio, video and interactivity, which are a fast-growing digital format for HarperCollins
HarperCollins faced legal challenges on five separate fronts, including the DOJ investigation which was resolved today. The e-book market has grown over the last two years from a small e-ink market, dominated by one platform, to a $1B market with several competing platforms. HarperCollins made a business decision to settle the DOJ investigation in order to end a potentially protracted legal battle.
About HarperCollins Publishers
HarperCollins, one of the largest English-language publishers in the world, is a subsidiary of News Corporation (NYSE: NWS, NWS.A; ASX: NWS, NWSLV). Headquartered in New York, HarperCollins has publishing groups around the world including the HarperCollins General Books Group, HarperCollins Children’s Books Group, Zondervan, HarperCollins UK, HarperCollins Canada, HarperCollins Australia/New Zealand and HarperCollins India. HarperCollins is a broad-based publisher with strengths in literary and commercial fiction, business books, children’s books, cookbooks, mystery, romance, reference, religious and spiritual books. With nearly 200 years of history HarperCollins has published some of the world’s foremost authors and has won numerous awards including the Nobel Prize, the Pulitzer Prize and National Book Award, the Newbery Medal and the Caldecott. Consistently at the forefront of innovation and technological advancement, HarperCollins is the first publisher to digitize its content and create a global digital warehouse to protect the rights of its authors, meet consumer demand and generate additional business opportunities. You can visit HarperCollins Publishers on the Internet at http://www.harpercollins.com.
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