Who cares if book publishers are colluding with Apple to raise e-book prices?

Leave Penguin Alone  By Matthew Yglesias|Posted Wednesday, April 11, 2012 - Slate

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This week, the United States Justice Department filed a lawsuit against Apple and several book publishers, alleging they had colluded to raise e-book prices after launching the iPad. A few publishers settled out of court, but Apple and the publishing houses Penguin and Macmillan will reportedly fight to protect the right of publishers, rather than vendors like Amazon, to set e-book prices. Last month, Matthew Yglesias argued that even if Apple did fix prices with publishers, it’s unlikely to have much of an effect on competition in the book business. The full piece is reprinted below.

A bit buried in last week’s iPad 3 excitement was the news that Apple, along with five major American book publishers, was given notice by the Justice Department that it’s about to be sued for colluding to raise prices. A tech giant can afford to shrug off something as petty as an anti-trust lawsuit over books, but for HarperCollins, Penguin, MacMillan, Hachette, and Simon & Schuster (full disclosure: my publisher) the implications are potentially quite dire. Scott Turow, president of the Authors Guild, went further and argued that “everyone who cherishes a rich literary culture” should be alarmed by the DOJ’s actions. He’s wrong. If there’s a case against the government’s actions it’s that the forces of disruption buffeting traditional publishing are much too large to be blocked by any cartel. The good news is that literary culture should survive either way.

The basic question here is, how much should a digital book cost? A traditional book is, among other things, a rather heavy manufactured product. Like many manufactured goods, it’s much more efficient to make a whole bunch of books at once rather than crafting them one at a time on demand. Consequently, to bring a book to market a traditional publisher needs to make a substantial up-front investment in inventory, and that inventory then needs to be lugged around the country. If consumer demand turns out to be low (the sad fate of my first book), then unsold copies end up languishing in warehouses. Factor in the retailers’ rent and labor costs plus their desire for a profitable markup, and it’s clear that each copy needs to be fairly expensive or the whole business will collapse.
Read the rest at Slate.

Image above - The world of publishing is changing fast. How can publishers adapt? Photograph by John MacDougall/AFP/Getty Images.