Apple, eBooks, Antitrust, Consolidation & Copyright

by on April 11, 2012 · 17 comments

So, the Department of Justice has formally filed suit against Apple and several major book publishers claiming collusion over eBook pricing. Let’s say Apple and the publishers are guilty as charged and in violation of our nation’s antitrust laws. Here’s my opinion on that: So what? What Apple and the publishers are doing here is trying to find a way to sustain creative works in an era when copyright law is slowly dying. As I noted here in a post yesterday, I take no joy in reporting the fact that property rights for intellectual creations no longer function effectively. I wish they did still work, but they are failing rather miserably in an age of highly decentralized digital dissemination. Moreover, I am not prepared to see government go to absurd enforcement extremes in an attempt to make intellectual property rights work. But, that being said, something needs to sustain and cross-subsidize cultural creations in an age of mass piracy. I have increasingly come to believe that consolidation of content and conduit (or devices) is a big part of the answer. Alternatively, some sort of informal collusion among cultural creators and information distributors may be the answer.

Apple and the publishers have figured that out and come up with a plan that keeps intellectual works flowing while making sure that the creators behind them get paid. At a time when copyright critics always say “just find a better business model” Apple and the publishers did just that. But now Department of Justice officials say that business model should be forbidden. That’s crazy.  If we’re going to let copyright die, we should at least grant more pricing and deal-making flexibility to the creative community to structure business arrangements that might give them a lifeline.

But won’t such deals give publishers and other creative artists and industries more pricing power that will help them keep prices up artificially? Yes, of course! That is the whole point! God forbid we actually have to pay something to cultural creators. Ain’t that a scandal. But here’s a news flash: That’s what copyright law was all about, too. It was about helping creators put some fences around their “property” to help them maintain some degree of pricing power for goods with zero marginal cost. The scheme worked brilliantly for many years. It spawned a vibrant marketplace of ideas and helped America become the leading exporter of expressive works on the planet. But now the effectiveness of traditional copyright is fading rapidly. Industry consolidation, cross-promotions, pricing deals, and so on, will increasingly be the “better business model” some will turn to.  So, are we going to allow it? Or will critics just keep mouthing “go find a better business model” and have the government step in every time they don’t like the one industry chooses?  I say let experimentation continue.

  • AdamGurri

    Simpler argument against this suit: Apple only has a fraction of the market compared to Amazon or even Barnes & Noble, and book/ebook prices have been going down, not up.

  • Digi

    Where to start, first you assume that authors get paid fairly by the publishers, and that the inflated prices consumers have to pay will help some poor artist to pay her bills. This is not the case. Then you argue that we should do away with anti-trust law because digital technologies have reduced the price of copying and dirtibution (really this means that the price of e-books should be much lower than physical books). And then you somehow try to assert that it was analog copyright which made the US an economic superpower. In reality the US was pirate central for a long time, and the US economy has not significantly declined since digital technologies made copyring and distribution cheaper. The publishers and Apple have not found a new business model, its very much the old business model. Publishers exploit the digital rights in e-books without extra payment to the authors, even though rights for ebook publication in many instances did not excist when authors assigned/licensed their copyright. Authors would be better off if they could negotiate their e-book rights seperatly. So instead of abolishing anti-trust law, how about updating copyright for the digital age and rebalancing it in favour of authors rather than corporate publishers.

  • Sean M. Flaim

    That would be a winning argument if this suit had been based on the Rule of Reason, which requires one to prove market power before one can win a claim.  But it is not.  The allegations are direct price fixing, which is per se illegal under the Sherman Act, whether agreed to by Apple and book publishers, or two gas stations across the street from one another, regardless of how many other gas stations are nearby.

    Indeed, most allegations of naked price fixing like this are brought as criminal charges.  The fact that these were not probably means that the DOJ lacks evidence related to scienter on the part of executives.  More than likely because they have a legal opinion stating the business model is legitimate.

  • Sean M. Flaim

    While normally I agree with Adam on a lot, I’m going to have to disagree on this one.  First, of all, the evidence that “copyright is dying” is anything but clear.  Sure, old business models are dying, but it is a far step from here to saying that copyright is either “dying” or that authors are seeing any of the benefit of industry’s continued attempts to avoid their Schumpeterian fate. 

    Claims by industry that “copyright is under siege” have not held up to serious scrutiny.  Julian Sanchez has written extensively at Cato regarding the “funny numbers” offered by Hollywood in support of additional copyright legislation.  Core copyright industries are outpacing overall economic growth by as much as 2-3%.

    Considering Adam’s great efforts on “techno panics” it’s a shame he gives into “copyright panics” embodied by his claims regarding the “death” of copyright.  Yes, these industries need “new business models,” but those new business models should be based on good old fashioned free-market competition, not collusion and naked price fixing.

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  • Anonymous

    Interesting perspective Adam, I have come to the exact opposite conclusion of “that consolidation of content and conduit (or devices) is a big part of the answer.”  Had you been paying attention to IBM in the 80’s or Microsoft in the 90’s or  Apple in the 2000’s you’d understand that when you squeeze sand tightly, more falls through your fingers.  The big players are the ones who support as many platforms as possible, not become exclusive to one.  

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  • AdamGurri

    Ah, that makes sense.

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