Apple Ebook Pricing: A Case Study in Collusion

It is well worth reading the arstechnica piece on the Apple ebook price collusion verdict in full. This is the perfect case study of what happens in markets where some participants have too much power. It is fascinating to see how at first Amazon was using its then 90% market share in the ebook market to drive prices down (all the while paying wholesale rates to publishers). Then Apple got together with the handful or publishers that control most of the books to come up with a different (and higher) pricing model and used its app store clout to force Random House in line. The deal then in turn forced Amazon to also accept the agency model.

One particularly exciting chart shows exactly how much in sync the price movement occurred and also how Random House was initially not part of the arrangement:

All of this is an amazing display of high stakes poker among a very small group of players with the losers being readers (and authors). Thankfully this market structure will not persist and I am excited about what’s in store for the future of books from companies such as Plympton, Wattpad and others (disclaimer: Susan and I have a personal investment in Plympton which acquired DailyLit and Wattpad is a USV portfolio company).