The Washington Post

Winners and losers from DOJ suit against Apple, publishers

The Justice Department’s lawsuit against Apple and five top publishers today has the potential to change the entire e-book market. But who are winners and who are the losers? That depends on who you ask.

Apple: Loser. But not as big as you might have expected. Despite being painted in the DOJ filing as a huge part of a major conspiracy to fix prices on e-books, Apple’s stock dipped only slightly on the news that it was being probed by regulators — often a kiss of death for stock prices. Why is that?

Sterne Agee analyst Shaw Wu suspects that because e-books aren’t a large part of Apple’s business, investors aren’t that interested in this particular suit. What they may be nervous about, however, is that this probe indicates that Justice will be taking a closer look at Apple in the future.

Amazon: Winner. Even the company has practically said so:

“This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books,” the company said in a statement Wednesday.

If Apple’s model goes the way of the dinosaur, Amazon will be able to expand as the undisputed king of the e-book market and will also be able t o pursue its discount selling strategy. It doesn’t matter that much, after all, if Amazon has to sell e-books at a loss — as long as they gain market share.

Publishers: Losers. The agency model that Apple proposed — where publishers set the prices and retailers got a cut — was a godsend for the companies that were chafing under Amazon’s way of doing business. But their decision to act together and move to completely change from letting retailers set prices to taking that power for themselves ended up backfiring on them in a big way.

Also, because some publishers settled, the two that are continuing litigation are in a tougher spot. Darren Hayes, a computer science professor at Pace University, said “ the settlement may be very beneficial for the DOJ in going after the bigger companies, since obviously there’s already a settlement [with some publishers].”

Finally, the DOJ’s actions are far-reaching, said Kellie Lerner of the law firm Labaton Sucharow, who said that the “settlements announced today are noteworthy in that they reflect the Department of Justice’s willingness to invalidate a wide variety of eBook relationships and to monitor the entire industry in a manner that would promote price competition.”

Barnes and Noble: Snatched defeat from the jaws of victory. The Justice complaint mentions the mega-retailer frequently as a victim of the pricing agreement, and it would seem that any agreement that keeps publishers from setting prices would be a win for retailers. But Barnes and Noble stock was down — almost 6 percent at one point — on Wednesday, since the loss of the agency model opens the door for Amazon to sell books cheaply to gain market share.

Consumers: Unclear. On one hand, the price of e-books is likely to go down if Justice is successful. That’s good for consumers, who — for obvious reasons — like lower prices.

On the other hand, if Amazon rises to be the dominant force in the e-book market, that will certainly mean that there are fewer competitors. That can be bad for the industry as a whole.

Michael Norris, a senior analyst at the market-research firm Simba Information, said that the book industry will have a lot of trouble on its hands if the “only players selling books don’t have to.”

“In a book store, the future of the store depends on books,” he said. “In a non-bookstore, the future of the books depends on the store.”

Related stories:

Justice Dept. sues Apple, publishers over e-book prices

Justice Department threatens to sue Apple, publishers over e-book prices

Apple, publishers named in EU e-book antitrust probe

Hayley Tsukayama covers consumer technology for The Washington Post.



Success! Check your inbox for details. You might also like:

Please enter a valid email address

See all newsletters

Show Comments
Most Read



Success! Check your inbox for details.

See all newsletters

Your Three. Videos curated for you.
Play Videos
Making family dinnertime happen
Deaf banjo player teaches thousands
New limbs for Pakistani soldiers
Play Videos
A veteran finds healing on a dog sled
Learn to make this twice-baked cookie
How to prevent 'e-barrassment'
Play Videos
Syrian refugee: 'I’m committed to the power of music'
The art of tortilla-making
Michael Bolton's cinematic serenade to Detroit
Play Videos
Circus nuns: These sisters are no act
5 ways to raise girls to be leaders
Cool off with sno-balls, a New Orleans treat

To keep reading, please enter your email address.

You’ll also receive from The Washington Post:
  • A free 6-week digital subscription
  • Our daily newsletter in your inbox

Please enter a valid email address

I have read and agree to the Terms of Service and Privacy Policy.

Please indicate agreement.

Thank you.

Check your inbox. We’ve sent an email explaining how to set up an account and activate your free digital subscription.