Dept. of Justice E-Book Price-Fixing Settlement with Publishers Leaves Collusion Against Writers Unpunished

Dept. of Justice E-Book Price-Fixing Settlement with Publishers Leaves Collusion Against Writers Unpunished

September 10, 2012

The anti-trust settlement approved September 7 in the Department of Justice case against major publishers, which accused them of colluding with Apple to fix prices for e-books through "agency pricing," resolves some of the pricing and revenue-sharing disputes between e-book publishers and distributors. However, the National Writers Union contends that the settlement fails to address publishers' more significant and harmful collusion against writers which deprives them of their fair share of e-book revenues.

The three publishers that have agreed to the settlement (Hachette, HarperCollins and Simon & Schuster; Penguin and Macmillan are continuing to oppose the DOJ lawsuit) have committed to allow any e-book distributor – mainly Amazon, which has garnered 90 percent of the e-book market – to set end-user licensing fees for individual e-books below cost, so long as the distributor's total income exceeds its costs, aggregated over all the e-books it distributes during any 12-month period.

"What matters to writers is not how much each end-user pays for a license to an e-book, but what, if any, share of that revenue is passed on to e-book  authors," says NWU President Larry Goldbetter. "This settlement and the DOJ lawsuit do nothing about the ongoing collusion among publishers to deprive writers of our fair share of e-book revenues."

Writers have already been squeezed by many publishers into accepting contract amendments or clauses in new contracts that limit their e-book royalties to 25 percent of publishers' net receipts. At the same time, publishers are systematically violating existing contracts by paying writers of backlist works the same royalty percentage for e-book licenses as for sales of physical books – as little as 5 to 10 percent – rather than the 50 percent revenue share of subsidiary rights licensing revenues usually stipulated in writers’ contracts.

The NWU urges the Department of Justice to take action against publishers for contract and copyright violations and for conspiring against writers in ways that restrain trade.

“It's no coincidence that large and small presses across the country have all decided to cap e-book royalties at the same 25 percentage. And it's no coincidence that they're all misinterpreting their backlist contracts in exactly the same way -- to reduce writers' e-book royalties at a time when e-books sales account for an ever-increasing share of publishers’ revenue,” states Goldbetter.

"It's one thing for publishers and distributors to keep most of the price of a physical book to cover the costs of printing and distribution. But it's unconscionable for publishers or distributors to claim anything close to the same percentage of e-book revenues when they have no printing, binding, warehousing, or shipping costs."

Readers also suffer from publishers' attempts to "have their cake and eat it too" with e-book licensing terms, according to the NWU. Publishers have told librarians e-books are licensed not sold, and the license terms don't allow library lending. Amazon says explicitly,  "Kindle Content is licensed, not sold, to you by the Content Provider." At the same time, the NWU has found that many publishers are reporting e-book transactions as "sales" rather than "licenses" on authors’ royalty statements to avoid paying the higher 50 percent licensing royalty in most contracts.

“The mission of the National Writers Union is to promote the economic well-being of freelance writers as we did when we won the 2001 Supreme Court ruling Tasini v. The New York Times, which established that writers must be paid for electronic uses, in addition to print uses, of their work," added Goldbetter. “That’s why we have to expose publishers' illegal actions and demand that writers receive equitable royalties for both books and e-books.”

 

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