STOCK MARKET WATCH -- Friday, 9 March 2012

[Demeter]

3. U.S. Warns Apple, Publishers

http://online.wsj.com/article/SB10001424052970203961204577267831767489216.html?mod=djemalertNEWS

The Justice Department has warned Apple Inc. and five of the biggest U.S. publishers that it plans to sue them for allegedly colluding to raise the price of electronic books, according to people familiar with the matter. Several of the parties have held talks to settle the antitrust case and head off a potentially damaging court battle, these people said. If successful, such a settlement could have wide-ranging repercussions for the industry, potentially leading to cheaper e-books for consumers. However, not every publisher is in settlement discussions.

The five publishers facing a potential suit are CBS Corp.'s Simon & Schuster Inc.; Lagardere SCA's Hachette Book Group; Pearson PLC's Penguin Group (USA); Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH; and HarperCollins Publishers Inc., a unit of News Corp. , which also owns The Wall Street Journal. Spokespeople for the five publishers and the Justice Department declined to comment. Apple, which introduced a new version of its iPad tablet Wednesday, declined to comment.

The case centers on Apple's move to change the way that publishers charged for e-books as it prepared to introduce its first iPad in early 2010. Traditionally, publishers sold books to retailers for roughly half of the recommended cover price. Under that "wholesale model," booksellers were then free to offer those books to customers for less than the cover price if they wished. Most physical books are sold using this model. To build its early lead in e-books, Amazon Inc. sold many new best sellers at $9.99 to encourage consumers to buy its Kindle electronic readers. But publishers deeply disliked the strategy, fearing consumers would grow accustomed to inexpensive e-books and limit publishers' ability to sell pricier titles.

(YVES SMITH COMMENTS: This case strikes me as backwards. Amazon is selling below cost. That’s generally called predatory pricing, since the only way it makes sense is if you kill enough of your competitors that you attain monopoly power. But instead it is going after the parties that tried to find a response. And before you tell me you want your cheaper e-books, authors need to be paid, and the pay for writing books sucked even before this race to the bottom.)

Publishers also worried that retailers such as Barnes & Noble Inc. would be unable to compete with Amazon's steep discounting, leaving just one big buyer able to dictate prices in the industry. In essence, they feared suffering the same fate as record companies at Apple's hands, when the computer maker's iTunes service became the dominant player by selling songs for 99 cents.

I THOUGHT TANSY GOLD MIGHT FIND THIS USEFUL...THERE'S A LOT MORE WHERE THAT CAME FROM...