As Apple prepares to go to trial to fight the US Department of Justice's claims that the Cupertino company conspired to fix ebook prices with publishers, former publisher of the Wall Street Journal L. Gordon Crovitz has an interesting oped in today's paper which he says that Apple's 30% profit sharing "agency model" with ebook publishers does not amount to the price fixing conspiracy that the DOJ accuses the company of. It is Crovitz's contention (as I assume Apple will also argue the same in court) that the government's assertion that the agency model is "inherently wrong" is false. The agency model means publishers, rather than resellers, set the prices of ebooks.
Matter of fact, Crovitz says that Apple's agency model is not only good for Apple, but good for consumers and publishers as well, insisting that instead of conspiring to fix prices, they conspired to fix a broken ebook system in which Amazon controlled almost everything:
Publishers conspired to repair an anticompetitive business model. They thought it made no sense for Amazon's Kindle to have a 90% market share and a single loss-leader price of $9.95 for consumers. They were right. Over the past couple of years, thanks to the agency model, the Kindle's market share has fallen to 60% thanks to competition from iPads and Barnes & Noble Nooks, and there is more variation in consumer prices, typically ranging from $5.95 to $14.95.
Of noted interested is when Crovitz relates how he met with Apple's Eddy Cue to discuss the terms of revenue sharing for published works. Expecting a better deal than the 30% take Apple generates from apps Crovitz was a bit surprised when Cue told him, "'I don't think you understand. We can't treat newspapers or magazines any differently than we treat FarmVille." As Crovitz states: "It was a sobering reminder that traditional media brands have no preferred place in the new digital world."