An e-book unhappy ending

The Justice Department called it price-fixing; Michael Shermer said it was the free market at work.

The author and Skeptic magazine publisher wrote in his Times Op-Ed article Monday that Apple’s work with publishing firms to set an e-book pricing model for the iPad represented the best chance to roll back monopolistic behavior by Amazon, which was charging artificially low rates.

“Why would Amazon willingly lose so much money on sales?” Shermer wrote. “To monopolize the e-book/e-reader market by driving out competitors who couldn’t afford to slash prices. We authors were concerned about how this might affect our ability to make a living and how our publishers would stay in business.”

In response, reader Hoyt Hilsman of Pasadena wrote:

“Michael Shermer often gets it right, but this time he’s wrong. Since when is price-fixing at artificially high prices good for consumers? And how is it even good for authors?

“In an era when authors can upload their e-books for free and earn three times the money for a $9.99 e-book as the publisher royalties on a $30 hardcover, why would an author hook his cart to their dying business model? Especially when major publishers do little, if anything, to promote anyone but celebrity authors.

“No matter who wins in the competition for the e-book market, authors — and ultimately readers — will benefit.”

Michael Shermer responds:

When Amazon first began its predatory pricing of e-books in order to capture a monopoly on e-book readers, I thought the Justice Department would swoop in to put a stop to that.

And if it had, I would have been against that as well.

As a libertarian, I tend to prefer that we err on the side of giving markets a chance to correct such economic imbalances through competition. When former Apple Chief Executive Steve Jobs came out with the iPad and the “agency” model, in which the publisher sets the price and Apple takes a set percentage — as opposed to Amazon charging $9.99 per e-book, no matter what the publisher wants to charge — I rejoiced, thinking: See, we really don’t need to worry about monopolies as long as competition is allowed to flourish.

But now we’ll never know if competition would have driven down e-book prices because the market was not allowed to be properly free.