US Government Questions High eBook Prices

April 6, 2012

Unlocking Word Meanings
Read the following words/expressions found in today’s article.

1. publisher (n.) [puhb-li-sher] – a person or a group that makes books, magazines and other print materials
Example Kodansha Limited is one of the largest publishers in Japan.

2. conspire (v.)  [kuhn-spahyuhr] – to secretly plan with others to do something bad
Example:  The thieves conspired to steal the king’s treasure.

3. wholesale (adj.) [hohl-seyl] – involving the selling of large amounts of products to businesses rather than individual customers.
Example:  Factories in China sell wholesale toys to stores all over the world.

4.  retailer (n.) [ree-teyl ; ri-teyl– a person or a group that sells products directly to individual customers
Example The new perfume can be bought from most perfume retailers across the country.

5. free market (n.) [free][mahr-kit] – an economic system in which prices are determined by business competition and not the government  
Example:   In a free market, prices change based on the number of competing businesses.

Read the text below.

The US Department of Justice (DoJ) plans to take legal action against Apple and five major publishers who are said to have conspired to increase eBook prices.

In the publishing industry, prices of books are normally decided through a wholesale business model. Using this model, publishers sell books to retailers at a cheaper, wholesale price. Retailers can then sell the books at any price to customers.

But when Apple joined the eBook market through its iPad and iBookstore, publishers started following Apple’s “agency business model” for eBooks.

The agency model lets publishers decide what price customers pay for eBooks. Through this scheme, publishers get 70% of money from sales, while retailers like Apple get 30%. Publishers really like this model, as it lets them earn more money than with wholesale.

But according to reports, Apple and the five publishers made an agreement, wherein the publishers must stop selling eBooks at wholesale or at cheaper prices to other retailers.

Amazon, an online store popular for selling eBooks at low prices, has since been forced to use the agency model and sell eBooks at high prices. Many consumers are unhappy with the price changes, with some eBooks having become more expensive than their paper versions.

The agency business model is not illegal, but the DoJ says the publishers and Apple may have all decided to raise prices together. This goes against US laws that promote and support free market competition. The companies and the DoJ are currently in talks to resolve the issue.

Viewpoint Discussion
Enjoy a discussion with your tutor. 

Discussion A

·         Do you think eBooks can someday replace traditional books?
·         What are the advantages and disadvantages of using eBooks instead of printed books?

Discussion B

·         How does competition help businesses?
·         In your country, would you say there is a healthy competition of businesses? Why or why not?


April 6, 2012