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Sunday, July 21, 2013

Early observations on an experimental family e-library and e-bookclub using Kindles

Instapundit Glenn Reynolds writes today that his Kindle Paperwhite has "replaced [his] iPad as [his] favorite device for reading Kindle books":

The backlighting is the key. It’s light, battery lasts a long time (longer than the iPad), it charges quickly (faster than the iPad), and it’s very clear and easy to read in all kinds of light, from bright sunshine to a dark room. And of course, it’s much, much cheaper [than an iPad].

To all of which, I say: Ditto. I bought one of the first Paperwhites last fall, and I like mine so much that I made this product the basis for a family e-book club.

PaperwhiteSpecifically, I've given four Kindle Paperwhites, plus two older Kindle models I'd purchased in 2010 and 2011, to my four college-age kids and two of their best friends. All these devices are associated with my Amazon Prime account, and as the group's sponsor I encourage the members to make responsible e-book purchases through Amazon using their devices. Those purchases are of course billed to my Amazon account — like many parents, I've never regretted buying books for my kids! — and each purchase generates an emailed invoice to me, which helps me keep track of new additions to our collective e-library and its ongoing costs.

Here's how the Kindle system multiplies the already formidable convenience and economics of e-books for a family e-library, though:

Most of Amazon's Kindle books include licensing rights for multiple copies of e-books to be downloaded simultaneously to six different devices. (The precise number is set by the publisher of each book, I gather — I wonder if that was another one of Apple's ideas or something the publishers insisted upon on their own?) Not everyone in our group can simultaneously be reading the same book, then. But then again, six copies at any one time is quite a few: What home library has as many as six copies of on-dead-trees books available for simultaneous checkout? When you remove a copy from one Kindle or other e-reader device, it automatically frees up the license rights for another free and nearly-instant download on any of my account's devices, so even the six-copy limitation turns out to have a trivial and rare effect on us.

And although we have a total of seven Kindle devices among us, there are actually more e-readers than that associated with my account. With the Kindles' autosync via WiFi capability, I also use my smartphone and a free Amazon Kindle app as an additional e-reader — which lets me pick up with the same book I'm reading on my Paperwhite on my smartphone, in exactly the same spot, whenever I happen to find myself standing in line or eating out alone.

(I opted to forgo the more expensive Paperwhite models with the built-in 3G wireless capability to augment the built-in WiFi. However, my smartphone can sync using either 4G or WiFi, and my Paperwhite back home will sync to where I leave off reading on my phone too. We don't think our group members need, or would much use, wireless on our Paperwhites, but YMMV and for some of you the additional cost may be justified.)

As I'd hoped, many of the books that one of us buys are ending up being read by more than one of us — and sometimes (e.g., the Game of Thrones series) by all or almost all of us. And as I'd also hoped, we're trading book recommendations and discussing books more frequently. Our "family book club" doesn't have meetings or circulate memos; instead these shared books become evolving, continual topics of occasional conversation whenever any two or more of us happen to feel like chatting (in person, on Facebook, or wherever) about something we've just read.

For those who worry that this might be "cheating" or that they'll get sued under the DMCA: I haven't studied the fine print in Amazon's sales and licensing agreements, but I emailed Amazon's customer support folks about my family book club plan before buying the additional Paperwhites last December. They replied that Amazon is perfectly happy to sell on those terms, which include the understanding that I'm maintaining financial responsibility for the purchases made by the responsible young adults to whom I've entrusted what are, legally, still "my Kindles" and "my [licensing rights to Amazon-purchased] e-books."

Finally: my older daughter just returned from a month's volunteer work in Nepal, where her internet access was limited and infrequent. She reports that she got more use and more satisfaction out of her Kindle than from any other gadget she had with her.

So far, then, I've been very happy with this ongoing plan and the return I'm getting on my investment. These Kindles don't suck at all. If you decide to buy one, I recommend doing it through either Instapundit's site or your other favorite blogger who's an Amazon Associates participant. (I'm not any longer; Beldarblog is nonprofit for the additional freedom that buys me with respect to "fair use" copyright issues.)

Posted by Beldar at 05:31 PM in Books, Family, Technology/products, Web/Tech, Weblogs | Permalink | Comments (3) | TrackBack

Wednesday, July 10, 2013

Reactions upon reading today's court ruling against Apple in the ebook price-fixing conspiracy case

I ought to have simply done this as a blog post to begin with, but:

When I started reading U.S. District Judge Denise Cote's written opinion in United States v. Apple Inc. this evening, I originally only intended to post a link to the opinion, with a very short comment, on Facebook, mostly for a few of my legally-inclined friends. But then I started leaving comments on my FB post, and it turned into a sort of "live-blogging" as I worked through the opinion.

Eventually I decided I ought to re-post it all here for a broader audience, with apologies for the disjointed format:

Ipad_ibook_reader

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Apple lost in court in New York today on the ebook antitrust case brought jointly by the Justice Department and several states (including Texas). U.S. District Judge Denise Cote's opinion is 160 pages (double-spaced), so it will take me a while to read it. But from the summary of findings (beginning on page 9 of the .pdf file), it looks like a major defeat for Apple. This paragraph (from page 11) seems key in my initial skim:

Apple and the Publisher Defendants shared one overarching interest — that there be no price competition at the retail level. Apple did not want to compete with Amazon (or any other e-book retailer) on price; and the Publisher Defendants wanted to end Amazon’s $9.99 pricing and increase significantly the prevailing price point for e-books. With a full appreciation of each other’s interests, Apple and the Publisher Defendants agreed to work together to eliminate retail price competition in the e-book market and raise the price of e-books above $9.99."

Here's a link if you're interested:

https://www.justice.gov/atr/cases/f299200/299275.pdf

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I hadn't realized that 38 different states had joined in this litigation, but I'm pleased to see that the Texas and Connecticut attorneys general were "liason counsel for the plaintiff states" (i.e., carried the ball and probably did most of the work for all the other state plaintiffs).

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The financial impact on Apple is uncertain, but treble damages loom: "The Plaintiffs have shown that Apple conspired to raise the retail price of e-books and that they are entitled to injunctive relief. A trial on damages will follow." And at that trial the question won't be whether Apple has to pay — today's ruling effectively decides that against Apple — but just how much, and to whom.

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No jury was involved in this, by the way. By consent of all parties, there was a bench trial in which Judge Cote served as factfinder in lieu of a jury.

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CEO Les Moonves of CBS (which owns Simon & Schuster, one of the defendants who settled before trial) is pegged as a major conspirator. I remember him from Rathergate.

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In footnote 38 on page 71, Judge Cote labels Apple Sr VP Eddy Cue's trial testimony as not being "credible" — which is the polite way to say she thinks Cue was lying under oath on at least some points. The factual recital is just brutal. Apple comes across as the proverbial 800 pound gorilla who bullied not only the consuming public and Amazon (which was fighting to keep ebook prices low), but Apple's fellow conspirators, five of the six big publishing companies. Appellate courts are particularly reluctant to overturn credibility determinations by the factfinder, whether that's been a judge or a jury. Apple's going to have a hard time digging its way out of the hole it's dug for itself.

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From pp. 85-86 of the .pdf file:

On January 27, Jobs launched the iPad. As part of a beautifully orchestrated presentation, he also introduced the iPad’s e-reader capability and the iBookstore. He proudly displayed the names and logos of each Publisher Defendant whose books would populate the iBookstore. To show the ease with which an iTunes customer could buy a book, standing in front of a giant screen displaying his own iPad’s screen, Jobs browsed through his iBooks “bookshelf,” clicked on the “store” button in the upper corner of his e-book shelf display, watched the shelf seamlessly flip to the iBookstore, and purchased one of Hachette’s NYT Bestsellers, Edward M. Kennedy’s memoir, True Compass, for $14.99. With one tap, the e-book was downloaded, and its cover appeared on Jobs’s bookshelf, ready to be opened and read.

When asked by a reporter later that day why people would pay $14.99 in the iBookstore to purchase an e-book that was selling at Amazon for $9.99, Jobs told a reporter, “Well, that won’t be the case.” When the reporter sought to clarify, “You mean you won’t be 14.99 or they won’t be 9.99?” Jobs paused, and with a knowing nod responded, “The price will be the same,” and explained that “Publishers are actually withholding their books from Amazon because they are not happy.” With that statement, Jobs acknowledged his understanding that the Publisher Defendants would now wrest control of pricing from Amazon and raise e-book prices, and that Apple would not have to face any competition from Amazon on price.

The import of Jobs’s statement was obvious. On January 29, the General Counsel of [Simon & Schuster] wrote to [the CEO of S&S, Carolyn] Reidy that she “cannot believe that Jobs made the statement” and considered it “[i]ncredibly stupid.”

Yeah, I agree that it was incredibly stupid. And arrogant. Jobs was bragging in public about the price-fixing conspiracy that his company had organized and executed to fix ebook prices. The reason the publishers were threatening to withhold their books from Amazon altogether was because that was the key term in the conspiracy that Apple was proposing. Unless Amazon agreed to knuckle under to the "agency pricing" model that Apple wanted (because it would eliminate retail price competition in ebooks, to Apple's benefit, and let Apple compete with Amazon on the basis of hardware, never price) — Amazon wouldn't be able to sell ebooks at any price.

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This whole fact pattern would never make a good exam question in an antitrust course in law school. It's way too easy. There's an arsenal of smoking guns. It's like no one at Apple ever heard of the Sherman Act.

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Maybe you aren't an ebook buyer, and because you only buy paper books, you think this conspiracy didn't affect you. Nope (p. 95): "The Publisher Defendants raised more than the prices of just New Release e-books. The prices of some of their New Release hardcover books were also raised in order to move the e-book version into a correspondingly higher price tier."

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From p. 103, Jobs is quoted as making the following brag — actually, a stunning admission to which he was blinded by his egotism — to his biographer:

Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that — they thought it would trash their ability to sell hardcover books at $28. So before Apple even got on the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.” But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.”

Yes, the customer pays a little more, but that's what you want anyway — if you're running a conspiracy to eliminate market competition via illegal price-fixing agreements, that is indeed exactly what you want.

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Key finding (from page 120, citation omitted):

In sum, the Plaintiffs have shown not just by a preponderance of the evidence, but through compelling direct and circumstantial evidence that Apple participated in and facilitated a horizontal price-fixing conspiracy. As a result, they have proven a per se violation of the Sherman Act. If it were necessary to analyze this evidence under the rule of reason, however, the Plaintiffs would also prevail.

That's a "belt and suspenders" finding: Judge Cote thinks (and I agree) that this is a "per se" case because of the type of conspiracies and restraints involved and where the players all were in the various supply chains. But she's also saying that even if she's wrong about that point, and even if Apple gets the benefit of the more flexible "rule of reason" standard instead of the "per se" standard, Apple would still lose.

That makes it much harder for Apple to win on appeal.

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This is just a methodical thrashing. In every appeal, the first thing the appellate judges (and their law clerks) read is the district judge's opinion. After reading this one, I think almost any appellate judge is going to be favorably impressed with its comprehensiveness and clarity. It's the kind of opinion after which you exhale and say, "Whew! That's going to be hard to fault in any significant way."

Apple is going to have a very tough row to hoe on appeal. I think they're well and truly hosed in this case, although it's not likely to threaten their existence as a company or even delay the next iPhone-whatever.

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Footnote 63 (at p. 135) is quite droll, as antitrust humor goes:

Apple uses the term 'competitive' to convey that it wanted its prices to be the lowest in the marketplace, not to convey that it wanted prices arrived at through the process of competition.

That means: "We want all the business, but at a higher, fixed price."

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In footnote 66 on p. 143, Judge Cote labels individual Apple and Publisher Defendant executives as "noteworthy for their lack of credibility" — which I would paraphrase as meaning they're "liars lying under oath and they can't be believed."

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Okay, finished. The last 30+ pages are devoted to anticipating every argument Apple can be expected to make on appeal and methodically rebutting or undercutting each of them. Judge Cote is a Clinton appointee who's senior status, so she has a lot of experience; and she's clearly learned how to write opinions in a way that make them particularly hard to reverse. The smartest and best federal district judges are usually the best advocates for why their own written decisions ought be upheld — they try to anticipate how the appeal is likely to proceed, and to make their decisions as nearly "bulletproof on appeal" as possible (which is to say, clear, well-reasoned, and correct). And this may be a candidate for the Second Circuit to "affirm on the basis of the district court's opinion" — basically the appellate court, instead of writing its own opinion, just saying, "Yeah, what she said." It's a very high compliment to a district judge when that happens in an important case.

Posted by Beldar at 08:47 PM in Books, Budget/economics, Law (2013), Mainstream Media, SCOTUS & federal courts, Technology/products, Texas | Permalink | Comments (49) | TrackBack