The email notice is part of a process to resolve a price-fixing case brought by state governments. It calls for retailers like Amazon and Barnes & Noble to inform customers about the settlement during the next two months so that any objectors can speak up before a “fairness hearing” slated for February.

The refunds in question amount to $1.32 for New York Times bestsellers purchased from HarperCollins, Simon&Schuster or Hachette between April 2010 and May of 2012. For older titles, customers will receive 25 or 32 cents. Should the deal go forward, customers will eventually receive a credit to their ebook account or, in some cases, a check in the mail.

While customers can “object,” the reality is that only a tiny percentage ever do in these type of settlements. Instead, the February hearing is likely to provide an occasion for more posturing between those who like the deal (Amazon and the government) and those who don’t (Apple and two holdout publishers, Penguin and Macmillan.)

Amazon is already using the settlement notice process to trumpet its view of events.

“In addition to the account credit, the settlements impose limitations on the publishers’ ability to set e-book prices. We think these settlements are a big win for customers and look forward to lowering prices on more Kindle books in the future,” said the Amazon email, according to the Wall Street Journal.

The three settling publishers are in favor of the deal because it allows them to escape the purgatory of expensive class action proceedings and, presumably, because it will result in some of the $69 million they are to pay coming back to them as a result of customers using the credits for new purchases.

Any customer payments will not occur anytime soon, however, because the final settlement must still be approved after the February hearing. While US District Judge Denise Cote has indicated she is strongly in favor, the deal could be delayed if Apple and the two publishers hold out and the settlement ends up before an appeals court. The upshot is that the earliest consumers will see any refund is next spring; alternately, if the process drags out, it could take until 2014.

The tens of millions at stake raise questions about the political and business motives behind the deal, and could provide more fodder for critics who question government decisions in the high-profile e-book case.

This investigation offers a closer look at the case’s many moving parts and, in the last section, an estimate of when (or if) any of the money will make it to e-book readers themselves.

“Parent of the nation” to the rescue

The conspiracy case is bitter and complicated but, at its heart, turns on whether Apple and five publishers broke antitrust laws by introducing a commission-style pricing system for e-books in early 2010. The new pricing system was a response to Amazon selling e-books below cost.

The publishers’ Apple partnership soon touched off a wave of class action lawsuits over alleged price-fixing as well as investigations by the Justice Department and state governments. The controversy crested this spring when the Justice Department formally sued Apple and five publishers for violating the Sherman Act.

Three of the publishers promptly settled and agreed to change their pricing policies but Apple and two other publishers, Penguin and MacMillan, are fighting the case in court. The court proceedings (including the settlement talks) are a sprawling affair scheduled to take years. The case has become especially complicated, however, due to the overlapping roles of the Justice Department, the state governments and the class action lawyers.

The Justice Department, you see, is only asking Apple and the publishers to change their pricing — not to pay out any money. It is the state governments and the lawyers who are after cash. They have competing lawsuits to shake civil damages out of Apple and the publishers.

While class action lawsuits are commonplace, the one filed by the state governments is not. The states’ case is based on a power called parens patriae (“parent of the nation”) that lets them sue on behalf of their citizens.

Connecticut and Texas initiated the civil lawsuit in April and more that thirty other states and Puerto Rico since decided to tag along. The dozen or so states sitting it out are mostly in the west.  Their attorneys general have not joined in because state laws require the governor or legislature’s permission to do so or, possibly, because they disagree with the lawsuit.

For the states that are taking part, the initial lawsuit paid immediate dividends. In April, the Connecticut attorney general held up a trophy in the form of a $52 million settlement with publishers Hachette and Harper Collins which will be used to pay “consumer restitution.” A third publisher, Simon & Schuster, settled soon after. The details of the Simon & Schuster deal have yet to be released but, if it’s consistent with the previous settlements, that publisher will also pay tens of millions.

If Connecticut’s prize was an immediate win for the states, it was a direct loss for the class action lawyers. These lawyers, who filed dozens of cases on behalf of Americans across the country, will not be able to collect if the defendants have already paid once to the state governments. (Right now, the class action lawyers still have a hope of collecting from Apple and the two holdout publishers – unless they too decide to settle with the states).

Steve Berman, a prominent lawyer who is leading the class action suit, argues that the states’ deal will ultimately shortchange consumers. He said via email:

“If you were a defendant would you want to negotiate with the law firm that was a lead counsel in the largest settlement in history (tobacco) … or would you prefer to negotiate with some relatively young and inexperienced assistant attorneys general? That’s an easy one, and we are disappointed the attorneys general took the bait.”

Consumer justice or just politics?

Parens patriae suits have been around forever but are still quite rare. The most prominent ones involve mass torts related to pollution or industry.

In the case of something like overpriced e-books, Berman says the job is better left to class action lawyers like him who have experience grinding the most money out of big companies like Apple and the publishers. So why did the states decide to file a parens patriae case in the first place?

“The reason the state is stepping in is it’s great politically for the attorney general,” says Daniel Gifford, an anti-trust professor at the University of Minnesota, who adds that he has “never seen anything like [the e-book suit] before.”

Connecticut’s ambitious former attorney general, Richard Blumenthal, was the impetus for the state investigations. He announced an investigation in mid-2010 when e-book pricing was a big news issue even though the Justice Department appears to have been investigating the situation at the same time. Blumenthal is now a US Senator and the mop-up work has fallen to his successor and has also been taken-up by the attorneys general of Texas and Ohio.

At the same time, the political winds are changing. This week, US Senator Charles Schumer penned an op-ed in The Wall Street Journal saying the New York publishers and Apple did nothing wrong, and urging the Justice Department to back off before it smothers the digital publishing industry. (At the state level, however, New York Attorney General, Eric Schneiderman, signed onto the multi-million dollar suit against the publishers. Schneiderman’s office did not reply to questions about how the money would be disbursed.)

The states’ lawsuit may be politically driven and redundant (don’t forget there is the class action case too) but that doesn’t necessarily mean it’s a bad idea. The states may demand lower legal fees than class action lawyers who typically collect 25 percent of the jackpot. This could mean more money overall for consumers.

The state governments could also bring a quicker end to the whole process. Bert Foer, the president of the American Antitrust Institute, says the three publishers’ motivations for settling with the states was to “make this go away as soon as possible.”

Foer, however, is skeptical about the state governments’ overall role in the process. He says the class action system was already poised to address any harm to consumers. Foer adds that the states will almost certainly take a cut of the settlement to cover legal expenses, including outside lawyers, in the same way as a class action law firm would do.

So when will e-book owners see the money?

Even though two of the publishers have signed a settlement to pay $52 million and a third (Simon & Schuster) is poised to top up that amount, it’s unlikely the money will flow to consumers anytime soon.

Beth Farmer is a law professor at Penn State and a former attorney with the New York attorney general’s office where she worked on antitrust cases. She points out that the proposed $52 million settlement still has to be approved by the court, that consumers have to be notified and so on. None of this is likely to happen while the cases against Apple and the holdout publishers drag on.

“[Consumers] need complete information before they can make an informed decision, I think, and mid-way through the case is premature.  Also, the notice and claims process is going to be complicated and it wouldn’t be efficient for the states to do that multiple times,” said Farmer by email.

For now, the states are scheduled to file for a preliminary approval of the settlement with the three publishers in late August. That filing (if it is not delayed) will lead to a period in which groups, including the class action lawyers, can file objections. Based on Farmer’s comments and the fluid nature of the larger case, it would be a surprise if Judge Denise Cote gives a go-ahead.

Meanwhile, the Justice Department’s case, which partially serves as the linchpin of the other lawsuits, is taking on a chaotic quality. The department has already missed a deadline to publish more than 800 comments filed in response to its proposed settlement. At the same time, political support for the settlement may be weakening as figures like Senator Schumer weigh in and as Justice Department staffers wait to find out if they will have a new boss come November.

Finally, the retail market for e-books is rapidly evolving. While a grand conspiracy between Apple and publishers may once have seemed a great threat to e-book buyers, some have suggested the Justice Department should have targeted Amazon and its giant market share instead. Others argue that the market for digital publishing is changing so rapidly that the government should simply step back from attempting to regulate it all.

As for that $52 million, e-book readers should not hold their collective breath about getting a $5 check anytime soon. The settlement money is tangled in a complicated political and legal process that makes it unlikely payment will arrive in the next two years – if at all.

See more: Everything you need to know about the e-book lawsuit in one post

(Image by StanOd via Shutterstock)

Ray Bradbury was right about so many things and spellbinding about so many others that it almost hurts to write this: Ray Bradbury was wrong when it came to reading. But then I also get to tell you this: he changed his mind. HarperCollins is in the midst of preparing its Ray Bradbury backlist for digital publication, paidContent has learned.

Bradbury’s longtime editor Jennifer Brehl talked to me about the plans and the author, who died Tuesday because, she said, “I don’t want people to think he was this dinosaur because he had some opinions” that he started to change late in life.

The details for the “huge undertaking” are still being worked out but Brehl said plans were well under way with Bradbury’s approval. (I’ve yet to reach Bradbury’s agent Michael Congdon.) “He knew we were going to do this,” she said. “He agreed to it. … I told Ray, ‘You have to step boldly into the future.’”

She added, “We respected his wishes for so long. [He finally said] ‘Yeah, ok, I see what you’re saying.’” The HarperCollins e-books all will be available to libraries no matter the publishers’ overall strategy, according to Brehl. “That was one of the big, big concerns.”

For too long, Bradbury equated reading with print

Bradbury fretted for decades over what would happen when reading books gave way to screens or was lost to ignorance. But for far too long, for Bradbury reading equaled print. The man who could see Mars missed the point closer to home: encourage reading in every form.

He also worried about the power of screens, as my colleague Mathew Ingram wrote. But he had no qualms about making books or stories into movies (whether he liked the results is a different matter). He embraced television, even adapting 65 short stories for HBO and USA’s The Ray Bradbury Theater and appearing in the opening. He allowed audio books.

But he famously kept most of his work from being published digitally (legally). Only a few short stories here and there and eventually, grudgingly, Fahrenheit 451, agreeing only to an e-book edition with the new print edition as long as it was made available to libraries. Publisher Simon & Schuster didn’t allow digital library lending so it was a victory.

That was the exception. Instead Bradbury either stymied his would-be digital readers — or sent them underground, a bit like Ray Bradbury characters willing to break the law to read. He was so protective of the form he missed numerous opportunities to make it easier to read his books. Yes, they’re mostly still available in print but they aren’t as accessible to everyone. It’s almost like a dare: if you really care about me and my work, if you really care about books, you won’t want digital versions.

But it wasn’t that. For Bradbury, says Brehl, it was about community. This is a man who went to the library to read and to write (Fahrenheit 451 was written in the basement typing room at the UCLA library), who saw the Internet as an isolating force that keeps people apart and as a massive distraction.

Brehl told me: “For a very long time, Ray was averse to having his books in digital because he felt the Internet did more about keeping people away from one other. If you have to have physical books you have to go to the library, you see each other. He thought the Internet put walls up between people.”

In Bradbury Speaks, a collection of essays published in 2005, he writes of the Internet with such derision that I can imagine this computer shooting sparks if he knew I was researching him online instead of in a library. Even worse, because it took him so long to come around, I’m reading the Internet essay in chunks via the Read Inside feature on Amazon instead of the digital edition I would have purchased last night, along with a couple of others, or checked out digitally from the library.

In 1996, he told a group at his childhood Waukegan Public Library:

“My God, all this Internet stuff is pure crap. You can’t take a computer to bed. You can take a book to bed.”

And, as numerous interviews and writings show, he didn’t like the idea of technology that removes personal control or responsibility.

Technological contradictions

He was a man of technological contradictions. He had a “giant” flat-screen TV, according to the New York Times, but resisted e-mail. Brehl laughed at one memory: for years, they faxed back and forth. When his daughter Alexandra took on responsibilities she and Brehl started using e-mail labeled Fax from Dad or Fax to Dad. They finally confessed and he got a kick out of it. “We enjoyed that,” she recalls. “I have no doubt he would have gone even further.” (You could almost see the smile over the phone when she also talked of Bradbury’s love of simple pleasures, like vanilla ice cream with chocolate sauce.)

He allowed NASA to send a digital version of The Martian Chronicle to Mars on mini-DVD in 2008, a book that it looks like we will finally get digitally on Earth. (S&S holds the print rights but not the digital, according to Brehl.)

Bradbury was right that reading a book in print is different — and about the smell, the crackle of pages, the way it feels to pick a title and make it a companion for however long it takes to read. I can close my eyes and see my first copy of The Illustrated Man, a used paperback from the bookstore I haunted as a kid in Memphis. Some books from college recently turned up, notes along the margin, words underlined, question marks and other symbols dotting the pages. Highlights in an e-book aren’t quite the same even though they may have made writing that thesis a lot easier.

While we talked on the phone, Brehl could see more than a dozen of his books that she’s left sticky notes in. Digital highlights aren’t the same for her either. But I also appreciate being able take otherwise-unwieldy books on a trip and the mind-and-money saving ability these past few weeks of mostly being housebound to download dozens of library books.

I’m not sure if Bradbury knew that you can read hundreds of pages of his work free through HarperCollins’ Browse Inside program. Not The Exiles, the one story I most wanted today (and literally can’t go looking for in my house because of some physical limits) but numerous complete stories from The Illustrated Man — The Veldt still has the power to completely creep me out, maybe more so on a screen — and other titles are there. Full books are not and in each anthology or book I found, The Exiles, first known as The Mad Wizards of Mars, was always in the unavailable section. (I am supposed to be able to embed the Browse Inside versions here but so far the HarperCollins widget isn’t cooperating.)

The Exiles, one of numerous precursors to Fahrenheit 451, is about a colony of authors, including Charles Dickens, L. Frank Baum and Ambrose Bierce, on Mars who survive as long as their books stay in print and die as their books are destroyed on Earth. (Spoiler) An astronaut annihilates the colony when he burns the last books. It didn’t occur to him in that story — or as far as I know — any others that books could die if they were only in print, that the content — and the authors — could live on through other formats.

Dinosaur image courtesy of Flickr / Denise Chan
Fahrenheit 451 image courtesy of Flickr / unten44

Apple set out the claims in a legal filing this week that responds to a sprawling class action suit. The suit seeks millions on behalf of consumers who allegedly overpaid for e-books after Apple and publishers changed to agency pricing.

The new filing is part of a complicated legal two-step in which Apple and two publishers are fighting both Justice Department antitrust claims and a parallel suit in which class action lawyers and state governments seek money.

Apple’s latest arguments comes after a colorful filing last week in which it said the Justice Department’s case was “fundamentally flawed” and mischaracterized Steve Jobs’ description of an “akido move” on Amazon:

“Akido” is not a team sport like football with a quarterback directing the plays; it is a defensive martial art practiced one-on-one by individuals, requiring use of little strength or power, based on redirecting an attacker’s own force.

This week’s filing has less flair and instead sets out point-by-point refutations of the class action lawyers’ claims. The most notable of these addresses a famous episode in which Steve Jobs told a Wall Street Journal reporter that “Publishers are actually withholding their books from Amazon because they’re unhappy.” Apple says this statement and another account in which Jobs said “Amazon screwed it up” and “We pulled it off” will “speak for themselves.”

Apple also notes that a series of bilateral contracts it negotiated with the publishers in January of 2010 have similar terms but are not identical. The point is intended to emphasize that Apple didn’t quarterback a conspiracy.

The most intriguing part of Apple’s filing, however, comes at the conclusion. That’s where Apple suggests that the class action can’t go ahead in the first place because some publishers are already paying money to state governments to settle some of the claims. Apple says it would be unfair for both actions to go forward at the same time.

Apple and two of the five publishers who are still holding out (Macmillan and Penguin) face an uphill legal battle as a federal judge earlier this month emphatically refused to dismiss the case.

To learn more about what the fuss is about, see our “Everything you need to know about the e-book lawsuit in one post.” Also, legal lovers can check out the new filing for themselves below:

Apple Response to Class Action
(Image by Robert Kneschke via Shutterstock)

The latest JK Rowling franchise has also raised eyebrows in the publishing world by selling e-books without digital rights protection.

“If you buy a digital book you should be able to read it on anything you want to read it on”, said Pottermore CEO Charlie Redmayne who was at paidContent 2012 in New York to chat about e-books with our publishing reporter, Laura Owen.

Redmayne said the decision to release the long awaited e-books without rights protection produced an initial spike in piracy as readers uploaded them to file-sharing sites. But the piracy soon abated as other readers pressed the moral case to take down the files (they also pointed out to the file-sharers that watermarks made them easily identifiable).

Redmayne also stated that Pottermore, which has been live for two months, has already received more than a billion pageviews. The website, which offers users a chance to participate in things like sorting hats and broomstick duels, is intended to supply the rest of the Harry Potter world in which the books are just a “narrow corridor.”

Pottermore has also pulled off another seemingly magical feat by persuading Amazon to redirect all sales to its site. Redmayne said this is in part a reflection of publishers’ desire to associate themselves with strong brands.

Check out the rest of our coverage of paidContent 2012. Full archived video on livestream (registration required).

Citing ongoing state, federal and international antitrust investigations, Cote turned down arguments that Apple and the publishers had acted independently when they changed the pricing model for e-books. (For more details on the case, see “Everything you need to know about the DOJ lawsuit in one post.”)

Cote’s opinion is at times remarkable for the emphatic language in which she decries the alleged conspiracy. It is also noteworthy for citing the late Steve Jobs on several occasions to suggest that Apple was at the center of it:

In short, Apple did not try to earn money off of eBooks by competing with other retailers in an open market; rather, Apple ‘accomplished this goal by [helping] the suppliers to collude, rather than to compete independently.’

[...]

Finally, Jobs’ prescient prediction at the iPad launch that the prices consumers would be paying for eBooks would all ‘be the same’ and the other quotations from Jobs, Murdoch and Sargent, combine to provide ample evidence that the Publisher Defendants had agreed with each other to undertake collective action to raise eBooks’ prices and that Apple intentionally and knowingly joined that conspiracy.

Apple has argued that its entry to the e-book marketplace was pro-competitive at a time when Amazon controlled 90 percent of e-book sales. The company has also stated that it had no motive to raise e-book prices at a time when it was looking to attract content onto its new iPad tablet.

Cote said Apple had the motive to act as the hub of a conspiracy:

Finally, the fact that Apple might have had different motivations for joining the conspiracy, and was involved in only a portion of it, does not undermine the existence of the conspiracy itself or Apple’s role as a participant.

Cote does not address what may have been the plaintiffs’ strongest argument for an Apple conspiracy — that Jobs conspired with the publishers in order to slow Amazon’s rise into the tablet market.

What it means in the bigger picture

Judge Cote’s ruling came in response to a request by Apple and five publishers to dismiss the case. It does not mean that the companies are liable for price-fixing, but rather that the class action lawyers can go forward in bringing the case to trial.

Cote’s strong language, however, reinforces that Apple and the publishers may be in a deep hole. Three of the publishers (Hachette, Harper Collins and Simon & Schuster) have already settled an antitrust lawsuit with the Department of Justice and agreed to change their pricing practices.

The three publishers are also in negotiations with state governments under which they are likely to pay tens of millions in consumer restitution. In plain English, this means that people who bought an e-book in the last few years may receive a small settlement payment.

The publishers appear to have entered negotiations with the states (led by Connecticut and Texas) in order to escape the clutches of the class action lawyers. Any settlement would largely excuse them from having to pay again in the class action suit.

That leaves two publishers — Penguin and Macmillan — as holdouts. Both Macmillan CEO John Sargent and Penguin CEO John Makinson have stated that their companies did nothing wrong.

Apple is unlikely to budge, in part because the pricing system it used with the publishers (in which takes a 30 percent commission) is the same one it uses with providers of other types of content. In the past, Apple has been anything but shy about litigating.

Here’s a copy of the opinion (note: Thanks to Porter Anderson for noting that highlighting in a previously-posted complaint obscured the text. I’m posting an unmarked version instead. Apologies for the inconvenience) :

Judge Cote’s Refusal to Dismiss Unmarked)

Esposito wonders whether DRM is more effective in preventing “casual copying” than large-scale infringement:

It will be argued that the promotional value of free copies outweighs the lost sales due to sharing. I don’t think so; the NPR example is telling us something about the propensity for people to pay for things that they don’t have to. And NPR has to work hard even to get 10% compliance, with relentless pledge drives and appeals to civic-mindedness, supplemented with salving premiums (an NPR T-shirt, etc.). Promotional friction can take many forms (providing excerpts, civic appeals, special features), but it’s an important element of this economy.

So moving publishing away from DRM “requires a great deal of thought and contingency planning.”

Can we afford to lose our course adoption sales? How do we monetize reading groups? And what about the used-book market, from which we currently derive no revenue? Can we come up with new ways to monetize books so that we can recapture some of that lost revenue? The issue concerning DRM is falsely thought to be a technological one. It is not; it is a marketing issue.

What is 2012′s most exciting digital book publishing initiative? The answer has to be J.K. Rowling’s Pottermore.com, the massively popular Harry Potter interactive site and e-bookstore that just opened to a general audience. We’re thrilled to announce that Pottermore CEO Charlie Redmayne is joining us at paidContent 2012: At The Crossroads, May 23rd in New York, to share insights about building a presence for a well-known brand, its business model, successes and challenges.

Redmayne, former EVP and chief digital officer of HarperCollins, calls Pottermore “a hugely exciting project which will take one of the greatest brands in literature into a digital future.” Redmayne oversaw the March launch of Pottermore’s e-bookstore — which is selling the Harry Potter series as e-books and digital audiobooks for the first time ever — and the sale of over $1.5 million worth of e-books in the first three days.

With the full Pottermore site now open to a general audience, Redmayne comes to paidContent 2012 with first-hand experience in launching a successful interactive fan community and selling DRM-free e-books to that community directly. And though the boy wizard is in many ways a unique case, Redmayne will share how others can learn from Pottermore.

We’ll discuss much more about the changing publishing landscape at paidContent 2012. Register today to join us at The TimesCenter in New York on May 23rd for paidContent 2012 and take part in a day-long conversation about the best ways to create, distribute and make money from content. In addition to Redmayne, speakers include Pulitzer Prize-winning author Richard Russo. The full list of confirmed speakers is here, with more to come.

If you’re interested in sponsoring the event, please contact eventsales@gigaom.com.

The Department of Justice’s lawsuit against two major book publishers — for allegedly colluding with Apple to keep the price of e-books artificially high — continues to make its way through the courts, and it has set off a frenzy of finger-pointing about who to blame for the destruction of the book industry at the hands of Amazon’s evil monopoly. I have argued that there’s a little bit of evil on both sides of this issue. But one thing seems fairly certain: If the publishers dislike the power Amazon has over them, they need to recognize they shoulder much of the blame, since they helped to forge the DRM chains that have kept them shackled to the company’s platform. Why not break those chains and try to set their content free instead?

The publishers have tried to argue they were forced to cut a deal with Apple to institute an “agency pricing” model for e-books — which allows them to set the ultimate price for their titles instead of giving that power to the end retailer, the way they did with Amazon until Apple came along — because otherwise Amazon would push prices down to unreasonable levels and take even more control over the industry. But who gave Amazon a lot of that control in the first place? The Big Six publishers themselves, by requiring DRM. As author Charlie Stross argued in a recent post:

By foolishly insisting on DRM, and then selling to Amazon on a wholesale basis, the publishers handed Amazon a monopoly on their customers.

Amazon no doubt wanted to lock up all of that e-book content with digital-rights-management protections just as badly as the publishers did, since that helped tie customers to its Kindle platform and the Amazon ecosystem. But the Big Six enthusiastically embraced the idea, because they believed piracy was a major risk with digital content and the only way to prevent it was to wrap it in Amazon’s proprietary file format. Further, those DRM controls also allowed publishers to set all kinds of restrictions on what e-book owners could do with their books, including how many times (or even if) they could lend them.

Has DRM prevented piracy? That seems unlikely, since it is relatively easy to get around those locks and copy a book if you really want to. What is pretty clear, however, is that those rights-management locks have cemented Amazon’s control over the publishers’ content. In other words, it has given the online retailer a stick with which to beat them, as Stross described it recently. And it has also made it more difficult for some independent e-book sellers, because publishers won’t let them sell their books without DRM.

Those DRM chains are hobbling the industry, not pirates

When it comes to readers and book buyers, meanwhile, DRM has been nothing but a source of pain and frustration, just as it has been in every other content market, including digital music. Books from the Big Six can’t be loaned or borrowed, or they can only be loaned or borrowed a certain number of times. And they can only be used on one platform, with all kinds of restrictions. What these chains and locks do, more than anything else, is to make the simple act of buying and reading a digital book horrendously complicated. Does that make more people want to buy and read e-books? It’s hard to see how. In a very real sense, those locks are hobbling the industry.

I think Christopher Mims of MIT’s Technology Review is right when he says the only option for publishers is to embrace the disruption that digital provides and do their best to disrupt themselves — and Amazon — rather than setting up artificial barriers:

It’s abundantly clear that publishers that survive in an Amazon world will be those who disrupt Amazon itself. If Amazon’s aim is to “cut out the middleman” then the next logical step is for publishers to cut out the middleman that is Amazon.

Some publishers refuse to bow to the god of DRM: O’Reilly Media, for example, sells all of its titles without any digital restrictions whatsoever. Tim O’Reilly has said he isn’t concerned about digital piracy, because most of the people who take his books without paying probably never would have bought a copy anyway. So it’s not as though he has lost a sale, and someone who reads them for free might later decide to pay (musician Neil Young has said that “piracy is the new radio”). And J.K. Rowling sells e-book versions of her massively successful Harry Potter series without DRM, although digital locks are added when a copy is downloaded to a Kindle.

Some, including Financial Times writer John Gapper, are skeptical that giving up DRM would make much of a difference for traditional publishers, since Amazon would presumably just continue to push down prices of e-books regardless, putting pressure on their profit margins and inexorably gaining more market share. And abolishing DRM certainly wouldn’t be some kind of magic wand that would return the book-selling business to the glory days of old. But at least it would give publishers a chance to be more flexible and adaptable, instead of trying to prop up their failing business model with price-fixing.

Post and thumbnail images courtesy of Flickr user Christine Zenino and Marcus Hansson

Such a deal would not only expand an existing proposed settlement that would refund money to e-book buyers, but would also short-circuit part of a large class action case now underway against publishers and Apple.

The developments came at a status hearing in Manhattan attended by Apple, the five “big six” publishers who are under investigation, the Department of Justice and  three state governments.

The parties had asked US District Judge Denise Cote to convene the hearing in order to help coordinate what is now a three-headed legal proceeding over alleged e-book price fixing. There are three cases because the federal government and the states filed separate suits in addition to a private class action that began last year.

The most significan part of today’s hearing came when counsel for HarperCollins, Shepard Goldfein, announced that three publishers — Harper Collins, Hachette and Simon & Schuster – were in “settling mode” and that he expected an agreement to be reached with all 50 states before long.

Under such a settlement, the states would collect “consumer restitution” to pay out on behalf of consumers who overpaid for e-books. In an announcement last week, Connecticut’s Attorney General George Jepsen said that two of the publishers were expected to pay $52 million as part of a deal with 15 states and Puerto Rico.

Goldfein did not comment on whether this amount would increase if all 50 states sign on to the settlement. Lawyers today also indicated that Simon & Schuster was poised to be part of the settlement.

Today’s news is a blow to Hagen Bermans, the Seattle law firm that beat off other class action firms for the right to play lead violin in the nationwide class action case. At today’s hearing, Goldfein explained that the settlement with the states’ effectively trumped the private class action — meaning e-book consumers will collect from the states and not via the private class action.

Steve Berman, who is heading the class action, responded at the hearing that the state settlement only applies to natural persons, not to businesses or libraries. HarperCollins’ Goldfein said after the hearing that there are few businesses and libraries who bought e-books.

Berman’s firm still has a chance to collect off the two publishers who refused to settle if he can persuade a jury they indeed fixed prices.

The two publishers — Macmillan and Penguin– and Apple have denied wrongdoing and are fighting the lawsuits.

The conspiracy supposedly involves a plot by five publishers and Apple to wrest pricing power from Amazon by switching to so-called “agency pricing” in 2010.

Photo courtesy of Flickr user [dslrninja]