In the case, HarperCollins says that its 1971 contract with George gives it the right to publish Julie of the Wolves in any format, including as an ebook. Open Road argues that HarperCollins never had ebook rights. George, who was 92 when HarperCollins first filed its lawsuit, said that she was “with Open Road all the way,” but she died in May 2012 and never gave a deposition.

HarperCollins argues that its contract included future types of works, and  that print books and ebooks are the same. Open Road contends that it did have the right to publish Julie of the Wolves because ebooks didn’t exist in the 1970s, and because HarperCollins’ 1971 contract with George didn’t specify a royalty rate on electronic works.

Both of the motions filed last week refer to a 2001 case in which Random House sued Rosetta for publishing ebook editions of Random House works. A federal judge ruled that ebooks and books weren’t the same thing and that Random House couldn’t block RosettaBooks from selling the titles. Random House appealed, but the decision was upheld, and Random House and RosettaBooks ultimately settled. Because of the outcome of that case, HarperCollins specifies in its motion how different the Julie of the Wolves case is from Random House v. Rosetta, and Open Road stresses the cases’ similarities.

HarperCollins: Ebooks weren’t around in 1971, but we knew they were coming

HarperCollins notes (here’s the PDF of the motion) that its 1971 contract grants it the right to publish Julie ”in book form,” and says that the grant “encompasses ebook publishing rights of the type Open Road has unlawfully appropriated, particularly given the virtually identical reading experience afforded by its offering to the hardcover and paperback offerings of HarperCollins, with which it directly competes.”

HarperCollins and Open Road both focus closely on the “storage and retrieval and information systems” clause in the original contract. The contract had stated:

“the publisher shall grant no license without the prior written constant of the Author with respect to the following rights in the work: use thereof in storage and retrieval and information systems, and/or whether through computer, computer-stored, mechanical or other electronic means now known or hereafter invented…”

HarperCollins argues that it’s “no stretch to recognize that ‘storage and retrieval information systems’ fully encompass the display of an ebook via an ebook reading device.” In a section of its motion on “the antecedents to ebooks,” it mentions, for instance, a 1968 article “envisioning the Dynabook, a new storage and retrieval device the size of a three-ring binder that would have a multipurpose screen that could be used for both reading and writing.” HarperCollins concludes that “without doubt, as of 1971, when the Agreement was executed, ebooks of the type offered by entities such as Open Road were foreseeable…Electronic delivery of books and other textual works was further anticipated as early as the 1950s and 1960s, when computer scientists envisioned and experimented with devices that could store books, documents and even entire libraries electronically.”

Open Road: “Information, storage and retrieval systems” don’t mean “ebooks”

In its motion (PDF), Open Road says that while HarperCollins takes the phrase “in book form” to include the right to publish an ebook as well, the judge in Random House  vs. Rosetta “found that this term excluded ebooks…It has been for decades the standard grant language that trade usage in the publishing industry has been understood to mean paper forms of the work.” Open Road cites HarperCollins’ own online dictionary, for instance, which defines “book” as “a number of sheets of paper, parchment, etc. with writing or printing on them” and has a separate entry for ebooks: “Hence, ‘book form’ and ‘digital form’ are clearly distinguished as separate forms of publication.”

Open Road also looks at HarperCollins’ later contracts and finds that, unlike the 1971 contract with George, they referred more explicitly to ebooks and didn’t use ”information, storage and retrieval systems” to mean ebook rights. Open Road adds, “ebooks and information storage and retrieval systems are apples and oranges…Harper cannot reasonably argue it now believes there is no difference between ebooks and information storage and retrieval systems, in light of its own differentiation of the two technologies in its earlier contracts.”

Open Road focuses on the fact that digital royalties were absent from the 1971 contract. It says it

“offered to pay Ms. George a 50% royalty to publish her work as an ebook. Ms. George was intrigued by Open Road’s offer and the prospect of bringing her work to a new medium. Still, she wanted to keep her works ‘in-house’ with her print publisher. So she asked Harper to publish Julie of the Wolves as an ebook for the same royalty. Harper flatly refused. It told her it would publish the ebook, but only for a 25% royalty … even though … (1) the contract is silent as to ebook publishing rights and lacks a royalty provision in exchange for those rights, (2) Ms. George expressly reserved all rights not specifically granted, and (3) the technology for such a product did not exist until many years later and a commercially viable ebook publishing market did not take hold until just a few years ago.”

The publisher argues that there was no nascent ebook market in 1971 “or 1981 or 1991,” saying, “the issue is not whether a few isolated academic visionaries could dream of a day when the words of an author’s work could be digitally transmitted through space.”

HarperCollins and Open Road both declined to comment, and a court date has not yet been set.

HarperCollins motion

Open Road motion

I got a demo of Bookish at the company’s trendy, book-filled offices in Manhattan’s Flatiron District last week, and had a chance to use the site further on Monday when it was prematurely available online for several hours as it was being tested. Overall, I think the long-delayed Bookish is off to a promising start.

Bookish has the opportunity to shape book discovery and offers publishers a chance to directly engage with readers. It also allows them to tiptoe into direct sales. I’m less intrigued by the original editorial content: I’m not sure it differentiates itself enough from other book-related content on the web to draw users to the site for the first time. Once those users make their way to the site, though, they’ll find a clean, easy-to-use design, and an algorithm that may well find them their next book — even though it’s limited to less than a quarter of the books on the site for now. Here’s my overview of the site.

 The basics: Books and authors

While only three of the big-six publishers are financially backing the site, the other three — Random House, HarperCollins and Macmillan — are making their books available through it, along with 10 other publishers including Scholastic and Houghton Mifflin. In total, that’s 1.2 million unique titles spanning 18 genres (fiction and literature, children’s, cookbooks, and so on), and 400,000 authors have profile pages. The book pages include basic information, a preview of the first chapter, related news and videos, and a roundup of any “must-read” lists that the book has appeared on (for more on those lists, see below). Each book page also includes purchase links (more on that below, too).

Algorithm-generated book recommendations

Online book discovery is a huge problem for publishers, and Bookish tackles it with a recommendation algorithm that lets users input up to four titles to find what to read next. “We’re very much a technology company,” Karen Sun, an MIT grad (and book blogger) who is heading the company’s recommendation engine, told me. “This is probably the largest venture in the book space, in terms of data.” Sun explained that while Amazon and Goodreads primarily deliver book recommendations based on “collaborative filtering” — namely, a user’s purchasing or rating and reviewing history as well as those of other users — Bookish doesn’t have that user or purchase data yet. Instead, it relies on “deep, introspective” data: “Recommendations are based on the books and understanding of the books.” The recommendation looks at features like the authors, editors and illustrators who contributed to a book, the awards a book has won, and genre and publication date, then layers on a machine-learning component that parses user and professional reviews to try to distill themes, concepts and sentiments. Insights from the editorial team are included, too.

A user who liked The Help, for instance, receives recommendations for Hotel on the Corner of Bitter and Sweet by Jamie Ford — another women’s fiction title that features race relations — and The Guernsey Literary and Potato Peel Pie Society, a book that, like The Help, includes an aspiring female author. Type in Malcolm Gladwell’s The Tipping Point and the engine pulled up four similar “big ideas” books, but also two Spanish-language titles that were out of place even if the subject matter was similar (and you’ll see a Spanish-language edition of The Room in the recommendations for The Help above).

For now, Bookish’s recommendation engine works with only about 250,000 of the 1.2 million books on the site. Sun says the engine will improve over time, and will eventually integrate reader reviews and user actions — other books users have looked at and rated on the site.

E-commerce: Essential, but…

Each book on the site can be purchased in print or digital formats directly through Bookish or from another retailer — there are affiliate links to Amazon, Barnes & Noble, Books-A-Million, IndieBound, Apple and Kobo.

Distributor Baker & Taylor is handling all of Bookish’s direct sales. For now, ebooks purchased through Bookish are only available in EPUB and PDF formats, for reading on iPad, Android, Nook and desktop — no Kindle.

Bookish seems to want to stress that it’s not cutting into other retailers’ sales, even though a serious direct-sales outlet is something that book publishers desperately need.

“We want to be able to say you can buy [a book] here and it’s reasonably priced. We’re not trying to steal sales away from other places,” CEO Khazaei told me. Publishers probably don’t care about taking sales from Amazon, but they may not want to sour relationships with retailers like Barnes & Noble and the independent bookstores represented by IndieBound.

Bookish’s print and ebook prices appeared to match those offered by Amazon, though I wasn’t able to test many titles. Khazaei told me that “I don’t know how the pricing decisions are made, really,” Khazaei said. “I assume [Baker & Taylor] is tracking [prices on other sites] but we just leave it in their hands.” While the site seems like an obvious place for publishers to run special sales on both print and digital books, that doesn’t seem to be a priority for now. Update: Khazaei stressed to me that his lack of involvement with pricing is required by the Department of Justice in order to be compliant with antitrust regulations. (The DOJ sued Hachette, Penguin and Simon & Schuster, along with Macmillan and HarperCollins, last year for allegedly colluding to set ebook prices; Hachette, Penguin and S&S all settled.)

Original editorial content along with the algorithm

Bookish has seven full-time editors who each manage different genres and update those sections daily with original book coverage. The site is also soliciting pieces from well-known authors and other public figures. In one ongoing feature, for instance, editors from The Onion review books. Other editorial features at launch include a column by Eat, Pray, Love author Elizabeth Gilbert and an interview between bestselling thriller authors Michael Connelly and Michael Kortya. In addition to that content, the site’s editors are curating columns and lists of books like “The Biggest BFF Breakups in YA Books” and “Big Ideas.”

Advertising, revenue and partnerships

Bookish is collaborating with USA Today’s books website. Its original editorial content will be syndicated on USA Today’s website, and the technology that Bookish uses to let readers view the first chapter of a book and to offer book recommendations will also be included on USA Today’s site. In exchange, Bookish will feature USA Today’s book bestseller lists on bookish.com.

In addition to book sales, Bookish will get revenue from advertising. For now the site’s ad slots are taken up with books from the three launch partners, but eventually the company will expand advertising to other publishers and to companies from outside the book business. Prior to its launch two years ago, Bookish had announced an advertising and content syndication deal with AOL Huffington Post, but that’s off the drawing board for now. A company spokeswoman told me Bookish is “in discussions about continuing to work with AOL in the future.”

Not a focus: Social, self-publishing

Other publishers can sign an agreement with Bookish to add their titles to the site. (Khazaei told me Bookish doesn’t charge publishers anything to join, but they presumably have to fulfill a number of requirements to be included.) However, self-published authors can’t add their books. “The focus right now is on traditionally published titles,” Khazaei said.

Also at launch, the social features that are a key part of Goodreads’ mission are absent from Bookish. Users can’t friend or follow each other — the focus is on a reader’s individual interests. I found that refreshing: Just because you’re Facebook friends with someone doesn’t mean that he or she shares your book preferences, and I prefer the algorithm-driven approach.

What will next year bring? Everyone loves to look into their crystal ball, and we’re no different. So here are our collective predictions for 2013, from books and video to newspapers and advertising.

This is one of a handful of pieces over the next week that looks at what’s coming down the road next year in the various sectors we cover.

Laura Owen

Jeff Roberts

Robert Andrews

Janko Roettgers

Mathew Ingram

Go to page 2 (of 6) on paidContent .

Like the Department of Justice in the United States, the European Commission, which began its formal antitrust investigation last December, accused Apple and publishers of colluding to fix ebook prices. While ebook sales made up 15 percent of trade book sales in the US in 2011, and — according to this report from yesterday — 12.9 percent of UK book sales for the first six months of 2012, ebooks are still a tiny sliver of total book sales in other European countries.

The EC reports in its Official Journal (PDF) that “by jointly switching the sale of ebooks from a wholesale model to an agency model with the same key terms on a global basis, the Four Publishers and Apple engaged in a concerted practice with the object of raising retail prices of ebooks in the EEA [European Economic Area, which includes the 27 countries in the European Union plus Iceland, Norway and Liechtenstein],” breaching EEA competition rules.

The EC also calls attention to most-favored nation clauses (MFNs) in Apple’s Agency agreements: “to avoid lower revenues and margins for their ebooks on the iBookstore, the publishers had to pressure other major e-book retailers offering ebooks to their consumers in the EEA to adopt the agency model.”

The Commission notes that Apple and the settling publishers don’t agree with its assessment but have agreed to settle anyway. Macmillan’s parent company Holtzbrinck, which is settling in the EU but not in the United States, said in a statement to The Bookseller, “From the outset, the Holtzbrinck group has strongly denied all charges of collusion in relation to its ebook businesses. That said, we believe it is in the best interests of our European business to proceed towards a settlement and have agreed to this set of draft principles, ready for a period of market consultation.”

Here are the terms of the proposed agreement, which largely mirror those in the ebook settlement in the United States:

• Apple, Simon & Schuster, HarperCollins, Hachette and Macmillan will terminate their agency agreements. Penguin, which is not included in the settlement (the EC is “still investigationg [its] conduct”), also has the option to terminate its agency agreement with Apple; if it doesn’t, Apple will “terminate the agreement in line with the conditions laid down therein.”
• Other retailers, like Amazon, will also have the option to end their agency agreements with the four publishers; if they don’t, the publishers will end them according to the contract terms.
• For two years, the publishers “will not restrict, limit or impede ebook retailers’ ability to set, alter or reduce retail prices for ebooks and/or to offer discounts or promotions.”
• There is some protection for ebook prices under agency agreements, however: “The aggregate value of the price discounts or promotions offered by any retailer should not exceed the aggregate amount equal to the total commissions the publisher pays to that retailer over a 12-month period in connection with the sale of its ebooks to consumers.” In the United States, publishers have the right to negotiate such a clause with retailers. In the EU, however, it appears that the clause is a requirement (i.e., a retailer can’t say no).
• Apple and the four publishers can’t enter ebook contracts with MFN clauses for five years, and “Apple will inform any publisher with which it has an ebook agency agreement that it will not enforce a retail price MFN clause in any such agreement for a period of five years.”

Consumers have a month (starting today) to comment on the proposed settlement. They can send comments “under reference number COMP/39.847/E-BOOKS, either by e-mail (COMP-GREFFE-ANTITRUST@ec.europa.eu), by fax (+32 22950128) or by post, to the following address: European Commission Directorate-General for Competition Antitrust Registry, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË.”

The settlement covers all the states except Minnesota, and five territories including Washington, D.C.

Consumers will be notified within 30 days if they are eligible for a small payment, but they won’t receive the actual payments until next year. That’s because Judge Cote also approved a “fairness hearing,” to be held on February 8, 2013 in New York. (I’ll attend this hearing.) The hearing will “consider the fairness, reasonableness and adequacy of the Settlements, the dismissal with prejudice of this action to the Defendants, and the entry of final judgment in this action.”

Consumers who oppose the settlement can speak at the hearing if they file a notice with the court by December 19, 2012.

As we reported earlier, consumers who bought qualifying ebooks from Amazon, Barnes & Noble, Kobo or Apple between April 1, 2010 and May 21, 2012 will receive an automatic account credit if the settlement is approved. Those who bought ebooks fron Sony will receive a check. And those who bought ebooks from any other retailer — like Google — must file a claim form. Payments per book range from $0.25 to $1.32 depending on the book’s date of publication and whether it was a New York Times bestseller.

Consumers could get a top-up if the states reach a similar settlement with Penguin and Macmillan, who are fighting the price-fixing allegations case in court, along with Apple. The trial is set to begin in June 2013.

The filing, which includes a copy of the notice that consumers will receive, is below. More information will be available at http://www.ebooksagsettlements.com, but the site isn’t up and running yet.

State eBook Settlement Approval

Hachette makes older ebooks available to libraries through digital distributor OverDrive. In an email obtained by Gary Price at Infodocket, Hachette tells libraries using OverDrive that it “will be raising its eBook prices on October 1, 2012 on [its] currently available eBook catalog (~3,500 eBook titles with release dates of April 2010 and earlier). On average prices will increase 220%.”

“We believe these terms fairly reflect the value to the library customer, that the ebooks will not need periodic replacement as do print copies, and there is no limit on amount of borrowing activity per ebook copy,” Hachette VP, communications Sophie Cottrell told me.

Separately, Hachette is testing a pilot program that makes new ebooks available to some libraries. That pilot program is presumably not run with OverDrive but with its competitors like 3M Cloud Library and Baker & Taylor’s Axis360.

Random House is the only big-six publisher to offer unrestricted access to its titles, despite the price increases this spring. Penguin recently ended its relationship with OverDrive and no longer distribute e-books and digital audiobooks to most libraries, though it is running a one-year pilot program with 3M with the New York and Brooklyn Public Libraries. Macmillan and Simon & Schuster do not make e-books available to libraries. HarperCollins allows e-books to be checked out 26 times before the library has to buy a new copy.

Photo courtesy of Flickr / Ian Barbour

We saw yesterday that HarperCollins has already entered into new contracts with ebook retailers like Amazon, Barnes & Noble and Google. Now Apple has a new deal with HarperCollins too. This morning I compared the prices of 12 HarperCollins titles across ebook retailers. Like Amazon, Apple is selling new bestselling ebooks for $9.99. (I’ve asked Apple for a comment on its pricing strategy for ebooks and will update this post if I hear back.)

Amazon is already dropping its ebook prices to match Apple’s, in the cases where Apple had priced a book lower than Amazon did. For instance, James Rollin’s Bloodlines and J.A. Jance’s Judgment Call were each $10.94 in the Kindle Store this morning and $9.99 in iTunes. Just a few hours later, both books are down to $9.99 at Amazon as well.

Sure, we can’t draw major conclusions about Apple’s new ebook pricing strategy based on what it’s done with one publisher’s books. But in the case of HarperCollins, we’re already seeing that even if Apple would prefer agency pricing, price bands and MFNs for books, it’s willing to compete on price in the absence of those things. And it has a lot more money to do so than other ebook retailers like Barnes & Noble and Kobo.

Under agency pricing, Apple’s ebook market share hovered around 10 percent. But if customers are drawn to Apple’s new low prices on ebooks, it’s actually possible to envision a world in which Apple’s ebook market share rises — under the terms it didn’t want.

(Note: The chart is cutting off part of the last column, Sony. You can see my full pricing spreadsheet here.)

A couple notes:

• Amazon doesn’t show the ebooks’ list prices. I had to go to Barnes & Noble for those. I obviously haven’t looked at HarperCollins’ entire list, but you can see that in some cases it’s raised ebooks’ list prices. For example, Michael Chabon’s upcoming Telegraph Avenue, which would have been priced at $12.99 or $14.99 under agency, has a list price of $17.99 in the new world.
• Apple is now discounting titles too (that wasn’t true yesterday). In some cases, as you’ll see above, Apple is offering lower prices on new bestsellers than Amazon. Amazon dropped prices to match Apple’s this afternoon. More on that here.
• Amazon is offering the lowest prices. Based just on the titles above, the average price on Amazon Kindle was $8.43; on Apple, $9.81; on Barnes & Noble Nook, $9.57; on Google Play, $9.91; on Sony (SNE), $10.42; on Kobo, $12.25.

Photo courtesy of Shutterstock / Thomas Bethge

“We are happy to again be lowering prices on a broad assortment of HarperCollins titles,” an Amazon spokeswoman told me.

“HarperCollins has reached agreements with our e-retailers that are consistent with the final judgment,” a HarperCollins spokeswoman told me. “Dynamic pricing and experimentation will continue to be a priority for us as we move forward.”

Jane Litte, who runs the romance blog Dear Author, first discovered the discounts that Amazon and HarperCollins have confirmed:

Many HarperCollins Kindle books no longer have “Price set by the publisher”. Is Agency done for HC? twitter.com/jane_l/status/…

— Jane L (@jane_l) September 10, 2012

My advanced search for HarperCollins Kindle books turns up many more discounted titles. Eloisa James’ romance The Ugly Duchess, which is #9 on this week’s New York Times bestseller list, is $6.64 in the Kindle Store, for example, and $7.99 (its list price) on Barnes & Noble Nook. Other titles are only discounted very slightly: Pittacus Lore’s The Rise of Nine is $9.59 in the Kindle Store, for example, compared to its $9.99 ebook list price at B&N. Update: Discounted prices on HarperCollins titles are now appearing at other retailers, like Barnes & Noble and Kobo, as well.

In addition, some HarperCollins titles are already appearing in the Kindle Owners’ Lending Library, which lets Amazon Prime members read them for free. For example, some HarperCollins books by Stephanie Bond — an author who had previously made her self-published ebook “Our Husband” available through the KOLL — are now available in the lending library. Update: Though Amazon lists HarperCollins as the publisher on the Bond titles in the KOLL, the books’ copyright pages suggest that the rights actually reverted to Bond and that she’s offering them in the KOLL herself.

As I reported earlier today, the settlement gives HarperCollins, Hachette and Simon & Schuster seven days to terminate their contracts with Apple, and as of this afternoon HarperCollins’s ebooks seem to still be appearing in Apple’s iBookstore under their list prices.

According to the settlement, non-Apple retailers can terminate their contracts with the settling publishers with thirty days’ notice, but I had not expected any  changes to take place nearly this fast. HarperCollins’ quick price changes suggest either that HarperCollins either began these contract negotiations with retailers before the settlement was approved or immediately afterwards. It’s also clear that neither side adhered to a thirty-day waiting period.

Digital bookstore Books on Board sent out an email this afternoon (thanks again, Jane Litte) with an announcement that “BooksOnBoard welcomes back Discounts for Harper Collins eBook titles! This week only! 24% Off all HarperCollins eBooks!”

In documents filed late Friday, Bob Kohn asked U.S. District Judge Denise Cote to stay her ruling on the grounds that consumers will be irreparably harmed by new e-book prices if the settlement goes forward.

Cote approved the settlement last week as a means to fix what she concluded to be blatant price-fixing by Apple and the publishers. The arrangement calls for Simon & Schuster, Hachette and HarperCollins to truncate their contracts with Apple by this Friday and to notify other ebook retailers that they are no longer bound by contracts that set a minimum price for ebooks.

What this means in practice is that, within weeks, mega-retailer Amazon will be able to resume selling ebooks at bargain basement prices, including below cost.

Kohn, Apple and two other publishers had urged Cote to hold off approving the Justice Department settlement until the price-fixing issues could be addressed at a trial next summer. In a surprise move last week, however, Cote threw aside planned court hearings and said the settlement could go into effect.

Kohn, a prominent entertainment industry lawyer, now says that the process should be halted until it goes before the Second Circuit Court of Appeals. If Cote doesn’t grant a stay, he says, “consumer welfare” will be harmed immediately as the new ebook prices will take effect and shift pricing power to Amazon. He also points out that, if the Second Circuit ultimately sides with the Justice Department, ebook buyers will not be hurt; they can simply collect more money under a proposed compensation scheme that proposes to pay them between 25 cents and $1.32 per overpriced ebook.

In an interesting tactical shift, Kohn appears to acknowledge that the publishers did in fact collude to fix prices but that the price-fixing was not illegal. Until recently, publishers have denied that they conspired.

This suggests that the publishers who did not settle are now putting all their hopes on a Supreme Court decision that held that price collusion is not illegal in the case of market failure. The argument is based that on the idea that Amazon, with a 90 percent ebook market share, was a monopsony (a single buyer with all the power) and that publishers had to take a one-time step to fix that.

Kohn first made the argument in a remarkable comic-strip he submitted to the court last week:

Judge Cote will rule on Kohn’s request for a stay in the next few days. According to Peter Toren, a veteran federal court litigator, Cote will almost certainly turn down the request. Toren added that this will pave the way for the settlement opponents to make an urgent request for a stay to the Second Circuit.

If the Second Circuit also rejects the stay, it’s effectively game over. This is so because it would take the Second Circuit many months to address the settlement itself — and, by that point, the new ebook prices will have gone into effect and changed the market.

Here is Kohn’s stay request with some relevant parts underlined:

Kohn Request for Stay