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DOJ Sues Apple and Publishers for Collusion

Discussion in 'Tech Talk - Gadgets, Gizmos and Technology' started by bobukcat, Mar 8, 2012.

  1. Apr 13, 2012 #61 of 165
    Stewart Vernon

    Stewart Vernon Roving Reporter Staff Member Super Moderator DBSTalk Club

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    Why couldn't the author decide to get more by charging the same price for an eBook as for printed, and instead of passing the "savings" to the consumer, pass the savings to the author?

    That should be a choice too... and if the market will bear it, that should be ok.

    Not necessarily. As I was saying earlier... People have this innate desire to associate "worth" and price... so a book that debuts at $10 is perceived by many to not be as good of a book as one that debuts at $20.

    I'm not saying *I* think that way... but many consumers do. Many consumers think that if a book (or any product) is better, it will cost more. Think about your brand name clothing vs non-brand name clothing where much of the quality is the same, but people will pay more for a name brand like Nike than they will for a generic shoe.

    When you go to a bookstore (if you still do)... do you look first at the Best Seller List? or the bargain bin?

    The books in the bargain bin are there because they aren't selling and are lower in price... thus the assumption by many consumers that books marked at a higher price "must" be "better"... again, not my thinking, but something many consumers use to make decisions.

    Not necessarily. Many eBooks (at least the ones in the ePub format) can be read on your computer with free software... and you already have a computer apparently :)

    On the flip side... if you buy books, it is true you don't have to buy an expensive shelf... but you have to put them somewhere... unlike eBooks that reside on whatever device you use to read them (like your PC) that is already taking space for other uses.

    And this is one place where eBooks lose, just like digital downloads... If you read a book and want to share it, give it away, or sell it... you can... but you can't with an eBook unless it was a free one with no DRM that is public domain intended to be shared.

    eBooks are growing on me... but there are still some things I like having on my bookshelf as a real book.
     
  2. Apr 13, 2012 #62 of 165
    Alan Gordon

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    I want to say two things, and I apologize if this has been brought up already, because I haven't been following this thread intently.

    1. It is true that eBooks cost the publisher less to manufacture, but it's also important to note (and it may already have been) that unlike B&M stores or e-tailers who have to store the inventory, there is no need to either use the item as a loss leader to get people to visit their store, nor the need to use sales to clear out excess inventory.

    2. Comic books. I grew up buying comics... I don't buy them anymore, but I still keep up with that world via a couple of sites, and DC Comics started selling all their new releases late August of last year, and I think Marvel is starting this month... or soon anyway. Other publishers are selling books as well. Recently, Apple started selling Marvel trade paperbacks (collected reprints) for iBooks via iTunes... not a big surprise given the fact that Marvel is owned by Disney. However, they do not sell new release issues.

      As is, I believe customary, Apple would get a percentage of the costs associated with in app purchases via Comixology, DC Comics, or Marvel Comics app, but the digital versions cost the exact same as the printed versions. Granted, DC Comics, and I believe Marvel is about to start offering certain titles from them in printed form with a free digital copy code for an additional $1.


    I'm not against a company using their clout to bring down costs, but I'm against a company using it to raise prices across the board. If there was negative price fixing involved, hopefully something will be done about it. If not, hopefully the truth will come out.

    ~Alan
     
  3. Apr 14, 2012 #63 of 165
    TBoneit

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    I guess I don't think that way. With food I buy the brands I buy for the taste. I prefer Best's Hot Dogs for their taste vs Nathan's or ball park etc. I tried em all.

    For shoes my brother and I wear the brand we do as it is the only brand easy to find locally that is comfortable.

    Strangely enough I look in the bargain bin and buy from there frequently as well as the best selling top xx section and by author. It is getting harder and harder to do as the Bookstores vanish. Until it disappeared I also bought from the local used book store.

    Except I don't want to read them on the PC , they aren't portable like a real book is. My books move around the house with me as I read them here and there.

    Right now I've been going through the boxes of books in the basement and attic and am reading books I originally bought in the 60's, 70's and 80's. Magazines too. Astounding and Analog Sci-Fi for example.

    I just can't see a eBook reader still being able to display the eBooks you bought after a span of years.

    Not only that but if I spend $20 for something I want something I can hold in my hand if possible.

    Interesting messages here.

    Best Regards
     
  4. Apr 14, 2012 #64 of 165
    Steve

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    Well a month later, after reading about this topic ad nauseum for the past few days (and based on the facts that have come to light thus far), I'm tending to agree with this scholar's view that it's the publishers, not Apple, ruining a good thing (my emphasis below):

    While I agree with the publishers that the playing field needed to be leveled to break Amazon's "monopoly" on e-book sales, the "agency pricing" approach does seem like blatant price-fixing to me. Instead, why not a "wholesale" price approach that would allow the resellers to sell to consumers for whatever the market will bear? Apple, Google and B&N.com would then have been free to discount selected e-books as much as they wanted, to draw market share away from Amazon. Just my .02.
     
  5. Apr 14, 2012 #65 of 165
    bobukcat

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    Yes, but is that really a good thing and how much of the market shift is really due to the agency model versus B&N and Apple having actually released competing readers in the same time span? Amazon chose to develop and aggressively market the Kindles with lower priced books to drive adoption rate. But just because they sold the book for $9.99 does not mean they paid the publisher or author less for it - in fact that's definitely not the case but I sense some people believe that's what happened. It is not unusual in the consumer electronics industry to subsidize the price of a relatively expensive new player / reader for a new format with cheap or free titles in that new format. When I bought my first DVD player it came with 10 free DVDs (from a list), the same with my first BD player which came with 5 free BDs from a list. Amazon grew the e-book market exponentially but instead of competing on similar terms Apple allegedly colluded with the publishers to raise prices and make more money - partly because they knew they could - when they decided to enter the market that Amazon developed from niche to mainstream.
     
  6. Apr 14, 2012 #66 of 165
    trh

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    How did the Agency model help Barnes & Noble & Apple gain market share? I see no correlation between the agency model and the gain by B&N or Apple.

    bobukcat is right. Amazon was still paying the publishers the price they set; so their costs (and the writer's royalties) were being met. So what if Amazon decided to sell below the cost of what the books cost them? Nothing illegal about that. Sort of like when someone calls DirecTV to cancel and they offer them all kinds of incentives to stay. Businesses do this all the kind to get or keep customers.
     
  7. Apr 14, 2012 #67 of 165
    Steve

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    I struggled to understand this as well, but apparently, by preventing Amazon from undercutting Apple and B&N, there was less reason for an e-book buyer to buy a Kindle and shop at Amazon if s/he was already an iTunes or B&N.com user. Unfortunately, the playing field got leveled by forcing Amazon to raise their prices, because the publishers would not agree to a wholesale model with Apple, like Apple has with the music industry.
     
  8. Apr 14, 2012 #68 of 165
    Stewart Vernon

    Stewart Vernon Roving Reporter Staff Member Super Moderator DBSTalk Club

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    Exactly... Barnes & Noble was an indirect beneficiary of things. With publishers agreeing not to sell eBooks lower at one store than another, it leveled the playing field and meant if you were a Barnes & Noble customer there was no immediate reason to bolt to a competitor.

    The problem with underselling (selling at lower prices than intended or even lower than cost) by Amazon is that it undercuts the perceived value of the books.

    Retail stores like Wal-Mart have loss-leaders, stuff they practically give away to get you in the store week after week so you hopefully buy other profitable things. This was why Amazon would do the same with eBooks... to get more customers browsing on Amazon and buying other things too.

    But in the process... items you see at Wal-Mart as loss-leaders become things consumers see no value in... and come to expect them to be given away... and won't touch them if they aren't... so eBooks could have been on a dangerous path.

    We see people all the time complaining "why can't I have music for free" because people see online downloads and they think making copies and downloading them isn't "stealing"... and eBooks were heading in that direction too. The lower value something has the less people pay for it AND the more they justify being able to take it because it is so cheap anyway.

    Remember the "browser wars" too... the DOJ went after Microsoft for giving away their browser to gain marketshare and preventing fair competition from others like Netscape. Now I had a whole slew of problems with that lawsuit too...

    but..

    the point is... That is what Amazon was doing by cutting prices on eBooks... trying to gut their competitors before they got off the ground, so Amazon could monopolize the eBook market.

    So... on the one hand, the DOJ went after Microsoft for unfairly underpricing a product... now they are going after publishers for overpricing.

    In my opinion, the DOJ should really have stayed out of both cases... and given the free market a chance to decide.
     
  9. Apr 14, 2012 #69 of 165
    TechnoBarbie

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    I'm glad I don't feel compelled to read anything that costs me money. I read alot of secondhand with anything that originally had a cost. This discussion has been interesting though.
     
  10. Apr 14, 2012 #70 of 165
    trh

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    eBooks were being sold @ $9.99 by Sony and other companies for years before Amazon and the Kindle. It wasn't an issue until Steve Jobs told the publishers he could get them more money (because Apple Fans are used to paying a premium price??).

    As the article that Stewart linked to yesterday said "... it doesn’t appear that the DOJ could have acted in any other way given the collusion among publishers, who according to the New York Times, admitted that they held regular meetings where they discussed how they “could solve the $9.99 problem,” a reference to the price point that Amazon had set for e-books."

    Who knows, maybe before this is all over, DOJ will be suing Amazon because of what they define as "monopolistic practices".
     
  11. Apr 14, 2012 #71 of 165
    bobukcat

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    Exactly, when B&N launched the Nook they would have had to compete on e-book pricing with Amazon to gain market share (or deliver on some other value that Amazon was not providing that was worth that price difference to consumers). The deal the publishers signed with Apple and then forced on Amazon negated that price difference and was a direct advantage to B&N.
     
  12. Apr 14, 2012 #72 of 165
    bobukcat

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    Yes, but they never came close to achieving the success that Amazon has with the Kindle line. Probably because of the marketing power Amazon had amassed as a seller of physical books, their reputation for customer service, free delivery over WAN, and other factors.
     
  13. Apr 14, 2012 #73 of 165
    bobukcat

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    I see it more as Amazon investing in ways to get buyers invested in their eco-system with the Kindle, much like Apple wants you hooked into their eco-system. You buy a Kindle and then you easy and quickly buy more books from Amazon on that Kindle. It's not restricted to only Kindle books but it sure is easier to buy from them than anyone else!

    Completely different situation, although I did have a hard time seeing the problem with what Microsoft was doing back then until I heard more details. Microsoft was strong-arming their integrators to not include Netscape or any other browser or to build machines with Windows without including IE. I'm not sure how that compares to what Amazon, Apple or anyone else in this story had allegedly done.

    I'm usually a big fan of the government staying out of things as much as possible but in this case I think they can right a wrong that has resulted in customers paying more for a product than they were before the price fixing collusion. Of course that is probably asking too much.
     
  14. Apr 15, 2012 #74 of 165
    Stewart Vernon

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    That's why it is hard to pick a side here...

    I like the free market, and wish the government would stay out of things... but there also is apparently evidence of price-fixing and collusion... and those are bad things... then it looks like it is possible the collusion actually helped avert a monopoly by Amazon, which would have possibly led to a different lawsuit by the DOJ.

    It's all a mess, basically.
     
  15. Apr 15, 2012 #75 of 165
    trh

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    Who knows, maybe in a few years the DOJ will be suing Amazon for "monopolistic practices."
     
  16. Apr 15, 2012 #76 of 165
    trh

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    Just reading a few BBC articles on this to see their take. Turns out the agency model actually makes the publishers and writers less money (because of the 30% share to Apple).

    One of the publishing CEO's said he made his decision for the future of publishing and to prevent Amazon from owning the eBook distribution. That CEO should probably have taken a look at what Apple and iTunes did to the CD industry before he got in bed with Steve Jobs.

    ----
    Scott Turow (mega-author and President of the Authors Guild) posted a blog on this topic - "Letter from Scott Turow: Grim News". Which was then followed by a point-counter-point type blog by authors Joe Konrath and Barry Eisler. Called "Barry, Joe, & Scott Turow". A bit long, but interesting.
     
  17. Apr 15, 2012 #77 of 165
    phrelin

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    How could Amazon get a monopoly on ebooks? As far as I know, they have never asked a book publisher to market ebooks exclusively through the Amazon Kindle Store?

    The only thing the DOJ should be looking at is making sure that Amazon will permit people with Kindles to buy ebooks through other sources if the source is willing to sell via the Kindle. You know, like on our iPads we buy books through the Kindle Store and read them with the Kindle App. Amazon should be required to offer the same courtesy to Apple, B&N, etc.

    For me the picture is very clear. Manufacturers and retailers should not be allowed to conspire to fix prices. Manufacturers should sell their product to retailers at prices that is based on a marketing plan that will give them a profit. Retailers should sell that product based on a marketing plan will give them a profit.

    And I don't really see why people worry so much about Amazon. Amazon is not the wealthiest entity in the world, not even close. Apple is. Neither Amazon's entire market cap nor enterprise value are as large as Apple's recently disclosed $98 billion in cash holdings.

    Amazon's profit margin is typical for a large retailer - 1.31% (Safeway's is 1.18%), and that is on $48 billion in revenue. Apple's profit margin is 25.80% on $128 billion in revenue.

    People shouldn't even be discussing the two companies in the same conversation they are so unalike. I don't get it.
     
  18. Apr 15, 2012 #78 of 165
    Steve

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    The worry was that if Amazon's e-book market share continued to grow unchallenged, all competition would be eradicated and at that point Amazon would be able to call all the shots in terms of e-book pricing. Let's face it, when this all started 2 years ago, at 90% market share and growing, Amazon was an e-book monopolist. It's just at that time, e-books represented such a small fraction of the book business, being a huge fish in a small pond wasn't cause for any scrutiny, except by the industry itself.

    Just my .02, but I think introducing Apple's wealth into this argument is a straw horse that steers the conversation away from the topic at hand, e-book market share.
     
  19. Apr 15, 2012 #79 of 165
    bobukcat

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    Didn't Apple recently kill the ability to buy through the Kindle app on their devices because it cuts them out of the money? I don't use my iPod for anything but music so I don't really know first hand but I thought that was what I read, you have to use the browser to make purchases from the Kindle store. I don't really think the DOJ should force Amazon to allow purchases from other stores on the Kindle hardware, especially the 3G Kindle because Amazon is paying for the wireless data plan when you use it and that is part of the value proposition of their ecosystem. If they were to somehow achieve a true monopoly on ebooks that discussion may have been necessary but that ship has sailed and there is plenty of competition in the market to allow closed ecosystems.
     
  20. Apr 15, 2012 #80 of 165
    Steve

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    The publishers did not enter into a "wholesale" agreement with Apple like the music industry. In that model, Apple pays a negotiated wholesale price for the music, and then charges whatever it wants.

    The publishers refused to go for it, but would agree to go for the "app store" model, where the content creator sets the price, and Apple takes a 30% cut. I don't know if the term "agency model" existed before, but that's the term the publishers decided use for it.

    Re: "what Apple did to the CD industry", many people feel the iTunes model saved the CD industry, as the most effective way to thwart piracy. Personally speaking, I believe the agency model for e-book selling encourages e-book piracy as well by not making content more affordable.
     

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