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DOJ Sues Apple and Publishers for Collusion


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#51 OFFLINE   Stewart Vernon

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Posted 12 April 2012 - 08:17 PM

The iTunes 30% "take"/royalty for Apple is literally apples vs oranges.

iTunes (Apple) hosts the worldwide Web site, handles accepting credit cards, taking payments, delivering the product when ordered, marketing to the whole world via iTunes and Apple TV commercials, etc.

Above are all things YOU would have to pay for yourself if you sold the App (or book) yourself. Heck, Agents often take 10-20% for an author's published manuscript... and arguably the Agent does far less than Apple!

The point is... you can do everything yourself, or you can sell on "consignment" and let someone else take the risks...

Meanwhile, regarding ebooks and prices.

People still seem to have this assumption that an ebook should sell for less than printed... and I don't know where this comes from.

Should you pay less for a movie ticket at a digital theater than one who projects film? It saves money not to make those film copies, so I guess you expect them to "pass the savings" on to the consumer. That almost never happens.

An eBook should sell for what the market will bear. If people want to pay, it will sell... if they don't, it won't.

That is why I'm against the artificially high prices like Apple setting a minimum price or colluding to get publishers to agree across the board on pricing... but I don't like Amazon's undercutting-to-get-marketshare model either... because that is a race to the bottom where people only want to pay a few bucks for all eBooks and the result would be driving the higher caliber authors out of the business.

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#52 OFFLINE   trh

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Posted 12 April 2012 - 09:07 PM

Meanwhile, regarding ebooks and prices.
People still seem to have this assumption that an ebook should sell for less than printed... and I don't know where this comes from.

My expectation of this came from the original marketing by Sony (I have one of the first Sony eBook Readers -- still works just fine). Their marketing was $9.99 (or less) for new releases/NY Times Best Sellers.

I just want a free market determining the pricing.

#53 OFFLINE   Stewart Vernon

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Posted 12 April 2012 - 10:58 PM

I just want a free market determining the pricing.


The problem is... in some ways, the market is more free now than it was before. IF Amazon dumps prices to the point they control the market and drive other publishers out of the market... prices could go up again AND not be going to the author's pockets, but Amazons... if they are allowed to have a monopoly, which is where things were headed just a couple of years ago.

Here's a good article explaining the irony here and one point I was trying to make...

On the one hand:

"After the Department of Justice announced an antitrust lawsuit against Apple and five major publishers, three of whom settled immediately (see “DOJ Files Antitrust Suit in E-Book Pricing Case”), Amazon, the nation’s leading retailer of e-books, responded by announcing that it was planning to lower e-book prices."

But on the other hand:

"Before the major publishers adopted the agency model in 2010, which let the publishers set the retail price of their ebooks (and kept e-book retailers like Amazon from selling below the publishers’ retail price), Amazon controlled 90% of the e-book market. The agency model helped other retailers such as Barnes & Noble and Apple gain share to the point that Amazon now controls just 60% of the e-book market."

Full article here.

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#54 OFFLINE   phrelin

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Posted 13 April 2012 - 12:24 AM

Meanwhile, regarding ebooks and prices.

People still seem to have this assumption that an ebook should sell for less than printed... and I don't know where this comes from.

Should you pay less for a movie ticket at a digital theater than one who projects film? It saves money not to make those film copies, so I guess you expect them to "pass the savings" on to the consumer. That almost never happens.

An eBook should sell for what the market will bear. If people want to pay, it will sell... if they don't, it won't.

That is why I'm against the artificially high prices like Apple setting a minimum price or colluding to get publishers to agree across the board on pricing... but I don't like Amazon's undercutting-to-get-marketshare model either... because that is a race to the bottom where people only want to pay a few bucks for all eBooks and the result would be driving the higher caliber authors out of the business.

All forms of the written word, including novels and non-fiction narratives and self-help manuals, should be sold for what the market will bear. But if you're a author is your goal is to sell one copy of your writing for $4 million? Or is it to sell 4 million copies of your writing for $1? Whatever, I look at it from the author's point of view.

Let's look at the economic flow for printed versions of your writing ignoring the printed self-publishing option which usually doesn't work out:
  • The author should sell rights to his/her work for the highest return he/she can get. But if the price is too costly, unrealistic, the printed version might not sell even if there is some publisher interest. And getting serious publisher interest if you are a new author is all a matter of luck. That's at the beginning of the economic flow.
  • The publisher should resell those rights in the form of printed hard bound books and printed paperback books to retailers for the highest overall return they can get which is a function of price less cost times volume. But there are significant costs well beyond paying the author, labor for editing, marketing which flows money into magazines and newspapers, labor and materials costs for printing, shipping which involves money flow through trucking firms to drivers, etc.
  • Retailers in hundreds of locations should sell hard bound books and printed paperbacks for the highest overall return they can get which again is a function of price less cost times volume. They have rent and insurance. They have to pay the help just to keep the store open, clean, and interesting. They have competition. The big emotional argument used to be over the neighborhood bookstore or the large chain. But retailers have a problem related to space for inventory, particularly unsold inventory. They have to drastically mark down - clearance prices.
  • At the other end of the economic flow is the reader, the final buyer. He/she buys the right to to read the author's words. Once they have been read, the book, whether a $8 paperback or a $28 hard bound, is a used commodity that can be resold, shared with a friend, or a dust collector on a shelf or trash. Nothing about that used commodity will generate more money for the author, but it might result in lower sales volume for the author, publisher and new book store retailer.
Now let's look at ebooks which are a different story:
  • Again, the author should sell rights to his/her work for the highest return he/she can get. No interest from a publisher? Self-publish on the internet. Maybe through Amazon's Kindle Direct Publishing. You set the price of your writing and have two royalty options. But let's say you get a publisher's offer. It's nice to get a publisher who generates printed hard bound books. The typical hard bound sells a few hundred copies and never gets printed in paperback. But you're looking for a serious ebook publisher.
  • You land a publisher that has a serious ebook approach - it's all about marketing on the internet. Your publisher should resell those rights in the form of an ebook through online retailers for the highest overall return they can get which is a function of mostly volume times price less online marketing and formatting costs. There are relatively minimal costs beyond paying the author and on line marketing - no money flowing into magazines and newspapers, no labor and materials costs for printing, no shipping which involves money flow through trucking firms to drivers, etc. I guess they pay editors, though you could fool me.
  • Ebook retailers should sell ebooks for the highest overall return they can get which again is a function of volume times price less costs. They have to pay the help to program the site, operate and maintain the servers, etc. They have competition. But they don't have a problem related to space for inventory, even unsold inventory. And if your book isn't selling, they can do what Amazon does - offer your writing as the Kindle Daily Deal for 99¢. They get some return and you might actually get to be known. And if you get to be known, people can buy your book because its still there on line. The retailer still has it in the store, not having replaced it with this week's new book.
  • At the other end of the economic flow is the reader, the final buyer. He/she buys the right to to read the author's words. Once they have been read, the book is simply available through the reading device, not taking up physical space and collecting dust, it can't be resold nor is it easy to lend.
IMHO the ebook model will be most successful for the most authors based on low pricing and volume.

IMHO printed books have a rather strange "economic model." It is an "economic model" that I find hard to defend.

If the printed book publishing business is suffering, it is because of high overhead and marketing costs related to snob appeal (always have a few overpaid executives lunching with the "right" people to get you a review in the New York journals). And it is just silly to use up all that paper and ink and energy to print a book. And it is downright wasteful to truck the book all over the country. And retail stores use energy for lighting, heating, etc.

But if you are an author, and you are lucky enough to get the right publisher, and that publisher assigns you to the "right person" and your book gets circulated to the right reviewers and one or more decides your book looks interesting enough to read and finds it interesting enough to opine about on the pages of the New York Times, you may get to be on the NYT Best Seller List and your book will sell for $34.95. And that will make your publisher richer, may make you rich and your writing ultimately will be broadly read when the book comes out in paperback and ebooks at a cheap price.

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#55 OFFLINE   Stewart Vernon

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Posted 13 April 2012 - 02:13 AM

The problem on the other end of pricing is that consumers tend to see "low prices" as synonymous for "cheap"...

Yes, people want to spend less... but if eBooks routinely become <$9.99 then people will expect them to sell for even lower... and the lower the price is, the lower overall value people will assign to the product.

There is very little difference between a $10 burger at a sit-down restaurant and a $5 burger at Burger King these days... but the sit-down restaurant can't drop their prices because people will see it as if their food isn't somehow as good. Similarly, people won't pay more at Burger King because they perceive fast-food as lower quality.

Blu-ray movies that are new releases of a movie in theaters earlier this year are sold at higher prices than Blu-ray releases of a movie from 20 years ago just now released in high-def... even IF that older movie is actually a superior movie.

Similarly... a movie found in the bargain bin at Wal-Mart is assumed to be a lesser movie... while simultaneously setting expectations for more movies to show up in that bargain bin soon.

It's part of the race for the bottom I was talking about.

Paperbacks of a novel might be say $6.95 while a hardcover of that same novel might be $19.95... It's the exact same story, so the only reason for the difference in price is the packaging. Hardcover books are seen as more "collectible" or something to display on your shelf.

A digital copy might cost less to make, but it provides things you can't do as easily with your printed book. For instance... you can search within the digital book very easily on a computer or mobile device. You can also copy/paste from the book to an email or something else to share with someone else for say a book review or just to tell someone something funny you read... instead of having to hold the book open and type all that OR scan the page.

The point is... a digital copy provides some things a printed copy doesn't, and vice-versa. What is it worth? It depends on the consumer and it depends on the book. Each book will be different and each consumer will be different.

It's easy to say printed books cost more, because they certainly do... but the value of a book is more than just what it costs to package it up... and I think some people are forgetting that value.

If you like a book, it is worth more... if you don't like it, you probably couldn't be paid to read it.

Look at all the great classic literature that is available in eBook format for FREE... stuff that costs you $5+ at a book store... Don't forget about that when talking about eBook pricing.

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#56 OFFLINE   hdtvfan0001

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Posted 13 April 2012 - 05:47 AM

At the end of the day:

- This lawsuit is based on 3 remaining parties (including Apple) violating current price fixing laws. One would like to give all 3 parties credit that they knew about this law as they chose to try to circumvent it.

- The publishers who went along for the ride are no less guilty, but likely felt somewhat intimidated to go along based on Apple's market position, and also for their own self interest to make more money.

- The participants were wrong, should be punished, and likely will receive still penalties for their actions. Still, as others have pointed out, Apple in particular has already set aside money for any fines and will simply move on.

- Since the cost of "manufacturing" eBooks is measurably less than paper-based Books, their pricing should be able to sustain sufficient profit margins at market costs below their paper counterparts.

We'll have to see how this unfolds. I suspect we'll see some kind of "settlement" and this never goes to trial.
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#57 OFFLINE   jdskycaster

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Posted 13 April 2012 - 06:25 AM

The problem on the other end of pricing is that consumers tend to see "low prices" as synonymous for "cheap"...

Yes, people want to spend less... but if eBooks routinely become <$9.99 then people will expect them to sell for even lower... and the lower the price is, the lower overall value people will assign to the product.

There is very little difference between a $10 burger at a sit-down restaurant and a $5 burger at Burger King these days... but the sit-down restaurant can't drop their prices because people will see it as if their food isn't somehow as good. Similarly, people won't pay more at Burger King because they perceive fast-food as lower quality.


This does not hold up in the digital world. You cannot feel, see or taste the digital bits of information. You can see some cover art and read a sample of the written book just you can sample a song but it really does not matter if it is .99 or $10.99. In today's digital world most purchased are based on word of mouth or written reviews rather than price shopping.

Why your food analogy does not work at all is that there can be a huge difference in quality that you can see and taste in the final product and that is service aside. If you think Burger King and Mcd's use the same ingredients in their dollar menu burgers as a sit-down restaurant serving a $10 burger you are going to the wrong sit down burger joint.

#58 OFFLINE   Stewart Vernon

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Posted 13 April 2012 - 12:41 PM

This does not hold up in the digital world. You cannot feel, see or taste the digital bits of information. You can see some cover art and read a sample of the written book just you can sample a song but it really does not matter if it is .99 or $10.99. In today's digital world most purchased are based on word of mouth or written reviews rather than price shopping.


Tell that to the people on iTunes who are routinely having sales of half price or so on their Apps in order to boost sales. This seems to indicate that some (like me actually) wait for sales to buy some apps. I also shop for the free TV shows they have on iTunes from time to time.

Why your food analogy does not work at all is that there can be a huge difference in quality that you can see and taste in the final product and that is service aside.


Unless you are reading books differently than I am... you can't taste the difference in eBooks either :)

If you think Burger King and Mcd's use the same ingredients in their dollar menu burgers as a sit-down restaurant serving a $10 burger you are going to the wrong sit down burger joint.


Where in my message did I say anything about the dollar menu? I specifically said the $5 burgers at fast food places are not much different than the $10 burgers at a sit-down place. Obviously the dollar menu is different, and sit-down places don't have a dollar menu equivalent.

Although, that said, I'd be surprised if the source of the beef at most restaurants isn't often the same... they all shop around for bargains I'm sure... so while I wouldn't make the comparison, there might not be that much difference (except for size and toppings) in dollar menu burgers after all.

Whereas a digital eBook contains the exact same content as a printed book.

Which reminds me... how come the debate is only about price of eBook vs printed book? Why no debate on the price of audio books which are routinely more than eBooks? An audio book is someone else reading the book to you, often paraphrasing or abridged from the eBook/printed book counterpart too... but I'm not seeing any outrage over prices of audio books.

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#59 OFFLINE   TBoneit

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Posted 13 April 2012 - 02:04 PM

Where I said cost I was referring to what It would cost me to buy.

I believe the author should get the same Dollar return per copy sold whether it is eBook, Paperback or Hard cover. Unless they agree to a sliding scale dependent on time.

I still believe that the author and the publisher can both come out ahead on a lower price based on the real costs for eBooks.

If a eBook would sell 20,000 copies at a $20 price point would not a $10 price point sell more for popular fiction? Thus making more money for the author due to higher sales? Would this also not make it likelier that a book buyer might take a chance on a book at a lower price and become hooked on the author?

Certain books that will always be low volume or have a fixed volume such as reference works or technical matter or books used in schools will in general have approximately the same sales independent of price within reason.

I don't have to have an expensive bookshelf for paperbacks or hardcovers.
For eBooks I have to invest in hardware.

Therefor I buy real books and do not even have a eBook reader.
In the last 6 months I have bought approximately 40+ books.

I wouldn't even think of giving someone a eBook for a Christmas gift for example.

Many of the books I bought in the last year were used. Not available new and for sure not as eBooks. One came from England.

One book for example was
http://www.amazon.co...t/dp/B0007E1H7Y
Sleeping planet
William R Burkett

Worth reading BTW.
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#60 OFFLINE   trh

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Posted 13 April 2012 - 03:53 PM

Which reminds me... how come the debate is only about price of eBook vs printed book? Why no debate on the price of audio books which are routinely more than eBooks? An audio book is someone else reading the book to you, often paraphrasing or abridged from the eBook/printed book counterpart too... but I'm not seeing any outrage over prices of audio books.

Probably hasn't come up because this thread is about the DOJ lawsuit regarding eBooks. Also knowing what goes into making an audio book (everything that goes into a printed copy plus having someone spend weeks in a recording studio with a recording engineer and a producer), adds more cost than an eBook or printed book. So no outrage from me.

Edited by trh, 13 April 2012 - 04:02 PM.


#61 OFFLINE   Stewart Vernon

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Posted 13 April 2012 - 04:52 PM

I believe the author should get the same Dollar return per copy sold whether it is eBook, Paperback or Hard cover. Unless they agree to a sliding scale dependent on time.


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.

I still believe that the author and the publisher can both come out ahead on a lower price based on the real costs for eBooks.

If a eBook would sell 20,000 copies at a $20 price point would not a $10 price point sell more for popular fiction?


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.

Thus making more money for the author due to higher sales? Would this also not make it likelier that a book buyer might take a chance on a book at a lower price and become hooked on the author?


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.

I don't have to have an expensive bookshelf for paperbacks or hardcovers.
For eBooks I have to invest in hardware.


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.

Many of the books I bought in the last year were used. Not available new and for sure not as eBooks.


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.

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#62 OFFLINE   Alan Gordon

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Posted 13 April 2012 - 05:08 PM

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.

  • 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.

  • 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.

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#63 OFFLINE   TBoneit

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Posted 14 April 2012 - 08:21 AM

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.


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.

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.


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.

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.


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.

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.


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.

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#64 OFFLINE   Steve

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Posted 14 April 2012 - 10:05 AM

Shortly after the iPad released and prices of books in the Kindle store went up I blamed Apple of ruining a good thing for consumers, it looks like the DOJ feels the same way.

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):

"Apple trying to compete against Amazon is a good thing," said Gus Hurwitz, a fellow at the Center for Technology Innovation and Competition at The University of Pennsylvania Law School. "It's the sort of thing we want to encourage so long as it's in ways that are complying with the law."

Fair competition is at the very heart of the Justice Department's case against Apple and the publishers. The government accused the publishers of illegally holding private meetings to fix e-book prices, and later teaming up with Apple to crack Amazon's dominance of the market. Bundling all the companies together in one complaint has its own problems, though. Indeed, Hurwitz noted that Apple is not a competitor with e-book providers.

"If e-book publishers decided to collude and break the law, that's not Apple's problem. They were free to break the law and come to Apple as a cartel," he said. "That's not illegal on Apple's part." [more]


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.
/steve

#65 OFFLINE   bobukcat

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Posted 14 April 2012 - 10:05 AM

But on the other hand:

"Before the major publishers adopted the agency model in 2010, which let the publishers set the retail price of their ebooks (and kept e-book retailers like Amazon from selling below the publishers’ retail price), Amazon controlled 90% of the e-book market. The agency model helped other retailers such as Barnes & Noble and Apple gain share to the point that Amazon now controls just 60% of the e-book market."

Full article here.


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.

#66 OFFLINE   trh

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Posted 14 April 2012 - 02:15 PM

But on the other hand:
"Before the major publishers adopted the agency model in 2010, which let the publishers set the retail price of their ebooks (and kept e-book retailers like Amazon from selling below the publishers’ retail price), Amazon controlled 90% of the e-book market. The agency model helped other retailers such as Barnes & Noble and Apple gain share to the point that Amazon now controls just 60% of the e-book market."

Full article here.


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.

#67 OFFLINE   Steve

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Posted 14 April 2012 - 02:33 PM

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.

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.
/steve

#68 OFFLINE   Stewart Vernon

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Posted 14 April 2012 - 02:44 PM

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.


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.

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#69 OFFLINE   TechnoBarbie

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Posted 14 April 2012 - 02:45 PM

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.
The views/opinions expressed herein are my own and are in no way meant to represent any other affiliations I may have including my employer

#70 OFFLINE   trh

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Posted 14 April 2012 - 04:29 PM

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".

#71 OFFLINE   bobukcat

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Posted 14 April 2012 - 04:36 PM

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.


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.

#72 OFFLINE   bobukcat

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Posted 14 April 2012 - 04:40 PM

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".


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.

#73 OFFLINE   bobukcat

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Posted 14 April 2012 - 04:54 PM

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.

SNIP

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.


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!

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...

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


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.

#74 OFFLINE   Stewart Vernon

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Posted 14 April 2012 - 10:21 PM

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.

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#75 OFFLINE   trh

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Posted 14 April 2012 - 10:33 PM

Who knows, maybe in a few years the DOJ will be suing Amazon for "monopolistic practices."




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