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MacRumors
Dec 7, 2011, 11:22 AM
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The Wall Street Journal reports (http://online.wsj.com/article/SB10001424052970203501304577084331269336926.html) that the U.S. Department of Justice has for the first time publicly confirmed that it is conducting an antitrust investigation of the e-book industry, joining yesterday's announcement (http://www.macrumors.com/2011/12/06/european-regulators-investigating-apple-and-e-book-publishers-over-antitrust-concerns/) of a similar probe by the European Commission.The U.S. Justice Department confirmed Wednesday that it is conducting an antitrust investigation into the pricing of electronic books, the latest antitrust watchdog to probe whether there was improper collusion by publishers and Apple Inc. to prevent discounting.

At a congressional hearing, Sharis Pozen, the Justice Department's acting antitrust chief, said: "We are also investigating the electronic book industry, along with the European Commission and the states attorneys general."The attorney general of Connecticut was first to launch a probe (http://www.macrumors.com/2010/08/02/apple-and-amazon-targeted-in-probe-of-ebook-pricing-deals/) into the issue last year in the wake of the launch of Apple's iBookstore.

Regulators are interested in examining the potential antitrust implications of the agency pricing model championed by Apple in which publishers control book pricing and retailers receive a commission (30% in Apple's case) based on the sales price. Publishers had previously sold books for set wholesale prices with retailers allowed to set retail pricing, but with Apple pushing the agency model, other major retailers such as Amazon have also signed on and remade the book pricing landscape as e-books have become increasingly popular.

Article Link: U.S. Department of Justice Also Conducting e-Book Antitrust Investigation (http://www.macrumors.com/2011/12/07/u-s-department-of-justice-also-conducting-e-book-antitrust-investigation/)



icelord
Dec 7, 2011, 11:32 AM
What am I missing here? The publisher sets the price...

This is no different than apps. What is anticompetitive? The competition for the publishers is other books, the competition for Apple is how much of a chunk will Amazon say they will take of the price. There is true competition and the control for pricing is further up the value chain.

Sounds good to me...

godknows
Dec 7, 2011, 11:43 AM
The problem comes from the whole system favoring big businesses rather than small startups. The big corporations enjoy way more tax cuts, have lower tax rates and generally more bargaining power.

If the system is composed of more, smaller companies, publication houses in this case, I don't see how the agency model will be a problem at all. Much like what is happening now in the app space.

mkrishnan
Dec 7, 2011, 11:45 AM
Sounds good to me...

I'm very curious to see what the US and EU investigations lead to, but it's hard to argue against the data that, with Apple's entry into the market, many eBooks that cost $9.99 now cost $11.99-12.99 and relatively few are offered at prices substantially lower than the $9.99 to offset. Likewise, before Apple revised it's pricing model for digital music, it all cost $0.99 on iTunes and often $0.89 on Amazon, and now most of the music costs $1.29. In neither case is it clear that the move caused broader adoption of the medium by publishers.

I'm not saying I'm against the agency model, and it has all kinds of advantages in leveling the playing field for smaller publishers and independents, but the net impact (I was buying both eBooks and downloaded music before this pricing model) is that stuff costs more now than it used to.

icelord
Dec 7, 2011, 11:50 AM
The problem comes from the whole system favoring big businesses rather than small startups. The big corporations enjoy way more tax cuts, have lower tax rates and generally more bargaining power.

If the system is composed of more, smaller companies, publication houses in this case, I don't see how the agency model will be a problem at all. Much like what is happening now in the app space.

Just like with many industries, technology will allow the value chain to be decreased. That is, bring more power back to the author and limit and reduce costs for each step along the way to the ultimate customer. Editing is still needed, promotion as well, but "publishing" is losing value.

I agree, the agency model pushes more pressure back on the middle man and not on the consumer, who still has plenty of power to choose. Choose a reader type, choose the store to buy from, choose whether to buy a particular book...

----------

I'm very curious to see what the US and EU investigations lead to, but it's hard to argue against the data that, with Apple's entry into the market, many eBooks that cost $9.99 now cost $11.99-12.99 and relatively few are offered at prices substantially lower than the $9.99 to offset. Likewise, before Apple revised it's pricing model for digital music, it all cost $0.99 on iTunes and often $0.89 on Amazon, and now most of the music costs $1.29. In neither case is it clear that the move caused broader adoption of the medium by publishers.

I'm not saying I'm against the agency model, and it has all kinds of advantages in leveling the playing field for smaller publishers and independents, but the net impact (I was buying both eBooks and downloaded music before this pricing model) is that stuff costs more now than it used to.

The pricing of books is not on Amazon or Apple. That is on the publisher. Same with music, the 1.29 songs are the "popular ones" that the labels want to charge more for. If you shop around, you can find songs that are more or less on iTunes vs Amazon. If the publisher or record label wants to charge more at one store vs another, that is up to them (unless they have a contract stating otherwise).

redscull
Dec 7, 2011, 11:52 AM
Can someone explain the alternative? If publishers don't set the price, then that means the retailer, Apple in the case of iBooks, sets the price? How is that better? And why would Apple want to maintain staff that makes pricing decisions on books? They just want a simple cut.

In an online world, it seems like content creators should set the price, not the digital distributor. And if authors still use publishers instead of selling their content directly, then it's those publishers who establish the content price. It just makes sense.

The only thing even worth investigating is whether or not authors can sell their wares directly via iBooks without going through a publisher. Can they? Cause if not, then that might not be fair (why give publishers a cut; what do they really provide to an author in a digital world?).

daxomni
Dec 7, 2011, 12:04 PM
I foresee a similar outcome as with the Microsoft antitrust case. Both sides of the Atlantic will find the defendants guilty. In Europe the fines will be steep and the terms severe. In America the fines will be relatively minor and the terms will allow them to be paid in something other than actual money. Shortly thereafter America's antitrust regulations will face another round of rollbacks to help ensure this sort of thing never happens again.

Zimmy68
Dec 7, 2011, 12:08 PM
It is written right in the Jobs book on what he did.

Too bad it is probably legal but I think it stinks.

Amazon had been pricing books to what people expected e-books to cost.

In comes Jobs and tells the publishers, we will let you sell at whatever price you want but if someone sells it cheaper, we can drop the price.

This let's the publisher tell Amazon, if you drop the price, we won't let you sell our books.

If this would have happened with music, we would be paying $4-$5 per song.

For people that have no problem with what Apple has done to e-book pricing...
Ever notice how the price of the major e-books don't fluctuate?
Hardcover versions vary wildly (up to 40% off) during the first weeks/months of release but the e-book price stays exactly the same on both iBooks and Amazon.
Isn't there something wrong with that?
Is that a free market system?

Because of Apple, the publishers get to say, pay what we want or you can't sell our product.

Lucky for me, there are easy ways to circumvent their "practices".

Rodimus Prime
Dec 7, 2011, 12:10 PM
I'm very curious to see what the US and EU investigations lead to, but it's hard to argue against the data that, with Apple's entry into the market, many eBooks that cost $9.99 now cost $11.99-12.99 and relatively few are offered at prices substantially lower than the $9.99 to offset. Likewise, before Apple revised it's pricing model for digital music, it all cost $0.99 on iTunes and often $0.89 on Amazon, and now most of the music costs $1.29. In neither case is it clear that the move caused broader adoption of the medium by publishers.

I'm not saying I'm against the agency model, and it has all kinds of advantages in leveling the playing field for smaller publishers and independents, but the net impact (I was buying both eBooks and downloaded music before this pricing model) is that stuff costs more now than it used to.


From what it sounds like it is not so much Apple and Amazon are being investigated for wrong doing but more Apple and Amazon are a location to gather a lot of information and it might lead to the publishers being nailed.

It seems people are thinking investigation means are Apple is in trouble and down rate it. They do not understand investigation could be nothing more than info gathering a bigger fish.
Hell it would nail some of the crap we see in college text books.

mkrishnan
Dec 7, 2011, 12:18 PM
Hell it would nail some of the crap we see in college text books.

Yeah, I don't have any interest in Apple or Amazon or anyone else being nailed -- just in transparency and fairness in pricing.

My observation is just that, irrespective of the underlying logic of the price moves, Apple's moves in pricing for music and more particularly books led to an industry-wide increase in retail price of these goods. That parallel doesn't clearly exist in the app market, where other app stores have a similar conceptual pricing model to Apple's but vendors clearly price differently as the please from site to site.

On the other hand, I think at some point it's highly likely that Apple's app store subscription policy will raise someone's alarm bells -- not because Apple does anything that is clearly "wrong," but that they create a dominant platform (like MS did with Windows), and once that is done, they can potentially take on an anti-competitive role by virtue of their lockdown of that platform.

I think the way that pricing works in these online markets is evolving and very interesting -- so I'm not waiting for Apple to get spanked, but just very curious to see what they find is going on. Certainly, when arguments were promulgated that text messaging costs to providers are disproportionately low compared to the charge to consumers, that was interesting (even if nothing has been done about it yet).

Laird Knox
Dec 7, 2011, 12:27 PM
I'm very curious to see what the US and EU investigations lead to, but it's hard to argue against the data that, with Apple's entry into the market, many eBooks that cost $9.99 now cost $11.99-12.99 and relatively few are offered at prices substantially lower than the $9.99 to offset. Likewise, before Apple revised it's pricing model for digital music, it all cost $0.99 on iTunes and often $0.89 on Amazon, and now most of the music costs $1.29. In neither case is it clear that the move caused broader adoption of the medium by publishers.

I'm not saying I'm against the agency model, and it has all kinds of advantages in leveling the playing field for smaller publishers and independents, but the net impact (I was buying both eBooks and downloaded music before this pricing model) is that stuff costs more now than it used to.

Then again, isn't everything more expensive these days? ;)

I'm not saying you are right or wrong, just that I remember when a cup of joe was a nickle and you could go to the moving picture show for ten cents. :D

icelord
Dec 7, 2011, 12:28 PM
Yeah, I don't have any interest in Apple or Amazon or anyone else being nailed -- just in transparency and fairness in pricing.

My observation is just that, irrespective of the underlying logic of the price moves, Apple's moves in pricing for music and more particularly books led to an industry-wide increase in retail price of these goods. That parallel doesn't clearly exist in the app market, where other app stores have a similar conceptual pricing model to Apple's but vendors clearly price differently as the please from site to site.

On the other hand, I think at some point it's highly likely that Apple's app store subscription policy will raise someone's alarm bells -- not because Apple does anything that is clearly "wrong," but that they create a dominant platform (like MS did with Windows), and once that is done, they can potentially take on an anti-competitive role by virtue of their lockdown of that platform.

I think the way that pricing works in these online markets is evolving and very interesting -- so I'm not waiting for Apple to get spanked, but just very curious to see what they find is going on. Certainly, when arguments were promulgated that text messaging costs to providers are disproportionately low compared to the charge to consumers, that was interesting (even if nothing has been done about it yet).

If Apple has a transparent cut of the sale model and a clause to price match anything lower, there is nothing wrong with that. If you think books are too expensive, then blame the publishers. I do not see how we can hold Apple responsible for market price when they do not set it. This is a fair model and allows for those who "own" the content to name the price they want. If consumers are at the expense of this, then they need to pursue action against the content holders.

We cannot continue to hold business and retailers hostage. The relationship is moving up the value chain. We interact with the developer and publisher on pricing and value. This is the same with Ebay or any other model where the retailer is providing a medium and not holding the content in inventory...

Rodimus Prime
Dec 7, 2011, 12:46 PM
Yeah, I don't have any interest in Apple or Amazon or anyone else being nailed -- just in transparency and fairness in pricing.

My observation is just that, irrespective of the underlying logic of the price moves, Apple's moves in pricing for music and more particularly books led to an industry-wide increase in retail price of these goods. That parallel doesn't clearly exist in the app market, where other app stores have a similar conceptual pricing model to Apple's but vendors clearly price differently as the please from site to site.

On the other hand, I think at some point it's highly likely that Apple's app store subscription policy will raise someone's alarm bells -- not because Apple does anything that is clearly "wrong," but that they create a dominant platform (like MS did with Windows), and once that is done, they can potentially take on an anti-competitive role by virtue of their lockdown of that platform.

I think the way that pricing works in these online markets is evolving and very interesting -- so I'm not waiting for Apple to get spanked, but just very curious to see what they find is going on. Certainly, when arguments were promulgated that text messaging costs to providers are disproportionately low compared to the charge to consumers, that was interesting (even if nothing has been done about it yet).


The App market still has so many players in it that no players have any large amount of control.
In books you have what 6 major players and they can raise prices and the market has no way to really stop it.

Take a look at the record companies. In the past they got nailed in court for anti trust and were required to pay out billions in after the law suit to anyone who bought cds over a select number of years.
Also right after that law suits CD prices dropped from like $15 per cd to $10 per cd.

mkrishnan
Dec 7, 2011, 12:59 PM
Then again, isn't everything more expensive these days? ;)

I'm not saying you are right or wrong, just that I remember when a cup of joe was a nickle and you could go to the moving picture show for ten cents. :D

Haha, true, but there's a difference between a 30% price increase in a commodity that occurs essentially in a light-switch fashion (which is what happened in these cases) and the price of a commodity creeping up over time. Movies did not go from 10 cents to $10 in a year. Where this happens outside of Apple's digital sales, there are also usually government inquiries (e.g. when gasoline prices increased in this fashion recently).

iorangutan
Dec 7, 2011, 06:18 PM
The discussion of Apple's "supposed" 30% commission is an interesting one, and there are many, many factors often ignored that would soon suck away a large proportion of the 30%, for example:

iTunes Gift vouchers - don't you think the retailers of the gift vouchers get a %?
Discounted iTunes gift vouchers - you can nearly always buy iTunes vouchers at a 25% discount. The Author/Musician still gets 70% of the sales price, Apple would get ~5%
Sales and other taxes (which vastly differ between countries)
Credit card fees - can be 5% or more
Other financial and management fees
Maintaining and supporting iTunes software (which certainly could be a lot better) and its customer support


These are just a few obvious examples.

And the shareholder expect a certain profit level. I find it hard to believe with 30% "off the top" Apple make much actual % profit on iTunes sales.

A lot of direct retail in shops has a 100% mark-up (i.e. they charge twice as much as they bought it for) to cover their costs and attempt to make a profit...

Good luck to them I say!

davidg4781
Dec 7, 2011, 11:51 PM
The App market still has so many players in it that no players have any large amount of control.
In books you have what 6 major players and they can raise prices and the market has no way to really stop it.



Can't the market just not purchase the goods or services to really stop it? Market price is what the seller and buyer agree on. If the prices of books or music were too high, it wouldn't be successful and people wouldn't buy them. Then Apple/Amazon/Publishers/Recording Artists/Whoever will bring the price down so that people will get excited and spend some money.

Right now, I'm assuming, the price of e-books are exciting for people and they're paying for them. Yeah, it seems high. Yeah, it's probably more than what we'd like to pay, but I doubt there's anything that someone will say, "You know what, I wish that thing cost more."

louiek
Dec 8, 2011, 03:41 AM
If you want to buy the latest book by your favorite author, you can go to any number of stores and choose the lowest priced copy. There's competition, free if not necessarily fair. If the price is being set by the publisher, then you've got a monopoly. Not a monopoly in books, but a monopoly on that particular book/author. Unless I'm missing something really obvious, and I probably am, how is this not monopolistic and anti-competitive? This is an inelastic market, people aren't going to say "gee that latest Dan Brown book was 30% more than I was happy paying, but look at how cheap this Barbara Cartland is."

Rodimus Prime
Dec 8, 2011, 07:59 PM
Can't the market just not purchase the goods or services to really stop it? Market price is what the seller and buyer agree on. If the prices of books or music were too high, it wouldn't be successful and people wouldn't buy them. Then Apple/Amazon/Publishers/Recording Artists/Whoever will bring the price down so that people will get excited and spend some money.

Right now, I'm assuming, the price of e-books are exciting for people and they're paying for them. Yeah, it seems high. Yeah, it's probably more than what we'd like to pay, but I doubt there's anything that someone will say, "You know what, I wish that thing cost more."

that really only works when their are comparible products you can get for a lower price. Problem is there are not enough players to force that to happen so they just up the cost for the rest of us.

You have no choice but to pay it. They can use higher prices and make us all pay because that is our only choice.

davidg4781
Dec 9, 2011, 01:03 AM
that really only works when their are comparible products you can get for a lower price. Problem is there are not enough players to force that to happen so they just up the cost for the rest of us.

You have no choice but to pay it. They can use higher prices and make us all pay because that is our only choice.

Buy the book from a local vendor
Library
Steal an ebook from the internet
Pool your money between friends
Half priced books for everyone
eBay
Watch TV

There are loads of choices. It's not like it's fuel or food or something where you HAVE to buy it. Not buying it is also a choice.

Rodimus Prime
Dec 9, 2011, 02:06 AM
Buy the book from a local vendor
Library
Steal an ebook from the internet
Pool your money between friends
Half priced books for everyone
eBay
Watch TV

There are loads of choices. It's not like it's fuel or food or something where you HAVE to buy it. Not buying it is also a choice.

By that argument I am going to point to cell phones.

In the US we pay more than almost all the other develop countries. About the only one we pay less than is Canada but they have even fewer players than we do.

Also by your arugment Microsoft should have free rein to do what ever they want because if they price to high or block things they can do what they want.

Also remember the same people who publish Ebooks also print them. They have some pretty strong arm controls there.

Lastly I look up the record industry getting nailed for illegally raising the price of cds in the early 2000's. People could of done all those choices then as well and yet they got nailed for it. Right around that time and after they loss in court prices of CD's fell like a rock from 15- 20 bucks per disk down to 10-13 bucks per cd.

icelord
Dec 9, 2011, 01:38 PM
By that argument I am going to point to cell phones.

In the US we pay more than almost all the other develop countries. About the only one we pay less than is Canada but they have even fewer players than we do.

Also by your arugment Microsoft should have free rein to do what ever they want because if they price to high or block things they can do what they want.

Also remember the same people who publish Ebooks also print them. They have some pretty strong arm controls there.

Lastly I look up the record industry getting nailed for illegally raising the price of cds in the early 2000's. People could of done all those choices then as well and yet they got nailed for it. Right around that time and after they loss in court prices of CD's fell like a rock from 15- 20 bucks per disk down to 10-13 bucks per cd.

Ever notice how many gas stations there are (yes, many are independently operated), yet the price is pretty much the same. There are some exceptions, but pretty uniform. Also, the price variance between each store is not result of competition as much as it is of a marketing. The books have a "retail" price. Anyone who pays retail for a hard copy book is also the same type of sap that would rent a movie on iTunes that is free on instant queue for their Netflix account. Hard copy books have a retail price, but the publisher makes their money and the retailer gets marginalized by trying to sell the book.

Apple is not in the business to sell books, rather to sell iPads. To them, the bookstore is another walled garden for them to encapsulate their members. They don't want to get hosed by publishers trying to play games, and just want to cover the costs to do business. The only step of anti-competitive measure I see is a clause that states lowest price will be matched. To me, however, that doesn't eliminate competition, but rather eliminates differentiation with competition. While seemingly a slight play with words, it does mean something that is not anti-competitive or anti-consumer.

As stated before. Ebay, consignment shops, and even clothing retailers have this model. They do not want to own inventory. They house a store and supply floor space. If your stuff doesn't sell. Tough for you. If it does, we take a cut. The competition between stores still exists, but it is argued with the whole library (as in the contract terms) rather than on a book by book basis.

icelord
Dec 9, 2011, 02:11 PM
I'm very curious to see what the US and EU investigations lead to, but it's hard to argue against the data that, with Apple's entry into the market, many eBooks that cost $9.99 now cost $11.99-12.99 and relatively few are offered at prices substantially lower than the $9.99 to offset. Likewise, before Apple revised it's pricing model for digital music, it all cost $0.99 on iTunes and often $0.89 on Amazon, and now most of the music costs $1.29. In neither case is it clear that the move caused broader adoption of the medium by publishers.

I'm not saying I'm against the agency model, and it has all kinds of advantages in leveling the playing field for smaller publishers and independents, but the net impact (I was buying both eBooks and downloaded music before this pricing model) is that stuff costs more now than it used to.

BTW,

Here is an example of the books having different prices.

Amazon 9.99:
http://www.amazon.com/ESV-Study-Bible-ebook/dp/B001CDWFPC/

This same book is 14.99 on iTunes...