How Apple's Agency Model for Publishers Fails to Merit Collusion Charges

macthetiger85 said:

I don't think Apple had sold a single iPad when these deals were made since iBooks was available from day one with books. So there was no complete market control whatsoever. Are actually blaming Apple now because they made a product that did well?

Apple - what a terrible company - keep making great products! :roll eyes:

By the way, I don't know anyone that thinks the iPad and Kindle compete. In fact avid book readers prefer the Kindle over the iPad. It's the screen that puts them in two completely separate categories. And for those that bought an iPad, a good percentage use the Kindle app on the iPad not the iBooks app. Amazon should be thanking Apple. Without Apple, Amazon would be losing money on every book it sold on the Kindle store since it never sold a Kindle to these people.

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Of course the fire is not competing with ipad, that's why it's reached a 20% cut of the tablet market and apple are rushing to release an ipad mini...

Yeah amazon should be thanking apple, and we should all be thanking apple for the rise in ebook prices too... and the doj should just thank apple and move along...

Your "arguments" have been rebutted by several posters here yet you refuse to understand, what can you do, you can lead a horse to the water...

IJ Reilly said:

That's a pretty good explanation, but the terminology should be "market power" instead of "monopoly," since this is what the antitrust laws recognize. Abuses of market power are said to be "monopolistic" but not necessarily "monopolies." If a company has the power to abuse its position in the market, and does so, then they will run afoul of the antitrust laws. I find using the correct terms of art help in comprehending what is going on here.

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I'm not sure the distinction that you are trying to make. The term "monopoly" is routinely used in the discussion of antitrust laws to refer to companies that abuse their market power.

http://www.ftc.gov/bc/antitrust/monopolization_defined.shtm

benpatient said:

Apple's terms for dealing with the publishers included that they were required to give Apple the lowest price (retail, not "list). That means that, combined with their agency-only policy, they were effectively pricing everything on Amazon's website, or anyone else's website, if they wanted to play ball with Apple's new store.

That gives publishers two options: Raise prices to other parties (amazon, B&N, etc), or stop selling their products with apple.

It is a very clever way of leveraging the sort of power a monopoly would wield without actually having a monopoly.

This would be like Wal-Mart telling Apple that they will stop selling iPods unless Apple changes the MSRP (and enforces the new one) to match or exceed Wal-Mart's iPod price.

Of course, Apple would just stop selling iPods at Wal-Mart, but imagine a situation where Wal-Mart is selling so many iPods that Apple has to comply, or face such a loss of business that they couldn't effectively recover. That's the threat of a retail monopoly, and with their record selling various iThings, Apple has created a mental monopoly of sorts. Companies are afraid to cross them. Afraid to tell them "no."

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This was indeed part of Apple's original contract terms with ebook publishers, and was over-the-top and egregious and at the time I in fact commented that it was probably illegal. But you know what? Apple removed that stipulation from the contract many months ago. The only limitation now that I'm aware of is, publishers can't link to an outside store from within their own e-publication. So Amazon had to take out the think from the Kindle app that directly brought a user to the Kindle web store. But I can go to the Kindle web store on my own, my an ebook for a price cheaper than the iBooks price, download it to my iPad directly, and read it. That wasn't possible at first, but it is now. I'm pretty happy with the current state of things, and despite Apple's original contract terms being ridiculous and yes, probably illegal, those terms were changed in a way that is favorable to users.

sha4000 said:

This article brings nothing new to the table IMO.

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No, but it does a great job of reminding us that Eric Slivka can't be trusted to remain objective when discussing any controversy that involves Apple.

blow45 said:

The publishers damn well want fixed prices and higher ebook prices and that's what they attempted to do, and we all have to thank apple btw for the recent surge in ebook prices.

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No. You have to thank publishers for that. Apple didn't force anyone. Apple only gave them an alternate store. What purpose they use the store is their own strategy. And if they want to use it to raise prices, that only tells me how badly amazon was pulling prices down.

macUser2007 said:

Good post and it summarizes the reason Apple is in hot water over this. I hope they get scalded.

BTW, ebook prices have shot up dramatically for consumers since Apple struck this deal, so only a true fanboy would be able to claim this is good for consumers without blushing.

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Ummm... people who actually understand business and the fact that pricing items below their cost can be damaging to a market by devaluing the product also care.

If I take your work and sell it for $1, inevitably, the perceived value of your products become $1. That does not bode well for you when you go back to charging the $15 you have to charge to actually stay in business and people say, "I'm not paying $15 for that, I got one of their books last week for $1." As a matter of fact, I am hearing that sentiment on this thread right now.

By prices "shooting up" you actually mean, have gone back to the price required to keep those companies in business (at least after Amazon stops subsidizing the losses). What is good for consumers is keeping the company in business that makes the things I like. I could easily steal any of these books from the internet and get them for "free". I choose to pay because I value the effort put into it by the people who made it.

As someone who has worked in the publishing industry, the devaluation of book publishing (especially around ebooks) has been devastating. Most people think the physical printing is the most expensive part of the book and it is not, it is the writing. Weirdly enough, people value the physical book more than they value the words and ideas they bought it for.

blow45 said:

Of course the fire is not competing with ipad, that's why it's reached a 20% cut of the tablet market and apple are rushing to release an ipad mini...

Yeah amazon should be thanking apple, and we should all be thanking apple for the rise in ebook prices too... and the doj should just thank apple and move along...

Your "arguments" have been rebutted by several posters here yet you refuse to understand, what can you do, you can lead a horse to the water...

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I wasn't talking about the Kindle Fire. I mean the Kindle Reader.
Until iPad Mini (as if they would call it that) is released, your claims of Apple rushing to release it are outrageous.

I'm not saying Apple is innocent in everything they do - goodness is it all or nothing with people around here? All I'm saying is if Amazon lowers their prices and the competition can't or chooses to not compete, then Amazon is free to price books where they want because there is no competition left.

Walmart does this time and time again to kill M&P shops and they get sued for it.

BaldiMac said:

The price of books isn't the only thing that consumers care about.

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you 've been dragging along that moronic "point" in all related threads and you don't seem to stop... I guess consumers don't just care about prices, they care also about quality of books and apple is offering superior quality by issuing standard epub books with drm, that are not interoperable with other devices. Or consumers don't just care about the price of books and they care about the price of clothes or groceries. Or consumers don't just care about book prices they care about their health too. Or consumers don't just care about book prices but they care about brick and mortar independent booksellers too which apple is taking care of by ensuring their channel of distribution is the only one, as opposed to the big mean amazon....

I care about you explaining at some point how what you are saying is anything other than nonsense....

BaldiMac said:

I'm not sure the distinction that you are trying to make. The term "monopoly" is routinely used in the discussion of antitrust laws to refer to companies that abuse their market power.

http://www.ftc.gov/bc/antitrust/monopolization_defined.shtm

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Good question, and a good link too. Notice that they use the term "monopolization" and "monopoly power" to describe abuses of market power. This is not a completely literal application of the concept of a monopoly, either from economics or the dictionary. A company does not need to have complete control over a market (i.e., a literal monopoly) to be found in violation of antitrust laws. As they say,

Courts do not require a literal monopoly before applying rules for single firm conduct; that term is used as shorthand for a firm with significant and durable market power — that is, the long term ability to raise price or exclude competitors. That is how that term is used here: a "monopolist" is a firm with significant and durable market power.

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Note also that they throw quotes around "monopolist." The law is all about what a company does, not what they are. Is that any clearer?

BaldiMac said:

The preemptive "anyone that disagrees with me is completely irrational". It's really the best way to win an argument.

The price of books isn't the only thing that consumers care about.

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Ah, but it's true.

And while price may not be the only thing consumers care about, it's right up at the top of the factors influencing a consumer ready to purchase a book.

Since Apple+publishers agreement, prices have shot up dramatically (to the tune of 60% on many titles), as no significant discounts can be offered, since they would hit the Apple price floor.

So, my assertion stands: only someone with extreme brand loyalty (a "fanboy"), would be happy that the shenanigans of their favorite brand-holder resulted in a 60% market-wide price hike.

wwchris said:

As someone who has worked in the publishing industry, the devaluation of book publishing (especially around ebooks) has been devastating. Most people think the physical printing is the most expensive part of the book and it is not, it is the writing. Weirdly enough, people value the physical book more than they value the words and ideas they bought it for.

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This is eloquently stated, and it's something that to laymen is counter-intuitive and I myself was surprised to learn a year or so ago. I would have figured that physical manufacturing and shipping were a huge percentage of the cost of a book, but it's not true apparently. Paying the writer, marketing the book, etc. is a significant factor. The publishing industry would do well to try to make this point more clear to their actual "users," people who read books (same goes for all print media, really). People balk at the cost of ebooks in comparison to hard copies, but the fact is, how can you put a price on a very good book, or a really good bit of journalism? The value they provide is priceless -- and Tom Dick or Jane blogger does NOT equal the NYTimes.

One thing that does irk me is DRM lock-in. I would like to be able to buy a book via iBooks that I can read on a Kindle or in the Kindle iPad/iPhone app, and likewise I would like to be able to buy a book via the Kindle store that I can read in iBooks. Also, loaning ebooks should be easier, in fact it should be directly analogous to physical books -- only one person can access the book at once, but it's trivial to allow that access to travel "with the book." If the publishers argue that "ebook trading networks" would simply develop that would make it too easy for people to lend each other books, I would counter with a simple "**** you, you greedy bastards."

I bet if ebooks worked more like physical books, and users could port between stores/apps and "lend" books to others, the ebook market would skyrocket.

Music labels dropped DRM and it didn't seem to hurt them very much. Book publishers should follow suit.

blow45 said:

I guess consumers don't just care about prices, they care also about quality of books and apple is offering superior quality by issuing standard epub books with drm, that are not interoperable with other devices. Or consumers don't just care about the price of books and they care about the price of clothes or groceries. Or consumers don't just care about book prices they care about their health too. Or consumers don't just care about book prices but they care about brick and mortar independent booksellers too which apple is taking care of by ensuring their channel of distribution is the only one, as opposed to the big mean amazon....

I care about you explaining at some point how what you are saying is anything other than nonsense....

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If you've already read my point in other threads, than why have you not managed to actually address it in this whole rant? I was referring to the quality of the actual content, not some special epub format. Artificially lowering prices in the book market could affect the quality and variety of books that are available.

IJ Reilly said:

Good question, and a good link too. Notice that they use the term "monopolization" and "monopoly power" to describe abuses of market power. This is not a completely literal application of the concept of a monopoly, either from economics or the dictionary. A company does need to have complete control over a market (i.e., a literal monopoly) to be found in violation of antitrust laws. As they say,

Note also that they throw quotes around "monopolist." The law is all about what a company does, not what they are. Is that any clearer?

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I understand that. My point was that it is perfectly acceptable to use the term "monopoly" in an antitrust discussion - it does not imply a literal monopoly in that context.

People seem to be hung up on the MFN part of the agreement, but MFN isn't illegal, just competing publishers agreeing to set the same prices.

macUser2007 said:

So, my assertion stands: only someone with extreme brand loyalty (a "fanboy"), would be happy that that the shenanigans of their favorite brand-holder resulted in 60% market-wide price hike.

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You're not seeing the whole picture. The concern on the part of the publishers is that Amazon would would use their near monopoly to bring down prices to the point where the publishers and authors can no longer make money.

Some have argued that amazon's prices are low to the point of being predatory and that they've been damaging in that they've skewed the public's view of the value of a book.

Personally I want to see the publishers stay in business and authors continue to make a living.

And to put things in perspective, while ebook prices may have gone up a bit, aren't those prices generally still much cheaper than buying a hard copy of a new release book (even taking into account the cost of printing)?

macUser2007 said:

Ah, but it's true.

And while price may not be the only thing consumers care about, it's right up at the top of the factors influencing a consumer ready to purchase a book.

Since Apple+publishers agreement, prices have shot up dramatically (to the tune of 60% on many titles), as no significant discounts can be offered, since they would hit the Apple price floor.

So, my assertion stands: only someone with extreme brand loyalty (a "fanboy"), would be happy that the shenanigans of their favorite brand-holder resulted in a 60% market-wide price hike.

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You are twisting things around. I'm not arguing that consumers are happy with a price increase, but they also won't be happy if some of their favorite fringe authors are no longer able to support themselves because artificially lowered pricing has marginalized the value of their work.

BaldiMac said:

... Artificially lowering prices in the book market could affect the quality and variety of books that are available....

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Huh?

In most cases, price is one of the main points of competition among sellers.

If Amazon was willing to discount ebooks, this could only benefit the consumers.

Those who place higher value on other aspects, such as brand loyalty, or whatever, could freely purchase from Apple, at the higher prices.

The problem is that Apple struck a deal with the publishers which effectively barred competition based on price (or at least at any price lower than what Apple charges).

Bad for consumers and likely illegal.

wwchris said:

Ummm... people who actually understand business and the fact that pricing items below their cost can be damaging to a market by devaluing the product also care.

If I take your work and sell it for $1, inevitably, the perceived value of your products become $1. That does not bode well for you when you go back to charging the $15 you have to charge to actually stay in business and people say, "I'm not paying $15 for that, I got one of their books last week for $1." As a matter of fact, I am hearing that sentiment on this thread right now.

By prices "shooting up" you actually mean, have gone back to the price required to keep those companies in business (at least after Amazon stops subsidizing the losses). What is good for consumers is keeping the company in business that makes the things I like. I could easily steal any of these books from the internet and get them for "free". I choose to pay because I value the effort put into it by the people who made it.

As someone who has worked in the publishing industry, the devaluation of book publishing (especially around ebooks) has been devastating. Most people think the physical printing is the most expensive part of the book and it is not, it is the writing. Weirdly enough, people value the physical book more than they value the words and ideas they bought it for.

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I feel for you, but the publishing business imo should have offered considerably discounted, or even free ebook versions with their print versions. Since ebooks became a reality a few years ago that's what I have been asking. They wanted to go all digital to reduce their costs drastically and become like the music business. Sadly they didn't understand that no one can tame the web and people are going to find most of their books for free too. Can you blame people for "stealing" an e-version if they already own the printed book and they are not given the benefit of an e-version of it?

I am planning to purchase a rather expensive at $200 book for work, the ebook version costs $180. Does the publishing industry really expect me to pay close to $400 for having the benefit of portability, and reading it on my ipad or fire as well?

I think, and sorry for being harsh, you guys have nothing but yourselves to blame. You opted for separate digital and print editions with, no discount in the digital version. That clearly to me was a way to phase out the printed book. Wrong choice, the printed book was a much treasured item for your customers. Your business depends on the ideas but it also depends on the physical item itself. Now you realize that people are devaluing the book when it's digital. Should of thought of that 5 or so years ago when the strategy became cut costs and make more profit by inciting all digital (a la music biz) and penalize customers who buy the printed item by not offering them an e-version too.

There's still time, give people the chance to get an ebook for a 10% say more on the printed book price and see your book sales pick up again and the book being valued. Keep charging almost double for the benefit of having an e-version and keep seeing your books being devalued and stolen left right and center on the web.

Oh, and something else. I recently bought a few book from an online publisher. They were charging $10.99 for each book on pdf, and another $10.99 for the epub version. I kindly asked that I have both versions as I don't know what format will eventually become more prominent, and because epub is more versatile but does not have so many native app readers yet. You know what they told me? No, you want two formats, you have to pay twice. Now is that the way to treat a customer, when I can spend 4 minutes and get their book out in 50 torrent sites, 4 p2p networks, and 5 online uploading services? The only reason I am not doing it is out of respect of the authors, because I 've been one, and I now what a hard, creative work it is....

MacRumors said:

Consequently, there are real fears among authors, publishers, and retailers that the federal government's efforts are working quickly to restore an Amazon monopoly capable of bringing down its competitors.

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I wonder how much Amazon money winds up in Washinginton each year. Washington is driven by money, just like everything else.

BaldiMac said:

You are twisting things around. I'm not arguing that consumers are happy with a price increase, but they also won't be happy if some of their favorite fringe authors are no longer able to support themselves because artificially lowered pricing has marginalized the value of their work.

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Huh? Huh?!

Your statement above makes no sense at all.

How does the discounting of a bunch of bestseller items affect the pricing of titles by "fringe" authors?

Even if Amazon or another seller discounted these "fringe" titles (as Amazon often did), the publisher and the author still get the same $$. In the case of such discounting, it's the seller (for example Amazon) who ends up with a lower profit margin.

BaldiMac said:

If you've already read my point in other threads, than why have you not managed to actually address it in this whole rant? I was referring to the quality of the actual content, not some special epub format. Artificially lowering prices in the book market could affect the quality and variety of books that are available.

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No one is artificially lowering prices. Amazon, b&n, and any bookseller have every right to buy wholesale and sell at what they see fit. The only one who's doing anything artificial is apple colluding and price fixing with publishers.

Do you seriously want us to believe that they are doing it for content? To help the consumer have better quality of content. If they wanted this, and since they are doing sweet eff all for books (unlike the app store where they provide the tools to build apps as well as verify each app) other than putting them on an interface and a search engine on the ipad, how about the set a 10% cut off for every book sold. I don't undertand how apple thinks they warrant a 30% off of each book for taking standard epubs (only to be used on their devices) and sticking them on a store front, and for that reason they wanted to change to an agency model, with fixed $12.99 and above pricing, as well as having a MFN agreement... Actually I think they have some nerve to demand all that, and then collude with publishers behind our backs to achieve them.

Boy, I guess they were doing all that, and they went for an app store high 30% even though the work they have to do here doesn't even come close to what they do to maintain the app store, because they care about the CONTENT.

Just give us break will you?

Back when Amazon was charging 9.95 for ebooks, they were not under priced. Not when Amazon was charging $6.00 for paperback version of the same book. no one can argue the an e-book costs more to make than a paper back.

BaldiMac said:

I understand that. My point was that it is perfectly acceptable to use the term "monopoly" in an antitrust discussion - it does not imply a literal monopoly in that context.

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If only more people understood that. I've been through enough debates over antitrust laws (from U.S. v. Microsoft forward) to know that this is clear to about 0.001% of the population. Most people will argue vehemently that so long as you "have another choice," XYZ Corp. could not possibly be a "monopoly" so the antitrust laws don't apply to their behavior. If the word is taken in a literal way, antitrust laws would not apply to anyone. Better to get the terminology straightened out first, is my experience.

macUser2007 said:

Huh? Huh?!

Your statement above makes no sense at all.

How does the discounting of a bunch of bestseller items affect the pricing of titles by "fringe" authors?

Even if Amazon or another seller discounted these "fringe" titles (as Amazon often did), the publisher and the author still get the same $$. In the case of such discounting, it's the seller (for example Amazon) who ends up with a lower profit margin.

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Too bad the majority of Apple cheerleaders here can't wrap their brain around the fact that the publishers have already been paid, and the concept of lower profit margin. The publisher could give two flyingfux if you charge $.20 a book, as long as they got there $6 or whatever there wholesale price is. And everyone here can't comprehend Apple isn't, hasn't and probably will never buy ONE single book which entitles them to zero in terms of having any say in price aside from the 30% Apple Tax.

The way Apple's hardware and OSX are handled are a lot more in lines of a monopoly than anything Amazon is doing with ebooks. Examples have been presented for the past few years now.

blow45 said:

I feel for you, but the publishing business imo should have offered considerably discounted, or even free ebook versions with their print versions. Since ebooks became a reality a few years ago that's what I have been asking. They wanted to go all digital to reduce their costs drastically and become like the music business. Sadly they didn't understand that no one can tame the web and people are going to find most of their books for free too. Can you blame people for "stealing" an e-version if they already own the printed book and they are not given the benefit of an e-version of it?

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I agree with this point and the one above about DRM. Without going into the specifics too much, my company saw this coming years ago and started electronic distribution long before Apple and about the same time as Amazon. We also aggregated the the rest of our industry to use our site. In order to do that, most of them demanded DRM.

Once they became comfortable with selling books online, we then moved them off of DRM (very similar to how Apple did it) and into a non-DRM "Watermark". The books are distributed as non-protected PDF's, but your name and order number is placed visibly on some pages and invisibly on others. Use it on any device you want (including the iPad), but don't distribute the files with your name on it. Of course the names can be removed, but for those wanting to do the right thing, it is more effort than it is worth.

Those who want to steal will find a way around any DRM anyway. The goal is only to make it obvious to those who "inadvertently" share because they actually don't think they are doing anything wrong.

As to the other issues, a shared digital copy is difficult with a mass-printed book. Where do you put it that the code cannot be taken out of the book and used? In order to do it, you have to shrink wrap or seal the book (and who wants to buy a book they can't look inside). I suppose you could glue a CD with the book, but now you have increased your costs (and kind of crapped up your nice book) and given people an "accidentally" distributable version of your book.

We do have a service where we offer softcover books printed on demand and shipped to you. These also come with a digital copy you can download immediately because we can verify that, in fact, you ordered the book.

I actually don't blame people for downloading an digital product to match a physical version they have purchased. If only everybody were so trustworthy.

It is a little easier for us because we are a smaller company and easier to maneuver and make decisions. The big publishers have so many contracts, individual legal requirements as well as localization issues that these are hard issues for them to navigate.

FYI, not as a plug, but just because I am sure some of you are wondering what this site is, I am including a link. We sell hundreds of thousands of books a year.

http://www.drivethrurpg.com/

macUser2007 said:

Even if Amazon or another seller discounted these "fringe" titles (as Amazon often did), the publisher and the author still get the same $$. In the case of such discounting, it's the seller (for example Amazon) who ends up with a lower profit margin.

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If Amazon sells books at a lower price, then this damages the author, even if they get paid the full price: Amazon selling at the lower price destroys the ability to charge more elsewhere. If a publisher based his business model on a retail price of $10 of which $7 is paid to the publisher, and Amazon sells for $5, then even if Amazon gives $7 to the publisher, the publisher isn't going to get $7 from anyone else anymore because nobody wants to sell it for $10.