European Regulators Reportedly Set to Approve Apple E-Book Settlement Proposal

[MacRumors]

Reuters reports that regulators with the European Union are preparing to approve an offer from Apple and four book publishers to settle an antitrust action related to e-book pricing.

Apple, Simon & Schuster, News Corp unit HarperCollins, Lagardere SCA's Hachette Livre, and Verlagsgruppe Georg von Holtzbrinck, the owner of German company Macmillan, made the proposal to the European Commission in September.

The move came after the EU antitrust authority opened an investigation into the companies' e-book pricing model, which critics say prevents Amazon and other retailers from undercutting Apple.

Officials in the U.S. and Europe have been taking on Apple and publishers over a shift to an agency model for pricing in which publishers set retail prices for books and distributors such as Apple and Amazon receive a set percentage of the sales price. The model, championed by Apple for the 2010 launch of the iBookstore, was intended to reduce Amazon's dominance in a market where it could purchase books at wholesale prices and sell them at a deep discount to undercut other retailers.

A key part of Apple's agency model was a "most favored nation" clause that prevented publishers from selling books to other retailers at prices lower than those offered to Apple. The clause was intended to prevent Amazon from striking deals to continue undercutting other retailers, but quickly drew criticism and the attention of regulators for potential price collusion effects.

Under concessions offered by Apple and publishers in the European case, Apple's agency model would be significantly unraveled, with Amazon and others being allowed to set their own pricing for books.

Article Link: European Regulators Reportedly Set to Approve Apple E-Book Settlement Proposal

[everything-i]

Back to the bad old days where the big players can strong arm the publishers into selling at prices that make them little or no profit meaning less money to invest in new titles and back to the race to the bottom.

[Daveoc64]

Originally Posted by everything-i

Back to the bad old days where the big players can strong arm the publishers into selling at prices that make them little or no profit meaning less money to invest in new titles and back to the race to the bottom.

This is nonsense.

The publishers set the wholesale price, then Amazon sells it for whatever they want.

The publisher needs to set the wholesale price at a level that meets their profit needs.

This is how just about every other product works (including paper books), why should ebooks be different?

I don't buy into "lowering customer expectation" of price.

[SimonTheSoundMa]

Originally Posted by Daveoc64

This is nonsense.

The publishers set the wholesale price, then Amazon sells it for whatever they want.

The publisher needs to set the wholesale price at a level that meets their profit needs.

This is how just about every other product works (including paper books), why should ebooks be different?

I don't buy into "lowering customer expectation" of price.

Large retailers, especially multinationals with large purchasing power bully most publishers in to lowering their prices. Retailers will even go as far as paying what they want, not what the publisher wants.

This happens with publishers, record labels, electronics manufacturers, farmers to name a few industries.

Example right now. Major retailers in the UK have forced to price of milk down to below cost price for the farmers. Many record labels have gone bust because online retailers would not pay full wholesale price.

Smaller companies also form group purchasing organisations so they can have collective buying power, whih again allows them to either buy at discount or bully manufacturers or distributors.

[Daveoc64]

Originally Posted by SimonTheSoundMa

Large retailers, especially multinationals bully most publishers in to lowering their prices.

This happens with publishers, electronics manufacturers, farmers to name a few industries.

So you're saying it's wrong for one company to do that to LOWER prices, but it's ok to do it to RAISE prices?

That's what it boils down to.

[samjohnbeck]

MacRumours should start using the correct iBooks icon

[SimonTheSoundMa]

Originally Posted by Daveoc64

So you're saying it's wrong for one company to do that to LOWER prices, but it's ok to do it to RAISE prices?

That's what it boils down to.

We're talking cost price, not retail price.



Example:
What they will do is the publisher will offer 100,000 books at $2 per unit. 100,000 books delivered, 3 months later the retailer has sold their stock sends payment to the publisher but at $1.80 per unit. It screws the publisher over.

Just following on from everything-i comment.

[Shaun, UK]

Originally Posted by SimonTheSoundMa

Large retailers, especially multinationals with large purchasing power bully most publishers in to lowering their prices. Retailers will even go as far as paying what they want, not what the publisher wants.

This happens with publishers, record labels, electronics manufacturers, farmers to name a few industries.

Example right now. Major retailers in the UK have forced to price of milk down to below cost price for the farmers. Many record labels have gone bust because online retailers would not pay full wholesale price.

Smaller companies also form group purchasing organisations so they can have collective buying power, whih again allows them to either buy at discount or bully manufacturers or distributors.

This is how retail works. What would you suggest? Fixed pricing so there is no competition amongst retailers? or prices set by manufacturers/publishers/etc? I don't see how that benefits me as a consumer. Large retailers like Amazon or Tesco will always undercut the smaller retailers because of their buying power and economies of scale.

I'm a book person. I don't like the way Amazon has driven many small independent book shops out of business, but I also like to get a discount if I can.

What we need is a return to the old co-operative movement IMO were smaller retailers band together to strengthen their buying power. In the milk example you quote why don't the milk producers join together and sell their milk collectively through a co-operative rather than each farm selling their own milk. With fewer producers the retailers would be forced to pay more because they have to offer fresh milk or they would lose customers in droves.

In this case Apple has said repeatedly that they make no money from iTunes sales so ok why not sell the iBooks for what they buy them for plus a few cents extra to compete with Amazon.

[danckwerts]

As a very small UK publisher, what drives me mad is that if I want to sell my book directly through the iBooks store I have to have an American tax ID. I have enough difficulties dealing with one tax authority and I need another like a hole in the head.

Yes, I could go through an aggregator, but why should I give someone a cut for doing almost nothing? Also, if my experiences dealing with Amazon are anything to go by, it puts one at a considerable disadvantage to have an indirect relationship with the vendor.

[everything-i]

Originally Posted by Daveoc64

This is nonsense.

The publishers set the wholesale price, then Amazon sells it for whatever they want.

The publisher needs to set the wholesale price at a level that meets their profit needs.

This is how just about every other product works (including paper books), why should ebooks be different?

I don't buy into "lowering customer expectation" of price.

Publishers can only charge decent prices for the block buster books but all the other stuff has the likes of Amazon setting the price or they just won't take it. You then end up with the only thing being supplied being the stuff Amazon considers worthy and the other stuff never published. They can do this because their high volume sales corner the market and stop anyone else from participating. All the smaller book shops have now closed and you have very little or no choice. With the Apple model it leveled the playing field to some extent so authors, publishers and suppliers could all make a decent profit. Ebooks are different because they are instantly available and any player can stock limitless numbers, it should have opened up the industry but instead the incumbents want to monopolise as usual. If there is any competition around they use their dominant place in the market to destroy it before it gets started. Basically without making a huge loss until your established there is no way to compete in this market and that is the basic problem.

----------

Originally Posted by Oletros

Publishers are paid FULL price

And why do you think many of the publishers actually favoured Apples scheme. It gave them the ability to say what was sold and for what price. Amazon has caused huge problems for smaller publishers and authors because they can set the price or they just won't take the book. They can do this because there is now little choice in supplier as the smaller ones were all driven out of business and that gives the big players too much power over publishers.

[SiPat]

What surprises me the most is that government regulators in some countries are willing to let Amazon establish a monopoly on eBooks by punishing those who want to open-up the market. Makes me wonder whether stuffed brown envelopes are involved somewhere along the line.

Amazon only paid-out 30% of each sale, whereas Apple proposed 70% -- Apple's bottom line for eBook sales doesn't benefit, but the halo effect does. And this is exactly what Amazon is doing but at a far higher profit on smaller margins.

Amazon wants to destroy the publishing market and has the buying power to tie-up the best authors by bidding higher than any publishing house -- eventually, Amazon will be the only book publisher around.

[Oletros]

Originally Posted by SiPat

Makes me wonder whether stuffed brown envelopes are involved somewhere along the line.

Really? Are you accusing them of corruption?

[Daveoc64]

Originally Posted by SiPat

What surprises me the most is that government regulators in some countries are willing to let Amazon establish a monopoly on eBooks by punishing those who want to open-up the market

They want a market where the price of products is set by the consumer through competition, not illegally by the publisher.

[throttlemeister]

Originally Posted by everything-i

And why do you think many of the publishers actually favoured Apples scheme. It gave them the ability to say what was sold and for what price. Amazon has caused huge problems for smaller publishers and authors because they can set the price or they just won't take the book. They can do this because there is now little choice in supplier as the smaller ones were all driven out of business and that gives the big players too much power over publishers.

Because Apple gives them a chance to sit on the chair of the retailer, and make a boat load of money. Problem is, they are not the retailer. They are the publisher and distributor. They want to have their cake and eat it too.

Personally, as long as ebooks are just as expensive as paper books, I will buy the cut down tree version any day thank you very much.

If they can make a paper book and make money selling it at $10, they can sell an electronic version for $5 and still make more than a good profit.

[everything-i]

Originally Posted by throttlemeister

Because Apple gives them a chance to sit on the chair of the retailer, and make a boat load of money. Problem is, they are not the retailer. They are the publisher and distributor. They want to have their cake and eat it too.

Personally, as long as ebooks are just as expensive as paper books, I will buy the cut down tree version any day thank you very much.

If they can make a paper book and make money selling it at $10, they can sell an electronic version for $5 and still make more than a good profit.

Except the $10 paper book only probably costs them $1 to print and they would be selling it for more if Amazon hadn't beat them up on the deal to stock it. The book market his currently in a mess with big players like Amazon having monopoly power and it looks like it isn't going to get any better now. There is no real reason with e-books why the publisher shouldn't be the retailer as well, Amazon offers no advantage other than providing a portal for multiple publishers offerings. After all many software companies sell direct and that doesn't cause problems. After all if they price it too high you don't have to buy it.

[gnasher729]

Originally Posted by throttlemeister

If they can make a paper book and make money selling it at $10, they can sell an electronic version for $5 and still make more than a good profit.

Printing books is _cheap_. Writing, and editing, and selling, that's the parts that cost the real money.

[Oletros]

Originally Posted by everything-i

Back to the bad old days where the big players can strong arm the publishers into selling at prices that make them little or no profit meaning less money to invest in new titles and back to the race to the bottom.

Publishers are paid FULL price

[Porco]

Apple probably don't have the same leverage now, given that since this all kicked off it's clear that Amazon own the market. If Apple were going to continue to play hardball, publishers would probably just say 'ok, see ya then Apple, won't really miss you!'.

When you have hordes of Apple/mac/iOS devotees on a site like this one saying 'I buy all my ebooks from Amazon because I can read them on different devices' (even if only macs/PCs as well as an iOS device) Apple are on to a loser. Quite why they still haven't released an OS X iBooks reader is baffling. I get why they didn't immediately, but it's backfired, and they need to admit it, and fix it, if they ever want iBooks to be anything more than for niche and casual sales, rather than mass-market in the way iTunes is for media and the appstore is for software.

[japanime]

Originally Posted by Oletros

Publishers are paid FULL price

Actually, this is NOT true. At least, not for small publishers such as my company.

Yes, we set the retail prices for our ebooks. But when Amazon discounts those prices, they pay us an amount based on that discounted price — not our original retail price.

[JohnnyW2001]

Originally Posted by everything-i

Back to the bad old days where the big players can strong arm the publishers into selling at prices that make them little or no profit meaning less money to invest in new titles and back to the race to the bottom.

You don't understand what's being discussed here. We're talking about RETAIL prices, not COST prices. Shops cannot haggle with distributors over prices -- what possible leverage do they have?

If a shop wants to sell a product at a lower than cost price in order to get more people in the store, they should be allowed to. It doesn't affect the publishers in the slightest.

When Amazon discounts their non-eBook products, the publishers (distributors) still get exactly the same amount of money. How do I know this? Because I've spoken to publishers about this very issue!

[ovrlrd]

The biggest issue is a fundamental difference in the way that Apple and Amazon operate.

Amazon has always been about attracting people to their store. If it means making a small margin on ebooks, that is inconsequential to their bottom line.

Apple has always been about selling hardware, and to do so they need virtual goods available to give their hardware a purpose. To make buying ebooks from Apple attractive, they need to have a huge catalog of books available for purchase. So what do they do? They make a deal with publishers that would attract them to the platform by not forcing a pricing model on them. The last thing publishers want is someone with a dominant position telling them how their books should be priced.

Consumers don't like publishers forcing their prices, but the fact is that pricing has a huge psychological impact on people's opinions of a book. Psychology is always a big factor in marketing, and people tend to forget that because they hate revealing the man behind the curtain.

[Shmet]

How is there 'bulk' purchasing for e-books? It's a file you buy once and sell many of. For physical media, sure, but for digital, I don't think it applies. I feel the agency model is better for digital, particularly for small/self publishers (for one author's view on the benifits of self publishing and evil stupidity of the 'big 6' publishers, visit http://jakonrath.blogspot.com/)
The big publishers still price their e-books at physical book prices, thinking to reap massive profits, but will eventually realize that the poor numbers aren't due to people not using e-readers, but because customers aren't willing to pay for such a huge markup.

[samcraig]

Originally Posted by Shmet

How is there 'bulk' purchasing for e-books? It's a file you buy once and sell many of. For physical media, sure, but for digital, I don't think it applies. I feel the agency model is better for digital, particularly for small/self publishers (for one author's view on the benifits of self publishing and evil stupidity of the 'big 6' publishers, visit http://jakonrath.blogspot.com/)
The big publishers still price their e-books at physical book prices, thinking to reap massive profits, but will eventually realize that the poor numbers aren't due to people not using e-readers, but because customers aren't willing to pay for such a huge markup.

It's the same content. So why should it be less? Further - why is it ok for Apple to reap tremendous profits with their hardware - but customers/posters here will balk at paying the regular price for an ebook?

Until physical books no longer exist (and that's a long time off) - it still costs the publisher to publish a book because of all the marketing, typesetting, legal fees, distribution of physical media, etc that are associated with publishing. Also charging less for eBooks vs physical books undervalues the content and undermines physical books as well. It doesn't make good business sense if you're a publisher.

[Shmet]

As you said, apple makes those profits on hardware. Each sale is for something that has to be built each time for each sale. An e-book (or any other digital media) on the other hand, only needs to be 'built' once.

Physical books require editing, typesetting, cover art, printing, binding, sales to bookstores, shipping and buy backs from the bookstores (and other things I'm sure I'm leaving out). This is used to justify the cost (and how little the author actally gets from each sale). An e-book only needs the editing, typesetting (formatting) and cover art, which are already done for the physical version. After that, its just place it online and sell it over and over again.

[samcraig]

Originally Posted by Shmet

As you said, apple makes those profits on hardware. Each sale is for something that has to be built each time for each sale. An e-book (or any other digital media) on the other hand, only needs to be 'built' once.

Physical books require editing, typesetting, cover art, printing, binding, sales to bookstores, shipping and buy backs from the bookstores (and other things I'm sure I'm leaving out). This is used to justify the cost (and how little the author actally gets from each sale). An e-book only needs the editing, typesetting (formatting) and cover art, which are already done for the physical version. After that, its just place it online and sell it over and over again.

Right - so explain how the VALUE of the product is diminished? It's not. It's the same content.