U.S. Government Warns Apple and Publishers of Antitrust Lawsuit over e-Book Pricing

[WannaGoMac]

Here is an author's description of publishing costs vs. ebook (self-publishing). He lists the costs of all the parts of creating a book.

http://www.huffingtonpost.com/ja-konrath/ebooks-and-self-publishing_b_764516.html



Also, let me clarify, I am supportive of Apple (I think the apple lovers here think I was attacking apple), I am attacking the publishers...

 

[jlc1978]

Sounds feasible to me, I know for a fact when I check e-book vs hardcopy prices I've found e-books to be much more expensive on numerous occasions. This doesn't make sense from a printing and delivery standpoint, and makes me believe these companies are trying to take advantage of the hype and popularity behind ebooks as a new technology. I hope they come down hard on Apple and Publishers if it's true, ripping off customers should not be a business model for any company. No sympathy for greed.

The cost of a product does not determine it's price, demand does. Companies then set prices based on what they believe will result in maximum profits.

Cost only determines wether or not I produce or continue to produce a product; if I can't price above costs eventually I will stop making a product or go out of business.

That doesn't mean the pricing and revenue sharing model for ebooks isn't wrong; but to say if it costs less to produce it should sell for less isn't correct.

 

[applesith]

The government can print money. that seems like a pretty anti-competitive practice.

 

[JP89Hornet]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Mobile/9B176)

Thank god they are doing something... For those of you out of college or never went let me tell you, it is getting crazy. I'm in 4 classes this semester and I spent $400, $300, $250, and $300(from last semester). And these prices are conservative for many books. What people don't understand is that the authors aren't the ones making the huge profits, it's the publishers. I have no doubt that if authors all switch to apple prices will go down, but I don't see that happening anytime soon.
Just glad to know someone in this country cares about one of the largest factors of American citizens debt... COLLEGE!

 

[bocomo]

apple agreed to sell for msrp in return for mfn/mfc status, this is common with larger clients. This is not a lock in and i don't see how it's collusion either.

http://itlaw.wikia.com/wiki/most_favored_nation_clause

personally the publishers can hang, but i don't see how apple is in violation of anti-trust. If anything amazon has been blatantly pulling a "walmart" on ebooks by using their dominant position to squeeze out competition.

this!

 

[drewyboy]

And apple has done what exactly? If I'm to look at this right, apple has done nothing wrong. They DONT set prices, therefore how can they take part in this? The whole point of the agency model is that the publisher is in charge of setting the price, not the retailer. They are simply a retailer for e-books. This should be focused solely on the publishers.

Please explain to me what I'm missing because this seems like an obvious fail for the DOJ to include apple. Is it just a money grab or because apple is a buzz word right now?

Edit: I'm serious, if you can correct me please do but I'm just not seeing it right now.

 

[Mak47]

Yes, but isn't the point of increasing competition to reduce prices?

Reduced prices are one benefit of a competitive marketplace. The others are innovation and product variety.

If, for example, all ebooks were priced at $9.99 there would be no competition based on price. Profit margins would be lower and as a result other companies may not be interested in entering the market. This would leave consumers with fewer choices in e-reader devices as well as fewer options in where to purchase content. It could also have led to fewer choices in content as a whole, as some publishers may have opted not to publish for the lower margin market.

If fewer companies are in the market, there is less incentive to innovate. With fewer companies and less innovation there are also fewer jobs created than would be as a result of an industry that is competitive on multiple levels.

Many would argue that it is best to compete on an innovative level first. Then when a product has become mature, allow pricing to be the competitive point--which it inevitably would.

Where Apple may have gone wrong here is the clause in their contract with publishers that doesn't allow them to sell their product for less with another company. Having not read the actual contract I can't speak to exactly how it works, but if it's simply that (as most of the reports point out), then that would create a potential problem.

 

[3282868]

I love Apple as much as the next guy...

...but c'mon guys, the blind faith that Apple can do no wrong is sometimes baffling.

My concern is that Apple may do to the eBook/text book industry as they did with iTunes and music: create a locked in eco-system by which the consumer has to use only Apple devices for their iTunes media through exclusive partnerships with publishing houses in which Apple dictates pricing (this is the case with app's, music, movies, etc already in the iTunes eco-system). I understand that DRM by the RIAA, et al was to blame for this and that most of the media (music mainly, not movies/tv shows) is now DRM free. However, if I decide I don't want an iPhone but a phone from company X, Y or Z, I then need to find another method to utilize my purchased content out of the iTunes eco-system.

If this happens for eBooks/text books (only readable for iDevices at the moment, I can't read an eBook in iTunes on my Mac), and Apple [again] compels publishers to deal with Apple's iTunes conduit, as is the case with music, then how is this helpful to us, the consumer? Amazon and other companies provide online digital music, but let's be honest, most of us buy it through iTunes as it's much more convenient and that's the way Apple wants it.

I believe there is much more to this than we realize (i.e. it's not simply about the pricing of books but the availability or lack there of in obtaining eBooks in the future should these partnerships with Apple become exclusive). Based on Apple's history it isn't a stretch to understand where this "partnership" may lead, just as it did with the music industry and now the movie industry. Apple is dictating the rules, and they have $80+ billions in cash and a strong consumer market to tap into. Either play by Apple's rules or get out of the sandbox.

 

[zoetmb]

So they'd rather publishers not be compensated fairly for their work? Um....

That's not the case. Regardless of what Amazon or anyone else charges, there is still a publisher-determined wholesale price that the publisher receives (in the traditional model, not the Agency model.) iTunes is an exception to that where Apple sets the price and the labels receive back 70%.

And for most trade books, authors receive royalties based upon the suggested retail price of the book and this applies to most (but not all) e-book deals as well. In the cases where an e-book is considered a subright or an ancillary right, the royalties to the author can be much higher - frequently 50%.

The problem with the trad model was that while the publishers generally still received what they wanted, Amazon selling ebooks for a loss was anti-competitive with everyone else who was trying to sell. That used to be called "predatory pricing" and it was illegal. But if all you're interested in is the lowest selling price, predatory pricing should be legal.

But what is a little bit weird here is that the Supreme Court ruled several years ago that manufacturers could set not only minimum advertised pricing, but minimum selling price (which I thought was a bad ruling because while the retailer doesn't have a choice in the matter, it still amounts to price fixing, IMO). There's really no difference between the agency model, where the publisher sets the selling price and setting minimum selling prices. So why is the Government going after everyone? They should establish new laws that kill that Supreme Court ruling first.

 

[bb426]

This isn't good! The government should not dictate what a company charges for it's products/services. If you are dissatisfied with Apple's pricing, you should buy your e-books from Amazon! If they overcharge, use Kobo or Barnes and Noble. If they overcharge, refuse to buy e-books until the pricing goes down.
It's called the free market.

Totally agree.

Nobody is making you buy Apple iBooks. There are numerous solutions out there, even those that STILL work with your iPad. If people don't buy the books, the prices will go down. Apple has always charged premium for their products... The government shouldn't be the one deciding what price is right. It's not their job.

And huge long political argument I won't respond to starts... now...

 

[sugarbear]

Sounds feasible to me, I know for a fact when I check e-book vs hardcopy prices I've found e-books to be much more expensive on numerous occasions. This doesn't make sense from a printing and delivery standpoint, and makes me believe these companies are trying to take advantage of the hype and popularity behind ebooks as a new technology. I hope they come down hard on Apple and Publishers if it's true, ripping off customers should not be a business model for any company. No sympathy for greed.

The cost of a product does not determine it's price, demand does. Companies then set prices based on what they believe will result in maximum profits.

Cost only determines wether or not I produce or continue to produce a product; if I can't price above costs eventually I will stop making a product or go out of business.

That doesn't mean the pricing and revenue sharing model for ebooks isn't wrong; but to say if it costs less to produce it should sell for less isn't correct.

Well said, jlc.

People are acting as if access to ebooks is some kind of inalienable human right. It's a luxury product (i.e. non-essential) and, if you don't like the price, vote with your feet and put your money elsewhere.

That's the language Apple and the book producers understand and why, absent unique conditions (like monopolies), the free market works.

If you want prices to go down, then don't buy 'em!

 

[iScott428]

When I was getting my undergrad a few years ago the book prices were ridiculous. I would have jumped at the chance to pay 15 !!FIFTEEN!! Dollars for a text book! I was paying Hundreds...So every semester I could have bought a new 16gb iPad and all my books and still probably spent less. My resort to avoiding paying extremely inflated prices for (a) book(s) that would be outdated next semester...not buy the book(s). So you either get my 15$ or nothing. I guess you want nothing. Fools.

 

[zioxide]

Publishers would stop publishing if they thought it wasn't worth it.

Publishers are ****ing useless, they take public domain information and put it in a book and then charge students $150 for it. A weeks pay for a single book. **** them. The textbook industry is a huge scam. Then they update the edition (by changing like one page) and you can't sell back the old version. Money doesn't grow on trees for us students, even though these companies think it does. They like to rape us over the coals for every last penny when we are already struggling enough. A months pay for textbooks at the beginning of the semester is RIDICULOUS.

 

[transmaster]

Check out Baen Books

One dioes not have to shop at the big joints for ebooks. If you are into Scifi/fantasy books there is no better place the Baen books.
http://www.baen.com/ Their ebooks cost $6.00 dollars and are DRM free. They also have cloud storage of your purchases, and they support what ever you are using as a reader.

As for content check out Google books, they have scanned in somewhere around 80 million books, and there are many 100's of thousands of those books that are free to download. If you want a hard copy there are numorous publish on demand book stores you can order a copy from.

 

[zoetmb]

Sounds feasible to me, I know for a fact when I check e-book vs hardcopy prices I've found e-books to be much more expensive on numerous occasions. This doesn't make sense from a printing and delivery standpoint, and makes me believe these companies are trying to take advantage of the hype and popularity behind ebooks as a new technology. I hope they come down hard on Apple and Publishers if it's true, ripping off customers should not be a business model for any company. No sympathy for greed.

The reason for that is that ebooks are usually considered an ancillary right or a subright and instead of the usual 10-12% royalty back to the author, it can be 50%. And in the cases where the publisher wasn't granted the ebook rights in the first place and now they want it, they usually also have to pay another advance which has to be earned out. There are cases where the agent/author are holding back ebook rights for themselves. That is a bad precedent that will kill traditional publishing: what difference does it make whether the end result is a printed page or an ebook? The publisher is (or should be) buying the right to the intellectual property.

 

[firewood]

The price of ebooks is WAY WAY too high.

Would you say that if you were an author who slaved for months on each book and depended on book royalties to pay the rent?

Or if someone were an author thinking about writing a book you would very much want to read, would they have enough incentive to spend the time to write it at a lower price point? Versus switching to some other career?

And the publishers are probably in a very good position to know where the peak revenue price point occurs. Better information than you have. Face it, you might just be too poor to be the most profitable market segment for ebook publishers to target.

 

[caddisfly]

Please provide facts to backup your claims. Numerous, now independent, authors have listed item by item the costs you say are so much and found that they can sell books profitably at ~$3 (or less) inclusive of hiring editors, layout experts, and writing. Google it and you'll find these write ups easily.

Ok, so if you're right that it's so inexpensive to distribute, why are ebooks not the same price or at least a bit less expensive than traditional books? There have to be SOME savings with ebooks over paper books.

take a look at: http://www.fonerbooks.com/paper.htm

Can't say they are definitive but....
1. the average book published in the US is a print run of 2000 copies in its lifetime. That includes the big blockbusters; most self-publishing is 200 copies

2. the cost of printing a run like that is estimated to be between $2 and $3 per book. It drops to $1 per book at 10,000 copies. That is printing...no money for anyone like the author, etc

So even if you could profitably sell a book at $3 per copy....how many folks do you know are willing to write a book for that? Not many folks can put out more than 1 book a year. Check the numbers:

-gross $6000 over lifetime of book
-minus amount of time/cost required to research, write, edit, design. layout book
-minus advertising and distribution costs (Apple's cut, getting an ISDN number, etc)

I don't see how anyone could make the numbers work at $3 per copy. Please provide how that works?

 

[Tailpike1153]

IMHO, the fact that this justice dept went public with this before having an air-tight case is typical. Threaten litigation on a federal scale so the defendants will be more inclined to pay for protection *cough* *cough* I mean settle.

What worked for the Mafia should be good enough for the US Govt.

 

[WannaGoMac]

take a look at: http://www.fonerbooks.com/paper.htm

Can't say they are definitive but....
1. the average book published in the US is a print run of 2000 copies in its lifetime. That includes the big blockbusters; most self-publishing is 200 copies

2. the cost of printing a run like that is estimated to be between $2 and $3 per book. It drops to $1 per book at 10,000 copies. That is printing...no money for anyone like the author, etc

So even if you could profitably sell a book at $3 per copy....how many folks do you know are willing to write a book for that? Not many folks can put out more than 1 book a year. Check the numbers:

-gross $6000 over lifetime of book
-minus amount of time/cost required to research, write, edit, design. layout book
-minus advertising and distribution costs (Apple's cut, getting an ISDN number, etc)

I don't see how anyone could make the numbers work at $3 per copy. Please provide how that works?

As I posted above in this thread....

Here is an author's description of publishing costs vs. ebook (self-publishing). He lists the costs of all the parts of creating a book.

http://www.huffingtonpost.com/ja-kon..._b_764516.html

 

[snowmoon]

Here is a hint to the DOJ. "Amazon Prime"

Amazon abused their dominance in the e-tailer market to push a yearly shipping fee where the primary outcome is that people will choose Amazon for future purchases. They then use this anti-competitive advantage to start offering other, unrelated, services in e-delivery markets. Each time they use prime as the foothold to leverage their market position in one market to start and undercut the competition in another. The most recent addition being Kindle lending network where authors agree to exclusivity on Amazon for a period of time to get a chance at a monthly pool of cash.

 

[zaphon]

This isn't good! The government should not dictate what a company charges for it's products/services. If you are dissatisfied with Apple's pricing, you should buy your e-books from Amazon! If they overcharge, use Kobo or Barnes and Noble. If they overcharge, refuse to buy e-books until the pricing goes down.
It's called the free market.

The government isn't dictating what the publishers charge. What is being looked at here is the new agency model that Apple publicly talked about prior to the launch of the iPad. Steve Jobs was asked how he expected to compete in the e-book market with people like Amazon (who was still using a traditional wholesale model, where they paid $X for the book, and than could sell it for any price they wanted (it's how paper books still work), even if that was a loss (stores do it all the time)), and he responded that Amazon customers would be paying the same price. The iPad launched, they had this new Agency model where the publishers controlled the price, and the publishers basically forced Amazon into the same model (the believe is that Apple colluded with the Publishers prior to the launch of the iPad to ensure that they would force this model on the other retailers, so that Apple could be competitive. How else could have Steve Jobs said the things he did prior to the launch of the original iPad, when Amazon/Barnes and Noble/etc. hadn't even been given a heads up about this new pricing model. That's what lead to this investigation.)

In the last year, I haven't bought a single book on my Kindle, as every single new book that has come out that I was interested in reading was CHEAPER in paper format (when I bought my first kindle, new best sellers we're priced at $9.99, and I had built a financial model showing just how many books I would have to purchase before I would recover the cost of my kindle (the first Kindle wasn't cheap). I've never reached that point, and I own 3 kindles now, so unless the agency model goes away, I will NEVER reach that point). I've seen tons of arguments in threads from people trying to explain how it costs more in e-book, but the reality is that it's simply the agency model. In the paper format, the wholesale model is still used, and all the stores are competing for price point in order to allure customers to their store. But the e-book pricing is fixed at every retailer.

I personally don't see how making every retailer charge the same rate helps competition at all, as what is the benefit of me going with retailer A versus B if the cost is the same? Especially in an electronic model.

Anyway, there is a lot of history on this, for those of you who have been following it (as a Kindle owner, I have actively followed it and complained to Amazon many times for giving in so easily, though the publishers played a pretty dang nasty game with Amazon (forcing Amazon to remove books from their store by the publishers)). I suggest you look into it.

 

[3282868]

Here is a hint to the DOJ. "Amazon Prime"

Amazon abused their dominance in the e-tailer market to push a yearly shipping fee where the primary outcome is that people will choose Amazon for future purchases. They then use this anti-competitive advantage to start offering other, unrelated, services in e-delivery markets. Each time they use prime as the foothold to leverage their market position in one market to start and undercut the competition in another. The most recent addition being Kindle lending network where authors agree to exclusivity on Amazon for a period of time to get a chance at a monthly pool of cash.

Replace "Amazon" with "Apple" with regards to music and other digital content. See a connection?

No one company should dictate an industry. As I stated earlier, Apple has done this with music and now movies. With $80+ in cash reserves and a strong consumer market and a dying print industry, of course publishing houses will jump into bed with Apple. However, it's either play by Apple's rules or get out. I don't believe this is about the cost of the eBooks and text books, but about Apple creating another closed eco-system through exclusivity with publishers through iTunes.

 

[spice weasel]

THis is quite incorrect.

Distribution costs are the least expensive components of a book; it's a labor intensive industry, from editing to procurement to..um...writing.

THe savings from ebooks simply aren't as great as people think.

I'm not even going to pretend that I know enough (or anything, really) about the publishing industry to either agree with this statement or to refute it.

However, I think the biggest issue with e-book costs is that people expect them to be lower because there is an intrinsic belief that something that is purely digital should cost less than something that is physically tangible. It's the same with music and movies/tv shows. So whether or not an e-book costs the same to create and distribute as a paper book (and I highly doubt it does, given that there is zero printing, shipping, and warehousing costs associated), it needs to be sold for less than its paper book counterpart if people are really going to get on the e-book bandwagon in large numbers.

In terms of this case, without knowing all the details I'll just say that price-fixing schemes are terrible for consumers and need to be dismantled by the government whenever they are discovered.

 

[dethmaShine]

Sounds feasible to me, I know for a fact when I check e-book vs hardcopy prices I've found e-books to be much more expensive on numerous occasions. This doesn't make sense from a printing and delivery standpoint, and makes me believe these companies are trying to take advantage of the hype and popularity behind ebooks as a new technology. I hope they come down hard on Apple and Publishers if it's true, ripping off customers should not be a business model for any company. No sympathy for greed.

It is definitely true. All of the computer science books are like +£5-£15 on the iBookstore. It just comes as a shock that you could buy two hard copies for the price of one. I for once, would not defend apple. I have no interest in buy books worth £100 when they are sold at £50 on amazon or other places.

 

[Daveoc64]

This isn't good! The government should not dictate what a company charges for it's products/services. If you are dissatisfied with Apple's pricing, you should buy your e-books from Amazon! If they overcharge, use Kobo or Barnes and Noble. If they overcharge, refuse to buy e-books until the pricing goes down.
It's called the free market.

No, it's called the Agency Model, where everything you've just talked about can't happen.

READ the article before posting.

With the Agency Model, retailers cannot compete with each other on price. That's the problem that the US Government (and several others around the world) have with the Agency Model.

The other issue to note is that books sold using the Agency Model don't sell as well as those that aren't - largely because retailers can't discount them. We've yet to see the Agency prices go down though. Another victory for the "free market".