Sidebar Sidebar
Become a MacRumors Supporter for $50/year with no ads, ability to filter front page stories, and private forums.

Apple Claims 20% of U.S. E-Book Market, Double Previous Estimates

Ralf The Dog said:
Apple does not sell songs at below their price If you use your market position to sell below your cost, it is destructive. If you use a new model to reduce your cost, making it hard for your competitors, it is the market at work.

The only reason to drop your price below cost and run everyone else out of business is to jack your prices up later. If you keep your prices below cost, you eventually run out of business yourself.

Reduced cost due to better efficiency and better business model, good. Reduced price due to having more money than everyone else and selling for a loss, bad.
Click to expand...

Amazon wasn't losing money. Only select titles were selling at a loss. And publishers already had a mechanism for "safety" - to simply not issue an eBook at the same time as a print book.

Again - you can't assume Amazon would have raised prices. You also can't assume Amazon would have had a monopoly.

And lastly - my scenario wasn't really addressed. If Apple sells music for .99 or 1.29 a track and "owns" the music space - there's nothing stopping them from deciding that $1.49 is better now. Or 1.99. But yet no one seems to be "concerned" with that because - why? It's Apple?
 
forty2j said:
I like low prices as much as the next guy, but what you need to realize about this case is that Apple's behavior (legal or not) disrupted a market where Amazon was taking a loss on every book sold to drown out competition, intending to monopolize the market and then charge whatever they damn well pleased once their dominance was permanently established. By forcing Amazon to make a profit, they actually save the DOJ from having to step in with an antitrust suit against them in a few years time.
Click to expand...

I appreciate trying to recast Amazon as the plotting culprit here. So play that out. Amazon dominates the Ebook market by that strategy, kills off all competitors, then socks it to us by- say- doubling or tripling prices. What then? Apple and other competitors could step into the market and undercut Amazon's new, much higher prices and kill their monopoly. While Amazon does control how it prices it's products, it doesn't control the products themselves. If suddenly, Amazon decided to triple all prices right now, it's consumers would just shop elsewhere. If there was no elsewhere at the moment, there would soon be many elsewheres popping up looking to take advantage of the huge opportunity provided by Amazon's decision to jack up prices.

Flip it. Can't we see Apple as the Amazon of eMusic? IMO, I think so. Does that stop upstart music competitors from competing against Apple with lower prices and apparently making a profit at lower prices? Lots of other players have music at lower prices than Apple. If Apple suddenly flexed it's dominance on music by doubling or tripling prices, would we all keep paying up or would more of us go buy our music elsewhere?

There's a big difference between the classic monopoly concept where a company can completely control the flow of a resource (oil, telephone service, etc) and the idea of a retailing monopoly in that the retailer that dominates to kill all competition and then jacks up prices to take advantage will essentially create new competitors who can offer the great consumer appeal of much lower prices. If that was Amazon's grand plan, Apple could have rolled out ebook in that scenario and quickly take a lot of share from the monopoly of that Amazon... make it's target margin and probably then some and not do what they did here.

If you want to talk retail monopoly, think Walmart. What seems to be the #1 focus of Walmart from a consumer's point of view? What makes many e-tailers shop Amazon instead of many other e-tailing stores? Both are built on a price-competing model. Both could indeed have plans to eventually double or triple prices if they ever achieve a complete monopoly, but as soon as they do the shoppers will look for lower-priced alternatives that would pop up right at that point. This is especially true in a cheap infrastructure e-tailing business like Ebooks.

Can this really happen? Think of absolutely unique products like maybe a patented pharma product. Price in U.S.: say $10/pill. Price in- say- Canada: say $2/pill. Anyone buy their medicine from Canada if they had the option? Of course. Need some serious dental work near the Mexican border. $5K or $10K US or drive across the border and get the same for $500 or $1000. Anyone drive across the border for dental services? It's thriving.

Lastly, by saving the DOJ from an anti-trust suit in a few year's time, Apple's actions replaced that legal burden with the current suit underway now.
 
Last edited:
Ralf The Dog said:
This is very good for authors. Amazon is using the Wholesale Model to artificially run it's prices down, well below cost, running it's competition out of business. The agency model prevents retailers from using their near unlimited resources to run the competition out of business.
Click to expand...

Amazon pays the publisher FULL price when they purchase them. They chose to offer some books at a loss for short periods of time.

Apple is on trial here. Not Amazon.
 
How is it the government's business to tell Apple what's good business? Surely their job is tell tell them when they're being naughty, not when they're not making as much money as they could be? They sound like some of the people on these forums!
 
donutbagel said:
Collusion is anti-competitive. It also doesn't work unless you have a high market share. Besides, I don't see how allowing publishers to name their own price is collusion, unless there is evidence of a secret meeting where they were fixing prices.
Click to expand...

There was a "secret" meeting(s). Jobs was there. I don't have the exact quote but it went something like "this helps you get what you want anyway" which was basically saying something along the lines of more money for you (publishers) and more money for us (Apple). Do a search and you can find the exact description of events. For instance, here's one: http://consumerist.com/2013/05/15/d...ow-that-apple-engaged-in-e-book-price-fixing/

Nothing against Jobs here either- he was doing the CEO thing of trying to maximize ROI for Apple shareholders. His job was to try to find ways to grow profits. In trying to bite into the Ebook market, it didn't look like they could get their target profits by competing with the lower-consumer-pricing model as it was. So the key was to raise prices for consumers in such a way that competitors running the other model (of lower prices for consumers) could no longer have lower prices for consumers. Net: Apple would have the lowest price but it would generally be a higher-to-much higher price than it was in the prior model.
 
Last edited:
HobeSoundDarryl said:
Lastly, by saving the DOJ from an anti-trust suit in a few year's time, Apple's actions replaced that legal burden with the current suit underway now.
Click to expand...

Agree about the eMusic (see my previous posts).

As for this comment - I'll add that there is no guarantee that there would have been any "other" trial (anti-trust) in the future. So in essence, Apple's actions (seemingly) has actually BURDENED the DOJ, not relieved it...
 
What's interesting about this issue to me is the general discussion about whether or not an ebook is a commodity. For commodities(generally speaking lower prices are always better. All commodities are pretty much the same - gas from one gas station is pretty much the same as gas from another gas station.

Apple's always been in the business of saying that their products are not commodities. If they sell specialty products or services, then they can charge more for their phone/laptop/computer because not all phones/laptops/computers are equivalent.

The ebook discussion; about what is better for the consumer is an interesting part of this. Low prices isn't the only factor. Apple's philosphy has always been that people should pay for better products. I think this philosophy is fundamentally why, for example, the App store is more financially succesful than the google play store; Apple customers abide by the philosophy that one should be willing to pay for a good product.

As it's applies to ebook's, the more money publisher's have, the more risk they can take on new author's: investing in books that may appeal to a smaller audience. It's why apple has been able to make drastic changes with IOS 7; because they have the money to fail. Reducing the price of book's will have a long term impact on the quality of book's. I'm not representing this as a legal stance, but Apple is taking a strong ethical stance: If Amazon is allowed to artificially lower the prices of book's, quality will suffer.

I think this is especially interesting in our newer world where big business can enter parallel markets. I think the traditional defenition of competitive capitalism doesn't cover the nuances of business that can use their funds to enter other market's. When I say that Amazon has artificially deflated the ebook market, it's because it would be unsupportable on it's own, they use the rest of their business to support their ebookstore and gain marketshare, driving out the competition. I think google has done the same thing with Android. It will be very difficult for other OS's to make themselves prominent, because who will take the risk on their own OS when they can get Android for free. It's an interesting debate. Apple somewhat did this early on with the itunes store as well, while it's probably profitable now, initially it was not profitable, it was just there to sell more ipod's.

And for all the discussion on Amazon inflating the prices of ebook's; they don't have to do that for it to be bad for consumer's, all they have to do is reduce the margin on book's to the point that publisher's can't make a profit.
 
Last edited:
HobeSoundDarryl said:
Flip it. Can't we see Apple as the Amazon of eMusic? IMO, I think so. Does that stop upstart music competitors from competing against Apple with lower prices and apparently making a profit at lower prices? Lots of other players have music at lower prices than Apple. If Apple suddenly flexed it's dominance on music by doubling or tripling prices, would we all keep paying up or would more of us go buy our music elsewhere?
Click to expand...

Since you mention music, how come the anti-competitive behaviour of the record companies which licensed DRM-free music downloads to Amazon, but refused to license it to Apple was never investigated?
 
Spectrum Abuser said:
Who would buy an e-Book from the iBook store? You're limited to just your iDevices in terms of reading your content. And don't tell me it's because of cloud syncing. The Kindle application sycns all of my content with every device that I own.
Click to expand...

I can only speak for myself, but I find iBooks to be a better reading experience than the Kindle or Nook apps on the iPad. I've purchased from all 3, and I've tended to go with the lowest price (including whatever price I can find for a physical book). To me, iBooks is a more responsive app.

While I've looked at a Kindle (I do find it hard to read an iPad outside) or a Nook, I've never been able to justify buying one. I don't travel enough to really benefit from the weight savings, and the eBooks are cheap enough in relation to a physical book (or a library-borrowed copy) to justify the cost of the device. At least the iPad can do lots of other things.

But to each his or her own.
 
gnasher729 said:
Since you mention music, how come the anti-competitive behaviour of the record companies which licensed DRM-free music downloads to Amazon, but refused to license it to Apple was never investigated?
Click to expand...

Good question. Perhaps (and I don't claim any expertise on this subject) it's because it wasn't about price fixing or collusion. Or simply there was no evidence that Amazon got together with the labels to "screw" apple with being stuck with DRM.
 
gnasher729 said:
Since you mention music, how come the anti-competitive behaviour of the record companies which licensed DRM-free music downloads to Amazon, but refused to license it to Apple was never investigated?
Click to expand...

The Gov doesn't go after every culprit in these kinds of behaviors. And if that led to consumers getting exploited by Amazon or the Music Industry, I'd personally be all for it. It's not the government's mandate to help one company get the same benefits/deals/etc as another company; it's supposed to be the government's business to keep such actions from socking it to "we the people". Most of the time the Gov fails at this for all kinds of reasons. But when they try, we should appreciate an action that seems to be putting "we the people" above "we the corporations"... even if it's an action against the ONE corporation we might like to rule them all.

There's a ton of other such targets the Gov should go after too. I think sometimes the Gov chooses a narrow, smaller niche thing like this to remind other bigger fish that it won't completely stand by and do nothing if they get too greedy (or maybe to remind other bigger fish that campaign contributions are due or you might be next). Whatever the case, it's nice to see an action focused on looking out for the average Joe instead of some of richest companies in the world.
 
samcraig said:
Good question. Perhaps (and I don't claim any expertise on this subject) it's because it wasn't about price fixing or collusion. Or simply there was no evidence that Amazon got together with the labels to "screw" apple with being stuck with DRM.
Click to expand...

The labels collectively refused to give Apple DRM free music without adopting a three tiered Agency model. Once Apple did accept it, the labels used their new found pricing control to raise the average selling price of a song in iTunes. Sound familiar?

That scenario was actually worse, they were trying to break up Apple's iTunes dominance by purposely setting prices higher than Amazon's instead of just aiming for price parity. Once you consider this, Apple's desire for a MFN clause makes a lot of sense.

The labels should have been investigated for that, and the publishers were rightly investigated for this. The weird part is the inclusion of a vendor in the collusion accusations. In both of these cases, I would not have placed blame on the vendor (Amazon in music, Apple in Books).
 
paradox00 said:
The labels should have been investigated for that, and the publishers were rightly investigated for this. The weird part is the inclusion of a vendor in the collusion accusations. In both of these cases, I would not have placed blame on the vendor (Amazon in music, Apple in Books).
Click to expand...

Well I disagree - if Amazon was the driving force behind the music label's actions - they should have been brought up on charges if the labels were.

Which is why I am OK with Apple being brought before the DOJ if they, in fact, were an equal partner in collusion.
 
samcraig said:
Amazon wasn't losing money. Only select titles were selling at a loss. And publishers already had a mechanism for "safety" - to simply not issue an eBook at the same time as a print book.

Again - you can't assume Amazon would have raised prices. You also can't assume Amazon would have had a monopoly.

And lastly - my scenario wasn't really addressed. If Apple sells music for .99 or 1.29 a track and "owns" the music space - there's nothing stopping them from deciding that $1.49 is better now. Or 1.99. But yet no one seems to be "concerned" with that because - why? It's Apple?
Click to expand...

No one is concerned about Apple raising prices on iTunes music because Apple has consistently wanted to keep prices low. If it were up to Apple, songs would never sell for more than .99 a track. It's the music labels who pushed Apple to allow them to sell for a higher amount. That's why all new music on iTunes is more than .99 - b/c the music labels want to maximize their profits.

Apple takes a straight 30% cut, on music and apps. But, they make a relatively small amount on software sales. They want music, apps, books, etc. to be cheap in order to sell more hardware (iPhones, iPods, iPads, Macs, etc.)

Apple was pushing the same thing for e-books - publishers can price their books at whatever they want. Apple takes a straight 30% cut. How is that price fixing? The publishers can set their prices as high or low as they want and let the market (buyers) dictate whether they want to pay or not.
 
AlterZgo said:
No one is concerned about Apple raising prices on iTunes music because Apple has consistently wanted to keep prices low. If it were up to Apple, songs would never sell for more than .99 a track. It's the music labels who pushed Apple to allow them to sell for a higher amount. That's why all new music on iTunes is more than .99 - b/c the music labels want to maximize their profits.

Apple takes a straight 30% cut, on music and apps. But, they make a relatively small amount on software sales. They want music, apps, books, etc. to be cheap in order to sell more hardware (iPhones, iPods, iPads, Macs, etc.)

Apple was pushing the same thing for e-books - publishers can price their books at whatever they want. Apple takes a straight 30% cut. How is that price fixing? The publishers can set their prices as high or low as they want and let the market (buyers) dictate whether they want to pay or not.
Click to expand...

Why do people insist that Amazon doesn't want to keep book prices low then?

Because it's Amazon? That's my point.

And based on the documents I saw online that were in court - Apple was seemingly trying to fix the price because they wanted higher prices that Amazon was offering to be the norm at the same time saying books needed to be between 12.99-14.99.

Regardless of what people think - I believe the inquiry is 100 justified and worthwhile. Regardless of outcome.
 
samcraig said:
Amazon wasn't losing money. Only select titles were selling at a loss. And publishers already had a mechanism for "safety" - to simply not issue an eBook at the same time as a print book.

Again - you can't assume Amazon would have raised prices. You also can't assume Amazon would have had a monopoly.

And lastly - my scenario wasn't really addressed. If Apple sells music for .99 or 1.29 a track and "owns" the music space - there's nothing stopping them from deciding that $1.49 is better now. Or 1.99. But yet no one seems to be "concerned" with that because - why? It's Apple?
Click to expand...

Apple has contracts with the Music Distributors and takes 30% of the sales price. Music Distributors set the price, and it is music distributors that wanted $1.29 for some of the more popular music, so Apple agreed if the music was lossless and DRM free. That's why we aren't concerned.

The Agency model at work.
 
samcraig said:
Well I disagree - if Amazon was the driving force behind the music label's actions - they should have been brought up on charges if the labels were.

Which is why I am OK with Apple being brought before the DOJ if they, in fact, were an equal partner in collusion.
Click to expand...

How can a vendor just breaking into the market be a driving force? The content owners are the ones with the power, vendors just negotiate the best possible deal for themselves. They can't actually participate in the act of price fixing, so how can they, by definition, be an "equal partner"?

The publishers didn't need Apple to force Amazon into the Agency model, they could withhold books at any time (and I understand some were). It's a really difficult case to go after a vendor due to a lack of direct involvement. There's also nothing to be gained from the case. The publishers already gave any concessions there were to be given (contracts terminated and renegotiated without the MFN clause). It's nothing more than the DoJ grandstanding on public dollars at this point.
 
paradox00 said:
How can a vendor just breaking into the market be a driving force? The content owners are the ones with the power, vendors just negotiate the best possible deal for themselves. They can't actually participate in the act of price fixing, so how can they, by definition, be an "equal partner"?

The publishers didn't need Apple to force Amazon into the Agency model, they could withhold books at any time (and I understand some were). It's a really difficult case to go after a vendor due to a lack of direct involvement. There's also nothing to be gained from the case. The publishers already gave any concessions there were to be given (contracts terminated and renegotiated without the MFN clause). It's nothing more than the DoJ grandstanding on public dollars at this point.
Click to expand...

I disagree. For reasons I've said in this thread and in others.

Apple seemingly provided a way out/alternative market which - even though they were new to books - had a proven model (music) and millions of customers already involved in their ecosystem.
 
lilo777 said:
It is relevant in the following way. Apple's share is 20% now. It's losing miserably to Amazon because Amazon's business model is better. But if Apple (and publishers) were allowed to keep their cartel prices Apple's share would be much higher. Government says that Apple needed price fix in order to succeed in e-book market.
Click to expand...

Amazons business model is (probably) not sustainable. Of course we will only know that for sure when brick and mortar book stores have all folded...
 
samcraig said:
Why do people insist that Amazon doesn't want to keep book prices low then?

Because it's Amazon? That's my point.

And based on the documents I saw online that were in court - Apple was seemingly trying to fix the price because they wanted higher prices that Amazon was offering to be the norm at the same time saying books needed to be between 12.99-14.99.

Regardless of what people think - I believe the inquiry is 100 justified and worthwhile. Regardless of outcome.
Click to expand...

The publishers wanted higher prices and Apple suggested and negotiated those tiers, and in at least one case, a publisher wanted higher pricing than the top tier. More to the point, after a bestseller has been out for a while the publisher can decide to lower pricing to attract more frugal customers, and the publishers do take advantage of that.

I buy lots of stuff from Amazon, books in print amongst that, but no ebooks, video downloads or music. I don't generally buy that from the iBookstore or iTunes either, preferring BD disks and CD's for music.

In my opinion, the DOJ hasn't figured out that tough negotiation positions aren't the same as collusion, but let the case unfold as it may.
 
You must log in or register to reply here.
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.
Top Bottom
Back