Apple Rebuts Antitrust Charges Over E-Book Pricing

[BaldiMac]

You said "Amazon's attempt to force prices down could inhibit the niche author's ability to live off of their work."

So, to me that implies "special treatment" in that you seem to be arguing by inference that this is one reason we all have to live with higher eBook prices, so that niche authors can continue to live off their work.

Again, I've already explained exactly what I meant. You keep changing what I said to argue a larger point that I did not make. I am not in favor of higher eBook prices. I just explained a potential negative consequence of a monopoly artificially lowering prices.

Or if that isnt your point, then why mention it ? Why not say instead "the people who make a living working in physical book distribution warehouses will find it harder to get jobs" ? Is that also a reason to raise prices?

Because that was not my point. I'm not in favor of raising prices. The fact that prices have been raised is not illegal. The actual issue is whether the publishers colluded to raise prices. The fact that prices are higher is not an antitrust problem by itself.

So what? You say this as if its a bad thing (unless its just another statistic you bandy around and will shortly say you dont mean anything by it) But that 90% is purely because they provided eBooks at a price people liked! Its not because they have a stranglehold on eReaders, authors, technological standards or anything other than a good price.

AIUI your argument is you wish them to raise prices so that i can buy exactly the same book at Amazon or Apple at a higher price in order that what ? That Amazon dont have 90%, and so that niche authors can possibly make a living? Whats the issue with Amazon having 90%? Whats teh magic number under which its OK to allow prices to be set by Amazon?

And re niche authors, I think you are way off base anyway, I've bought dozens more books, many from niche authors, since the availability and prices of such niche authors books are typically around the $1-$5 range (both thanks to Amazon = do you wonder why they got the 90%?).

A niche author at $15, I'm not going to take a chance. So I suspect that niche authors do much better under the new world than the old.

An actual example, take John Locke, who I'd never heard of before Kindle, I've bought probably a dozen of his books, all around $2. So that niche author is getting some percentage of around $20 in total from me, as opposed to the zero I'd have spent with him at $15 when I simply wouldn't have bought one of his books.

90% of the market is significant because the issue we are talking about is potential antitrust violations. How are new competitors supposed to enter the market when Amazon is willing to lose money on the most popular books?

And your point is what exactly? If they don't like those terms, they can go elsewhere, there is no blockage to that. Why dont the 6 publishers provide a place where authors who wish to sell books at $15 each at 70% can go? Thats not Amazons job. Though as I said above, I think Amazon know what price people will spend hence why they discourage authors from setting that price point. But they dont forbid it and the author can publish elsewhere if she doesn't like it.

No, they couldn't realistically go elsewhere when Amazon had 90% of the market. They still have massive market power. That's why we have antitrust laws.

 

[EbookReader]

Because without the entry of Apple, and its Agency-pricing model, competition with Amazon in the e-book business was going to be all but impossible. Only companies that were prepared to subsidize (to the tune of hundreds of millions of dollars) the sale of new Bestsellers were going to be able to compete. Even if you are the strongest possible proponent of self-publishing, you cannot assert that having only one outlet for an author's work can be a good idea?

Why can't Apple compete with Amazon on wholesale?

Apple

1) bigger company with a lot more cash reserve ($90 billion)
2) huge profit margin on hardware (Ipad) compare to Amazon no profit margin on the Kindle Fire

It's seem to me Apple is in a MUCH BETTER position to compete against Amazon on ebook pricing. But elected not to do so.





Apple is competing with Amazon using wholesale on

1) digital music
2) digital movie
3) digital movie rental

why can't Apple compete using wholesale with digital books?


p.s. Didn't Apple also have a HUGE share of digital music? It is slowly declining thanks to new players (Amazon MP3 and Google Play). These 2 players compete against Itunes using "wholesale."

Kindle had a huge share of ebook (90%) back in late 2009 because its only competitors back then was

1) Sony
2) Nook (debuted back in late 2009) and selling using "wholesale"

Its market share would diminish if the like of Apple and Google also enter the market and compete using wholesale.

 

[EbookReader]

Who are the major content holders of apps in the App Store? (aka between themselves, they own more than 60-70% of the market)

----

Who are the major content holders of digital books?

The Big 6 Publishers


Who are the major content holders of movies and tv shows?

The Big 6 Hollywood Studios



Who are the major content holders of music?

The 4 Major Record Labels







Amazon buys mp3 wholesale at around $0.91.
Sell it at $0.99 for many best sellers

Itunes buy mp3/aac wholesale at $0.91
Sell it at $1.29 for many best sellers


Would there be an anti-trust lawsuit if Apple and the Major Record Labels got together and decide to force Amazon MP3 to raise its price from $0.99 to $1.29? (by letting the Major Labels decide on the retail price)

 

[BaldiMac]

p.s. Didn't Apple also have a HUGE share of digital music? It is slowly declining thanks to new players (Amazon MP3 and Google Play). These 2 players compete against Itunes using "wholesale."

Apple's share of the digital music market was around 27% in 2010. It has grown slowly to around 35% as the percentage of downloads to CD sales has increased. Their share of the downloadable music market has remained pretty stable over the last couple years with only a slight increase.

 

[tbrinkma]

Your argument doesn't follow from the figures you posted to support it...

They priced that Steven King novel "sky high" as an ebook to slow down the adoption of ebook.

...

see for yourself http://www.amazon.com/11-22-63-A-Novel/dp/1451627289

List Price: $35.00
...
Kindle price: $18.99

The e-book price is 'sky-high' compared to the physical book, at roughly 1/2 the price?

why is it that Amazon is allowed to discount physical book but not ebook?

That's the difference between the wholesale model and the agency model.
Even with Amazon apparently eating their *entire* profit (based on typical book production costs and wholesale -> retail markups), the ebook only cost about $1.50 more than the physical book, while providing a 30% profit to the seller at $18.99, rather than a 50% profit at $35.00.

Please explain how that is 'sky-high', because that claim doesn't make any sense if you actually look at the numbers you presented.

 

[tbrinkma]

I believe that have already addressed these points. To clarify:

1) They settle because they are going to lose if they go to court.

2) Antitrust suits may be expensive to fight, but they aren't settled because the companies can't afford the cost of going to court. They settle because more often than not it's a waste of time, money and resources.

3) The Antitrust Division of the DoJ has a finite budget set by Congress. The companies they are up against typically have no practical limit to what they can spend on their defense. Further, try to imagine a scenario were a company facing antitrust charges has insufficient resources to fight them in court. Seems like a virtual oxymoron to me.

Ok, you 'addressed' my first point, by simply claiming the opposite. You 'addressed' my second point by rewording my first point, and acknowledging that it's *expensive* to fight charges, regardless of their merit. Often more expensive than simply settling, thereby making it not worth the time money and resources required to defend against an accusation. And then you 'addressed' my third point by claiming that *book publishers* have "no practical limit to what they can spend on their defense".

You have absolutely no knowledge about the financial means of a typical (even large) publisher at all, yet from that ignorance you manage to claim that they have more money at their disposal to defend against an (admittedly expensive) anti-trust suit? And from their decision not to do so, you then conclude that because a member of an industry with historically low profit margins, which is currently dealing with lower profit margins caused by the introduction of a disruptive technology (ebooks), and a seller with (or approaching) monopoly power, *must* be guilty because they settle instead of entering a long, drawn out, expensive legal process.

Um... Wow...

Nope... Can't fault your logic at all there...

 

[sha4000]

He'll be back shortly to clear that up for you. I really believe that this whole issue will be cleared up shortly one way or another. Just my opinion though.

 

[IJ Reilly]

Ok, you 'addressed' my first point, by simply claiming the opposite. You 'addressed' my second point by rewording my first point, and acknowledging that it's *expensive* to fight charges, regardless of their merit. Often more expensive than simply settling, thereby making it not worth the time money and resources required to defend against an accusation. And then you 'addressed' my third point by claiming that *book publishers* have "no practical limit to what they can spend on their defense".

You have absolutely no knowledge about the financial means of a typical (even large) publisher at all, yet from that ignorance you manage to claim that they have more money at their disposal to defend against an (admittedly expensive) anti-trust suit? And from their decision not to do so, you then conclude that because a member of an industry with historically low profit margins, which is currently dealing with lower profit margins caused by the introduction of a disruptive technology (ebooks), and a seller with (or approaching) monopoly power, *must* be guilty because they settle instead of entering a long, drawn out, expensive legal process.

Um... Wow...

Nope... Can't fault your logic at all there...

This too convoluted to fully comprehend. Sorry, I really don't know what you are arguing anymore, and I have a feeling that you don't either. In any event all of these points were addressed by me in this thread in some depth and repeatedly, so I don't see the need or value in more depth or further repetition.

 

[Huntn]

I just read an article in Entertainment Weekly called: Inside the Battle Over E-Books. Unfortunately I can't an online link for this article.

What strikes me as strange is that Amazon who held 90% of the market is painted as the victim, because they now hold 60% of the market. I assume Apple, Macmillan, and Penguin (the 3 defendants fighting the lawsuit) colluded to lower the price of ebooks. Despite lowering prices to break Amazon's hold on the ebook market, this is bad for the consumer?

It's also noteworthy that last week, Amazon CEO Jeff Bezos touted the company's exclusive content- a staggering 130000 in-copyright books are Kindle only

The biggest issue I have with this is that the ownership of a book should not be limited to a certain electronic device. The manufacturer's should be forced to offer their products on competitors devices imo. On my wife's iPad we have the Barnes and Noble app installed. I believe developers of ebook readers have no right to make book titles exclusives on just their device. To access 100% of current titles, are consumers expected to own every ebook reader out there? That's plain wrong.

 

[jterp7]

I just read an article in Entertainment Weekly called: Inside the Battle Over E-Books. Unfortunately I can't an online link for this article.

What strikes me as strange is that Amazon who held 90% of the market is painted as the victim, because they now hold 60% of the market. I assume Apple, Macmillan, and Penguin (the 3 defendants fighting the lawsuit) colluded to lower the price of ebooks. Despite lowering prices to break Amazon's hold on the ebook market, this is bad for the consumer?



The biggest issue I have with this is that the ownership of a book should not be limited to a certain electronic device. The manufacturer's should be forced to offer their products on competitors devices imo. On my wife's iPad we have the Barnes and Noble app installed. I believe developers of ebook readers have no right to make book titles exclusives on just their device. To access 100% of current titles, are consumers expected to own every ebook reader out there? That's plain wrong.

Was this a simple typo or is it from the EW article?

 

[Huntn]

Was this a simple typo or is it from the EW article?

I re-read my post and the article and it turns out to be my assumption. As I said, I assumed that to break the hold of a merchant who owns 90% of the ebook market (Amazon/Kindle), wouldn't you have to lower prices on your product, not raise them or am I confused about this? My thinking is that if you raised the price of your product would that not drive more business to Amazon, unless Apple was thinking that those who own an iPad will just have to pay their higher price to read it on an ipad?

Anyway I stand my premise that ebook manufacturers should not hold exclusive content. I'm not saying they should give their products away, but I assume they make more money on the sale of their books vs the sale of their readers. Apps should be made available for all of the major ebook brands.

 

[polarbeer]

There is a big difference in this case between DOJ vs Apple and DOJ vs publishers. The main reason is the publishers met in person and made a number of phone calls to each other to discuss signing on with Apple's agency model. They wanted to co-ordinate accepting the Agency model because none of them wanted to go it alone. The DoJ has an easy case against the publishers for collusion which is why they settled.

Apple, however, was never a part of these GROUP discussions and instead only had 1-on-1 talks with each publisher. If Apple said come to California and we'll all discuss it in our board room, that would have been a different issue.

So the DoJ has no case on collusion for Apple. Rather, they have more of an issue with the MFN which is really just a low price guarantee. You can read all the case facts published by the DoJ here: http://online.wsj.com/public/resources/documents/ebooks04112012b.pdf

I think Apple will win this case handily if they pursue it. There has been a lot of discussion here about wholesale vs agency and people mention supermarkets as a wholesale model and digital as an Agency model. Well, that's not the key distinction. The key distinction is that Apple is setting up a platform (the iBookstore) which is just laying the ground for a market between publishers and consumers. Apple has no special knowledge about book pricing the way a supermarket does about the sale of milk. So with the agency model Apple delegates the pricing to publishers, but just wants to be re-assured that the prices in the iBookstore are competitive in relation to its competitors. Apple would be really pissed if Barnes and Noble were selling Book X for $15 in the iBookstore, but then those with the Barnes and Noble app on the iPad could download it for $10!

A question for you guys: many have said eBook prices went up after the Agency/MFN implementation. Does anyone have any historical price data of some sort to back that up? I'm not challenging anyone, just curious.

PolarBeer

 

[terrymr]

With Barry in the WH anything is possible. Look how they've gone after Gibson Guitar.

Yeah because OMG it's Gibson they must be innocent, right ?

Making a false statement to customs would land the rest of us in Jail.

While the sensationalists are claiming DOJ is trying to interpret indian law in the USA - the truth is that the customs declaration was for wood veneer products and the actual cargo was raw wood.

There is no interpretation to be done here india notifies US customs of which products they allow export and the products in question were illegally exported along with a false declaration to US customs.