Apple Rebuts Antitrust Charges Over E-Book Pricing

[Daveoc64]

You are correct here. Instead of the traditional old-fashion e-book, consisting of black text on white pages, where you flip from page to page, resulting in a semi-boring experience.

Now, Apple's idea of an e-book experience, where you can resize and color the text to your desire. Have someone narrate the text to you, with sound effects in the background, moving animations on each page. Animations that might actually be interactive to the touch ( or tilt of your device you are reading it on ). Links to other resources on the internet, and a bevy of features that I'm sure I'm forgetting here.

And to top it off, if your version is updated, you just click on a button to update it for free in about 30 seconds! Let's see you update that thick calculus book you bought for your Calculus 121 class for your electrical engineering degree from 4 years ago. See if the publisher will update you to a new version for free! Good luck with that!

Amazon has been doing everything you describe since before iBooks launched.

a) Apple has done nothing revolutionary
b) These technical advancements do not depend on the Agency Model to work

 

[BaldiMac]

WHAT!? So you buy a specific book from Apple and it comes with more content?

Amazon has the largest store (i.e. variety)

You misunderstood what I said. I believe that the publishers were worried about Amazon devaluing their content to the point where the publishing industry becomes untenable. My concern is that the quality and variety of content will suffer in favor of mass market crap.

Apple does not insist that developers have to sell their Apps at the cheapest price on the App Store.

They can sell their App cheaper on Windows, Android, Linux, Blackberry, Bada, etc.

... and many do!

Sure, but you said the Agency Model is considered illegal. You are describing the result of Apple's MFN clause, not the agency model.

 

[Daveoc64]

iTunes is an agency model, isn't?

No, it isn't.

----------

Sure, but you said the Agency Model is considered illegal. You are describing the result of Apple's MFN clause, not the agency model.

I consider the whole thing to come as a package. It doesn't work as well when you take away the requirement that all stores use it.

The Agency model would be (slightly) more palatable if the publishers could offer discounts in some retailers.

 

[Limboistik]

There's no reason why they cannot do this innovation with a competitive pricing model.

The problem isn't innovation, it's the ability for all the "innovation" out there to even get a publishing deal or be discovered.

What Apple is offering with the Bookstore ecosystem, just like the App store ecosystem, is a way for independent authors, writers, or small publishers, to distribute their content to the masses, without the traditional capital required and loss of profit should they deal with a publisher like before.

The bottom line is, with Apple's model, it's easier, and cheaper, for content creators to get their work into the hands of consumers.

Obviously not all the content will be of quality, but look at how the App store thrives. It encourages discovery.

 

[Daveoc64]

The problem isn't innovation, it's the ability for all the "innovation" out there to even get a publishing deal or be discovered.

I just don't understand why you think this is the case.

Again, Apple is not doing anything new here. You can publish to the Kindle or Nook Stores with the same arrangements (even before iBooks launched).

The Agency Model does not need to exist for authors to be able to self-publish books.

 

[pacman7331]

I dunno what this is about, but I doubt the government wants anything more than more control over what people are able to know and learn. Thats usually the story as i've understood it.

 

[BaldiMac]

iTunes is an agency model, isn't?

No, it isn't.

Music and Video are wholesale. Apps and books use the agency model.

I consider the whole thing to come as a package. It doesn't work as well when you take away the requirement that all stores use it.

Except we already established that it isn't a package. The App Store uses the agency model and works well.

 

[Oletros]

The bottom line is, with Apple's model, it's easier, and cheaper, for content creators to get their work into the hands of consumers.

Can you explain what difference are between the auto publishing model from Apple and the one from Amazon?

 

[Limboistik]

I just don't understand why you think this is the case.

Again, Apple is not doing anything new here. You can publish to the Kindle or Nook Stores with the same arrangements (even before iBooks launched).

The Agency Model does not need to exist for authors to be able to self-publish books.

The "new"-ness or difference here is that they're not simply building a network to distribute the same thing.

With this new model they are aiming to raise the bar for content, to justify purchases and a different price point. Therefore publishers and authors can accumulate better profit margins, and help foster creation.

Again, better content.

You are comparing Apples to Oranges here.

 

[Daveoc64]

Except we already established that it isn't a package. The App Store uses the agency model and works well.

I meant "works well" from a collusion standpoint.

Apple using the agency model for books only works well for Apple if everyone's doing it - hence the lawsuits.

 

[tbrinkma]

http://www.macworld.co.uk/ipad-iphone/news/?newsid=3350944&pagtype=allchandate



If the DOJ has no case, I don't think the three publishers would have settled.

And 2 of these already agreed to pay $52 million for restitution.

A lot of the time, people/business settle suits (of any type) simply because they can't afford the money needed to defend the suit to completion in court. An anti-trust suit is even more expensive to defend against than a patent suit, and in the case of anti-trust, the prosecuting party has the advantage of being even more well funded, partly *by* the defendant in the form of taxes.

 

[Daveoc64]

With this new model they are aiming to raise the bar for content, to justify purchases and a different price point. Therefore publishers and authors can accumulate better profit margins, and help foster creation.

Explain what you actually mean by this

I produce a book and upload it to Amazon or Apple.

I get paid the same with both, yet more people buy books through Amazon.

What is Apple doing that is better for me and my book?

Given Apple's marketshare, you'd be a moron to only sell your book through iBooks.

The lawsuit doesn't cover self-publishing.

 

[tbrinkma]

Music and Video are wholesale. Apps and books use the agency model.

Can't say for certain about video, but we know the iTunes music store is *not* using the wholesale model. If it were, the labels couldn't have forced Apple to allow *them* to set the prices of some songs higher than $.99 in exchange for giving Apple access to the same, DRM-free, higher-bit-rate distribution rights that Amazon (and others) had already been given.

 

[BaldiMac]

Can you explain what difference are between the auto publishing model from Apple and the one from Amazon?

One big difference - if you want to price your book over $9.99, you only get 35% royalty.
https://kdp.amazon.com/self-publishing/help?topicId=A301WJ6XCJ8KW0

And you pay delivery costs if you choose the 70% royalty.

And (like everyone is complaining about with Apple) Amazon can price match any competitor.

 

[EssentialParado]

Can't say for certain about video, but we know the iTunes music store is *not* using the wholesale model. If it were, the labels couldn't have forced Apple to allow *them* to set the prices of some songs higher than $.99 in exchange for giving Apple access to the same, DRM-free, higher-bit-rate distribution rights that Amazon (and others) had already been given.

It's kind of neither, but closer to agency model. Apple gives 30% of sales and allows them to choose their price, but only from 3 price points — $0.69, $0.99, $1.29.

There's a monopoly in the music and video industry, so Apple felt it wrong to allow them to set their own price points.

This monopoly doesn't exist in the software and book markets, hence why Apple lets them set their own pricing.

Whichever way you look at it though, it's agency model throughout the entire product line, even down to stores that sell Apple products.

 

[BaldiMac]

I meant "works well" from a collusion standpoint.

Apple using the agency model for books only works well for Apple if everyone's doing it - hence the lawsuits.

You are drifting farther away from your original point. You said the agency model is illegal. You were wrong. The problems you have described are related to the MFN clause and, most importantly, collusion among the major publishers.

 

[Daveoc64]

You are drifting farther away from your original point. You said the agency model is illegal. You were wrong. The problems you have described are related to the MFN clause and, most importantly, collusion among the major publishers.

I'm only going on what I've read.

Random House UK initially said they thought that the Agency Model was illegal - as such, they didn't use it for a long time.

 

[Tarzanman]

What a lot of you dont' seem to understand is that Sony, BMG, and all the other music studios didn't sit down with Apple, decide what prices should be and then force Amazon (Amazon also sells mp3's) to sell at the higher prices that they decided upon.


That is the issue. I've had some anti-trust, anti-competition seminars where I work (I used to be in sales), and discussing your prices with a competitor to fix the market is a very quick way to incur the wrath of the DOJ.

If the DOJ even has half the evidence that I have read about, then they have more than enough to win the case (they've won on less, regarding price fixing). The fact that e-books prices have gone up since the Apple agreement is pretty damning evidence itself.

There is a reason that 3(?) of the publishers decided to settle and pay 52 million. Apple can fight, but they won't win. Going to court is just a way to try to mitigate the penalty that they will have to pay. My guess is they will fight it for a year or so and then settle for half what the other publishers paid.

 

[Oletros]

One big difference - if you want to price your book over $9.99, you only get 35% royalty.
https://kdp.amazon.com/self-publishing/help?topicId=A301WJ6XCJ8KW0

And you pay delivery costs if you choose the 70% royalty.

And (like everyone is complaining about with Apple) Amazon can price match any competitor.

Thanks.

 

[Rocketman]

The wholesale model is not something magical and scary, it's how virtually everything we eat is sold.

Correct. Virtually everything we eat is delivered physically not virtually. That is a good use of the wholesale model. I use that for my physical products.

The Agency model works for virtual and meta products. Examples include downloaded music, software and books, insurance, which often has a physical sales call and a mailed document, but the product itself is "notional". Another example includes stocks and bonds.

Rocketman

https://forums.macrumors.com/posts/14642633/

https://forums.macrumors.com/posts/14647098/

https://forums.macrumors.com/posts/14649333/

https://forums.macrumors.com/posts/14649751/

https://forums.macrumors.com/posts/14649846/

That is the issue. I've had some anti-trust, anti-competition seminars where I work (I used to be in sales), and discussing your prices with a competitor to fix the market is a very quick way to incur the wrath of the DOJ.

They didn't meet and discuss prices. This is an improperly pleaded price fixing case. They discussed MARGINS. Totally different animal and entirely related to the model and the way the vendor, Apple in this case, was structuring it, in this case a 30% margin and covering all hosting and bandwidth costs and notably delivering a tens of millions potential userbase overnight, growing 60-100% a year.

Rocketman

 

[EssentialParado]

What a lot of you dont' seem to understand is that Sony, BMG, and all the other music studios didn't sit down with Apple, decide what prices should be and then force Amazon (Amazon also sells mp3's) to sell at the higher prices that they decided upon.


That is the issue. I've had some anti-trust, anti-competition seminars where I work (I used to be in sales), and discussing your prices with a competitor to fix the market is a very quick way to incur the wrath of the DOJ.

If the DOJ even has half the evidence that I have read about, then they have more than enough to win the case (they've won on less, regarding price fixing). The fact that e-books prices have gone up since the Apple agreement is pretty damning evidence itself.

There is a reason that 3(?) of the publishers decided to settle and pay 52 million. Apple can fight, but they won't win. Going to court is just a way to try to mitigate the penalty that they will have to pay. My guess is they will fight it for a year or so and then settle for half what the other publishers paid.

What "evidence" have you seen that assures you Apple will lose? All Apple are doing is using the same model as the App Store.

While it may have appeared that eBook prices rose in price, the actual fact is that Amazon simply was not allowed to undercut on pricing anymore after the iBook agreements, putting the prices back at normal levels. This is what has made it look like a collusion to raise prices to you and the DOJ, but it doesn't make it so.

I bet all a publisher needs to do is show their wholesale price they were selling eBooks at before, then compare it to the net profit they receive from the agency model, and if they're even loosely close to each other, the suit will be thrown out.

 

[Daveoc64]

The Agency model works for virtual and meta products.

"The agency model does not work for virtual and meta products."

You can keep saying something over and over, but without any evidence to back up your point you just sound like a broken record.

 

[IJ Reilly]

A lot of the time, people/business settle suits (of any type) simply because they can't afford the money needed to defend the suit to completion in court. An anti-trust suit is even more expensive to defend against than a patent suit, and in the case of anti-trust, the prosecuting party has the advantage of being even more well funded, partly *by* the defendant in the form of taxes.

This isn't really accurate. Microsoft had plenty of money to fight their antitrust lawsuit, and still lost. They lost because they were actually guilty, and they'd have been better off settling with the government, because they were actually guilty. Small companies (without the resources to fight) do not get investigated for antitrust law violations.

The most common misunderstanding I am hearing about antitrust actions is that the government is somehow incentivized to take these cases to court. Quite to the contrary. The vast majority never see a courtroom because the government gets compliance with the law without it. If the company agrees to comply, the matter is typically closed out. Fighting it out in court is a dumb move on a company's part. The DoJ doesn't take a case to court if they think they are going to lose.

 

[MacAddict1978]

I think it is pretty obvious Apple presented a way for Publishers to set ebook prices and benefit Apple at the same time.

Who was the loser when this "agency model" was introduced -purchasers of ebooks!

That is obvious, but what isn't obvious is if Apple's actions were illegal.

Retailers negotiate pricing all the time. Look at Wal-Mart. 70% of most manufactures sales come from a wal-mart check out lane. Wal-mart can say, "we want it at this price, or we'll pull ALL your products from our shelves and give that space to your competitor." It's why detergent and yogurt have less ounces... it was the only way to meet wal-marts demands.

What's different is companies didn't act in collusion with one another to set prices, and it was ONE retailer. What this did affected EVERY retailer... but it's hard to argue that Apple did anything other than negotiate a sales contract with vendors. Apple didn't make those vendors sit down together and conspire to fix prices... they might have inspired this... but they reached out simulatenously to all parties... and those parties then got together on their own.

I think Apple will end up in the clear... but I don't think the publishers are going to be so lucky. There are several laws in questions that they might have broken. They might get off the hook on a few, but not all of them.

Apple is nothing in the world of book sales... that kind of helps them as well.

 

[Daveoc64]

Apple is nothing in the world of book sales... that kind of helps them as well.

I think that will help them, but it's also one of the reasons they're under fire.

After seeing the huge success of the iTunes Music store and App Store, publishers would have been crazy not to get on board with Apple's plans for books.

Some regulators are arguing that they unfairly used their dominance in the other markets (Apps, Music) to persuade the publishers to sign up to the Agency model.