Class-action Suit Filed Against Apple and 5 Book Publishers Over E-book Pricing

[acorder]

Hot Damn! As an author, I know I got not one penny more after prices were jacked up by Jobs and company. The money went into the pockets of the greedy publishers. They can make tons of money off selling new books at $9.99 because they have no printing costs, paper costs, distribution costs, warehouse storage costs or transportation costs. eBooks are extremely profitable. This was nothing more than greed running rampant among the publishers.

You may want to check your contract. Most publishers pay royalties as a percentage of net. So, one of three things is happening: the net proceeds your publisher received have not actually changed under the new terms; they made an accounting error; you're wrong. I encourage you to check your contract and make sure you go over your royalty statements carefully. Then, please report back to us.

Of course, if your contract gives a set amount royalty per book, then of course it wouldn't change.

The idea that publishers make "tons of money" and that "eBooks are extremely profitable" is, at best, a stretch.

 

[DisMyMac]

Publishers colluding to bring prices up is just a way of bringing some integrity to the content in question.

.... illegal.

Is just illegal.

 

[Consultant]

Wirelessly posted (Mozilla/5.0 (iPhone; U; CPU iPhone OS 4_3_5 like Mac OS X; en-us) AppleWebKit/533.17.9 (KHTML, like Gecko) Mobile/8L1)

Let me see if I get this right, Amazon dictating the price of ebooks was 'free market' and Apple letting the publishers set the price is 'anti-competitive'?

Exactly. Amazon was flooding the market at a loss to gain market share.

 

[xizar]

How the hell is it possible to sell a digital object "at a loss"? Assuming the product was valuable enough to bring to market (i.e., worth making), the duplication costs are close to zero, and the distribution costs are also very small (unless Amazon's ISP throttles their bandwidth after 250gigs/month).

If the product can't sell enough copies to re-coup the cost of editing and whatever, it seems that the publisher's chose poorly on one hand (shouldn't have offered to publish), but also won in the end, as they don't have a horrific pile of pulp laying around, waiting for covers to be torn off.

@Consultant
YouPorn is being sued by Vivid for "depriving" them of a revenue stream. This sounds similar, and I'd be interested in seeing of the two cases pan out the same way.

(As far as I know, the youporn/vivid case hasn't gone to trial, yet.)

 

[acorder]

Do you really believe writers of books are not getting paid the same as they did before ebooks were born?

I do. When prices change, royalties change. When publishers know they won't be making as much money in sales, advances (when given) also change to reflect that. A typical publishing contract ties author royalties to how much money the publisher makes; when there's less revenue, there's less that gets passed on to the author. And advances are made up more slowly.

So, yes. Writers of books are not getting paid the same as they did before ebooks were born. They might be getting the same percentages, but if the sale price is half of what it would be on hard copy, then the author makes less money.

 

[barberio]

Amazon didn't just push the price they sold their e-books down to act as a loss leader, they required the publishers to only accept a portion of the price that it was sold at. Amazon were essentially using their monopoly power to fix the price of e-books, and force the publishers to take the loss when Amazon priced e-books as loss leaders to sell kindles.

Let's say that again... Amazon were using their monopoly power to force publishers to accept a loss in order to sell more kindles.

The idea that rejecting Amazon's monopoly abuse to move to a better market price is "price fixing" is flat absurd, and I expect this case to be thrown out on it's ear if that's all it's based on.

 

[Zimmy68]

Amazon didn't just push the price they sold their e-books down to act as a loss leader, they required the publishers to only accept a portion of the price that it was sold at. Amazon were essentially using their monopoly power to fix the price of e-books, and force the publishers to take the loss when Amazon priced e-books as loss leaders to sell kindles.

Let's say that again... Amazon were using their monopoly power to force publishers to accept a loss in order to sell more kindles.

The idea that rejecting Amazon's monopoly abuse to move to a better market price is "price fixing" is flat absurd, and I expect this case to be thrown out on it's ear if that's all it's based on.

Not really.
Amazon came up with a price point that they thought consumers would find fair.
They needed to be consistent for the Kindle to be taken seriously.
At the time, I doubt the publishers really cared.
IIRC, some didn't sign up.
Now that they see dead tree sales plummeting along with brick and mortar book stores, they are scrambling to keep their precious market model that just doesn't work anymore.

Sounds sort of like Apple's 99 cent per song, doesn't it?

Now, here comes Apple, late to the party, they need to get into the book business but still need their 30% stranglehold.

Do they let the market decide and allow Amazon to keep their $9.99 while they charge $14.99 for the same book?

No way, let's collude and force it all at the same price!!!

Everyone's happy!

 

[barberio]

Now, here comes Apple, late to the party, they need to get into the book business but still need their 30% stranglehold.

Do they let the market decide and allow Amazon to keep their $9.99 while they charge $14.99 for the same book?

No way, let's collude and force it all at the same price!!!

Except what happened wasn't collusion. It was the wholesalers deciding they didn't like Amazon's price, and liked Apple's a lot better.

Think of it like this. Pear orchards have to sell a lot of their product to Red-Top BigBoxStore, because Red-Top BigBoxStore have seen huge and near monopolistic growth into what's becoming a dominant market. Red-Top BigBoxStore start demanding wholesale prices that allow them to undercut the traditional competition. And they cut those prices so much that the pear orchards have to sell a lot of their crop at a loss to stay in Red-Top BigBoxStore.

Then White-Circle RetailOutfit come along and say "We're going to be as big as Red-Top BigBoxStore, *and* we're going to pay a wholesale price that allow the orchards to make a profit". So the pear orchards all up their wholesale price to White-Circle RetailOutfit's price. Red-Top BigBoxStore throws a fit, and starts an orchard boycot of all the orchards who put their wholesale prices up, until they realize they can't control the price anymore, and have to pay the new prices.

Who in that situation was using coercive monopoly power to fix prices, and who was offering competition that benefited the producers?

Apple didn't "collude" with the Publishers. They put a new offer out for a better deal for the Publishers, and the Publishers took it. Then they decided they weren't going to accept Amazon's one-sided deal any more, and Amazon tried to boycott some publishers from their search results to try and get them to accept their terms.

 

[tbrinkma]

To qualify for the iBookStore, Apple insisted that the publishers agree to the agency model for all distributers. It wasn't enough that the publisher agree to use the agency model with Apple, they had to also agree to use the agency model with Amazon, and at the same price.

Apple is dictating the price at which the publishers sell their ebooks in other stores, like Amazon. They can't do that.

Not at all. The agency model means the *publisher* is dictating the price, not Apple. Apple's agreement simply makes it so that the publisher can't screw over Apple by setting the price at $30 in the iBook Store, and $10 in the Kindle Store. It's a simple, straight-forward, 'most favored nation' clause, which guarantees that the prices the *publisher* sets in Apple's store will not be *higher* than what they set it for in another store.

That's something Apple learned the need for when they were last negotiating with the music industry. For a while there, Amazon was able to get DRM-free tracks for the same cost that Apple could DRM-ridden tracks. This time around, they've protected themselves from being undercut by their own suppliers.

 

[tbrinkma]

In the beginning, Amazon owned the market. I could purchase a bestseller for $9.99.

Then Apple enters the market, and that same book was now $14.99. Wait, Apple entered the market and prices....INCREASED? I thought competition resulted in LOWER prices? Oh, not when there's price fixing it doesn't.

In fact, I wrote about this issue in this very forum when Jobs first made his statement. I said it was illegal then, and I still say it's illegal now. Apple colluded with the publishers, as alleged, so they could get their 30% cut, and also to stop the rise in popularity of the Kindle.

Amazon was selling below cost to increase Kindle sales, which is totally legal. Apple (as is typical) broke the law to gain a competitive advantage. Just as they did when they killed lifetime support for Macs in the 90s, just as they did when they undercut all their dealers with their own stores, and just as they do when their "Geniuses" claim something is software and not hardware so they don't have to cover it under AppleCare.

You Apple lovers need to face the facts: Apple is better than most companies, but like any corporation, they're willing to break the law so long as it's cheaper to break the law and get caught than it is to abide by the law. Apple couldn't beat Amazon at its own game, so they just cheated.

Here's why the price went up

Amazon was selling the books below cost in order to drive adoption of the Kindle, back when it was priced at $500. The publisher got a fixed per-copy fee from Amazon. (Probably about $10-11 based on the $9.99 price tag, and the the fact that Amazon was selling at a loss.)

Apple's contract very likely includes a clause that they are able to use the publisher-set 'agency' price or the price advertised anywhere else the publisher supplies the book to, whichever is *lower*. (A bog-standard 'most favored nation' clause used to safe-guard against a supplier playing pricing games with you.) The publisher gets 70% of the sales price.

If the publisher keeps selling to Amazon at the fixed $10-11 per copy at that point, and Amazon keeps advertising at $9.99, then Apple, by contract, can sell at $9.99 as well. In that case, the publisher gets $7 which may be below their costs (production costs / expected sales).

Now, there's probably also a clause in Apple's contract that says they can discount the books below the agency price, but they pay the publisher an amount based upon the publisher-set agency price, *not* the sale price.

Notice that Amazon switched from the per-copy fee to the agency model at pretty much the same time they dropped the price of the Kindle from $500. They no longer had a few hundred bucks extra profit to absorb their losses on the book sales.

There's probably nothing illegal, immoral, or unethical going on here.

 

[EricNau]

Except what happened wasn't collusion. It was the wholesalers deciding they didn't like Amazon's price, and liked Apple's a lot better.

[...]​

Apple didn't "collude" with the Publishers. They put a new offer out for a better deal for the Publishers, and the Publishers took it. Then they decided they weren't going to accept Amazon's one-sided deal any more, and Amazon tried to boycott some publishers from their search results to try and get them to accept their terms.

Except, you left out the part where Apple refused to sell the publishers' books if they didn't change their pricing agreement with all other retailers. Apple didn't offer the publishers a new, revolutionary pricing model; Apple forced them to use a new pricing model for all retailers by withholding their titles until they relented. ...Which is the entire point of the lawsuit.

For example: RandomHouse did not want to use the agency model. Not with Apple, and certainly not with Amazon. However, failure to concede entailed sacrificing the entire iPad and iOS market. Given Apple's dominance in the portable media market, RandomHouse had no choice but to change their pricing model with Amazon (or suffer a huge loss in potential revenue). That's what's illegal; Apple strong-armed the publishers into accepting their terms, which included raising prices for all retailers such that Apple could "compete."

Not at all. The agency model means the *publisher* is dictating the price, not Apple. Apple's agreement simply makes it so that the publisher can't screw over Apple by setting the price at $30 in the iBook Store, and $10 in the Kindle Store. It's a simple, straight-forward, 'most favored nation' clause, which guarantees that the prices the *publisher* sets in Apple's store will not be *higher* than what they set it for in another store.

That's something Apple learned the need for when they were last negotiating with the music industry. For a while there, Amazon was able to get DRM-free tracks for the same cost that Apple could DRM-ridden tracks. This time around, they've protected themselves from being undercut by their own suppliers.

Except, that's the very definition of collusion. Apple can't use its huge market presence to dictate the relationship between the publisher and other retailers. In other words, Apple can't say: "Raise your prices with Amazon otherwise we won't allow your titles to be sold in the iBookStore."

I do believe Apple could have said: "Give us the same deal you give Amazon or we won't sell your titles in the iBookStore," but that would have required Apple to suffer a small loss in ebook profits. And, you know, follow the law.

Notice that Amazon switched from the per-copy fee to the agency model at pretty much the same time they dropped the price of the Kindle from $500.

That's not true. Amazon was selling a very large percentage of their titles (all RandomHouse titles, that is) using the wholesale model until last March, when RandomHouse signed the deal with Apple and switched to the agency model. Amazon never chose to switch to the agency model: that was decided by the publishers who wanted their titles to qualify for sale in the iBookStore.

 

[Rocketman]

A "fight among models" is not the same as collusion or monopoly.

It is a messy trade, like the rag trade. But it does bring in the feet and dollars.

Rocketman