You need to look a little further:
The publishers take chances by publishing books etc.
If their profits go down, so goes their will to take risks.
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DOJ Says Publishers Are Again Colluding in Objecting to Proposed Apple Penalty in E-Book Case
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You need to look a little further:
The publishers take chances by publishing books etc.
If their profits go down, so goes their will to take risks.
US gov is going down hill.. and if change doesn't happen soon its going to get worse before it gets better.
Looking even further, self-publishing is going to be more and more relevant and with self-publishing the risk is a lot lower.
Well, this is the DOJ's propose resolution. A judge has the final say. If the judge approves, then the DOJ does have the right.
20 years ago in Alaska there were several local competing grocery stores. Carrs (Safeway) came in and undercut everybody's prices, including selling many staple groceries at a loss. Everyone loved the low prices.
But the "win" for consumers was short-lived. You see, the local stores couldn't compete with selling at a loss, and so they eventually all went out of business. You think Carrs kept selling at a loss? Hell no, Carrs jacked up the prices above where the now-out-of-business local stores were selling in the first place. Carrs had no competition.
Amazon is essentially doing exactly this. Did you know Amazon is not a profitable company? They sell many things at a loss, more than just books. And just like the local grocery stores in Alaska, Amazon's competitors are feeling the pain. Where is Borders? How is Best Buy doing?
Do you think Amazon will simply sell at a loss forever? What do you think they will do when they've eliminated their remainder of their struggling competitors?
BTW - The publishers aren't happy either, despite getting paid the full price. Selling at low prices for a long time makes consumers accustomed to those prices. From their point of view, books are being devalued.
Predatory pricing is great for consumers... temporarily.
Do you have a link to back up your Amazon comment regarding it not being profitable?
This hypothetical is something I've thought of and think should be discussed more often.
Apple has way more cash than Amazon. If Apple really wanted to, they could easily sell books for $1 at a loss, and they would be able to run any other bookseller out of business by doing so.
Obviously, that is predatory pricing.
This is what wikipedia says about predatory pricing:
"In business and economics, predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly."
To me, it sounds like Amazon engages in predatory pricing.
Most businesses cannot afford to sell books at a loss as they do not have the luxury of being able to break even or even lose money and still be able to survive.
Yes, I do love it. It keeps arsenic out of my drinking water. I don't like it when the government is wrong (like this case), but do you want to argue that the break up of AT&T was a bad thing? Anti-trust laws are great for consumers and business when properly applied.
http://money.cnn.com/2013/07/25/technology/amazon-earnings/index.html
technically, Amazon did lose money last quarter.
(and I believe the quarter before)
It's not predatory pricing, it's a loss leader. Like Walmart, Amazon sells a bunch of products below cost in an attempt to lure people to their website to browse and purchase their other items that are sold for profit.
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Amazon's negative quarter came from costly investments, not because they didn't bring in a net profit from their sales. It's typical accounting for publicly traded companies.
I think what he's saying is that there are two possible reasons for the "loss leader" tactic.
If the company is doing it purely to bring you in store and the sales are short lived, but the company is profitable and competitive, thats one thing.
But if the company uses a large reserve of cash, goes into the negatives and undercuts everyone with the sole purpose fo driving everyone who can't rely on reserves out of business. it is predatory.
P.S. just because I agree with the DOJ's ruling on this case, doesn't arbitrarily mean I think Amazon is innocent of predatory pricing either. I would hope (probably in vain) that if Apple is being held to a certain level of scrutiny than so should Amazon in their own manipulations of the market.
Absolultely!! I didn't even think about that. Holy crap is this petty compared to what they got away with.
If everyone were charging the same high price, a new publisher would entice customers and authors by offering lower prices, resulting in higher volumes. Market equilibrium would be achieved. Government interference only makes for a less efficient economy.
I'll admit i haven't really combed through this quarters financials.. (why i do so usually still baffles me as a non investor, stupid accounting heredity).
I wasn't claiming anything about the reasons behidn their losses. Just responding that technically They have lost money in the last few quarters.
I meant to imply nothing in my post, just the facts
Apple won't go out of business, but Barnes and Noble and every other book seller has to compete against a zero profit (or less) business model. This was in the testimony of the trial. If it was the Chinese doing that with steel here in the U.S., it would be considered dumping by the WTO.
The profitability of the company as a whole doesn't matter. If they actually are selling ebooks at loss overall you have a point, but it could be that they are profitable in the ebooks market but have heavy losses from some other business unit or are investing in some project. The article states that the losses are due to "costly investments that the company is making" citing digital devices and video streaming services.
The difference between a loss leader and predatory pricing is all about intent, so both of us are speculating (unless you work there and are making the decisions).
If Amazon keeps selling items at a loss forever, we can assume it's a loss leader as you say. If Amazon wipes out a competitor and jacks the prices up, as Carrs did, we'll know at that point that it was predatory pricing.
Until the only only one left selling eBooks is Amazon and they stop subsidizing the books.
I see someone else has already answered you, but here is the one where I got my predatory pricing opinion from:
http://www.slate.com/blogs/moneybox...xist_but_the_company_keeps_on_keeping_on.html
It's not a secret or anything, Amazon is a publicly traded company.
Monopoly
If the DOJ had done its job and gone after Amazon's destructive practices publishers wouldn't have to work together to break Amazon's choke hold on them. If one person goes after a bully they get their butt kicked. If many work together to do it they at least stand a chance. The DOJ went after the wrong people here.
If the DOJ had done its job and gone after Amazon's destructive practices publishers wouldn't have to work together to break Amazon's choke hold on them. If one person goes after a bully they get their butt kicked. If many work together to do it they at least stand a chance. The DOJ went after the wrong people here.
i hope the court fines apple and these publishers a hefty amount, only that will teach them some lesson.
Just because you want to stick to a limited definition of predatory pricing, doesn't mean the rest of us have to. The idea that being profitable overall in eBooks excuses predatory pricing is the opinion of the DoJ.
I believe that it ignores key facts about the specific market. Primarily, that eBooks are not a commodity. Best sellers are extremely important to operating a eBook store successfully. Competing against below cost pricing for best sellers is a significant barrier to new competition in the market.
It also ignores that while Amazon may operate its eBook division at minimal profits, its operating costs are minimized through their enormous scale. Making it almost impossible for any new competition to be successful with similar pricing and margins. In addition, Amazon's prices are further subsidized by their refusal to collect state income tax in most states.