European Regulators Investigating Apple and e-Book Publishers over Antitrust Concerns

[jakeOSX]

while your sentiment is nice, it is not really how things work these days. sure if you are grishom or king you'll get a nice up front payment to produce something, but most writers need to have the work completed before negotiations with the publishing agency.

most royalty levels for the writer are low percentages as well. and again, if you are not a BIG writer, you are paying for your book tour, your own ads, all out of your pocket.

the 'key role' that the publishers provide is slowly slipping away, and they know it. the idea that we get our books from somewhere other than a bookstore scares them because once we are outside of their control we could (*gasp!*) buy self-published books.

naturally they are responding as rationally as the MPAA and RIAA.

Publishers are granting up-front payments to authors, which in turn allow them to write books to begin with. Publishers are generally bad, but not all bad. They serve a key role in the ecosystem of things. In short, no publisher no book. No book, no e-book. Publishing is more than just printing, and, in fact, i am sure that they do more for authors than Apple will ever do (and yet, somehow, Apple is supposed to deserve a 30% cut).

p.s.

Now, if i had a book written, and that was that, and i thought that i could get it out on my own, then yes, paying 30% to Apple wouldn't be all bad. However, most of the time, thats not how the story goes.

 

[gkpm]

Letting retailers set prices theoretically increases competition because each retailer will be competing to get the lowest price possible. If a book is the same price in Store A, B, C and D then there's no competition on price between them. That is "price fixing" if it is enforced by the manufacturer, supplier or distributor of that product.

If I want to buy a specific book, then I have no option but to pay the publisher's price for it - that doesn't happen with any other type of product. I can buy groceries in several supermarkets and smaller stores - exactly the same products, completely different prices.

The Agency model is (effectively) a conspiracy between retailers and the publishers to ensure that there is no competition over pricing of ebooks - that is what the EU (and several local governments) are investigating.

However the issue with the old model is that it was effectively encouraging predatory pricing.

Large retailers sell books at a loss - and as retail choice dwindles (not many can compete with loss), those fewer larger retailers start effectively dictating the wholesale prices.

That's why many publishers jumped to the agency model (again, may I add), reality was heading towards publishers having no control whatsoever over the prices of their own books.

Ideally we'd have a model halfway between the agency and full retailer control. But it seems no one has found it yet, so we just go in cycles every few years.

 

[divinox]

Nope, she was...very talented. Avid reader and amateur writer herself. She could have easily landed a job at ANY publishing house....but they could not come close to the money she was making. She worked for a very large defense contractor editing highly technical (and classified) technical works.

Editing books....any books....was child's play for her.

Way to miss the point, and, she surely wouldn't be able to edit my books. What you fail to miss is that some things are dependent on contextual, specialized, knowledge, meaning that generic competence - while necessary - is not sufficient. I am sure your ex-wife is competent. Has nothing to do with that.

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while your sentiment is nice, it is not really how things work these days. sure if you are grishom or king you'll get a nice up front payment to produce something, but most writers need to have the work completed before negotiations with the publishing agency.

most royalty levels for the writer are low percentages as well. and again, if you are not a BIG writer, you are paying for your book tour, your own ads, all out of your pocket.

the 'key role' that the publishers provide is slowly slipping away, and they know it. the idea that we get our books from somewhere other than a bookstore scares them because once we are outside of their control we could (*gasp!*) buy self-published books.

naturally they are responding as rationally as the MPAA and RIAA.

Maybe thats the case. I only know what i hear and see, and i guess what i hear and see aren't always very representative. Naturally, i did not mean to imply people would get money with just an idea. Rather, i sought to imply that publishers could allow for the transformation of a good idea into a great book (part financial support to the author, part editorial activities) -- and naturally, to get said book out in the market and selling once there (part gatekeeper ********, part servicing).

That said, gatekeepers sucks, and eventually benefit no one but themselves. Parasites, we'd call them, if we weren't so damn in love with the illusion of the free market.

 

[MacAddict1978]

The EU investigates when an ant crosses the road. Too much government.

I actually agree with you, and don't know why you got voted down. You can't blink without seeing an EU investigation to nearly ANYTHING.

Though while they are extreme and even, imo, unfair at times, it sure beats our system here where we break up monopolies just to let them merge back together again over time. (Look at the bloody oil companies! Standard Oil is completely back together again almost, just in two pieces instead of the 8 it was broken into. Then there is AT&T...)

The good is when the EU takes action, our govt. sometimes will look into something they would not have.

The ebook issue is actually one that warrants looking into. The agency model really does cripple people from having any kind of competitive advantage.
Books usually have more like a 50%-60% mark up, which gives a bookseller a lot of room to offer sales and promotions. At 30% margins with Fixed pricing, not so much.

I think the publishers were foolish for taking this route because it DOES hurt sales.

I think a wholesale model would be better for everyone.
Let's use the book, "The Help" for an example.
You could offer the angency alternative to say, Amazon, or give them an option to purchase virtual inventory in the traditional way of print books.
Amazon's cost, just like paper books, is lower the more they buy. Amazon now has an incentive to buy more copies than it would sell at the Agency model because they can afford to offer the book at a sale price periodically.

What ends up happening is "The Help" comes out in hardcover and sells for $20 everywhere with a retail of $29.99." The print version has a margin probably around 60%, and the ebook comes out at $19.99. The retailer is making more money on the paper book at this point.... the publisher more on the ebook... and the consumer is seeing no value in buying the ebook until the paper back version comes out when the ebook will get a price drop to be in line with the paper back. So the only winner is the publisher... BUT the publisher will now sell LESS ebook versions that are more profitable.

It comes down to control on the publishers end. Now say Amazon had a more traditional choice, you would probably be able to get the book in its first run as an e-book for HALF the price of the hard cover in print!

When ebooks debuted, there was almost no cost incentive over paper. That was changing when Apple put their foot into all of this. Booksellers were having price wars, sales, etc. that have now gone "poof." Ereaders began to pick up in sales because people were seeing value in ebooks over paper.

I will say though that I think this has mostly backfired on the publishers. While sales of ebooks increase, they aren't increasing nearly as fast as they would have. At the end of the day, volume at a lower margin would have made everyone more money than less sales at a higher margin, as it has since the day the book was invented for sale.

If you recall, Amazon was totally opposed to the Agency Model, as was B&N and ever other bookseller. They got black balled, and it's funny, because in all honesty, the iBook store is somewhat of a failure. Apple doesn't come close to the sales of their competitors on the book end, nor do they have nearly the same number of titles as their competitors. Apple likes this "one size fits all" model in their echo system, and it does not work for everything.
Even when it comes to magazines and newspapers. Publishers would much prefer the Android platform to take off because they're not getting sliced and diced 30% (only 10%).

And all this from Apple, who god rest Steve Jobs Soul, tried to claim that people don't even read.

I actually really hope the EU spanks Apple and the publishers for this one. Competition is good... and one size doesn't not fit all. I will be curious to see how Amazon responds to this.

 

[SandynJosh]

OK, so you say it wasn't 70% cut for big publishers, it was 50%. It's still more than 30% isn't it?

Since Apple takes 30% of the sales price, that computes out to a 43% mark-up over cost. While reading this thread I've noticed several people throwing out percent numbers without identifying whether they are talking mark-up or margin.

The Agency model yields a margin number while the previous profit-over-wholesale-cost model is easier to see as mark-up. The difference between the two numbers widens rapidly as the profit portion grows.

For example:
10% margin is 11% mark-up
20% margin is 25% mark-up
30% margin is 43% mark-up
40% margin is 67% mark-up

You can't mix the two percentages in a sentence and have a reasonable statement while ignoring that the percentages represent two different computations.

If you are not in business a 30% margin may seem like a hefty profit for an e-book because there is actually no physical product to inventory, warehouse, or ship. However, that 30% needs to support the whole infrastructure, wages, and legal costs to cover suits and investigations by gawd-knows-who.

 

[Glideslope]

The EU investigates when an ant crosses the road. Too much government.

LOL. No fear. In 5 years the EU will no longer be here.

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I actually agree with you, and don't know why you got voted down. You can't blink without seeing an EU investigation to nearly ANYTHING.

It's Mac Rumors. The Socialist Club.

 

[Daveoc64]

I actually agree with you, and don't know why you got voted down. You can't blink without seeing an EU investigation to nearly ANYTHING.

Europeans aren't as ideologically fixed as Americans.

It's often irrelevant to us whether or not something is "big government" or "small government" - we only care about results.

If the result of this is that there's more competition in ebook prices, then people will see that as a good thing.

Small government can't fix all of the world's problems, nor can big government.

 

[charlituna]

The EU commission already investigated DVD price fixing and region locking back in 2001, just after dropping the price fixing investigation on CD sales.
Nothing came of it.
.

Yes but that was before the age of tv on Hulu, iTunes etc. and before ebooks

A lot has changed in 10 years

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That would revolutionise the industry. Authors often have several different publishers across different geographical locations and sell rights to different formats via different publisher/agency combinations. The film business is the same with studios contracting with different distributors in different countries.

How this arose, I know not, but the homogenisation you're calling for might be very difficult to achieve.

In the film industry it came about in part due to various importing rules. It was easier, and sometimes required, to work with a local distributor. Even filming sometimes we work with a local studio to get tax cuts etc. well when you are someone big like Warner's who has various international divisions

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Apple didn't set the price. The publishers did.

History: $0.99 songs on iTunes. $0.99 apps.

Nope .99 was set by Apple. Labels got the power to pick in exchange or removing drm

 

[JAT]

Way to miss the point, and, she surely wouldn't be able to edit my books. What you fail to miss is that some things are dependent on contextual, specialized, knowledge, meaning that generic competence - while necessary - is not sufficient. I am sure your ex-wife is competent. Has nothing to do with that.

What are your books?

 

[SandynJosh]

The ebook issue is actually one that warrants looking into. The agency model really does cripple people from having any kind of competitive advantage.
Books usually have more like a 50%-60% mark up, which gives a bookseller a lot of room to offer sales and promotions. At 30% margins with Fixed pricing, not so much.

I think the publishers were foolish for taking this route because it DOES hurt sales.

I think a wholesale model would be better for everyone.

<snip out example>

It comes down to control on the publishers end.

<snip out example>

If you recall, Amazon was totally opposed to the Agency Model, as was B&N and ever other bookseller.
I actually really hope the EU spanks Apple and the publishers for this one. Competition is good... and one size doesn't not fit all. I will be curious to see how Amazon responds to this.

I hope I shortened your post without distorting your main point, which I don't disagree with, for the most part, because the agency model does give publishers greater control over their market.

However, lets look at that market which ranges from large outlets like B&N and Amazon, down to independent booksellers. All sell physical books but only the top few sell e-books. It's important to publishers to preserve the small outlets as well as feed the big ones. The agency model help level the playing field between Amazon and an independent bookseller, and that's a good thing on a local level, but not so good for the buying consumer.

If the publisher would not have this level of control then the top tier of outlets would have control, who would lower the purchase price to the point it would force out all but the top tier of players. Once the publisher had that few of outlets, the end point would be reached.

I grew up in a world with lots of brands of gasoline, including independent brands. That world was also full of independent book sellers. The independent gas stations are gone and the independent book sellers are nearly gone. If you value small businesses, then you may want to re-think your conclusions.

I see the book market like I see a lot of markets. There is a need for balance of control if it is to be healthy. The product needs to come from a collection of sources, both large and small. There needs to be a diversity of outlets, again, both large and small. And finally the product needs to be available in a competitively pricing environment for the consumer.

In a healthy market there will be a lot of change over time, but these changes need to be moderated to allow for the various parts to adjust.

 

[vrDrew]

There are a host of cultural, linguistic, technological, historical, and commercial reasons why the e-book business has been somewhat sluggish in Europe.

If the EU wants to investigate Apple, good for them. But I think they are barking up the wrong tree if they think Apple is planning on bolstering their bottom line via excessive profits on e-books they sell to their iPad and iPhone customers.

The biggest issue facing European e-book sales is the labyrinth of different publishing laws and agreements that cover every country. Add to that the fact that the market is further fragmented by a dozen or so different languages. Europeans may pay for things with a common Euro - but they haggle over the price in Catalan and Swedish, Danish and Dutch. And while many Europeans are (at least) bilingual - that doesn't mean they want to read Tom Clancy or John Grisham in the original English.

BTW: This fragmentation - both legal and cultural - is one of the biggest impediments to Amazon's Kindle Fire ever becoming a serious challenger to the iPad in the tablet marketplace. If Amazon is hoping to use e-commerce sales to make up for its subsidy of the device sales price- its going to have to count on the US market alone.

 

[Joe-Diver]

Actually this kind of price fixing is common in many industries. One good example is SCUBA equipment. If you own a shop and try to offer a discount below MSRP some brands of gear the distributor will simply cut you off and you will never get any more product.

So don't buy Aqualung or ScubaPro. There's plenty of other fine choices on the market....just look to LeisurePro and Scuba Toys....fine examples of online retailers with big discounts on name brand gear: Oceanic, Mares, Zeagle, Sherwood, Tusa, Cressi.....and many more.

Aqualung and ScubaPro will have to change, or they will eventually go out of business. It's only a matter of time. Refusing to support nothing other than brick and mortar dive shops is a sure way to kill your business in this day and age.

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Way to miss the point, and, she surely wouldn't be able to edit my books.

I didn't miss the point and she could surely edit anything you would possibly be able to write.

 

[applebook]

Having Clooney star as Jobs would be a terrible mistake.

 

[louis Fashion]

Every time I hear the words "European Regulators" I reach for my Lugar.

 

[Bernard SG]

I think a wholesale model would be better for everyone.
Let's use the book, "The Help" for an example.
You could offer the angency alternative to say, Amazon, or give them an option to purchase virtual inventory in the traditional way of print books.
Amazon's cost, just like paper books, is lower the more they buy. Amazon now has an incentive to buy more copies than it would sell at the Agency model because they can afford to offer the book at a sale price periodically.

There's a key word in there that, in my view, just kills your argument: "VIRTUAL". In the context of eBooks, that "virtual" actually means totally artificial and arbitrary. There's no meaningful economic rationale to assign a value to your "virtual inventory" when the marginal cost of each additional sold copy is in the vicinity of zero.

The notion that the wholesale model is "better for everyone" is also highly questionable. The wholesale model tends to favor the retailer and the final customer, for sure, but as such it also tends to squeeze the publisher's revenue which, as a result, reduces the publisher's ability to remunerate the author decently. In other words, the wholesale model devaluates the process of production and locates the profit at distribution level. While this might be desirable for material goods (and that's even debatable as far as it leads to outsourcing production to cheap-labor areas), it's potentially disastrous for the economy of content creation.

I'm not saying that the agency-model miraculously solves the issue but it has a potential to do so, if only publishers used their power to find the right balance between all parties, from the author to the final customer. Sadly that's not what they're doing, but it doesn't make the model faulty per se, it's their attitude that is to blame.

The reality is that this digital era is progressively making publishers (as well as music labels) redundant. The transition is painful but I'm convinced that some time in the future, the publishers will be marginalized and eventually disappear. The dominating model will be Content creator>Digital retailer>Consumer and then, the agency-model will be the one that makes sense.

 

[divinox]

What are your books?

Academic ones, of which i have but one (in print), and no real intention of writing more (at least not in the upcoming years). all work no play (and more importantly, no money) makes jack a dull boy. But, to be fair, i would be reluctant having her (or anyone else outside of the field) edit my articles either (for things other than language). To illustrate, my father used to work as an editor-in-chief. At times, i have had him look over my writing. Have it been valuable? Of course. Have he been able to correct and better my texts? Naturally. Is he competent (read context-knowledgable) enough to make accurate decisions on all matters? No where close. Style and language is where he shines (actually, not so much style, as the academic style of writing is quite different - here, i believe his ex-wife would do somewhat better, having a background in technical writing -- which too, i am sure, is quite dull from a stylistic perspective).

Yay! I love parentheses!





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I didn't miss the point and she could surely edit anything you would possibly be able to write.

One last time. Editing is sometimes more than "language control". Both accurately reflecting complex matters and tailoring to a specific crowd (both demographic and geographic) requires non-generic competence. And no, i have a hard time believing that your ex-wife has adequate experience and knowledge of every strand of publishing from biomolecular archaeology to children's books targeted at (parents of) hindu children. For clarity, look above.

 

[divinox]

There's a key word in there that, in my view, just kills your argument: "VIRTUAL". In the context of eBooks, that "virtual" actually means totally artificial and arbitrary. There's no meaningful economic rationale to assign a value to your "virtual inventory" when the marginal cost of each additional sold copy is in the vicinity of zero.

The notion that the wholesale model is "better for everyone" is also highly questionable. The wholesale model tends to favor the retailer and the final customer, for sure, but as such it also tends to squeeze the publisher's revenue which, as a result, reduces the publisher's ability to remunerate the author decently. In other words, the wholesale model devaluates the process of production and locates the profit at distribution level. While this might be desirable for material goods (and that's even debatable as far as it leads to outsourcing production to cheap-labor areas), it's potentially disastrous for the economy of content creation.

I'm not saying that the agency-model miraculously solves the issue but it has a potential to do so, if only publishers used their power to find the right balance between all parties, from the author to the final customer. Sadly that's not what they're doing, but it doesn't make the model faulty per se, it's their attitude that is to blame.

The reality is that this digital era is progressively making publishers (as well as music labels) redundant. The transition is painful but I'm convinced that some time in the future, the publishers will be marginalized and eventually disappear. The dominating model will be Content creator>Digital retailer>Consumer and then, the agency-model will be the one that makes sense.

Virtual or not, you can still apply the whole-sale model. Heck, one could even tier it, if one so please, simply reducing the unit cost once you reach x in sales. None of this requires fixed pricing, or more control to the publishers. Have them set the base and the tier, and let the retailer do retail.

Further, i disagree with your forecast. In it, you seem to ignore that publishers do create value (both in music and in print). Rather, what (i think) will happen is that reduced barriers to entry will break publishers as a control point. With the gatekeeper aspect out of the picture, publishers will be just fine. They'll do their job, and they'll do it competitively.

That said, this just means more (potential) control to the retailer, but hey... life's a bithc.

 

[icelord]

The problem is that there can be no competition between ebook sellers - the publishers are "price fixing" which is illegal in many jurisdictions.

Under the old system, the ebook sellers (like Amazon, Kobo etc.) had some room within which they could discount books (just like a real store could) - the agency model doesn't allow that.

Notably absent is the publisher "Random House" - they decided against the Agency Model in the UK because they thought it was illegal and didn't want to take the risk.

No competition between ebook sellers? Really? So, if Amazon said, "We'll only take 20% rather than 30%, would Apple not find that as competitive?

How does this differ from App stores? How does this differ from authorized dealers of items that cannot sell below retail price?

I think if you want to shake up the competition, then give more power to the authors, but ebooks can be sold many parties, and they can compete on the charge they pose to the publishers it is quite competitive that way.

 

[Joe-Diver]

One last time. Editing is sometimes more than "language control". Both accurately reflecting complex matters and tailoring to a specific crowd (both demographic and geographic) requires non-generic competence. And no, i have a hard time believing that your ex-wife has adequate experience and knowledge of every strand of publishing from biomolecular archaeology to children's books targeted at (parents of) hindu children. For clarity, look above.

You can believe you're so elite if you wish, but I've seen the stuff she edits, from simple children's stories, to resumes, to incredibly complex classified technical documents with schematics, complex theoretical physics formulas, and highly detailed engineering "speak". (what she gets paid so much for)

You can believe whatever you want.

 

[Rodimus Prime]

The EU investigates when an ant crosses the road. Too much government.

Do you think they are going after Apple or Amazon?
The real target is the publishing companies as their are so few players that they can easily be abusing their power to raise prices over all.

 

[Daveoc64]

No competition between ebook sellers? Really? So, if Amazon said, "We'll only take 20% rather than 30%, would Apple not find that as competitive?

They would not be able to do that with the Agency model.

Same price. Same cut for the retailer (30%). Same cut for the publisher (70%) - on every store.

How does this differ from App stores? How does this differ from authorized dealers of items that cannot sell below retail price?

App Stores don't tend to have "exclusivity" over a specific type of App. There are many Apps that display documents on different platforms. Having Pages exclusive to iOS is not an issue. You can get an alternative App elsewhere.

You can't say the same for a book - if you want to buy a specific title, you have no choice but to pay what the publisher wants you to pay, rather than what the retailer wants to charge you.

"Authorised Dealers" would legally be entitled to sell the products at any price they choose to do so here in Europe. They would obviously have to consider profit margins when doing that though.

I think if you want to shake up the competition, then give more power to the authors, but ebooks can be sold many parties, and they can compete on the charge they pose to the publishers it is quite competitive that way.

As above, the agency model doesn't allow that.

Assuming it did, there is no benefit to consumers in Store A charging a higher "commission" than Store B. The EU is investigating the issue from the point of view of consumers.