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Earlier this month, we reported on word from the U.S. Department of Justice that regulators were looking at filing suit against Apple and e-book publishers over the "agency model" of pricing championed by Apple leading up to the launch of its iBookstore. Under the model, retail book prices are set by publishers, with retailers receiving a cut of the proceeds.

Of most concern to regulators, Apple's agreements with the publishers included "most favored nation" clauses that prevented publishers from selling their books through any other retailers at lower prices than offered through Apple's iBookstore. Reuters now reports that the parties involved in the dispute are continuing to move toward a settlement in order to ward off a lawsuit, and that the settlement is likely to see the removal of these clauses. As a result, the publishing industry will likely in some form return to the previous wholesale model in which retailers set their own prices for books.
While negotiations are still fluid, the settlement is expected to eliminate Apple's so-called "most favored nation" status, which had prevented the publishers from selling lower-priced e-books through rival retailers such as Amazon.com Inc (AMZN.O) or Barnes & Noble Inc (BKS.N), the people said.

The deal could also force a shift, at least temporarily, in pricing control from publishers to retailers, one of the people said.

Such a move to a "wholesale model" would not only benefit consumers but also Amazon, which had been the leading bargain e-book retailer with its Kindle reader.
Under the wholesale model, Amazon priced e-books at or even below cost in many cases in order to draw in customers who would then purchase other items from its online store. But the practice generated concern among publishers that their works were being devalued, and many were happy to sign on with Apple's agency model in order to create more price stability.

Analysts estimate that a return to the wholesale model could add $1 billion to Amazon's revenues this year given its commanding 65% share of the e-book market and the impact of discounted pricing on sales of other items in its store. Book sales make up only a small portion of Apple's revenue, with estimates pegging iBookstore sales at roughly $50 million annually, and the company is expected to see little impact from any pricing changes in the book market.

Article Link: Settlement over e-Book Pricing to Undo Apple's Agency Model for Pricing?
 

KPOM

macrumors P6
Oct 23, 2010
16,536
5,445
So, the biggest beneficiary of the government's anti-trust action is: a big corporation with 65% of the market.
 

ericvmazzone

macrumors regular
Dec 9, 2008
208
0
Kalamazoo, MI
I demand as part of the settlement every penny back that I was overcharged for ebooks, I demand this from the publishers who manipulated the price, not from the vendor who was forced into this system by the publishers working on collusion.
 

jontech

macrumors 6502
Feb 26, 2010
435
115
Hawaii
I demand as part of the settlement every penny back that I was overcharged for ebooks, I demand this from the publishers who manipulated the price, not from the vendor who was forced into this system by the publishers working on collusion.

Agreed

Apple has nothing to do with it

On the other hand, we need to stop buying media, that would kill two birds with one large stone
 

hkenneth

macrumors regular
Jul 25, 2011
245
23
Buy a Chinese self-learning book from iBooks, master it, then you are able to download any book you want from Chinese websites~ :D
 

The Man

macrumors 6502a
Jul 7, 2004
599
203
I don't get this wholesale model. In the Netherlands, publishers set the price of books. It's their asset, it's their choice to price high or low. Why should books be sold wholesale and then discounted if publishers want certain books to carry higher price? Don't get me wrong, I don't like high prices, but I don't see anything wrong with the agency model. Why does Amazon get to decide what prices Apple iBooks are sold at? Who decides what price is the "standard" and which is too high for consumers? I'm confused. I do think lower is better, but still I don't get the suit.
 

iLilana

macrumors 6502a
May 5, 2003
790
279
Alberta, Canada
huh?

how is this fair? doesn't the same price everywhere benefit all? Who loses out? bulk/warehouse pricing for physical products I understand. Paper and printing costs money but e-products have no overhead really. marketing and bandwidth which is miniscule. By allowing amazon to undercut others forces them to lower prices as well. price fixing is so subjective.
 

paradox00

macrumors 65816
Sep 29, 2009
1,181
379
I bet they'll set a recommended MRSP and charge Apple and Amazon 70% of that price, but they'll be free to undercut the MRSP if they wish. That would be the simplest way to adapt the agency model to something that isn't anti-competitive.
 

Torrijos

macrumors 6502
Jan 10, 2006
383
21
I have to agree this practice by Apple is pretty obviously anti-competitive.

Because Amazon using its position as market leader to devaluate certain products to bring in more clients for others (so devaluating books from one producer to benefit usually a different producer), feels like a sane business model for everybody?

Then again I won't cry on the producers' destinies, if they feel abused they should stop giving part of their business to Amazon. The fact remains that this is one more thing to add to the incredible capacities that old american business have NOT to adapt to the modern world!

After music, TV & movies, that had YEARS to adapt to the evident future that we, almost, all live in now, they still tried pushing their producer - distributor model to the internet age missing the fact that any delay in distribution would be detrimental to profits.

Now look at the book market, for years now the Internet as shown that the written word could be complimented by illustrations, animation and interactivity for the reader pleasure, but no-one, not even Amazon tried to help or prepare the transition.

Then Apple comes up, produces tablet capable of pushing media better than before to a larger audience (people that had trouble handling technology) BUT after three years of iPads nobody in the sector offered better editorial or publishing tools, editors still produce mediocre ebooks that feel like cheap .pdf.

All those people should have gotten their heads out of their a**e**es, and taken control of their own industry, but instead I welcome the age of self-published books thank to Apple, like I welcome Kickstarter or Steam (to a certain extent) for indie games.
 

hkenneth

macrumors regular
Jul 25, 2011
245
23
I don't get this wholesale model. In the Netherlands, publishers set the price of books. It's their asset, it's their choice to price high or low. Why should books be sold wholesale and then discounted if publishers want certain books to carry higher price? Don't get me wrong, I don't like high prices, but I don't see anything wrong with the agency model. Why does Amazon get to decide what prices Apple iBooks are sold at? Who decides what price is the "standard" and which is too high for consumers? I'm confused. I do think lower is better, but still I don't get the suit.

Well, Apple could potentially lower the price to the limit that eventually kills all its competitors (Amazon), after that they control the whole market, both the publisher (cuz they don't have anywhere else to sell) and the consumer (cuz we don't have anywhere else to purchase), then the dark age begins. It is called monopolism.
 

NorEaster

macrumors regular
Feb 14, 2012
239
23
By allowing amazon to undercut others forces them to lower prices as well. price fixing is so subjective.

How is this any different than any other retailer lowering prices because they can afford to make lower margins for a given product by making it up elsewhere? For Pete's sake...your local grocery store does this every week. They put certain items (like cereal) on sale so you go to their stores, buy the cereal, and then buy other items that yield a better margin for the store.

Are you telling me you never comparison shop?!
 

The Man

macrumors 6502a
Jul 7, 2004
599
203
Well, Apple could potentially lower the price to the limit that eventually kills all its competitors (Amazon), after that they control the whole market, both the publisher (cuz they don't have anywhere else to sell) and the consumer (cuz we don't have anywhere else to purchase), then the dark age begins. It is called monopolism.

But Apple doesn't set the prices, the publishers do. Apple only sets the cut they get.

----------

How is this any different than any other retailer lowering prices because they can afford to make lower margins for a given product by making it up elsewhere? For Pete's sake...your local grocery store does this every week. They put certain items (like cereal) on sale so you go to their stores, buy the cereal, and then buy other items that yield a better margin for the store.

Are you telling me you never comparison shop?!

Yes, Amazon may undercut if they wish, but why should publishers adhere to the undercutting when they sell their own books through iBookstore and want to set their own price model?
 

HiRez

macrumors 603
Jan 6, 2004
6,059
2,073
Western US
So is going to result in iBooks prices going down? I buy a lot of them (a couple dozen a year), so I'd love that.
 

gnomeisland

macrumors 65816
Jul 30, 2008
1,022
720
New York, NY
again and again

content wants to be free

or nearly next to it ...

Do you create content or just consume it? Content doesn't want to be free, consumers just want it to be. I get that. But as someone who creates content I want to get paid and as a consumer I don't want to have to open my all my closets (google) or wade through advertisements (google) to get my content. I'm Ok that those options exist but I also get that Amazon was undervaluing books for their own benefit.
 

KPOM

macrumors P6
Oct 23, 2010
16,536
5,445
Uhh....no. The biggest beneficiaries will be the folks who buy eBooks.

Not if authors and publishers drop out of the market because they can't make enough money. Why is it inherently better for Amazon to set the price of a book rather than the publisher?
 
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