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

[EbookReader]

Is there agency pricing for music sold on Itunes and Amazon MP3 and Google Play?

Or is it based on wholesale model? (Itunes/AmazonMP3/Google Play buy it for X amount and sell it for whatever price they want)....

 

[dashiel]

A big presumption. If Amazon is in fact engaging in predatory pricing, then they'd run afoul of the antitrust laws too.

http://pandodaily.com/2012/01/17/co...n-amazons-sights-and-theyre-going-to-kill-us/

 

[bsolar]

http://pandodaily.com/2012/01/17/co...n-amazons-sights-and-theyre-going-to-kill-us/

The rant above boils down basically to this phrase:

Long-term there’s no future in printed books. They’ll be like vinyl: pricey and for collectors only. 95% of people will read digitally. Everybody in publishing knows this but most are in denial about it because moving to becoming a digital company means laying off like 40% of our staffs. And the barriers to entry fall, too. We simply don’t want to think about it.

So, you know your business model is going to disappear in a few years, and do exactly what to be the one leading the innovation? Not only you do nothing, you try to protect the old way because you don't have the guts or brains to innovate yourself. They complain the competition is offering more than they can match, and don't realize that if their industry has no money maybe it's time to change how you do your business.

On top of that, barriers to entry falling? I'm all for that! Let's shake the tree, so that the dead branches finally fall down.

They "simply don't want to think about it" because they are too lazy or conservative to change a failing business model, just like the music labels. We have to thank Apple who did show to all of these dinosaurs what the future was about with iTunes. And they had to *insist* on many points to get through their thick, conservative skull.

The sooner the old publishers go away the better. They are hindering the future just like the music label did before Apple forced their hands. Amazon, Apple and whoever else gets it will take over the business in the next few years anyway.

 

[dashiel]

The rant above boils down basically to this phrase:

So, you know your business model is going to disappear in a few years, and do exactly what to be the one leading the innovation? Not only you do nothing, you try to protect the old way because you don't have the guts or brains to innovate yourself. They complain the competition is offering more than they can match, and don't realize that if their industry has no money maybe it's time to change how you do your business.

On top of that, barriers to entry falling? I'm all for that! Let's shake the tree, so that the dead branches finally fall down.

They "simply don't want to think about it" because they are too lazy or conservative to change a failing business model, just like the music labels. We have to thank Apple who did show to all of these dinosaurs what the future was about with iTunes. And they had to *insist* on many points to get through their thick, conservative skull.

The sooner the old publishers go away the better. They are hindering the future just like the music label did before Apple forced their hands. Amazon, Apple and whoever else gets it will take over the business in the next few years anyway.

I don’t dispute any of that, I was pointing out the irony of Apple being taken to task for “price fixing” while Amazon is quietly consolidating power as creator, distributer and reader a position that has far more opportunity for anti-trust and price fixing violations.

 

[bsolar]

I don’t dispute any of that, I was pointing out the irony of Apple being taken to task for “price fixing” while Amazon is quietly consolidating power as creator, distributer and reader a position that has far more opportunity for anti-trust and price fixing violations.

Selling at loss to gain market share is nothing new and nothing automatically violating antitrust regulations. One example is Microsoft which sustained losses for years with the Xbox division before it gained enough market share and became profitable.

In my opinion Apple is less responsible than the publishers: Apple offered a perfectly legit sales model which is the Agency. It's the publishers who colluded to leverage this to engage in anticompetitive practices.

I'm all for Apple competing with Amazon, both companies are innovative and know how to satisfy the customers and put in place new, successful business models. I'm also fine with the Agency model, unless it gets abused as the antitrust claims.

 

[SlugBlanket]

That almost makes sense, except the part where SJ strong armed the record labels to drop the DRM requirement from iTunes music, so you could play your iTunes music on any MP3 player, phone, or computer.

Can you take a downloaded Amazon Kindle book (.AZW) and open it with another ebook reader? I think not.

Having a proprietary document format isn't illegal. The anology for now still stands.

 

[EbookReader]

this is from the class-action lawsuit:

http://paidcontent.org/2012/04/02/4...l-evidence-enough-to-prove-e-book-conspiracy/

In response to Apple’s defense, the plaintiffs said the company had a motive to be the hub of a conspiracy because:

The “situation that existed” was that Apple was late to the eBook market, Amazon had a very large installed user base, a strong appetite for discount eBook pricing, and Apple wanted to knock out a reason to buy a Kindle versus an iPad – the price of eBooks. The scheme protected Apple from price competition from other retailers and increased Apple’s revenue per eBook unit sold compared to the wholesale model.

If Apple settle the DOJ antitrust case (as rumored), what will it means to the class-action lawsuit?

 

[marksman]

Wirelessly posted

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.

This is something people are missing here. It used to be illegal for companies to require retailers to price above a certain level. It is no longer illegal. The book publishers did not do this with amazon originally because amazon had all the leverage.

If the agency model dies book publishers can still require everyone to sell their products for whatever they want. With apple there now amazon will no longer have any leverage and will not be able to loss lead.

This very well could have no impact on pricing and may even cause prices to go up if publishers set minimum prices less than 30% margin retailers get now.

It is almost like apple and the publishers tricked people into this. There may be some fines if they can evidence that apple middlemanned agency model consent but it still will not likely cause ebooks to drop in price. Only time will tell.

 

[marksman]

Wirelessly posted

Somewhat ironic considering Amazons aggressive push to become a publisher and using their revenue from non-book sales to drive traditional publishers out of business.

A big presumption. If Amazon is in fact engaging in predatory pricing, then they'd run afoul of the antitrust laws too.

It is not a presumption. Amazon regularly sold ebooks well below cost. This was done to discourage any competitors from forum while they developed their chain from books to readers.

The ebook market is actually lucky apple came along. While it has caused short term increases, amazons plan was never to sell ebooks below cost for ever. It was to corner the market on ebook sales and distribution and then profit greatly from it.

 

[marksman]

Wirelessly posted

no they can't. Because they don't set the prices. the publishers do.

If, as suggested by the article, the agency model dies, then Apple will set the retail prices.

Like retailers set the prices for the apple items they sell?

 

[AppleHater]

I keep on being told how cheap it is to do ebooks, so I am sure that someone such as you will have the numbers. Keep in mind the costs are exactly the same for free books and books that dont sell many copies. Or is this one of these "facts" that is true simply because so many people say it is true, no one actually knows of course, but it must be true because it sounds good and agrees with your point of view.

So tell me, how many servers does Apple have, 10,000...50,000, 100,000, 500,000 ????

At say 400W each thats how many GW of power ?
That power comes out as heat, so now add in the running of a multi gigawatt aircon unit. Oh and best add in some extra for all the hard drives, switches, fibrelinks, etc too.

Now add in the costs of xx many hard drives failing each week/day.

And what is the wage difference between a programmer/Sysop and a shop sales person ?

Try thinking, try working it out, and stop being lazy an simply accepting something that is on the web must be true because its what you want to be true.

How many of these do you "know" is true ?
http://www.buzzfeed.com/chrismenning/20-popular-misconceptions

Are you trying to make a point, or just intrigue? If making a point, some hard fact will work better than some hypothetical ideas with buncha questions that you don't have answers to and a link to "you don't use your 10% brain power".

 

[IJ Reilly]

It is not a presumption. Amazon regularly sold ebooks well below cost. This was done to discourage any competitors from forum while they developed their chain from books to readers.

The ebook market is actually lucky apple came along. While it has caused short term increases, amazons plan was never to sell ebooks below cost for ever. It was to corner the market on ebook sales and distribution and then profit greatly from it.

Yes, it's a presumption. As others have pointed out, selling below cost is not automatically a violation of antitrust laws. Companies do this routinely. If the traditional publishers feel that they are the victims of predatory pricing schemes from Amazon, then they will be taking those complaints to the FTC or the DoJ, and backing them up.

 

[John.B]

Having a proprietary document format isn't illegal. The anology for now still stands.

What are you talking about? That has to be the worst analogy I've heard yet.

Apple used their market position to get the labels to remove DRM so that music downloads could be played on any device, not just those that Apple sells.

Amazon is using their market position to drive publishers out of business so they can take over the publishing part of the market in addition to monopolizing the sales channel, which will allow them to dictate selling terms to writers. All while locking buyers into using their reader software platform (all of my .AMW books are DRM'ed).

I'm not sure how you could even use the word "analogy" in that context. The two business models couldn't be farther apart.

 

[Oletros]

So I wrote a book, and I think it should be sold for $9.99 and I should get $7 of every sale.

That is the only right part, the rest was wrong. You get $7 an Amazon can sell the book at the price they want

 

[EbookReader]

Music (MP3) is sold through wholesale pricing on Itunes/Google/Amazon.

Google Play and AmazonMP3 sold several digital albums at a huge loss about a month ago. As consumers, you gotta love competition.

http://www.billboard.biz/bbbiz/indu...mazon-selling-select-digital-1006423552.story

Both AmazonMP3 and Google Play have seemingly set a new low for album pirces, listing digital albums like Lady Antebellum's 2011 "Own The Night" and Coldplay's "Mylo Xyloto" for a mere 25 cents.

If it were agency pricing, discounting would not be allowed. The prices of these albums would have to be exactly the same as it is on Itunes.


Same thing with digital movie rental:

GooglePlay recently priced these movies at $0.25 (and Amazon price matched)

Puncture
Inglourious Basterds
Vicky Cristina Barcelona
American Psycho
Crash
Sunshine Cleaning
Reservoir Dogs



So, digital movies = wholesale, digital music = wholesale, digital book = used to be wholesale...now agency...will be back to wholesale if DOJ has its way.

 

[EbookReader]

Apple has a lot of cash ...so we know it can compete with Amazon selling ebooks using the wholesale model.

i.e. buys books at $8 wholesale and sell it at whatever price Apple deem best.

$12 for $4 profit
$10 for $2 profit
$8 for break-even
$7 for $1 loss (but bring traffic to the store)



The other player is Google Play. It too has cash to compete with Amazon and Apple.


Who win when these stores compete? Customers.

(unless Apple, Amazon and Google conspire together and fix the price of ebooks....buying ebooks at $8 and all sell it at $11, which gives each store $3 profit per sale......though if that happens, another player could enter the game...

buy it at $8, sell it at $9....($2 cheaper compare to competitors). Would book buyers flock to this new store and buy books at $9 compare to $11?

 

[EbookReader]

http://tech.fortune.cnn.com/2012/04/11/why-apple-is-telling-the-doj-well-see-you-in-court/
Why Apple is telling the DOJ: 'We'll see you in court'


interesting article, especially this:

A protracted cooling off period -- in which Amazon goes back to selling bestselling e-books for $9.99 and Apple is still adding its 30% surcharge to the publishers' prices -- could seriously damage Apple's e-book business.

Worse still, that it could keep the books off the iBookstore altogether.

When everything is switch back to wholesale, why can't Apple do the same thing as Amazon and offer bestselling e-books for $9.99?

Must Apple have 30% cut? Can't 10% be enough?

If Amazon can survive on low margin on ebooks, Apple is even in better shape. Why? Because Apple's other businesses are hugely profitable.


The way I see it, if Amazon can survive can 5% ebook margin, Apple can too.

 

[SlugBlanket]

What are you talking about? That has to be the worst analogy I've heard yet.

Apple used their market position to get the labels to remove DRM so that music downloads could be played on any device, not just those that Apple sells.

Amazon is using their market position to drive publishers out of business so they can take over the publishing part of the market in addition to monopolizing the sales channel, which will allow them to dictate selling terms to writers. All while locking buyers into using their reader software platform (all of my .AMW books are DRM'ed).

I'm not sure how you could even use the word "analogy" in that context. The two business models couldn't be farther apart.

If you can't follow logic or threads then perhaps you should be more judicious when you quote people.

My first response on this thread was to a comment that a virtual monopoly would be handed to Amazon, to which I not unreasonably countered and made the analogy of Apple's current market position with iTunes. It has nothing to do with business models and everything to do with market dominance. The discussion as a whole at that point was about alleged illegal practices but you then decided to quote me and my analogy and swing it towards DRM, which had nothing to do with the point I raised. You then compounded your ignorance and disinclination towards an inoffensive discourse by once again belabouring your preoccupation with DRM.

Since you obviously have an issue with this form of DRM I'll give you my thoughts on it. DRM is nothing more than another means of a company trying to maintain control over their product. If Amazon choose to use that then its fine by me. I can still read my Kindle titles on my Windows machines, my Mac or my iPad. I don't even have to use my Kindle so for me DRM in this field is a non-issue. You say Amazon are using their market position to drive publishers out of business but yet you say nothing about the hundreds of record stores that went out of business as a result of iTunes market dominance. Ask Virgin or HMV about Apple's business practices.

For you, it seems from your responses that it is another manifestation of the Evil of Amazon compared to the Good of Apple. I can only hope to be enlightened in the presence of your evangelism.

It's possible I could be missing your point. Maybe I should be angry with Apple for me not being able to play Zombie Gunship on an Android device. Actually wait a minute, that's a good thing, isn't it ?

 

[bobob]

A Message from John Sargent

Dear authors, illustrators and agents:

Today the Department of Justice filed a lawsuit against Macmillan’s US trade publishing operation, charging us with collusion in the implementation of the agency model for e-book pricing. The charge is civil, not criminal. Let me start by saying that Macmillan did not act illegally. Macmillan did not collude.

We have been in discussions with the Department of Justice for months. It is always better if possible to settle these matters before a case is brought. The costs of continuing—in time, distraction, and expense— are truly daunting.

But the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.

When Macmillan changed to the agency model we did so knowing we would make less money on our e book business. We made the change to support an open and competitive market for the future, and it worked. We still believe in that future and we still believe the agency model is the only way to get there.

It is also hard to settle a lawsuit when you know you have done no wrong. The government’s charge is that Macmillan’s CEO colluded with other CEO’s in changing to the agency model. I am Macmillan’s CEO and I made the decision to move Macmillan to the agency model. After days of thought and worry, I made the decision on January 22nd, 2010 a little after 4:00 AM, on an exercise bike in my basement. It remains the loneliest decision I have ever made, and I see no reason to go back on it now.

Other publishers have chosen to settle. That is their decision to make. We have decided to fight this in court. Because others have settled, there may well be a preponderance of references to Macmillan, and to me personally, in the Justice Department’s papers – often without regard to context. So be it.

I hope you will agree with our stance, and with Scott Turow, the president of the Author’s Guild, who stated, “The irony of this bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition. This would be tragic for all of us who value books and the culture they support”.

Since we are now in litigation, I may not be able to comment much going forward. We remain dedicated to finding the best long term outcome for the book business, for Macmillan and for the work you have entrusted to our care.

Thanks.

John


(Via Daring Fireball)

 

[EbookReader]

If someone want to read the whole DOJ lawsuit, go here
http://assets.sbnation.com/assets/1053857/e-books_complaint.pdf

The Verge has summarized the key parts here
http://www.theverge.com/2012/4/11/2...k-price-fixing-case-against-apple-an-analysis


Two of the publishers agreed to pay restitution at $52 million. If all 5 do this at the same amount, that's $250 million in restitution.



These publishers colluded and worked in tandem to raise ebook prices
http://assets.sbnation.com/assets/1053857/e-books_complaint.pdf

81. When Amazon stopped selling Macmillan titles, other Publisher Defendants did
not view the situation as an opportunity to gain market share from a weakened competitor.
Instead, they rallied to support Macmillan. For example, the CEO of one Publisher Defendant's
parent company instructed the Publisher Defendant's CEO that "[Macmillan CEO] John Sargent
needs our help!" The parent company CEO explained, "M[acm]illan have been brave, but they
are small. We need to move the lines. And I am thrilled to know how A[mazon] will react
against 3 or 4 ofthe big guys."

82. The CEO ofone Publisher Defendant's parent company assured Macmillan CEO
John Sargent of his company's support in a January 31, 2010 email: "I can ensure you that you
are not going to find your company alone in the battle." The same parent company CEO also
assured the head ofMacmillan's corporate parent in a February 1 email that "others will enter the
battle field!" Overall, Macmillan received "hugely supportive" correspondence from the
publishing industry during Macmillan's effort to force Amazon to accept the agency model

83. As its battle wi th Ama zon cont inued, Ma cmi l l an knew tha t , be c aus e the othe r
Publisher Defendants, via the Apple Agency Agreements, had locked themselves into forcing
agency on Ama zon to advance their conspiratorial goals, Amazon soon would face similar edicts
f rom a uni t ed f ront ofPubl i she r De f endant s ......