Should Apple settle the DOJ ebook price fixing lawsuit?

[EbookReader]

Here's the term of the settlement from the 3 Publishers that have settled:

http://news.cnet.com/8301-1023_3-57412592-93/whats-the-future-of-e-book-pricing/

HarperCollins, Hachette, and Simon & Schuster, which is owned by CBS, the parent company of CNET, will have a couple of pricing models to choose from. Either they can go back to the old way of charging wholesale pricing (retailers buy a book for right around half its list price and then sell it for whatever they want) or they can simply set the price for the book (as they are doing now under the "agency" model) and give a 30 percent cut to the retailer. Apple operates both its iBookstore and App Store under the latter terms.

The big change will be that retailers will be allowed to discount the price of e-books. Under the terms of the current agency model that caught the eye of the DOJ and precipitated the investigation and eventual antitrust lawsuit, no retailer could set a price for a book below Apple's price in its iBookstore. That so-called "most favored nation" (MFN) clause has been removed as part of the settlement.

So retailers are free to discount under the new terms -- but not without a caveat. The terms are only good for two years. After two years, publishers can negotiate a new agreement that would allow them to go back to the current terms and restrict discounting.

If that's not complicated enough, a retailer like Amazon, which was aggressively discounting titles to $9.99 under the former "wholesale" model (and losing money on bestselling titles), isn't permitted to take an overall loss on a publisher's catalog. In other words, a retailer's commissions have to at least equal the amount of discounts its offering. For example, if a retailer makes $100,000 from the 30 percent commission it gets from the catalog of publisher X, it can only discount (take a loss) of up to $100,000.

In a nutshell if Apple accepts the settlement:

1) wholesale pricing like Apple is doing with digital music and digital movies on Itunes (buy ebooks at a negotiated price and Apple can sell it at any price it wants, similar to digital music and movies)

or

2) agency pricing but seller is allowed to discount their 30% cut (can't go below 0% on an aggregate level of the publisher's catalog)






In Europe, Apple offers to settle:

http://www.telegraph.co.uk/finance/...-in-Europe-but-will-fight-case-in-the-US.html

Apple offers to settle ebook price fixing row in Europe but will fight case in the US






This is in the Ipad forum because Apple launch the ibookstore when Ipad was launched. A lot of reading are done on Ipad so I feel this is the most appropriate forum. This forum also has a lot of traffic so that more people will vote on the poll.

 

[Aluminum213]

$14.99 ebooks are way too much, especially when hard copies can be found cheaper


Bring on $9.99 ebooks

 

[EbookReader]

$14.99 ebooks are way too much, especially when hard copies can be found cheaper


Bring on $9.99 ebooks

That is not why there is a lawsuit. This is why:


using 2 bestsellers as an example with current data:

The Witness by Nora Roberts
Penguin Publishing

Kindle: $14.99 (forced to keep 30%)
ibookstore: $14.99 (forced to keep 30%)
Nook: $14.99 (forced to keep 30%)
GooglePlay: $14.99 (forced to keep 30%)

The Innocent by David Baldacci
Hachette Book Group

Kindle: $14.99 (forced to keep 30%)
ibookstore: $14.99 (forced to keep 30%)
Nook: $14.99 (forced to keep 30%)
GooglePlay: $14.99 (forced to keep 30%)


If sellers want to discount part of their 30% commission and pass this savings in the form of lower prices to customers, they should be able to.

But they CAN'T. There is no competition among these sellers.

If Google wants to sell "The Witness by Nora Roberts" for $10.49 (passing the whole 30% commission to the customers), why is Google being forced not to?

 

[EbookReader]

In capitalism, retailers want the biggest mark up possible. Competition forces the mark up down. By setting a fixed percentage of mark up (30%), competition is eliminated.

If a retailer only wants 10% or 15% mark up instead of 30%, why can't they? (especially when low mark up = low prices for the consumers)




Take a look at Amazon MP3 and Itunes for best selling songs.

Both buy wholesale at $0.91 per song (Somebody I used to know, We Are young, Glad You Came etc....)

Itunes sell for $1.29 (for 30% mark up)
AmazonMP3 sell for $0.99 (8% mark up)

Competition works. Consumers benefit from lower prices.




Why did the publishers insist that Amazon take the whole 30% when Amazon only want to take 10% (and pass the 20% mark up to the consumers in the form of lower prices?)

 

[thewitt]

No, they should not settle.

They did nothing illegal, and they should go forward with the jury trial they have requested.

 

[EbookReader]

No, they should not settle.

They did nothing illegal, and they should go forward with the jury trial they have requested.

http://www.dailytech.com/Apple+Sued...fy+it+With+a+Public+Response/article24447.htm

Sharis Pozen, head of the DOJ's antitrust division, told reporters, "This took place at the highest levels of these companies.* Executives knew full-well what they were doing.This action drove up e-book prices virtually overnight.* Let me be clear: When companies enter agreements that prevent price competition, that is illegal."

DOJ just need to prove that the agreement prevent "PRICE COMPETITION"

The Witness by Nora Roberts
Penguin Publishing

Kindle: $14.99 (forced to keep 30%)
ibookstore: $14.99 (forced to keep 30%)
Nook: $14.99 (forced to keep 30%)
GooglePlay: $14.99 (forced to keep 30%)

If Amazon want to keep 10% and pass on 20% to consumers in the form of lower prices, but not able to....


There is no price competition for ebook.

 

[thewitt]

Nonsense. Opinions will not settle this, only a judge and jury.

I look forward to the trial.

 

[Capt T]

In very simple terms. Since I am no legal expert.

I thought the deal was that the publisher set the price... but that they could not have the price higher in the iBook store, than another digital download store. So if they wanted it to be $10 at amazon then the iBook store had to have it at $10, but if google books kept it at $14 and it was $10 in the iBooks store that was fine.

In other words Apple didn't want them charging a premium to the consumer, just to get it in iBooks. They wanted lower prices if the price was lower anywhere else. It is the publishers who are not allowing anyone to lower the price.

 

[thatoneguy82]

I really hope so, these are electronic/data, not hardcopies. I prefer the iBooks format over the Kindle but the prices are just way too high for what it is. I'm glad the Kindle app has a pretty GUI, almost like iBooks.

 

[EbookReader]

Motive: (see below)
End result: higher ebook prices and no price competition


1) What is the publisher motive? (high ebook prices to protect print books)
2) What is Apple motive? (don't want to compete with Amazon on prices because that would result in very low margin)

Agency pricing with MFN clause will

1) increase ebook prices (big plus for publishers)
2) eliminate price competition (big plus for Apple)

How to make Amazon agree to this?

- Team up and tell Amazon if they don't accept, they won't be able to sell books from 5 of the 6 Big Publishers. Amazon can fight against 1 of 6 (it did fought back for 2 days against Macmillian before caving). But when the other 4 also told them if you don't switch to agency, we won't give you book to sell......Amazon caved.



This was at the Ipad unveiling (a few months before the switch to agency).

Walt asks Steve, "Why should she buy a book for $14.99 on your device when she can buy one for $9.99 from Amazon or Barnes & Noble?"

Steve responds somewhat knowingly, "That won't be the case."

Walt says, "You won't be $14.99 or they won't be $9.99?"

Steve says knowingly, "The prices will be the same."

Then the video cuts, then Steve says, "Publishers are actually withholding their books from Amazon because they're not happy."

You can see the video of it here: (fast forward to around the 2 minutes mark)

http://allthingsd.com/20100128/boom...arring-walt-mossberg-plus-a-steve-jobs-cameo/

This will be used by DOJ.