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Amazon Battles Apple By Arm-Twisting Publishers

Posted by Soulskill on from the slapfight-of-the-titans dept.

bizwriter writes "Apple has upset the e-book pricing cart by agreeing to a so-called agency model, where the publisher sets the price and the seller takes a cut. This goes contrary to the degree of control Amazon likes, so although it apparently gave in to Macmillan back in February, it turns out that Amazon continues twisting arms. The problem publishers face is that Apple has a most-favored-nation clause, so it gets the best deal that the publishers offer. If the publishers give in to Amazon, then they also have to provide the same terms to Apple."

28 of 137 comments (clear)

  1. Ambiguous title by the_humeister · · Score: 2, Funny

    So this has nothing to do with Arm processors? Oh well.

  2. Meanwhile by zippthorne · · Score: 3, Informative

    Barnes & Noble's device is fairly decent, although its missing Wikipedia and some of the features could be better done. Why is this is being set up as an Apple vs. Amazon fight when, of the several companies putting out eReaders, Apple is the only one who doesn't actually have a device available for sale right now?

    --
    Can you be Even More Awesome?!
    1. Re:Meanwhile by maxume · · Score: 4, Insightful

      Because Apple is the one with the contracts that (potentially) hurt Amazon's business (whereas Barnes and Noble is trying to run the same sort of business as Amazon).

      --
      Nerd rage is the funniest rage.
    2. Re:Meanwhile by Low+Ranked+Craig · · Score: 2, Informative

      it's for sale, just not shipping until April 3rd. http://www.apple.com/ipad/pre-order/?aid=AIC-WWW-NAUS-K2-PREORDER-IPAD-INDEX&cp=PREORDER-IPAD-INDEX

      --
      I still cannot find the droids I am looking for...
    3. Re:Meanwhile by teg · · Score: 3, Interesting

      Exactly, there's Sony, B&N and others. I think par tof Amazon's success is that the press talks about no one else

      I think Amazon's success is based on how easy it is to use, and get books on it. The Apple mantra, "it just works", sure applies there. Go to Amazon, purchase and a minute or two later, it's on your Kindle. Many others providing this hardware don't have as integrated a solution as Amazon does - other than B&N, probably none. Also, their hardware is good.

      Now we have Apple who has, imo, a very half-assed device and they're unfortunately getting more attention then superior competition which means they'll probably get more sales than they deserve.

      "Half-assed"? Apple does a lot of things, but "half-assing" is not one of them. They do, however, have evil lockdown schemes - even to the point of trying to censure publications in app form. Europe doesn't have the weird American "violence good, boobies very bad" attitude, so there have been cases of German magazines being censured by Apple. Other than the worrysome censoring and lockdown, I'm sure it's going to be a very good general purpose device. The Kindle is a specialized device - with e-ink, it'll last a lot longer and be a lot better when reading text books.

    4. Re:Meanwhile by travisco_nabisco · · Score: 2, Insightful

      I find it funny that you are so determined that the iPad is a superior ebook reader when you haven't even seen one, much less read a book on one.

      I am open to it being a better reader, however until I can see one for myself and try reading for 4+ hours on it, I cannot judge whether it is a better ebook reader or not.

      Surprisingly, unless you have some super inside secrets and have already used an iPad, you are unable to conclusively say it is superior at the task of reading ebooks. Most people are in this same category and may believe it is superior, but very, very few people are able to make a blanket statement about this issue.

  3. This is unexpected, how? by Auckerman · · Score: 3, Interesting

    Competition from a new contender that is known to be a strong player causes the strongest early market entrant to throw a hissy fit, news at a 11.

    Until I can actually BUY an e-book, not rent them for life, the entire market will remain irrelevant to me.

    --

    Burn Hollywood Burn
    1. Re:This is unexpected, how? by digitig · · Score: 2, Insightful

      Competition from a new contender that is known to be a strong player causes the strongest early market entrant to throw a hissy fit, news at a 11.

      Until I can actually BUY an e-book, not rent them for life, the entire market will remain irrelevant to me.

      There are plenty of DRM-free epub titles out there. Just none that I want.

      --
      Quidnam Latine loqui modo coepi?
  4. Amazon is fighting for their life here, remember by kithrup · · Score: 4, Interesting

    This goes contrary to the degree of control Amazon likes

    Forcing an "agency model" on any retailer is going contrary to both history and market standards. The general model for booksellers is to buy wholesale, at somewhere around 40%-50% of MSRP, and then sell at some price between that and MSRP. Amazon has discounts of MSRP all the way from 55%, to only a few percentage points. Barnes & Nobles has similar prices (if you become a "B&N Member," for US$25/year, the prices are pretty much the same as Amazon's. A bit lower sometimes, a bit higher sometimes.)

    What's really going on here is power: the publishers have decided they don't want retailers undercutting each other -- that leads to a single player having market dominance, which allows them to try to force concessions (lower prices, content changes, etc.) from the publishers. As examples of this, see Amazon and Wal-Mart.

    When Apple joined the ebook market, however, they were able to take the same "we don't care about making a profit on content" attitude they have for music, and offer it to the publishers. And the market share Apple can offer with the iPad is probably at least as large as Amazon's current market share with is Kindle. (And unlike Amazon, Apple won't be paying the end-user bandwidth costs.) This gives publishers who are willing to sign up with Apple enormous negotiation power with Amazon -- over ebooks. Amazon's only negotiation power that can counter that is the physical book market.

    Personally, I would certainly be offended if someone said, "You will sell this product at a price we dictate, and only take 15%. You cannot charge more to make more money; you cannot try to maximize profits through selling more by offering it for less. And if 15% of an arbitrary price we set isn't enough for you to make profit -- or even enough for you to run your business, tough." And I'd fight it as best I could.

    Of course, that's also pretty much Amazon's attitude towards the publishers. So a pox on all of them, really.

  5. huh? by arcite · · Score: 3, Insightful
    "Until I can actually BUY an e-book, not rent them for life, the entire market will remain irrelevant to me."

    You're really concerned what's going to happen to your ebooks when you're dead? Taking corporate paranoia to the afterlife is a little extreme, no?

    1. Re:huh? by Auckerman · · Score: 4, Insightful

      You're really concerned what's going to happen to your ebooks when you're dead? Taking corporate paranoia to the afterlife is a little extreme, no?

      I don't have to buy a different set of eyes to read books purchased at different stores. They all work, as is. Where as, with ebooks, once you have a collection from Amazon, if you EVER want to read them again, you must do so on an Amazon supplied reader. If at any point in the next couple of years, Amazon decides to stop manufacturing those readers and yours dies, all of your books stop being readable.

      We already know with DRM'ed music, that companies have taken their tracking servers off line, making moving the music to new hardware IMPOSSIBLE.

      If I own something, I own it. I don't need the entity I bought it from to give me permission to use it.

      --

      Burn Hollywood Burn
    2. Re:huh? by brucifer · · Score: 2, Insightful

      Ok seriously, this is slashdot (not Sparta). Anyone reading this page should be able to bypass DRM on an ebook rather easily. If you feel that strongly that you own an ebook (which I agree you do), then look outside the DRM encased format you bought the title in.

      This really goes back to the classic sense of the term "hacker", taking something apart and making it work for you.

    3. Re:huh? by blamanj · · Score: 2, Insightful

      That's not an unreasonable point of view, however, there's a "truth in advertising" issue going on. If Amazon said, "We'll sell you this book as a physical object for $X or rent it to you for $Y" there would be little argument about the issue. However, that's not what they're doing. They are claiming to sell you the ebook. But if you buy an ereader that's better than theirs, you can't take the book with you. If they decide you don't deserve the book (the 1984 fiasco), they can take it away without due process.

      So if Amazon wants to get into the book renting business, more power to them. But that's not what they're claiming to do now.

  6. Lesser of the two... by semiotec · · Score: 4, Interesting

    One control-freak company wants to sell cheaper books, while another control-freak company wants to sell more expensive books?
    I know which weevil/weasel I will go with.

    and while this is just one side of the argument, but anyone who thinks Apple's deal with the publishers will work out better for the authors should read this:
    http://techcrunch.com/2010/02/07/its-nsfw-because-the-word-fuck-is-in-the-url/

    1. Re:Lesser of the two... by digitig · · Score: 2, Interesting

      And you end up with a cluster of devices, because it ends up with the books you want not all being available on the same device. Another triumph for market forces.

      --
      Quidnam Latine loqui modo coepi?
  7. First they ignore you.... by bangzilla · · Score: 3, Insightful

    First they ignore you: ""
    Then they ridicule you: "Ho ho - tiny little screen; who'd buy one of these toys?"
    Then they fight you: "Crap - we better make our own ebook reader and screw around with pricing to protect ourselves. But we're kinda late and our pricing strategies are reactive and ill thought out"
    Then they loose: "Double crap - all our best selling authors are now publishing their own book directly on the Kindle and taking 85% of the revenue rather than the 10% we used to give them. Ingrates!"

    Feel free to bookmark this post and come back to it in 5 years time to see how it all came true.....

    --
    Rich people are eccentric. Poor people are strange. Me, I'd be happy with odd.
    1. Re:First they ignore you.... by dloose · · Score: 3, Interesting
      I'm confused... Is Apple the "they" in your post? Who's pricing model is "ill thought out" and what is "ill thought out" about it?

      You may be right. In 5 years, all authors could be publishing independently. But right now there's money to be made by selling books put out by the big publishing houses. Amazon and Apple are competing for that money.

      I think you mean, "Then they lose". "Loose" is the opposite of "tight". "Lose" is the opposite of "win", "find", and "gain". This is important.

    2. Re:First they ignore you.... by arcite · · Score: 2, Insightful
      No kidding... Amazon is the one with the most to lose. Apple doesn't really care about being middleman. Apple barely breaks even hosting Apps/music/movies/ebooks; as long as you buy their hardware they could probably care less what you do with it. You can buy and ipad/ipod/iwhatever and never spend a dime on content and still get loads of use out of it through free apps and your own content you upload to it. Why should Apple take the responsibility for pricing third party content, why not let authors/publishing companies/movie companies ect... determine their own price and let the consumer choose?

      I think Apple's way creates a more sustainable market place for the consumer while maintaining quality...unlike Amazon model, which is more akin to walmart.

  8. What's best for consumers by xzvf · · Score: 2, Interesting

    While it doesn't always happen, the company that provides the best prices and best selection to the consumers should be the winner. In music Apple unbundled the album and created a reasonable price point. More music is being sold, but music publishers are making less money. Consumer wins. In publishing the total cost of a book should be authors cut + cost of manufacturing + cost of distribution + marketing costs + profit for publisher + profit to distributer = total cost of book. E-books should dramatically reduce the cost of manufacturing and distribution and if things follow the music model, more books will be sold allowing for a reduction in profit margin due to volume. The consumer wins, if Apple and Amazon can strong arm the publishers not to add savings from manufacturing and distribution to their profit margins.

    1. Re:What's best for consumers by Colonel+Korn · · Score: 3, Insightful

      While it doesn't always happen, the company that provides the best prices and best selection to the consumers should be the winner. In music Apple unbundled the album and created a reasonable price point. More music is being sold, but music publishers are making less money. Consumer wins. In publishing the total cost of a book should be authors cut + cost of manufacturing + cost of distribution + marketing costs + profit for publisher + profit to distributer = total cost of book. E-books should dramatically reduce the cost of manufacturing and distribution and if things follow the music model, more books will be sold allowing for a reduction in profit margin due to volume. The consumer wins, if Apple and Amazon can strong arm the publishers not to add savings from manufacturing and distribution to their profit margins.

      This particular case is Apple giving the publishers a way to strong-arm Amazon and increase prices for ebooks by 50%. If you want to look at it from the perspective of a consumer, then Apple's entrance to the market isn't very good. The funny thing is that Amazon did the same thing to Apple a few years ago by introducing the agency system to mp3 sales. The difference is that Amazon provided a superior product for the same or a lower price that forced Apple to then improve its own product by removing DRM. This time Apple is forcing Amazon to raise prices, so it's not quite as fun for those of us buying books.

      --
      "I zero-index my hamsters" - Willtor (147206)
    2. Re:What's best for consumers by jo_ham · · Score: 2, Insightful

      Apple didn't remove DRM because it faced pressure from Amazon, it removed DRM at the earliest possible opportunity that it could, as one of the original stated goals of the iTMS - as soon as they were able to change the deal with the music companies they did so (and in turn gave up the "one price" model that had been in place before, and moving to a variable pricing model).

      While it may look like this is a bad deal for consumers, I think that ultimately it will balance out. Amazon's model is very similar to that of Wal Mart - a giant that can essentially dictate the market conditions, making it hard for smaller retailers and encouraging a monoculture. Large supermarkets and retailers like Amazon and Wal Mart reduce the choice for consumers, and in the case of WalMart, can actually dictate the content of your product (or they can refuse to stock it, and cost you a gigantic portion of your sales).

      Apple's model switches it around a little, and allows the publisher to set a price, and I am sure that they will try to set the prices high (I mean, who doesn't want to maximise their profits), but if it's too high then no one will buy. Eventually the sweet spot will be released.

      I am not a fan of retailers like WalMart gaining too much control of a market - it only puts pressure on the supplier of the products to drive prices down, which in the long run is bad for the consumer (but hey, if WalMart sells milk 5c cheaper per pint, who cares that it forces smaller farmers out so only the mega-farms can economically produce milk?). If a model that favours publishers works, it will allow the rise of much smaller publishers who just simply couldn't survive under a "profit margin squashed to zero" approach. The rise of smaller publishers also means that the current big guys have to compete more on quality and price.

    3. Re:What's best for consumers by Anonymous Coward · · Score: 2, Insightful

      You couldn't be more wrong about Apple/iTunes/DRM if you had tried!
      Apple NEVER wanted DRM, DRM was shoved down their throats in an attempt by corporate weasels to force the consumer to buy elsewhere/anywhere but the iTMS.
      Unfortunately, it was people most like /.'rs with their "i hAtoRzs teh aPPleZEs" attitude that kept the lie alive as long as it did.

    4. Re:What's best for consumers by jo_ham · · Score: 2, Insightful

      So Apple's stated goals, on record, that they wanted to remove DRM had nothing to do with it whatsoever?

      Remember, it wasn't Apple's choice to use DRM in the first place.

      And if you think that artists get much from a $10 CD, you are mistaken - the iTMS (and other online distribution channels) have done more to put money in the artist's pockets than anything the big cartels have done in recent years, since it allows independents and small shops to get distribution to a wide audience - a difficult thing to get when the big players control the radio stations and have the money to manage the physical creation and distribution of CDs.

      Just because Apple is going to enter this market (selling a product that they don;t set the price of) does not mean that authors are suddenly going to get screwed - that is happening already due to the publishers. eBooks may be a way for smaller authors and publishing houses to get some serious distribution going, in much the same way that music producers have done.

      Apple may be a part of that solution, with a large and successful store with a broad audience. They won;t be the only player though.

  9. Wait...what?? by jamrock · · Score: 2, Insightful

    Apple "strongarmed" the publishers by agreeing to their retail model? Clearly you have a different definition of "strongarm" than most people...

  10. twisting is good, though by pydev · · Score: 3, Insightful

    The headline makes it sound like Amazon is doing something bad. But Amazon is twisting publishers' arms to sell their books for less than they would otherwise. Publishers have wanted to charge excessively high prices for their books. And Apple has been trying to lure them by letting them get away with it.

    1. Re:twisting is good, though by 99BottlesOfBeerInMyF · · Score: 2

      The headline makes it sound like Amazon is doing something bad. But Amazon is twisting publishers' arms to sell their books for less than they would otherwise.

      Generally when a corporations threatens to stop doing business with you altogether, including with regard to different products and different markets, most people consider that to be doing harm to the person or organization they're doing business with. For example, publishers publish whatever book they think will make money. If they can't sell books designed for smaller markets at a higher price, those books may simply no longer be a viable business move for them to publish so they don't get made. And since Amazon will stop publishing the books in print as well as e-book the publisher is given extra incentive to not make them at all.

      Publishers have wanted to charge excessively high prices for their books. And Apple has been trying to lure them by letting them get away with it.

      In this instance Apple is being an impartial conduit, which is not great, but Amazon is not motivated by anyone's best interests but their own. Their goal is to become a single gatekeeper for book publishing and that's not something any rational person should be rooting for.

  11. Re:Alternate Headline by eggnoglatte · · Score: 3, Insightful

    Huh? So Apple basically says "we follow whatever retail model you want, but if you give somebody else a discount, you have to give it to us as well".

    How the hell is that strongarming? Of course anybody would always fight for getting a deal that at least matches what competitors get. Those have got to be the weakest demands any company with some market power has ever negotiated.

  12. iphone runs both the B&N ereader and the Kindl by ClaraBow · · Score: 3, Insightful

    Doesn't this mean that if you have an ipad, which runs iphone apps, that you will be able to buy from apple, or Amazon or B&N? What am I missing here?