DoJ Investigates eBook Price Fixing

dave562 writes "The U.S. Justice Department's antitrust arm said it was looking into potentially unfair pricing practices by electronic booksellers, joining European regulators and state attorneys general in a widening probe of large U.S. and international e-book publishers. A Justice Department spokeswoman confirmed that the probe involved the possibility of 'anti-competitive practices involving e-book sales.' Attorneys general in Connecticut and, reportedly, Texas, have also begun inquiries into the way electronic booksellers price their wares, and whether companies such as Apple and Amazon have set up pricing practices that are ultimately harmful to consumers."

Comments

zzzz

[Hotweed Music]

Obviously providing the means to download relatively small files is cheaper than manufacturing and shipping books, so good thing something might be done about it.

Re:zzzz

[Chrontius]

A lot of the fixed costs of production must be amortized the same regarding both ebooks and paperbacks.

Marginal costs are far lower for distributers, but I need to buy an expensive electronic reader.

You never have ebooks that are sitting around taking up valuable shelf space so they get put on sale or clearance to get them to move, however, as ebooks don't really compete for finite retail space. If they go on sale, it's as a loss leader, or to get at least a little money out of price-sensitive consumers who have more time than money.

Re:zzzz

[rtb61]

Competition is the killer of ebooks. Not only do you end up with all available content, you can also add all out of copyright content to that list. Now that you have paid for an expensive eReader there is also all that other content available, like video content and of course interactive content.

They are setting electronic publishing cartel because that is the only way that they can survive, well, survive for as long as possible whilst the corporate executives suck as much money as possible out of foolhardy investors and less than honest pension funds.

The likely reality is universities will simply end up sponsoring book production, whether it be fiction or non-fiction (years down the track) and then take in donations and use volunteers for proof reading, editing and critiquing work. Many universities will share this effort by forming associations for the various scholastic styles involved.

The publisher was a middle man that assisted in providing the needed skills to link between, the author, the printer, the distributor, the retailer and the reader. When the need for a printer and rubber and bitumen distributor ended, so did the need for a publisher. The only need left is for funding, the 'one of' payment to authors to produce the work.

Re:zzzz

[Osty]

Obviously providing the means to download relatively small files is cheaper than manufacturing and shipping books, so good thing something might be done about it.

The fallacy here is that the physical cost of a book (printing, storing, shipping) is the largest contributor to its price. It's not*. For mass market books, print runs are done in such large quantities that the economies of scale bring the physical price down to pretty much nothing per book. The real cost of a book comes from people -- the author, editors, proof readers, cover artists, marketers, agents, researchers, people doing layouts, etc. That and marketing, of course, because nothing will sell if it doesn't have a million dollar marketing campaign behind it. All of the rest of that is needed for ebooks just as much as it's needed for paper books, so the net result is that from a pure cost perspective a paper book and an ebook should cost about the same (assuming the mass market paperback print copy here, not the limited-run hardcover). Also, at least currently, the big publishers are still very much stuck in a print mindset and all of their processes are geared toward a print world. This has obvious repercussions for ebooks, but less obvious is that a lot of editing that happens for a print run is done on copies other than the original manuscript, in formats that are difficult or impossible to convert back to a proper ebook (mobi/epub, not PDF, as PDF is not a valid ebook format). This is why we end up with so many poorly-edited ebooks from major publishing houses, some of which are very obviously OCRed rush jobs without even broad proof reading for obvious mistakes.

The investigation here is whether or not price fixing has taken place, and at least from my perspective it very obviously has. The agency model prevents retailers from setting their own prices or running sales. If you want to sell a book under the agency model, it can be no more and no less than the same price your competitors charge. That removes competition, and that's the problem. The funny thing is that agency pricing was just the first step in Apple's evil plot for (ebook) world domination -- first force everybody to sell at the same price as Apple, and then for step 2 charge ridiculous fees for in-app purchases of books such that Amazon et al can no longer viably work on your platform (if 30% has to go to Apple and 70% has to go to the author, and the price cannot be more than the price in the iBooks store, how can Amazon make money selling on iOS?), thus driving everybody to buy their books from the iBooks store (muahaha!). Of course step 2 failed, with 3rd parties finding loopholes or simply abandoning the platform for greener pastures, leaving Apple in a tough position. Nobody wants to buy anything from the iBooks store, and Apple can't run sales to entice new readers to buy because they're bound by the agency pricing agreements. Oops!

* This applies to large-scale publishers, not smaller houses or vanity presses. In the paper world, if you're not guaranteed to sell several hundred thousand copies you're not going to get a contract with a big publisher because they can't afford to do a small print run. Smaller presses afford it by charging more per book. In this scenario, ebooks are a huge win for smaller/independent authors because the huge cost of a tiny print run is no longer a factor. And of course let's not forget the ability to cut out the middle-man entirely. Ebooks make it much easier for authors to self-publish, depending on how much effort they're willing to put into the process beyond simply writing a book.

Re:zzzz

[Richard_at_work]

>

The publisher was a middle man that assisted in providing the needed skills to link between, the author, the printer, the distributor, the retailer and the reader. When the need for a printer and rubber and bitumen distributor ended, so did the need for a publisher. The only need left is for funding, the 'one of' payment to authors to produce the work.

The publisher also provides the marketing, editing, proofreading, typesetting, illustrations and quite a few other services that the author cannot provide themselves.

Re:zzzz

[ortholattice]

The likely reality is universities will simply end up sponsoring book production, whether it be fiction or non-fiction (years down the track) and then take in donations and use volunteers for proof reading, editing and critiquing work. Many universities will share this effort by forming associations for the various scholastic styles involved.

I think the likely reality is that university professors will continue to rearrange the chapters in next year's version of the Calculus 1 textbook, making it incompatible with this year's so there's no resale value, and sell it for $150.

Re:zzzz

[Liambp]

"The publisher also provides the marketing, editing, proofreading, typesetting, illustrations and quite a few other services that the author cannot provide themselves."

This is an important point. Traditional publishers provided a lot of valuable services to authors not least of which were marketing and publicity. However in return for these services publishers asked a very high price - up to and sometimes even including all ownership of the creative work. They got away with this because of the monoploy power they held due to the huge barrier to entry caused by high printing and distribution costs. Ebooks have effectively eliminated printing and distribution costs and have undermined that entire business model. I don't think traditional publishers can continue as they are now that their main source of power is vanishing. The question as to who will take over from publishers as the dominant power in the market is as yet unresolved:

In my favourite scenario it will be the authors themselves. A small number of successful self published authors are showing this is possible and when a superstar like J K Rowling opts to self publish you have to take it seriously. Unfortunately the much larger number of poor quality self published works makes me suspect that most authors lack the knowledge and skills to critically evaluate, edit and market their own works.

In my least favourite (bud sadly more likely) scenario it will be a small number of (possibly only one) mega online retailers who will own the market.

As for the publishers, well everything they used to do will probably become just a service for hire.

Re:zzzz

[TiggsPanther]

Obviously providing the means to download relatively small files is cheaper than manufacturing and shipping books, so good thing something might be done about it.

The fallacy here is that the physical cost of a book (printing, storing, shipping) is the largest contributor to its price. It's not*.

The problem with ths fallacy, though, is that it is reinformed by the retail side of it. Hardback are pricey, paperbacks are cheaper. Hardback prices still stay at the same price even after teh paperback comes out, therefore hardbacks cost more. Therefore printing is a key factor in cost.

The conclusion may be false, but it is logical given the perception of the facts at hand.

There is also the matter of value.

Personally, I don't mind paying close to paperback prices for an ebook. Hardback prices, on the other hand, make me want something persistent. Maybe if the file was DRM-free. Maybe.
But hardback pricing for less functionality than a paperback? It's just not worth it.

Re:zzzz

[Luckyo]

You forget the single most important part of publishing: it provides stable(ish) income to the author when his royalties do not. Income such as advance payments.

Re:zzzz

[Pastis]

So according to you
* printing, storing, shipping costs are not a large part of the book price as Extra costs (marketing, etc) are to be applied
* this is only valid for large scale sales as low scale aren't envisioned due to poor viability
* because of large scale, they need to have large marketing costs, increasing the cost ratio of these Extra activities
* because of large scale, publishing costs get lowered per item, thereby reducing its ratio

The publishing costs are just low per item because the system is focusing on large scale printing to actually lower the distribution costs per item...

Aren't you just describing an inefficient system that justifies itself ? I say cut the inefficient part.

According to http://ireaderreview.com/2009/05/03/book-cost-analysis-cost-of-physical-book-publishing/

And author's get 8/15% of a book. That's a bit small to me. And that's in part caused by this inefficiency.

Re:zzzz

[Quirkz]

1) Editing. Writers cannot edit. If they could edit they would be editors. If they could do ANYTHING else they would do it.

Close, but not quite. I can write. I can edit. I cannot edit my own writing, and I think that's the case for almost everyone. It's not that they don't have the skills, it's that they can't get the right perspective on their own work.

How do they decide what to investigate?

[mykos]

There isn't a lot of consumer outcry about ebook price fixing, but there's quite a bit of complaints about telecom price fixing. Any chance we could get that looked into?

I always wondered...

[Mitreya]

How can the electronic copy of the book cost more than paper version of the same? (Just like audio tapes used to cost much less than CDs)

I guess that's unfair book pricing in action
Although I am unsure what they can do about it. Amazon can increases prices if they want to, can't they?

Price is too high Price fixing

[Boscrossos]

Although I don't disagree with the posters before me that the price is too high, that's not what's at stake here, I think. Price fixing does not mean a company setting a price too high. It means multiple companies, together representing a large majority of the market, conspiring to all keep the prices high, thus eliminating the normally healthy effect of competition, with the prupose of making more money for all. If Amazon wants to sell its ebooks for more than the manufacturing costs plus some profit, that's perfectly fine and nothing wrong with it. However, if they make a secret arrangement with all other major ebook players, that is not, because then competition is bypassed, and customers are cheated by cartels.

Amazon doesn't always set the price, publishers do

[inflex]

This is something that has had a lot of discussion in the past on various e-book forums. The publisher sets the price, not Amazon. When you submit a book for resale on Amazon they take their 75% or 32% cut depending on what you select (books under $2.99 are generally only eligible for the 75% cut).

A lot of independents have been working the 99c book sale pricing but lately we've been finding that it's just about impossible to make any sort of sane living at those levels, so we're gravitating more to the $1.99 and $2.99 brackets, sometimes pushing to $4.99 if it's a book from a popular series (Amanda Hocking, David Dalglish etc).

I'd be very surprised if any action is taken against Amazon, while they do have a strong hold on the distribution market of eBooks they aren't (yet!) controlling the publishing prices.

Most of us are just self-publishers in the eBook market, it's almost like the whole OpenSource software movement all over again.

http://elitadaniels.com/

Re:About time

[Richard_at_work]

That has nothing to do with what the DOJ are investigating - they can't stop a publisher or retailer from setting their own price at a rate you deem "greedy", but they can stop what Apple is attempting to do in saying "you cannot price your book cheaper anywhere else than the set iTunes price - if you do that you will cease to be able to sell on iTunes" while still adding an extra 30% cost over other outlets.

Similarly, the publisher can set it's wholesale price but cannot set the price every retailer must sell for, retailers can pick their own prices and even sell at a loss.

So it's not about high prices or greed, it's about control of the market.

Re:About time

[Osty]

That has nothing to do with what the DOJ are investigating - they can't stop a publisher or retailer from setting their own price at a rate you deem "greedy", but they can stop what Apple is attempting to do in saying "you cannot price your book cheaper anywhere else than the set iTunes price - if you do that you will cease to be able to sell on iTunes" while still adding an extra 30% cost over other outlets.

Even that's not really the issue here. Apple can charge whatever they want for you to sell on their OS, though there could certainly be monopoly concerns (leveraging their mobile OS "monopoly" to gain an advantage in the ebook market?). The problem with agency pricing is that it's not an MSRP value. It's a price set by the publisher that cannot be changed. For example, a publisher can price a paper book at $15 but Amazon, Barnes & Noble, etc will often sell that book for $7 or less because they can. The MSRP is just what it says it is, a suggested price. But Amazon, Kobo, Sony, BN, etc cannot run a sale on an agency-priced ebook. This is why it is commonplace to see ebooks selling for a higher price (and often much, much higher!) than the exact same paper book. That's what the DOJ is investigating, and Apple's part of it because they were the ones who started the whole "agency pricing" crap in the first place.

What the publishers say...

[bhunachchicken]

I've spoken to a few publishers about this sort of thing, and they've told me the following:

You are not and never have been paying for the cost of the book, but the words and the story contained within.

They've never explained why a hardback costs twice as much, though.

They need to charge as much as they do for the cost of a book because they have a number of overheads and they need to get back the advance they paid the author. There is a lot of risk involved in publishing a book, due to the subjective nature of storytelling.

Why pay advances at all? Isn't that basically just a form of credit? Apparently, a lot of books don't earn out their advance. This makes no sense to me, whatsoever. Why not just pay higher royalties quarterly, when you know what the book has actually made. This reduces your risk and allows you to invest the accrued money for a period before handing over the author's share.

If you self publish a book (that they didn't want to publish) then you are both impatient and doing the work of the Devil.

Sure, not every book needs to be published, but given that I've spent around $50 on crap books this year, I don't really think they should get their knickers in a twist over someone selling a book for $3. I'd rather pay $3 on a crap book, than $12. Also, what are they REALLY scared of?

The publishing industry is a really strange beast, that I'm sure which anyone has at one time worked within or tried to get published in probably knows. It's a bit of a circle jerk, with a lot of cliques and infighting. It's also somewhat fascist in places.

Re:What the publishers say...

[rklrkl]

Paying advances allows the author to actually pay their bills whilst working on the book. However, you'd expect publishers to offer authors other models that might result in a bigger overall payout for the author if the book is really successful (e.g. smaller advance/higher royalties or even no advance/even higher royalties) if the author is already wealthy enough not to need the money right away. It's also not clear what happens if the book doesn't sell enough to cover the advance - does the publisher swallow that or does the author have to pay it back? I guess it depends on the contract.

As for e-books, it's clear to anyone that e-books should cost less than the physical version - it *must* be cheaper to distribute the electronic version than the physical one. How much less is up to debate, but even a nominal amount (e.g. 10%) would at least encourage more e-book sales if nothing else. A good example of publishing greed this year is that the #1 Amazon book of 2011 was the Steve Jobs biography. amazon.com has the hardback at a decent $17.87 (basically half price) - the Kindle version is $20.67 - WTF! It's price-gouging on e-books lke that which puts people off buying them and they end up pirating them.

Cheap eBook Webstore

[splutty]

Probably interesting to most Slashdot readers, but I have most of my ebooks from a webstore called www.webscription.net

The publishers here include ones such as Baen, Del Rey, Tor, etc.

Fairly focused on SciFi/Fantasy, but almost all their books are in the $4-6 price range, a lot of them are older books, they have a quite extensive free library, and allow you to download in a number of formats, all DRM free.

Jim Baen alone has probably done more for the SF/Fantasy book world than any other publisher out there and I find the fact his publishing company stands behind this very promising.

And as a sidenote to all you US readers that think not a lot is done for disabled veterans: They give away everything for free if you're one..

Re:"Real Cost"

[mcgrew]

Proof Readers: I'll skip that one, nothing that a spell check can't fix

Watt in the whirl ore ewe talking a boot? Dew knot truss yore spill chucker! That's what's wrong with most slashdot comments. A spell checker can't tell that your using the wrong word (yes, that was intentional). A spell checker doesn't know if you want to loose the dog or if you want to lose the dog. A spell checker won't tell you that your use of apostrophe's is retarded.

Take care of the Big Picture stuff and then do a major revision by the author for the Second Printing

I fucking HATE patches and the lazy bastards who issue them. Get it right the first time, damn it! If I'm paying full price for a book or an operating system the damned thing should WORK. You don't have to patch a new pair of jeans, do you?