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DoJ Files Suit Against Apple, Ebook Publishers
forkfail writes "The Department of Justice has filed suit against Apple and a number of book publishers, including Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster, claiming that they worked in collusion to artificially rig prices on eBooks."
They finally decide to tackel the horrific affects of book publisher collution with Apple.
Iz Christmas!
http://online.wsj.com/public/resources/documents/ebooks04112012b.pdf
And regardless, I hope the publishers get crushed on this one. While I won't go so far as to suggest that they don't serve any useful purpose anymore (as some people do), they _are_ dinosaurs and need to be dragged into 21st century competition. This should do it.
My userid is prime!
Last time the DOJ sued a cartel (CD companies), I and several family members got $25 each for refunds. It was the punishment for overcharging and price-fixing.
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
While the oil companies continue to make record profits as they keep the price of gas jacked up... cause that isn't collusion.
Just because you are wrong and I called you out on it doesn't mean I am a Troll.
Well. Since ebooks seem to be priced at higher than print book prices....no. no they are not cheap at all.
I have a book in the iBookstore. I set the price on it. Apple sells it for that price and gives me 70%. I have the same book in the other bookstores. I have no control over the price. They give me what they want, which is half of what Apple gives me. I have no choice or say in the matter. And the Department of Justice sues Apple? That's just wrong.
I'd like to think that the DoJ is actually interested in keeping the future of published works out of proprietary formats but I know better.
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Attack America's last successful company, good job.
You do realize that the price of crude oil (and therefore gasoline) is determined by the spot market, and therefore the oil companies have (almost) nothing to do with the price of gasoline you pay at the pump?
Charming man. I wish I had a daughter so I could forbid her to marry one. -Arthur Dent
The paperback was $38 shipped and the downloadable version was $97. Excuse me but that's insane.
Although some eBooks are cheap or free, most of the popular ones cost as much or more as their dead tree counterparts
Not to mention that taxes account for a sizeable portion of what you pay at the pump - one of the big reasons states like NY and CA are so much more expensive than their neighbors.
Wow, the U.S. government helping people who are not rich, who do not run corporations? Are the Republicans on sabbatical?
Yeah, because oil companies are getting away with it, everyone else should, makes sense, you should be a politician.
It is worth mentioning that it is widely believed that price fixing by Apple et al is a response to perceived dumping (selling at a loss) by Amazon.
In other words, it may be a case of using one form of anti-competitive behaviour (price fixing) to battle a different form of anti-competitive behaviour (dumping).
http://www.theglobeandmail.com/news/technology/tech-news/us-sues-apple-publishers-on-e-book-agency-model-price-fixing/article2398161/
Since launching the Kindle in 2007, Amazon has made a point of offering best-sellers for $9.99. The discount is so deep from list prices of $20 and more that it's widely believed Amazon is selling the e-books at a loss as a way of attracting more customers and forcing competitors to lower their prices. Amazon also has been demanding higher discounts from publishers, and stopped offering e-books from the Independent Publishers Group, a Chicago-based distributor, after they couldn't agree to terms.
When Apple launched the iPad two years ago, publishers saw two ways to balance Amazon.com's power: Enough readers would prefer Apple's shiny tablet over the Kindle to cut into Amazon's sales and the agency model would stabilize prices. Apple's iBookstore has yet to become a major force, but publishers believes the new price model has reduced Amazon's market share from around 90 per cent to around 60 per cent, with Barnes & Noble's Nook in second at 25 per cent. The iBookstore is believed to have 10 to 15 per cent.
This is the number 2 ebook retailer was trying to gain share on number 1 - while if the allegations are true there is some element of anti-trust, this is not like the number 1 trying to drive the number 2 into the ground.
Assuming there is antitrust here and there is a settlement, the really interesting thing will be how it plays out. The DOJ will not remove the books of these publishers from Apple - that would hurt the consumer who could not longer get them on their iPad without using Amazon's Kindle app, and if they went that route they are awarding Amazon a monopoly on these five publishers' books and the cost to consumers would rise.
So most likely everyone will pay the DOJ some money and agree not to do it again. The income for these publishers drops, so what will they do? Yes, raise the wholesale prices on Amazon and Apple. Remember. Apple makes it money on hardware, the iTunes store is a tiny part of their revenue and ebooks a small part of that. So Apple sells ebooks at cost - this doesn't help us, because that cost has just gotten greater and the net is the same for us. If it plays out this way, Amazon is the big loser - they give away hardware t cost to sell ebooks, if they now have to give away ebooks at cost to match Apple's prices, where do they make money?
The way I see this playing out is a tiny pinprick for Apple, a wash for the publishers and the consumers, and a bit of a hit for Amazon.
Not to mention that oil companies decid how much oil gets pumped and how much gets refined and any nation that goes against them suddenly gets hit with a rain of bombs (a sizable portion of which are paid for at taxpayer expensive i.e. all of them).
I'm glad they finally got around to this, but what about audio books? The same scheme appears to be in place. It's absolutely ridiculous that I can buy a hollywood (or indie) movie download for $5-$10, but it costs me $10-$30 for an audio book.
burrocrisy
and that would be what? Ruling by jackasses? Never has a slashdot misspelling been more apropos
You do realize that the price of crude oil (and therefore gasoline) is determined by the spot market, and therefore the oil companies have (almost) nothing to do with the price of gasoline you pay at the pump?
Come on, man, don't you know that high prices are rock solid evidence of anti-competitive collusion? You must be a one-percenter.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
Well here's the spin I just heard on MSNBC (you can decide how accurate it is). "The standard price for ebooks was $9.99 but when Apple started selling them, they colluded with the publishers and raised that price to 14.99 or even 19.99. So claims the DOJ."
If that is true, it's called price-fixing and forming a cartel. It is illegal under U.S. Consumer Protection Laws (antitrust).
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
What is shifty about wanting the best price? If Store A sees that Store B is getting a better price from the manufacturer of course Store A wants the manufacturer to match that price.
You do realize that the price of crude oil (and therefore gasoline) is determined by the spot market, and therefore the oil companies have (almost) nothing to do with the price of gasoline you pay at the pump?
You do realize a market consists of suppliers and consumers. How would suppliers have nothing to do with the price? Oil producers know full well that how much they produce (or refine) has a lot to do with how much they can sell it for.
It's the difference between wholesale and agency models that brings about the curious discrepancy in prices. Print books fall under the wholesale model: they are bought at a discount from the publisher and the retailer gets to set the price they sell at. Whereas for eBooks, sold under the agency model, publishers set the price on the book and the retailer gets a percentage of the sale. Under the wholesale model the retailer can choose to make a particular book a loss-leader or negotiate a deeper volume discount so that they can offer lower prices. The retailer has no control over the pricing for the agency model.
Why is a loss selling a digital version of a book at the same or similar enough price as the paper version, that have a physical space, a bunch of intermediaries, have to be transported (sometimes overseas) and must be stocked by libraries while covering in the price not selling all, or being stolen or whatever? The price of ebooks should be 99% author profit, and still would make a huge profit for amazon/apple/b&n/etc.
Don't know if the "collusion" bit is true, but Shyster and Shyster books are all $19.95 on Amazon and Kobo, even while the paper version of the same book is going for $6. They used to be less than the paperback, which is why it made economic sense to buy an ereader, since you'd eventually make the money back in book savings. Now you're paying treble for a book you cannot lend, resell, or give away.
ASCII stupid question, get a stupid ANSI
Contrary to popular belief, there is nothing illegal about selling at a loss. Microsoft does it with Windows. Apple does it with OS X. Sony and Nintendo and Sega do/did it with their consoles. Shaver and razer makers do it with with their shavers/razers (and make money off the replacement parts like blades). Stores do it with "loss leaders" like $50 bluray players that cost $150, in order to attract customers to the building.
None of that is illegal, and neither is what amazon is doing with its low-priced kindles and ebooks.
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
What is (alleged) to be happening is that Store A (Apple) sees that Store B (Amazon) is getting a better price, so they pressure the publisher to raise the price they sell to Store B (Amazon). The publishers are happy to follow Apple’s lead and crank up the price for everybody.
What you really want to do is study the structure of the market. The buyer, seller, and the middle man gains in a transaction – If they didn’t then there would be no transaction. However, the next question is how the gains are split. Does 80% of the gains towards the seller or only 20%. The lawsuit alleges that Apple et.al. restructured the marketplace so more gains would roll towards the Publishers (and thus indirectly hitting Apple’s competitor - Amazon)
The agency model is what Apple and the publishers are being sued over. The retailer doesn't have control over price because of the price fixing. Thus you get wierd things like ebooks costing more than discounted physical books. I think physical books will still sometimes cost more than ebooks even if the agency model goes away. At some point physical bookstore need to clear their inventory. They do this by selling unwanted books at cost. Ebook stores don't have inventory issues so they will never offer discounts. Of course no one cares about this. These are unwanted books. People don't like the price difference on best sellers on release day. That problem will be solved.
The market for audio books is small compared to printed books or movies. Hiring good talent to make decent audio books is higher than you expect (And this is something that you want – I listened to some pretty bad audio books in my life.) So you have higher fixed costs per unit sold – have to make up the difference someway.
It’s one of the reasons why I get most of my audio books via the library.
1) Collusion- OK, that bad.
2) Publisher/seller model. Why couldn't the publishers sell the e-books (individual ID per copy) to the end sellers at a price, just like they do now for physical books. Then the end seller could decide on the end price. I admit I don't have any e-books, so I'm not conversant in this area.
Vote monkeys into Congress. They are cheaper and more trustworthy.
Lets see. I can download a best-selling song for $0.99. I can download a best-selling app for $1.99. I can download a best-selling book for $19.99. Yeah, something's wrong there. At the very least, ebook prices should be closer to paperback prices than hardcover prices. Ideally they should be similar to song & app prices.
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For example, Exxon's profit on a gallon of US retail gasoline is about seven cents. They have big numbers in profit because of the large amount of product they sell.
In fact, of all industries, oil and gas has one of the lower profit margins, far outpaced by the likes of soft drinks, electronics and chemicals.
Your state and the federal government takes many times more than that in taxes. So if you want to demonize someone for gouging you at the pump, look at your politicians, especially the "green" ones.
First off, the publisher doesn't have any of the issues that you are talking about - printing and shipping books is really cheap. Maybe $2 for most soft-cover books and maybe $0.25 to ship it (with others in a box) anywhere in the US. After it gets there, it is the book store's problem which does not affect the price the publisher is charging. Same thing with getting stolen - not the publisher's problem.
Most of the book's cost is the editing and promotion. No editing has been tried and it sucks. You can find many self-edited books for the Kindle on Amazon and almost universally they aren't worth the $0.99 they are charging for them. Authors are not editors. Promotion isn't optional either - if you don't get the book noticed, nobody will buy it. Promotion isn't all advertising to the consumer, either. There is a lot of promotion that goes on just to get a book store to put it on the shelf or a reviewer to bother to read it instead of the hundred other books they got that week. So the reviewer reads it, writes about it and the book store puts it on the shelf because money was spent promoting it. End result is people hear about it and buy it.
Want to guess how many books are produced each week that nobody knows anything about? Promotion is the only way out of that trap.
If you can figure out how to replace editing and promotion (which is what the publisher does and nearly all of what they do) and get rid of the publisher, great. But not doing those things is not an option.
By the way, I'll bet you didn't know that publishers do not print books - that is done by a book printing company which is usually far, far away from the publisher. Again the publisher provides editing and promotion and that is about all they do.
The oil cartel OPEC does not fall within EU or US juris diction. I thought that was bleedin' obvious.
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
They are not claiming that independent authors are conspiring together to set prices. Clearly there is no price fixing going on among indepedents. Books from independents are cheap and sold at several price points. They are saying the publishers conspired together not to compete on price. They are saying Apple assisted them.
They are asking why prices went up from $9.99 to $14.99 uniformly for ebooks sold by publishers after Apple entered the market. New competition is supposed to drive prices down not up. Costs didn't go up. Demand didn't go up. Supply did not go down. Ebooks didn't suddely become longer or increase in quality. The only thing that changed was that the publishers met with Apple and set prices.
Well the DOJ is claiming the prise went up for the same reason discount CDs suddenly rose from $9.99 to $12.99 (during the 90s/early 2000s). The publishers were colluding with one another to set a high price.
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
Yeah, because picking on Apple is probably going to score *tons* of points with the rubes.
--Jeremy
Jesus was a liberal
Before Apple started with the agency model, the "average" price for eBooks at Amazon was, indeed, lower than those prices today. Amazon was selling the books at a loss in order to sell more Kindles. This infuriated the book publishers, out of concern that Amazon was devaluating the book in general with prices that low. The book publishers had no control whatsoever over the retail price. Combined with Amazon's weight, the publishers had no choice but to just "suck it up".
Apple, on the other hand, needed to do something to break Amazon's lock on the eBook market, and to get the publishers to offer their material on the Apple store. So, they offered the publishers what they wanted, which is the agency model.
How this turns into collusion is beyond me, as Apple is not establishing the price of these books, nor did they convince the publishers to all agree on a price or any such thing. The DOJ's angle appears to be the "most favored nation" clause, which has the effect of making Apple's price the best price for a given title, but that seems pretty weak to me, as that does nothing to get the various publishers to sell their books at the same price as all of the other publishers. Even if it did, doing so is not collusion.
If you have control over whether it's in those other bookstores, then, yes, you do have control over the price. You don't like their terms, don't publish it there. That's how you control it.
That's not control over price, that's control over availability.
Repeat after me. Loss leaders are not dumping.
Dumping would be Amazon selling all of their books below cost for a year, taking huge losses to force Barnes & Noble out of business, then raising prices on everything. As long as Amazon is making a profit on nearly everything they sell, it is not dumping. Selling a $20 book for $10 is merely the use of loss leaders to draw customers in, nearly all of whom will then add another $15 worth of profitable merchandise to their carts in order to get free shipping.
Bear in mind that they usually aren't losing money on the sale. Amazon typically buys at a 40% discount. This means that their cost for that $20 book is typically about $12. So they might lose $2 on that one item, plus maybe $3 for the free shipping. The other $15 worth of books, however, assuming they aren't sale items, only costs them about $9, so they make $6 on them. Thus in total, they actually turn a $1 profit even with the free shipping and the loss leader factored in. Now admittedly that doesn't cover their warehousing costs or picking costs, but those are fairly minimal in quantities. I'd imagine that even in the worst case, they break even on those loss leader sales so long as the person buys enough merchandise to qualify for free shipping.
And, of course, if the person doesn't buy enough to get free shipping, there's probably some profit built into the shipping costs to offset part of the loss.
Check out my sci-fi/humor trilogy at PatriotsBooks.
This is exactly what is at issue in the hub-and-spoke model of collusion (cf. section beginning "Information Sharing in the UK") the DOJ is alleging.
Quoting myself from elsewhere:
blog
Every eBook I've downloaded has been free... where are you getting yours?
The thing that people seem to forget when arguing that ebooks should be cheaper is the fact that it costs money to have a paper based book sit in inventory. Eventually the publisher and/or retailer will be willing to take a loss and sell that book at a steep discount in order to make room for a more popular book with more potential to make a sale.
Since digital books take no physical space, there is no incentive to move product out the door.
Yes it costs more to produce a paper based book, but there is a shelf life of profitability for that book. Digital works have no such liability since it's much cheaper to produce and costs next to nothing to store.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
Because you can't show that Amazon gained its market share through dumping. Amazon gained its market share by being first to market with a ereader that you could buy books on. They created the market by converting their physical book customers into ebook customers. They have been loosing market share ever since. From 90% to 60%. Not a single ebook seller went out of buisness under the wholesale model. Several went out of buisness with the Agency model. You could say Amazon killed Borders by dumping. But to do that you would have to ignore the vast history of physical stores that went out of buisness when competing against digital.
The government want to appear to be 'anti-collusion' ( for lack of a better word). If scapegoating a minor player while leaving 'too big to punish' untouched scores *tons* of points, which it does and serves as a good distraction away from the big boys, then so be it.
When taking tests in school, the teachers always advised us to answer the easy questions first, instead of getting bogged down with the difficult ones, in order to ensure a higher score.
I'm sorry but bullshit. In the RPG-industry (and probably others), which have been doing POD/e-books for at least a decade, it's always understood that e-versions cost half the print-versions. Amazon kept doing that. The big-name publishers are just greedy.
I've heard this in a few places, and I'd like to point out that just because a physical book costs a certain amount, it's *not necessarily* the case that a digital version should cost less.
Yes, a physical version comes with all sorts of physical costs: the paper, ink, shipping and storage. But when I buy a book, I'm not actually looking at those things when I make my decision to buy it. The content--the actual story or information being conveyed--is what's important to me. Thus, when I pay $10 for a paperback version of one of George RR Martin's books, I'm really just trying to give him $10 for a good story that I can enjoy.
I would argue that book prices should actually stay close to what they are, and hopefully more of the money can go to the authors. In the event that I'd like a hardcopy version of the book, I'd like license to print it out myself, or even better, have it printed for me in a volume of my choice (leather bound, large format, thick paper, etc.) with the cost of the materials borne by me, since in that case I AM looking to pay some extra money for the medium.
I know this is sort of tangential to the whole discussion of price fixing and collusion, but I actually don't think that the authors should be making any less. The margins for the publishers might diminish or disappear (since everyone now has the possibility of self publishing), but I'm just concerned with the stories.
HAHAHAHAHAHA
Wait, you were serious? Have you ever even looked at a 10-K?
Technically “petroleum products by value” – and that’s important.
First, the US has a lot of refiners. Low cost Nigerian crude oil is shipped to the US, we ship higher cost gasoline, etc. back to Nigeria.
Second, thanks to fracking, we have a lot of natural gas. And we export a lot of that – either directly or indirectly (like Propane, Petrochemical Feedstocks)
I work at a small publisher, there has been a lot of publisher consolidation and that is bringing the number of competitors down which allows the big publishers to price fix.
Us small fries aren't getting hit with this shit.
One of the reasons books go "out of print" is due to being a little long in the tooth, not being the current trend of "Teen Paranormal Romance"- essentially, it costs the publisher inventory taxes to hold volumes in the warehouse should demand ever increase for an older title. So when a print run ends, they don't reprint another 10,000 copies to store and pay inventory taxes on in the hopes of selling 10 at a bookstore each subsequent year... this is why it's hard to find older CJ Cherryh books and stuff by Niven.
With digital- there is no warehouse, there is no annual tax on unsold items...
IRS: "How many books in your warehouse?"
Publisher: "One!"
( as an aside- I'd love to see MAFIAA math applied by the IRS to their digital titles. )
IRS: "How many albums / movies in your warehouse?
MAFIAA: "One!"
IRS: "that equals 30 bazillion potential copies. Pay up."
The point is that if the market was working as it should, the lower costs would have gotten passed on to the consumers at some point of time. Even if you say that printing, transportation, storage, paper, ink etc are not much (which I don't believe), it's still something. Even a price reduction of 50 cents would indicate that. Instead, we see nothing - no price reduction at all. And possibly even higher prices!
John Scalzi has a good run down on this, with a letter from CEO of Macmillan regarding this issue. I good place to start on what's going on here.
I drank what? -- Socrates
Stabilize Prices is nice way of saying price fixing.
Actually, no, the DoJ's angle on collusion appears to be (from actually reading the complaint -- see the section "VI. DEFENDANTS' UNLAWFUL ACTIVITIES" beginning on page 12) the series of communications between the publishers in which they conspired to jointly raise the retail prices of e-books by establishing the agency model as standard, which was initiated prior to Apple's attempts to enter the e-book market, and continued after that entrance (and specifically included mutual support in conflicts with Amazon after the Apple deals were implemented.)
The MFN clause is alleged to have become a key signalling mechanism once Apple was brought in, but isn't the key of the case alleging the existence of collusion.
It sounds like the DOJ has evidence that collusion occurred. From the complaint filed today: "As a result of discussions with the Publisher Defendants, Apple learned that the Publisher Defendants shared a common objective with Apple to limit e-book retail price competition, and that the Publisher Defendants also desired to have popular e-book retail prices stabilize at levels significantly higher than $9.99. Together, Apple and the Publisher Defendants reached an agreement whereby retail price competition would cease (which all the conspirators desired), retail e-book prices would increase significantly (which the Publisher Defendants desired), and Apple would be guaranteed a 30 percent "commission" on each e-book it sold (which Apple desired)."
Case information, including the complaint, is here.
Knowing something and being ready to take it to court are two different things. Also, part of the delay was settlement talks (which may have included cooperation on gathering evidence against the remaining defendants--notice that settlements with three of the five charged publishers were announced simultaneously with the announcement of the filing of the lawsuit.
The direct quotes in the complaint suggest that there is considerable paper trail mentioning targetting Amazon, both among the publishers and from Apple to the publishers.
No, they aren't asking a question about why it happened, nor are they inferring a conspiracy merely from the absence of some other explanation.
They are alleging a very specific conspiracy with the intent of jointly raising prices by implementing the agency model as a universal norm that was agreed to by publishers before Apple tried to enter the market, that Apple was brought into and actively participated in for its own gain, and that the publishers worked together to protect when Amazon pushed back after Apple entered the market.
Specific communications between the colluding publishers and specific actions in furtherance of the conspiracy are alleged.
This is all laid out in the complaint.
More text from the complaint suggesting that DOJ has hard evidence:
"Beginning no later than September 2008, the Publisher Defendants' senior executives engaged in a series of meetings, telephone conversations and other communication in which they jointly acknowledged to each other the threat posed by Amazon's pricing strategy and the need to work collectively to end that strategy. By the end of the summer of 2009, the Publisher Defendants had agreed to act collectively to force up Amazon's retail prices and thereafter considered and implemented various means to accomplish that goal."
"The Publisher Defendants directly discussed, agreed to, and encouraged each other to collective action to force Amazon to raise its retail e-book prices."
"Publisher Defendants took steps to conceal their communications with one another, including instructions to 'double delete' e-mail and taking other measures to avoid leaving a paper trail."
"They received assurances from both each other and Apple that they all would move together to raise retail e-book prices."
"All five Publisher Defendants agreed in 2009 at the latest to act collectively to raise retail prices for the most popular e-books above $9.99. [Then quotes internal email]."
"Apple concluded that competition from other retailers, especially Amazon, would prevent Apple from earning its desired 30 percent margins on e-book sales. Ultimately, Apple, together with the Publisher Defendants, set in motion a plan that would compel all non-Apple e-book retailers also to sign onto agency or else, as Apple's CEO put it, the Publisher Defendants all would say, 'we're not going to give you the books'."
"As it negotiated with the Publisher Defendants in December 2009 and January 2010, Apple kept each Publisher Defendant informed of the status of its negotiations with the other Publisher Defendants. Apple also assured the Publisher Defendants that its proposals were the same to each and that no deal Apple agreed to with one publisher would be materially different from any deal it agreed to with another publisher."
"Each publisher defendant rquired assurances that it would not be the only publisher to sign an agreement with Apple that would compel it either to take pricing authority from Amazon or to pull its e-books from Amazon. The Publisher Defendants continued to fear that Amazon would act to protect its ability to price e-books at $9.99 or less if any one of them acted alone. Apple supplied the needed assurances."
"Near the time Apple first presented the agency model, one Publisher Defendant's CEO used a telephone call, ostensibly made to discuss a marketing joint venture, to tell Penguin USA CEO David Shanks that 'everyone is in the same place with Apple'."
"On the evening of Saturday, January 23, 2010, Apple's Mr. Cue e-mailed his boss, Steve Jobs, and noted that Penguin USA CEO David Shanks 'wanted an assurance that he is 1 of 4 before signing'."
There's about 20 pages worth of evidence, with email and telephone conversations quoted. This will be a big case. It looks like Steve Jobs and the publishing companies' CEOs were personally involved in the conspiracy.
This is an oft-repeated meme on slashdot, and for the most part it is just plain wrong.
The only time that statement is true is when there are multiple sources of a product, and there is no difference between the products (or the purchasing thereof) except for price. For instance, supposing there are two sellers of product X, selling the exact same item. Retailer A charges $2 and has the product available today. Retailer B only charges $1, but you have to wait a month to get the product. Those two purchases are NOT identical, and the fact that retailer B is charging only half of what retailer A is charging is not going to cause A to lower his price.
Now, for the comparison between paper books and e-books. The first, most obvious, thing is that ebooks and paper books are not the same thing. Therefore, comparing their prices is meaningless. Sure, they both have the same content. But beyond that there are value adders and detractors. Is paper an adder or detractor? Depends on the purchaser. Some people would pay more to have a physical book. Some people would pay more to NOT have a physical book they have to carry around, store, and dispose of.
If people are willing to pay more for an ebook (ie the ebooks are selling), why is the market not 'working as it should'? If people are not willing to pay more for an ebook (the ebooks are not selling), why is the market not 'working as it should'? The market works both ways - sometimes prices go up, sometimes they go down.
Does anyone else wish they could do this?
1.) Buy the $6 physical copy
2.) Have Amazon deliver it to an onsite furnace
3.) Pirate a copy of the ebook you now "legitimately" own
Market segmentation at various price points should still be possible with eBooks. Since there is no need for "clearance" price reductions, inventory costing can safely be factored out of the product life cost equation. While the eBook price of a popular title may never have any incentive to drop to the clearance price point, it ideally should never be higher that the fully costed physical edition in a free market. This is particularly true for simple typeset novel eBooks.
The whole point is that the pricing model in its current form is not supported by normal supply and demand without collusion. The "indefinite" shelf life of an eBook is a red herring as demand will drop as the market becomes saturated with copies. The price point should drop as demand wanes assuming an infinite supply.
So what you're saying is paper books are cheaper because they're more expensive...?
No. I'm saying paper books will naturally lower in price when the price of keeping it in inventory is greater than selling at a discount and making room for a book that may actually be purchased close to its list price. Basically the paper books are cheaper because of the retailers need to cut their losses.
I'm not justifying eBooks higher cost. I'm just pointing out that there are deflationary pressures on traditional books that doesn't appear to exist for its digital counterpart.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
That's what this who DOJ thing is about isn't it? That's it's not a free market in the first place, but one that is being distorted by price collusion. After all, merely because a market is not free doesn't mean that people will still not buy and sell things.
I agree that eventually eBook pricing should fall, however I don't think it will come from publisher's voluntarily changing their pricing model. I think the more likely scenario is that the lower cost to market for eBooks will create more independent publishers which means more competition and ultimately lowering the price that the market will bear for a particular type of book. We are seeing evidence of this already.
I know I'm able to buy digital versions of books from independent publishers cheaper than their paper version which seems logical. However the traditional publishers have inertia working against them and will continue to have a large production of paper based books distributed to retailers who are motivated to move them off the shelf as quickly as possible while still trying to make a profit.
Until the market for eBooks reaches critical mass, we will continue to see the traditional clearance pricing model associated with paper based books.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
The thing that people seem to forget when arguing that ebooks should be cheaper is the fact that it costs money to have a paper based book sit in inventory. Eventually the publisher and/or retailer will be willing to take a loss and sell that book at a steep discount in order to make room for a more popular book with more potential to make a sale.
Since digital books take no physical space, there is no incentive to move product out the door.
Yes it costs more to produce a paper based book, but there is a shelf life of profitability for that book. Digital works have no such liability since it's much cheaper to produce and costs next to nothing to store.
That is not true at all. There are still fix costs associated with ebooks to have to be recouped. Not to mention, ebooks have to return a certain percentage in net profits. So, there is incentive for publishers and retailers to discount ebooks in order to increase sales on laggards. Also, there is no evidence to support your thesis. I say this because I haven't seen any correlation between prices of low volume paperback and newer issues.
Apple isn't the focus of the case. The key illegal behavior and basis of the suit is the action of the five colluding publishers that began before Apple entered the ebook game. Apple is charged, too, but they are involved as a collaborator in an illegal scheme hatched by the charged publishers, not as the instigator.
No, the DOJ action is not about ebooks costing more than paper books, or even that the cost of ebooks is 'too high'. The DOJ action is about Apple conspiring with the publishers to ensure that Apple does not have to compete with anyone on price. That is illegal.
Anyone is free to set whatever price they want on the goods they are selling (except in certain situations, like necessities during an emergency). The market will decide if the price is too high or not.
So you're saying there's no connection whatsoever between higher ebook prices and the DOJ investigation? None at all?
While that's true, there's more than one supplier. If Chevron artificially limits supply in order to drive prices up, then Shell comes along and pumps more in order to make more money on the back of Chevron's restraint. When Chevron gets a whiff of this, they start pumping more too. The problem with this kind of collusion is that there's incentive for some to cheat.
This happened in the oil embargo of the late 70's. OPEC decided to limit production. Saudi Arabia limited theirs and drove prices up. All the other OPEC nations were pumping like mad to make as much profit as possible but since Saudi Arabia was the largest producer, it kept prices high. Finally Saudi Arabia got sick of it and pumped like mad to punish the other cheaters and drove down prices even lower than they were before.
Embargos and price fixing usually don't last long because of the incentive to cheat. If you look at the complaint, there was a lot of discussion between the different publishers just to make sure nobody was going to cheat and cut a different deal with Apple.
www.joshferguson.org
Apparently Hachette, HarperCollins, and Simon & Schuster have agreed to settle out of court, while Apple, MacMillan, and Penguin apparently mean to contest it. http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CCgQFjAA&url=http%3A%2F%2Fwww.webpronews.com%2Fmacmillan-ceo-john-sargent-responds-to-doj-lawsuit-2012-04&ei=vu6FT8LLK9H4ggfzvozWBw&usg=AFQjCNGWnKvqJJnBbXAkg-k9tADur-eSJw
No, I did not say that. Certainly the case has to do with fact that illegal price fixing caused the prices to rise. However, even in the absence of illegal price fixing the price of ebooks could still rise, and ebooks could still cost more than paper, and there is nothing illegal or wrong with that. If people are willing to pay more for a good, the price goes up.
Your post which I first responded do did not say anything about price fixing. It said that because COSTS are lower with ebooks, PRICE should naturally be lower. This is simply not true. Price reflects the point at which the seller thinks he will make the most money, not the 'cost' of the product. Too high, sales drop more than the increase in unit price adds. Too low, sales increase but not enough to make up the difference in the lower unit price.
But you're assuming there's no competition in your scenario. The situation you're describing is how a single seller would determine price in the absence of competition.
Honestly, it doesn't matter if they were in collusion. I could see investigating Apple for antitrust, given their massive market power, but the music labels? Even if they were in collusion, there are better ways to spend taxpayer dollars than going after a thin-margin industry that is struggling to adapt to new technology and provides at least some marketing/production for many albums, not to mention is one of the only industries that promoted listening for pleasure. There are only a few big labels left. They operate on tiny margins. It will not help them to be attacked by Justice, and it will not help us to have them be attacked by Justice. At least not yet. Maybe when the industry is stronger.
No, they can't (well, they'll soon be able to for books from the three publishers that settled, but only as a result of the settlement), since the whole point of the collusion charged here was for the involved publishers to cooperate together and use some other retail outlet (which turned out to be Apple, but the collusion and plan existed between the publishers before Apple's bookstore existed) to provide leverage to force Amazon to accept the agency model in which the publishers, not the retailer (Amazon), set the price for sale to consumers, and that this effort was successful immediately after the iBooks store opened.
Why is getting everyone to sign a similar deal illegal? Isn't that what Amazon already does? As well as other companies, like Wal-Mart?
They never agreed on a fixed price, which is what actually *is* illegal. This just sounds like none of them wanted to sign up with Apple alone, which would mean being fucked over on Amazon, but if they all did it, they would be free of Amazon's predatory practices.
This lawsuit is bizarro world, Amazon was the anti-competitive monopoly, the contracts with Apple busted it. But because all the publishers had to "collude" to fix a broken market, it shares superficial traits of a trust, and so the DoJ is prosecuting image over substance.
This shit's going to fail miserably in the courts, other than potentially leading to some sort of agreement in order to stop the lawsuit if it drags on, but there's no way the DoJ will actually win this one.
There's about 20 pages worth of evidence, with email and telephone conversations quoted. This will be a big case. It looks like Steve Jobs and the publishing companies' CEOs were personally involved in the conspiracy.
Like we need another reason for people to want to dig Steve up and put him in front of people to speak.
So why is a gallon of gasoline as much or more now with oil at $107/barrel then when it was at $140/barrel?
That would be illegal, but that's not at all what the case is about. The cases is a number of large publishers colluding to jointly raise prices on ebooks by coordinated application of market power. Apple is involved because they allegedly became involved as something of a co-conspirator after the collusion began (and their involvement became a key factor in the collusion actually working, though without them its quite likely that the publishers would have found or formed another retail outlet to fill the same role.)
Editing and promotion adds to the cost? Yes. Could be that cost comparable to the cost of actually writing the book? Would you take a cut of 30% of i.e. Tolkien's works value on every book sold just because did a spellchecking on steroids once and displayed some banners for it?
But anyway that dont weight in the factors that put different costs to the physical and digital versions of a book, they work for both in more or less the same way. Paper (including luxury editions), storage, intermediaries (each level getting a cut), insurance, transport, are things that must have a weight by the time the client purchase the paper version. Maybe because living in another country feel that those costs should add really a lot, but still are not so far the digital and the paper versions
Around here if one gas station changes their prices, all the other gas stations in the entire city change within an hour or so. Prices generally go up right before a long weekend, go up instantly if there is any bad news about the oil supply (even though they're selling from the underground tanks they filled at the old price), and drop back down very slowly compared to the speed at which the oil price drops.
Sure, when doing an e-book you save the costs of the printing and shipping. However, you now need to do additional work to validate the e-book. You need to ensure it looks good on all the different readers out there, pick the best of the available fonts, check the alignment at all the different font sizes, make sure any images carry over nicely, etc.
When doing it properly, there is additional work to prepare the e-book, and somebody has to pay for those costs.
That said, I do think it's insane that they want to charge as much as they do.
between the DOJ and Amazon. The latter wants their monopoly back and to be able to use predatory pricing to force other resellers out of business.
The question I would like an answer to is what sort of "favours" did Jeff Bezos offer to the DOJ investigators?
Who watches the watchers?
Jesus was a compassionate social conservative who called individuals to sin no more.
They never agreed on a fixed price, which is what actually *is* illegal.
I left out a lot of the evidence listed in the criminal complaint because it was too verbose to retype here, and some of what I left out indicated that specific prices were discussed and set together by the publishers with Apple's consent. If the DOJ can actually back up what they've put in the complaint, this looks like a slam dunk for them.
Go read the actual criminal complaint and not just my excerpts. These companies are screwed. This is the kind of thing that leads to prison time for executives.
Here's what's going on. Steve Jobs wanted 100% of the saving of switching from print to ebooks to go to Apple, not users or publishers and authors. However, he didn't want to drive customers away with higher prices. So, how do you suck 30% of the revenue out of an industry as pure profit without adding value or inviting unwanted competition? This is pure Steve Jobs evil marketing genius, and one reason to be glad he's dead.
The answer is the "agency model" combined with "most favored nation status". The agency model eliminates the likes of Ebooks.com and Ebook Depot, where you could often go and find an ebook for $1 or $2 less than Amazon. By forcing the industry to go to the Agency model, an ebook costs the same no matter where you buy it, eliminating any priced based competition, and reducing the consumer's choice to a matter of convenience, where Steve could dominate with the iPad and iTunes. Just for good measure, he removed any apps that also sell e-books from the App Store, like Sony's e-book app.
However, the big publishers wanted all of the profits for publishing as ebooks and then some. They pretty much wanted to screw authors, users, and the ebook stores, and were hopping mad at Amazon for forcing them to sell at $10 while Amazon took a bigger share of the profits than was even close to reasonable (over 50% for small publishers). In dealing with Apple, they loved the agency model and immediately raised prices, and of course they wanted all of the revenue. Statements like "4% would be a reasonable fee for the digital distributor" were common. Rather than bicker with each publisher like Amazon did, Apple simply demanded the lowest price the publisher offered anyone, meaning Amazon's price. Thus, Steve gets just as good a deal as Amazon had for so long. And in this case, he gets tons of cash with no work, and no added value in the chain. On the positive side, he did lower Apple's cut for doing nothing to 30%, or roughly 100% of the savings for going digital. Amazon responded by requiring their publishers also give them the lowest price, and then even Google jumped on board. Thus over 90% of the distribution channel for ebooks agreed on one thing: Apple, Amazon, and Google get 30% for doing almost nothing. Screw users, authors, and publishers. Between them, they have become the new gate keepers, sucking money out of you and me and crushing independent stores and sales channels. It's about time the DoJ looked into this!
This anti-competitive price fixing pisses me off. In the age of digital media, authors should be closer than ever to their readers. Publishers are still needed for editing and marketing, as books rarely become best sellers by themselves. However, the lower cost of digital distribution should mostly go to us, the consumers. If a print book is $10, I want the ebook for $7.
I got so upset at how all these companies are screwing the consumers over, that I came up with a potential solution. I've got a stalling effort to create Ebooks.coop. Members of this coop would pay for ebooks through the coop at the same price as they would using iBooks or a Kindle, because of the agency model. The coop would hopefully get close to the price from publishers as Amazon and Apple. Thus, for doing pretty much nothing, Ebooks.coop would make an unreasonable amount of money on each sale. At the end of the year, members would be mailed a check for their share of the profits, which would be proportional to how much they spent at the coop. This should enable us readers to "earn" most of that 30% savings.
The main reason I've stalled on this effort is DRM. I have difficulty reading print or a computer screen, and use text-to-speech software to read ebooks. Fortunately, I can get many popular ebooks almost for free from Bookshare.org, because of a loop-hole in copyright law specifically designed to help the blind. However, most ebooks are not available there, so I am forced to break the DRM manually, which is a huge pain, and always a moving challenge as publisher
Celebrate failure, and then learn from it - Nolan Bushnell
No, the DOJ action is not about ebooks costing more than paper books, or even that the cost of ebooks is 'too high'. The DOJ action is about Apple conspiring with the publishers to ensure that Apple does not have to compete with anyone on price. That is illegal.
This, apple collided with publishers to ensure that other stores could not sell the same book for less then what apple was selling them for. Its not about the cost of books although a common side effect of collusion and price fixing is that prices for the product rise.
Calling someone a "hater" only means you can not rationally rebut their argument.
By the way, there are solutions to the DRM problem. Each ebook can be digitally "water marked", making subtle changes to the text in random places, so that each user gets a different version. For example, they can use a long or short dash in places, for pauses, they could use "...", or ". . .", or randomly insert two spaces rather than one between words in a few chapters. If a particular version winds up on ThePirateBay.org, then the copyright holder could file a law-suit and get a court order to find out what account was used to purchased that copy. This wont stop a determined copyright violator, as there's no way to keep a user from using character recognition to suck up the contents of an ebook from a Kindle, or from a printed book. In reality, DRM is 100% useless at keeping copies from appearing on the Internet. However, most consumers are willing to fall in line and buy legal copies if there's a chance they'll get caught making illegal copies. I'm all for copyright protection. Keeping a database of which accounts bought which books is kind of icky, but every ebook store does this anyway, just so they can balance their books, and most users would want to be able to access their ebooks in the future from the store they bought them from. A person determined to hide their buying patterns could buy ebooks with digital cash without an account, so anonymity could still be protected.
The same goes for other digital media, like music, where we could introduce unperceptible changes, flipping he LSB of samples in noisy sections like a drum beat or vocal plosive. Images can similarly be watermarked. If copyright holders want to keep me honest, I don't mind buying watermarked copies. In fact, I do when I read ebooks from Bookshare.org, where I legally download ebooks almost for free. My copies are water marked, so when my kids ask if they could borrow my ebook, I have to wonder if that will lead to it getting posted on the Internet. So, I've bought both kids Nook Touches, and I've agreed to pay for any book they want to read. This water marking stuff really does work in so far as it helps keep honest people honest.
Celebrate failure, and then learn from it - Nolan Bushnell
The market works both ways - sometimes prices go up, sometimes they go down.
Except in the case of ebooks, the prices don't change. Steam has sales all the time, I recently bought a couple of games at half price. Ebooks? They can't go on sale because the retailer has to sale them at the price the publisher set. That is how the market isn't working as it should
The only point that you seem to have made pertinent to this discussion is that eBooks, according to your insight, should be $2.25 less than the physical book. Why then do they frequently cost more than the paperback on Amazon? I'll give you a little hint: you might look at that little notation on the page that says that the price is set by the publisher.
They never agreed on a fixed price, which is what actually *is* illegal.
I left out a lot of the evidence listed in the criminal complaint because it was too verbose to retype here, and some of what I left out indicated that specific prices were discussed and set together by the publishers with Apple's consent. If the DOJ can actually back up what they've put in the complaint, this looks like a slam dunk for them.
That's not illegal. Price fixing is an agreement among multiple suppliers or sellers to sell their products at a fixed price. That's not what is happening. No one agreed to sell books for no less than $9.99, or whatever price you want to pick. There are only two "conspiracies" here. One is the "conspiracy" of the publishers making a deal with Apple. That fits the definition of conspiracy (i.e., two or more agents working together), but not what people mean by a conspiracy, and definitely nothing illegal. It's the definition of commerce.
The other "conspiracy" was that the publishers worked together to make sure that they weren't the only one going up against the *real* monopolizer, Amazon, alone. Again, not illegal.
Go read the actual criminal complaint and not just my excerpts. These companies are screwed. This is the kind of thing that leads to prison time for executives.
The DoJ has no case. It's pure smoke and mirrors. You didn't list any evidence because fundamentally you know it's nonsense, and can't type it up with a straight face.
Dazzle me with just *one* actual crime. No need to list multiple, just one will do. Pick the most damning. I look forward to seeing factual evidence and changing my mind accordingly.
Publishers are still needed for editing and marketing, as books rarely become best sellers by themselves. However, the lower cost of digital distribution should mostly go to us, the consumers. If a print book is $10, I want the ebook for $7...
But that's the thing. There really is a value-added service. A small publisher can get his book on Amazon without much trouble at all. Big publishers aren't the gatekeepers they used to be, but they bring in something extra, and they can't collude to keep anyone out of the market. All they can do is raise or lower prices on the books they own the rights to print. They can charge whatever they want for the book, and you can buy it or not buy it--it's not like anticompetitive behavior in gas or oil or telecom or power.
-- IANAL, this isn't legal advice, and definitely isn't legal advice for you. Also, Squee!
Ooops, forgot to install that Greasemonkey script to prevent slip-up-mods....