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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
Aren't eBooks cheap enough as it is? Doesn't the DoJ have bigger fish to fry? When can we expect RICO charges against Lloyd Blankfein?
Give me Classic Slashdot or give me death!
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.
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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.
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
I don't understand why they choose a relatively minor, non essential industry to pick on. Oh yeah, I forgot.. We're in the middle of a major campaign season. Gotta look good to the rubes back home.
The paperback was $38 shipped and the downloadable version was $97. Excuse me but that's insane.
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.
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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.
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.
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.
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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 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.
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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.
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.
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.
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.
Honestly, it doesn't matter if they were in collusion. I could see investigating Amazon for antitrust, given their massive market power, but the book publishers? 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 gatekeeping/editing function for many books, not to mention is one of the only industries that promoted reading for pleasure.
There are only a few big publishers 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.
-- IANAL, this isn't legal advice, and definitely isn't legal advice for you. Also, Squee!
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)
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."
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.
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.
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
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.
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, 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.
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.
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.
Ooops, forgot to install that Greasemonkey script to prevent slip-up-mods....