Slashdot Mirror
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."
Yes, yes they are.
Can you express why they shouldn't be doing this?
Don't know something? Look it up. Still don't know? Then ask.
I think the DoJ may be able to do more than one thing at a time.
Tic-Tac-Toe, Global Thermonuclear War, and relationships all have the same winning move.
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!
Well, price rigging is an important issue. If it were gas that they were doing this with and your gas started costing $4+ a gallon you'd care more. Oh... wait....
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.
You'll never get gas price rigging solved.
The Republicans don't want it solved, they've blocked EVERY attempt to put proper regulation on the oil speculation market (which is where the prices are being driven up far beyond normal market pricing) because they get tons of donations from the oil speculators and kickbacks from oil industry execs in exchange for federal subsidies.
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
Wow, the U.S. government helping people who are not rich, who do not run corporations? Are the Republicans on sabbatical?
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.
Because after decades of $100+ physical textbooks from the major publishers, they go after far cheaper eBooks while they're still young.
Why they didn't go after publishers a LONG TIME AGO and only choose eBooks now is beyond me...
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
It has nothing to do with whoever is in office. The US has no control over an internationally traded commodity and never will. The US can only *temporarily* affect the market. The US can dump several million barrels on the market and OPEC will just cut production the same amount. No effect. So regardless of which party you hate they can do nothing and anyone claiming they can is a liar.
Until the US can import no oil at all they are subject to the international price and even then I am not certain though I would think you would have more power to control domestic prices if it is all internal. Now the subsidies are another matter, but I don't know enough about them to know whether they are having an effect, positive or negative, on domestic oil prices.
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"
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.
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
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)
Caused???? Are you crazy, the 'Bush Depression" was caused by every idiot that bought a house they knew they couldn't afford if there was any kind of ripple in their finances. Truth be told both parties were responsible for the trouble we are now in. The Pub's repeal the controlls and the Dem's pushed bad policies based on the belief that 'everyone had the RIGHT to be a homeowner' (wether they could afford it or not).
Do you have an example of a major textbook that's "far cheaper" in ebook format?
Usually I see at most a 10-20% difference. For that you get a book you cannot write in, and which has no resale value. Many paper textbooks can be resold for 40-50% of their purchase price.
Dumping is the act of charging a lower price in a foreign market than one charges in the domestic market. They are not dumping, they are selling loss leaders, an action common in every brick and mortar supermarket or electronics store.
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.
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.
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.
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"
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.
To be more precise, loss leaders are promotions designed to get people into a store. However if you're selling below cost with the purpose to drive the competition out of the market, that's predatory pricing, which the DoJ will sometimes go after if they can prove you're trying to establish a monopoly.
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
Exxon's profit not only comes from the shear volume of sales but they make a margin throughout the petroleum delivery chain. They spread their revenue across drilling, transportation, refining, pipeline traversal, wholesale, and finally retail.
These comments are my own and do not necessarily reflect the views or opinions of my employer or colleagues...
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.
In 2011 the US was a net exporter of refined oil products. The US is still a huge net importer of crude oil.
Crude Oil: http://www.eia.gov/dnav/pet/pet_move_neti_a_epc0_IMN_mbblpd_a.htm
Oil Products: http://www.eia.gov/dnav/pet/pet_move_neti_a_EPP0_IMN_mbblpd_a.htm
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!
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.
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.
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 that's why they sued wallmart?
Make a man a fire and he will be warm for a day, set a man on fire and he will be warm for the rest of his life
I think it is almost a tautology to say that the government represents the interests of whoever has the most influence in government (a more precise statement might be that government represents the combined interests of all people, weighted by each person's degree of influence over government.)
That's exactly what is alleged in the complaint. Its "not shown" in the sense that this is usually the case when a lawsuit is filed, since you tend to have the trial and presentation of the detailed evidence after the lawsuit is filed rather than before, but the complaint is pretty specific on the acts and communications involved in the collusion among the publishers to raise prices and Apple's active role once it became involved in that effort.
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