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Amazon: Publishers Strong-Armed Us On E-Books
Nerval's Lobster writes "Strengthened by an agreement with Apple that set the prices for their respective e-books higher, publishers strong-armed Amazon into giving them similar terms, an executive for the online retailer has testified in Manhattan federal court. The U.S. Department of Justice has taken Apple to court over the alleged price-fixing, after reaching out-of-court settlements with five publishers (HarperCollins Publishers LLC, Simon & Schuster, Hachette Book Group, Penguin Group, and MacMillian). Apple, which competes with Amazon in the e-book space, refused a similar settlement. "Certainly if someone offered reseller, we would have taken them up on that offer," Russell Grandinetti, Amazon's vice president for Kindle content, testified before the court, according to Reuters. "Reseller" means a company sells goods to a retailer for a particular price (usually wholesale), allowing the retailer to set the actual sales price. Under the terms of that model, Amazon could sell e-books for super-cheap, even if it meant going beneath the publisher's wholesale price. Macmillan and Amazon ended up in conflict over the issue, with Amazon temporarily yanking the publisher's e-books from its digital shelves. "We will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books," Amazon wrote in a statement at the time. "Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay $14.99 for a bestselling e-book." But Amazon eventually relented to Macmillan's demands, along with those of other publishers, and submitted to the agency model, in which publishers have a heavier hand in setting retail pricing."
Why do they want even more than for a the paperback?
I am getting less in that I cannot resell it and no physical copy, yet they want even more. On top of that their costs are reduced, since they need not print, ship or deal with any of that.
I just end up not buying those books. It seems though all media folks are just too greedy for their own good, books the same as movies.
But you can't fix prices on books...
Well, e-books anyway.
Dead trees are still highly variable.
A feeling of having made the same mistake before: Deja Foobar
Is it just me or is everyone doing mental calculations of how many books I should pirate to get my money back?
Amazon has made a fortune by understanding the marketplace. Publishers only care about controlling the works they release. I think often they forget that the reason people purchase books, and just assume they'll buy them. There's a reason I frequent used bookstores and only pick up ebooks for free or for a very, very low price. I like lending my books, I like selling my books if I don't like them, and I like not having to worry about whether my device is charged.
People know when they're getting ripped off. $15 to copy a file which can be sold an unlimited number of times by the publisher with no further cost or effort is ridiculous, especially when compared to the price of waiting for a physical paperback or a used copy.
In SOVIET RUSSIA... erm...NSA AMERICA, the Internet logs onto YOU!
That's all well and good when you're selling things for which equivalents can be easily found. For books if you want (say) the newest Neal Stephenson book, and you don't like the publisher's prices you can't just say "Well screw them, I'm going to get Neal's new book from this other publishers".
The link in the summary is /. masturbation, so here's the Reuters article that it links to, no extra ad impressions needed. (wtf is "Slashdot Cloud"?)
You don't set your price based on what it costs you to make/provide something. You set your price to maximize profits.
So it doesn't matter that eBooks are cheaper to make/distribute than hard copies. What matters is whether people are willing to pay the same price for an eBook as they are for a hard copy. eBooks are arguably better than hard copy books, so it stands to reason people will pay at least as much, if not more, for them.
Now, in a free market, you would expect a competitor to enter the market at lower pricing - but books are copywritten, so it's not exactly a free market. Even then, the justice department is examining whether competitors in the market illegally colluded to force the agency model on eBook retailers.
paintball
Cracking the DRM and converting between epub and mobi is trivial. PDFs suck on e-readers, and tablets suck for reading.
When Amazon says that they'd like to sell some books below wholesale, and claims that the agency model prevents that, they are lying their asses off. They could easily get around that restriction. The simplest way being by offering an account credit on certain books. The problem with that approach from Amazon's perspective is that it would reveal how large the subsidy is. Doesn't matter to the consumer, but it is competitive information they wouldn't want public.
On the other hand, if the agency model prevents Amazon from negotiating a different wholesale price than Apple pays, then that is collusion. I'm not sure it rises to the level of needing a government crackdown, but it is slimy none the less.
And the flip side of this is that Amazon of course would be happy to subsidize book sales and Kindles to drive people to the Amazon store to buy other things. Which in turn could have the anti-competitive effect of making tablets from Apple, Samsung, and others over priced by comparison and push them out of the market.
It doesn't matter which way the courts rule on this one, the consumer loses.
Absolutely, but that's not really relevant to my comment or the one I replied to. He was saying that when computer parts manufacturers raise prices, he just buys his parts from someone else. And that works fine as longs as those parts are completely interchangeable (memory, hard drives, etc). But if you're selling ebooks, and you don't like Neal's publisher, then you simply can't sell his books unless you cave to their demands.
As Amazon said, the publishers have a monopoly on works by their authors.
Amazon's model isn't much better. They make their money by setting the price for a best-seller high, and everything else ridiculously low. And this seems reasonable to a "supply and demand" society, but there's an endless supply of ebooks. More over, that means that authors aren't going to make enough money to keep writing unless they happen to have a best-seller - and the market ends up flooded with garbage like Twilight and 50 Shades of Grey. It's a CostCo mentality. The consumer doesn't know any better, and hey, they're getting most of their books for 99 cents! Seems great from their perspective. But that model kills publishing in general. Anyone who thinks the only cost to publishing a book is the time it takes to write it, has never published a book. Even for a bare-bones self-published ebook, you need at the very least an editor. For anything serious, or that crosses over into the print world, then you need a cover artist, a designer, marketing, and probably someone who knows how to bring it all together... they call those people publishers.
Have you seen the absolute garbage that gets "self published" on Amazon? The ability to put a book out there on Amazon's site *for free*, is perhaps the biggest danger to the publishing industry ever. There are thousands upon thousands of "books" that are nothing more than $.99 scams. Some are literally garbage text or word for word rip off's of someone else's work with a new title. They might only get a few suckers, but they do this *thousands* of times over.
The relatively high price of many e-books drastically reduces the number of e-book purchases I make. I'd be much more inclined to purchase more e-books if they were more reasonable (especially since what you're purchasing is usually more like a license to read it, rather than owning a permanent copy of the work). One side-effect is that I've purchased more self-published or small-publisher e-books than I would have otherwise.
Pricing can be based on utility, rather than cost; see http://en.wikipedia.org/wiki/Utility. I completely agree with you in principle, but I've found I am now just buying ebooks, even when I could get a paper copy for less, because:
- I get it instantly
- I tote my entire library around on a device that weighs 11 ounces
- I can read on multiple devices and it syncs my position automatically
And I recently gave >1000 books to the library when moving, so I know that despite my fears that Kindle as a platform might die, I'm not necessarily keeping all my books forever. (Although since my daughter is 11 and I'm now giving her books I bought when I was a kid... there is definitely some merit to it. If anything, this is the one thing that keeps me occasionally buying paper books; the loaning and hand-me-down factor.)
I'll be honest - I hate myself a little for capitulating, because on principle I completely agree with you. But I also drop $6 on triple lattes frequently and I just feel too busy to feel any rage over a few bucks here or there. I applaud everyone who goes for the cheaper option even if they'd prefer the e-book at that price.
The equivalent crap happens in movies as you point out. HD movies on iTunes being $15 instead of $10, or $20 instead of $15, say, seems fairly absurd, since the difference is perhaps $.02 of bandwidth. TV shows even more crazy, being $3 instead of $2.
The reality is, publishing is a completely shitty business. Macmillan's parent company (a publishing conglomerate) made a whopping 6.7% on 2.1B Euros in 2005 (BEFORE taxes). (2010 they were up to 2.25B euros)
That's not exactly rolling in the dough.
That's exactly what Apple wanted to kill. Amazon was willing to sell eBooks with 5% profit margin because it cost them nearly nothing to sell them. Apple wanted 30% and they saw an opportunity to raise the prices and get more profit for Apple and the publishers. The 5 Publishers that have settled with the government all had record profits after they colluded with Apple to fix prices.
The funny thing is this is ALL in the emails, the intent to raise prices marketwide. The intent to limit competition so Apple could gain marketshare without price competition. The intent to raise prices more than the 30% margin so the publishers could rake in even more money than they do on paper books. It's all there, the government has all the evidence and that's the reason the Publishers all settled after denying they would. The publishers lawyers took one look at all the information the government has and told the publisher to settle or they would get killed in court.
Price fixing is illegal and if the government has the evidence to prove it you will get nailed. The reason you see so few prosecutions is the government rarely has good documentation, the collusion is often done orally behind closed doors with no notes or records of the conversation. Job's probably believed he had enough chutzpah to avoid a prosecution or he believed he was above the law. He was an egotistical asshole that didn't give a rats ass about ordinary people.
Don't get me wrong... Agency has downsides. Lots of them. It's tremendously annoying that there are no sales on Agency books. Kobo (my preferred store) gives out lots of discount codes, but they're of limited use because they don't apply to Agency books. And those publishers that choose to price their ebooks above the paperback price are extremely frustrating (although a few of them seem to be getting a clue. Tor, for example, prices Robert Jordan's Wheel of Time books at a decent discount from paperback. DRM free too.)
But without Agency, it's entirely possible we'd be living in a Kindle-only world.
Amazon was using ebooks as loss-leaders to sell Kindles. $9.99 for the latest bestseller. The publishers hated it because it cannibalized their hardcover sales. But the danger went a lot further then that.
One of the boards I read (I think it might be mobileread.com) introduced me to the concept of a monopsony. Call it the flip side to a monopoly. There existed a very real possibility that Amazon would become the only practical retailer for ebooks, thanks to their willingness to take a loss to build market share (and the deep pockets to enable taking that loss.)
I much prefer the current, varied ecosystem in ebook retailing. I like owning a Kobo Touch, which lets me read ebooks from anybody selling epubs (as long as they don't use customized DRM, but hey, it's a pain getting Barnes & Noble to sell to a Canadian anyways, so who cares.) Amazon wouldn't work nearly as well for me. Canada is an afterthought market for Amazon.
The trial is proving interesting. CNN/Fortune has really good coverage on their Apple blog.