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."

Comments

What is wrong with these folks?

[h4rr4r]

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.

Re:What is wrong with these folks?

[Anonymous Coward]

Because it works. Most people buy into it. Why should I pay $20+ for a BluRay? Oh, because it comes with the DVD and a Media file. But I don't want the DVD and Media file!!!! Too bad. You can't buy it any other way (than used.) So consumers buy anyway. And the sellers sit back rub their hands together with a MUAHAHAHA!

As soon the majority just buys into it, it doesn't matter that the price level is higher.

Re:What is wrong with these folks?

[PhrostyMcByte]

Take your pick:

1. Ebooks open the floor to self-publishers wanting to reach a mass audience, which cuts out the established publishers entirely. This is already quite prolific on Amazon. Making the popular ebooks expensive is an effective way to kill off a platform before it starts -- why would anyone buy a Kindle when the books they know are significantly more expensive on it?
2. Ebooks are certainly more profitable, but they've already invested a lot in physical manufacturing and distribution. Becoming popular too quickly might force them to scale down operations at too fast a pace, and pricing is a way to artificially dampen it.
3. They're money-grubbing whores and trying to pass the ebook experience off as a premium one because you can carry around hundreds of them, highlight passages, and dozens of other features that 90% of people won't use, while ignoring the core reading experience which is still sub-par even when comparing to cheap mass-market paperbacks.

Re:What is wrong with these folks?

[Zerth]

Because they want to keep you buying paper where publishers have all the control. In a digital book market you no longer need financiers able to absorb the cost of printing and distributing 10k copies and you don't need a marketing/sales department that can get your book onto an endcap at bookstores. You still want the people that work for publishers(editors, artists, etc) but you can contract for those directly.

If everyone switches to digital, the publishers' advantage of having a huge bankroll to be able to bet on multiple authors while keep the lion's share of the profit on the few winners is negated when Amazon will sell for anyone and the contract work can paid for like saving up for a car down-payment.

Re:What is wrong with these folks?

[steelfood]

tl;dr: to kill the medium before it can be born.

They're scared of it. They don't know what to do, or how it will affect their bottom line. They don't want it. They want people to stop using it. They want their control of the industry back.

The only way they know how to do this is to price the new way above the old way. Because they're still living in their old world, where supply is physical and limited physically. And in that world, changing the price of things changes demand.

Re:What is wrong with these folks?

[hairyfeet]

Look at the emails written by Jobs and you'll have your answer, one word...GREED, especially greed on behalf of Apple regarding how big a slice they would get. I don't see how anybody could read the emails and not accept its blatant price fixing, I really don't. He was about as subtle as a freight train and this really shouldn't surprise anybody who has looked into Jobs history because the man really was a sociopath.

I'm sure i'll get hate for saying that about St Steve but its a fact, sorry. he fucked over his friends, even when he had more money than them such as fucking Woz out of his share of the games they sold,sold out his friends when he got caught selling blue boxes, go read up on his history folks, he was NOT a nice man.

So the only question in my mind is does the DoJ have any teeth left and will they do fuck all about it, as we have already seen companies like Intel that really REALLY should have been busted for price fixing walk away scott free and after reading the emails if the DoJ doesn't bust their asses i think we can accept that corps can just do what the fuck ever they want in this country. Again do NOT take my word for anything, please go read the emails for yourself, they are just as damning as the Halloween documents from MSFT or the heads of Dell and Toshiba saying the profits they made in several quarters were nothing but Intel kickbacks, again he was NOT in any way subtle about the whole plan.

Re:What is wrong with these folks?

[Nyder]

Because it works. Most people buy into it. Why should I pay $20+ for a BluRay? ....

I'm going to point out that when DVD's were newish, they were $20 new. And you are getting a much higher quality video in Bluray format then you are in DVD format. Give it 10 more years or 4k movies becoming popular to see the price of Bluray movies going down. VHS movies used to cost alot when new also, way back when.

And oddly enough, what you could do is buy a cheaper DVD version of a movie, then download a bluray version to watch. Sure, it's not legal, but you are paying what you feel the movie is worth, just not as much as they want.

Re:What is wrong with these folks?

[Anonymous Coward]

Even worse, if you do what I did and stop buying movies on discs (I'll wait til they show up Netflix), you are part of the "decline of sales that proves billions of dollars lost to piracy" ... even if you never pirate a goddamn thing. :/

Re:What is wrong with these folks?

[0123456]

Wow, that's a lot, right!? Weeeeelllll...... not so much after you deduct author's living expenses while writing the book, the salaries of editors, typesetters, and other people involved in the production of that final .epub file, and less still after you calculate the distributor's cut - Amazon, Apple, B&N, and others don't sell that book for free.

Uh, what? A writer whose e-book sells 50,000 copies at $9 with a typical trade publishing deal makes about $68,000 after giving $12,000 to their agent. Amazon makes about $135,000. That leaves $235,000 to the publisher.

Do you really, seriously believe that editing a book, formatting it as an .epub and sticking a cover on costs $235,000?

Oh, apparently you do.

Re:What is wrong with these folks?

[ducomputergeek]

This is what a friend of mine is doing. He's released 3 books and a collection of short stories ranging in price from $.99 - $2.99. He's sold about 8K copies thus far this year. When I asked him about it he said if he had accepted an advance from a publisher, about $3,500 since he was a new author, he'd still have to do all the marketing and promotion work himself. He figured if that was the case he'd rather do it all himself and cut out the publisher entirely. As he said the 70% Amazon gives him is a better deal.

An an extra $16k in his pocket really helps his family as that's about half what his wife earns per year. He enjoys writing and is hoping in a couple years that his wife will be able to afford to stay home with the kids. Which is rather important because one has special needs.

Re:What is wrong with these folks?

[jader3rd]

Because it works. Most people buy into it. Why should I pay $20+ for a BluRay? Oh, because it comes with the DVD and a Media file. But I don't want the DVD and Media file!!!! Too bad. You can't buy it any other way (than used.) So consumers buy anyway. And the sellers sit back rub their hands together with a MUAHAHAHA!

My parents don't have a BluRay player. My mom went to buy some DVD, and had to ask the store if they had it just as a DVD (instead of the combo pack) and the teenage store worker said that they did have just the DVD, but the combo pack is a better deal. My mom asked if the combo pack was cheaper than just the DVD, and they said 'No', but still insisted that it didn't make sense for my mom to buy the DVD because the combo pack was a better deal. My mom couldn't convince the teenager that a combo pack isn't a better deal if you can't use the other disks. So now she kind of holds it as a badge of honor that she's able to confuse the store clerks by getting just the DVD.

Re:What is wrong with these folks?

[CodeBuster]

VHS movies used to cost alot when new also, way back when.

Indeed they did. In fact, it was this high cost that spawned the rental market for movies in the first place. At that time, most people weren't going to watch a film enough times to justify paying more than $20, and VHS tapes had no "extras", so it made sense to rent the film for 1 to 5 dollars instead (early 1980s dollars). As a teenager I worked in a video rental store and I can remember the store owner telling me that he paid $100+ for each of those tapes. One of the first VHS releases to break this trend was Top Gun which was priced at around $20-$30 when it was released. At the time that was an incredible bargain since most other films cost well over $50.00 if they could even be found offered for retail sale (remember that this was the early to mid 1980s so there were no downloads or even digital copies of films).

Here, have a real article

[RyoShin]

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"?)

More importantly...

[raehl]

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.

Re:grow some balls

[_UnderTow_]

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.

Re:Not to defend Apple, but...

[ducomputergeek]

And it also opens up opportunity. I have one friend who elected to do Amazon self-publishing. Ended up on Good Reads and got some glowing reviews, about 30 last I checked, and has sold 6k of his first book. He just released his second book and a collection of short stories and talking with him over memorial day he's made about $16k so far this year. Much better than the $5,000 advance the publisher offered and he would have had to do his own marketing anyway. That doesn't sound like much, but his wife makes $30k a year and he makes around $50k. An extra $16k with two young kids makes a difference.