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Apple, publishers 'sued for price fixing'

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Re: Apple, publishers 'sued for price fixing'

#21
post #4

I don't understand why they aren't selling ebooks for the same price as printed books, minus the production costs. That would be fair. Discriminating certain distribution channels might be good for profits, but I think it's clearly unethical.

Because they're desperately trying to protect the sales of hardcover books, and, in part, trade paperbacks. They don't want to risk cannibalizing sales.

Consumers look at ebooks like another variation of the same product. Publishers don't. To them, it's an entirely separate entity. To them, the question you're asking could be (very roughly) translated to "I don't understand why concert tickets aren't the same price as a CD. It's the same music."

It's a bit backwards, and the same kind of thinking that made the MPAA consider the VCR a threat to movie theaters and the MLB think that nobody would buy tickets to the ballpark if games were broadcast for free on TV.

But I can understand why they're doing it. An enormous part of their legacy business model is wrapped up in hardcover book sales.

As for production costs, it would only be paper, printing, and distribution. Nobody ever thinks about pre-production costs or employee costs in professional editors, typesetters, and jacket design. That's a lot of dough that they have to lay out that still needs to be paid out whether we're talking ink or bits.

Re: Apple, publishers 'sued for price fixing'

#22
post #7

Earlier quoted context omitted.

Apple would rather charge you $0.99 for every ebook. Just like they'd rather charge only $0.99 for a single, and $0.99 per TV show and $0.99 for a movie rental. Where they have enough pricing power, they are able to achieve this (they held the line on the $0.99 single for a long time.) Where they aren't they aren't. Unlike Amazon, Apple is not in the business of selling books. Apple is in the business of selling iPad…

Alternatively, publishers could just sell their ebooks to everyone at a wholesale cost and then not concern themselves with what the retailer sells it for. In this situation, if Amazon wanted to do deep discounts, that's on them. Isn't this how Amazon works in other areas? According to this infographic ( http://p.printingchoice.com/e-books-vs-real-books/ ) that wholesale price would be about $10 on average for both p…

Let's just take for the sake of argument that this wholesale model is "better" for some definition of better. The question at hand is, what right do you, or I, or anyone have to force- and here I mean, using the threat of violence or imprisonment if one doesn't comply- this model onto Amazon, Apple, or the publishers?

Amazon and Apple own their stores. The publishers own their books. Freedom of association says they have the right to decide what terms to do business with each other. We have a long tradition market pricing in this country, where everyone competes for some mix of market share and profits.

There's no evidence that the 6 publishers and Apple have colluded to set prices, quite the opposite-- in the new model the prices are variable, whereas in the previous model, the prices were fixed by one agency: Amazon.

The real change here is that there is more competition. Before Amazon had essentially a monopoly on ebook sales, and after they have to compete with Apple.

As a result, Amazon may have been able to force prices to be lower by using the publisher's assets as leverage to sell more Kindles at publisher's expense.

But now that there's competition in the ebook store market, do you really think that more competition is going to result in higher prices over time?

Looking at other media sold online, over time the prices have come down (inflation adjusted.)

You might want to fix wholesale prices at $10, but in order to do that, you really would have to engage in price fixing of some sort. That info graphic shows that the cost distribution is different, and that difference is a strong argument for ebooks being cheaper to buy - but not for a specific model of selling them.

Re: Apple, publishers 'sued for price fixing'

#23

Edited - My comment earlier was worded poorly and did not come across as I was hoping. The price fixing talk did not start with Amazon. It started because when Apple joined the market the publishers where not going to give them the same deal that Amazon had forced on them. So I think Apple wanting to get a piece of the market worked with the publishers and they all set the same pricing. Now it happened so quickly tha…

It seems counter intuitive, but I think it has to do with the opening up of the ebook market. Several years ago, Amazon offered the only decent ereader in town--the Kindle. Thus, given the limited market, they could dictate price and keep the market price low because there wasn't much demand.

Fast forward several years and each of the major bookstore chains offered their own ebook reader (Nook, Kobo) and tablets started offering ebook experiences--either through Amazon/Barnes and Noble/Kobo apps or the tablet creator's own ebook reader (iBooks). The market explodes in terms of the number of devices people now read on, and publishers start treating ebooks as an accepted way of offering content--with that comes the high costs in terms of marketing, promotion, post-production costs (do they do anything special for ebooks), that kind of thing.

Re: Apple, publishers 'sued for price fixing'

#24
post #20

Earlier quoted context omitted.

I don't follow. The price-fixing claim stems from publishers forcing Amazon to raise their prices by threatening to cut off Amazon's access to their books; it doesn't have to do with competition from the iBook Store. However, it alleges that Apple was complicit in forcing Amazon to raise prices, not through competition, but through threats.

Apple offered a better deal. That may be a competitive threat, but that is competition, not a threat of... violence? criminality? What are you implying? Amazon was not forced to do anything, they chose to offer the same deal Apple does because they wanted to keep the business. If Amazon only capitulated to this deal in order to keep the big six on board, why do they offer it to everybody, including small publishers?…

> The complaint claims that the five publishing houses forced Amazon to abandon its discount pricing and adhere to a new agency model, in which publishers set prices and extinguished competition so that retailers such as Amazon could no longer offer lower prices for e-books.

> If Amazon attempted to sell e-books below the publisher-set levels, the publishers would simply deny Amazon access to the title, the complaint claims.

http://www.google.com/hostednews/afp/article/ALeqM5hg3Qe5XrI...

Similarly,

> Recently, you may have heard that a small group of UK publishers will require booksellers to adopt an “agency model” for selling e-books. Under this model, publishers set the consumer price for each e-book and require any bookseller to sell at that price. This is unlike the traditional wholesale model that’s been in place for decades, where booksellers set consumer prices.

http://www.teleread.com/paul-biba/amazon-uk-tells-customers-...

This is the price-fixing Amazon is complaining about: "you can't sell our books unless you sell them at our prices." As far as I know, their complaint has nothing to do with royalty percentages or competition with Apple's iBook prices.

(edited for clarity)

Re: Apple, publishers 'sued for price fixing'

#25

Edited - My comment earlier was worded poorly and did not come across as I was hoping. The price fixing talk did not start with Amazon. It started because when Apple joined the market the publishers where not going to give them the same deal that Amazon had forced on them. So I think Apple wanting to get a piece of the market worked with the publishers and they all set the same pricing. Now it happened so quickly tha…

It seems counter intuitive, but I think it has to do with the opening up of the ebook market. Several years ago, Amazon offered the only decent ereader in town--the Kindle. Thus, given the limited market, they could dictate price and keep the market price low because there wasn't much demand. Fast forward several years and each of the major bookstore chains offered their own ebook reader (Nook, Kobo) and tablets star…

I'm dubious about this analysis. You seem to be saying that prices were low when Amazon had a monopoly and prices have risen as competition entered the market. That's counterintuitive so perhaps I've missed something.

Re: Apple, publishers 'sued for price fixing'

#26
post #7
post #3

As much as I like Apple and ebooks, it sickens me that they want to charge more than $10 for best selling ebooks. It is an electronic file. I am willing to pay more than $10 for a physical paper book I can hold in my hand, but I can't see spending more than $2-$3 for an ebook. And so I rarely buy ebooks, even though I want to, because I can't see the economics behind doing so. If ebooks are going to be just expensive…

Apple would rather charge you $0.99 for every ebook. Just like they'd rather charge only $0.99 for a single, and $0.99 per TV show and $0.99 for a movie rental. Where they have enough pricing power, they are able to achieve this (they held the line on the $0.99 single for a long time.) Where they aren't they aren't. Unlike Amazon, Apple is not in the business of selling books. Apple is in the business of selling iPad…

and the iBook Store is probably much large now than the kindle store

Maybe it is, but the iBook store is sorely lacking in programming books compared to Amazon (from my experience). I'm guessing there's a lot of other technical books they're missing, too. Perhaps they're targeting the kinds of books "the masses" would purchase.

Also, iBooks is not available outside of iOS.

Those two points are keeping me away from iBooks. (I want to at least read my books on my Macbook Air. Come on, Apple!)

Re: Apple, publishers 'sued for price fixing'

#27
post #25

Earlier quoted context omitted.

It seems counter intuitive, but I think it has to do with the opening up of the ebook market. Several years ago, Amazon offered the only decent ereader in town--the Kindle. Thus, given the limited market, they could dictate price and keep the market price low because there wasn't much demand. Fast forward several years and each of the major bookstore chains offered their own ebook reader (Nook, Kobo) and tablets star…

I'm dubious about this analysis. You seem to be saying that prices were low when Amazon had a monopoly and prices have risen as competition entered the market. That's counterintuitive so perhaps I've missed something.

I am saying the prices where lower then they are now. When Amazon had a almost all the market share they were able to bully the publishers to the pricing they wanted. When Apple entered the market publishers stood strong and got together and got Apple to the prices on there ebook store.

Amazon then was forced to raise there prices if they wanted to get the same books that Apple got. So yes as the market has grown and there are more choices the prices have gone up. The publishing industry conspired with each other to get hire prices.

Re: Apple, publishers 'sued for price fixing'

#28
post #18

Earlier quoted context omitted.

The allegations stem from the agency model that was forced on Amazon by the big six publishers when the iPad launched. Previous to that model, Amazon treated eBooks like they did everything else -- they'd buy them at a wholesale price and then sell them at whatever price they wanted. That included, to my understanding, selling them at a loss so they could sell more Kindle hardware. Under the agency model, the publish…

How was the agency model forced on Amazon? Apple offered a better deal, and if I recall correctly, even before the iBooks Store had launched, Amazon changed their terms to offer the same deal. Amazon offered this same deal to everyone, including us. I'm not under a misunderstanding of what the deals are... I think you believed what you read in this press release and took it at face value. A "model" cannot include "ot…

Amazon chose to meet the publishers' terms because publishers began to withdraw books from Amazon:

> Macmillan CEO John Sargent had been meeting with Amazon to discuss getting full control over e-book prices, but Amazon refused to budge and all Macmillan's books were temporarily removed from Amazon—including the print versions. Amazon eventually relented and is allowing the books back on site, and is going along with Macmillan's demands for higher e-book prices.

> At issue is Amazon's practice of setting nearly all new e-book releases at $9.99 no matter what it's paying the publisher. This means Amazon may be paying the publisher $14 per title, for example, but is intentionally taking a loss on sales in order to push cheap e-books to Kindle users.

http://arstechnica.com/gadgets/news/2010/02/publishers-conti...

Amazon was paying the publishers the full price they demanded -- the issue was not about publisher profit. Instead, Amazon intentionally took losses to promote ebooks as loss leaders. Publishers threatened to remove their books unless Amazon only sold their books at pre-specified minimum prices.

Re: Apple, publishers 'sued for price fixing'

#29
post #25

Earlier quoted context omitted.

It seems counter intuitive, but I think it has to do with the opening up of the ebook market. Several years ago, Amazon offered the only decent ereader in town--the Kindle. Thus, given the limited market, they could dictate price and keep the market price low because there wasn't much demand. Fast forward several years and each of the major bookstore chains offered their own ebook reader (Nook, Kobo) and tablets star…

I'm dubious about this analysis. You seem to be saying that prices were low when Amazon had a monopoly and prices have risen as competition entered the market. That's counterintuitive so perhaps I've missed something.

I think it's the same idea as what happened with the online music market. Initially, it was a niche market that reached a turning point when Napster hit the scene and started offering music online for free. At that point, publishers started taking action and we saw the rise of digital music stores and the complete marginalization/destruction of the previous market with low prices/easy access.

In other words, Amazon had a niche market that few people competed in. Hence, price ended up being artificially low (same as the online music market in the 90s). Once people realized they could turn it into another distribution channel, competitors exploded and the price of the good adjusted to a more normalized market value.

In economics, a monopoly can go one of two ways. It can either push prices to an extreme high in order to maximize profit, or it can push prices to a low in order to lock competitors out of the market and incentive the purchase of other goods (Kindles in Amazon's case). Once the monopoly broke, the price of the good normalized--which for us means it increased.

Re: Apple, publishers 'sued for price fixing'

#30
post #18

Earlier quoted context omitted.

How was the agency model forced on Amazon? Apple offered a better deal, and if I recall correctly, even before the iBooks Store had launched, Amazon changed their terms to offer the same deal. Amazon offered this same deal to everyone, including us. I'm not under a misunderstanding of what the deals are... I think you believed what you read in this press release and took it at face value. A "model" cannot include "ot…

Amazon chose to meet the publishers' terms because publishers began to withdraw books from Amazon: > Macmillan CEO John Sargent had been meeting with Amazon to discuss getting full control over e-book prices, but Amazon refused to budge and all Macmillan's books were temporarily removed from Amazon—including the print versions. Amazon eventually relented and is allowing the books back on site, and is going along with…

All of this may be true but none of it puts Apple at fault nor do I think Apple will lose this one.
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