5 ms·

Apple, publishers 'sued for price fixing'

53 points by yariang 15y ago

ben1040 15y ago
I know I have bought less ebooks since the agency model came into play and a lot of paperback books on Amazon suddenly became three or four dollars less than the Kindle version. I certainly haven't stopped buying them altogether, but when it was priced at ten bucks or less it was in impulse buy territory.
NathanKP 15y ago
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 as paper books then I'm going to buy paper books. Apple and the ebook publishers are just shooting themselves in the foot.
- nirvana 15y ago
  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 iPads. Apple doesn't dictate prices - they let you set whatever price you want - because Apple realizes that central planning doesn't work. (Apple' can't know what the right price for frankenstein should be, and doesn't even try, while Amazon, as a retailer, does have pricing experts. Apple just want's %30, and for the market to be as robust and vibrant as it can be.) Amazon would cut prices against the publishers desires, and the publishers would get the lower revenue. Amazon did this to drive up popularity of the kindle. Apple doesn't believe in operating this way, and has a consistent policy- you set the price. I believe Apple's approach is superior because more people will sign up and there will be more availability of books. (and the iBook Store is probably much large now than the kindle store was at the same number of quarters after launch.) I don't know much about Amazon's balance sheet, but I do know that, while Apple does make money from iTunes, it is not strategic money. It is money that helps fund data centers, and stuff like that. Apple's not in the media business, it is in the devices business, and it operates a media business only to generate demand for devices. %30 is meant to show a slight profit, not to boost the bottom line.
  - healsdata 15y ago
    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/ http://p.printingchoice.com/e-books-vs-real-books/) that wholesale price would be about $10 on average for both paper and ebooks and then the retailers could make decisions after that point.
    - nirvana 15y ago
      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.
      - fpgeek 15y ago
- capnrefsmmat 15y ago
  Printing cost of a paper book is only $3-4, so even eliminating the cost of printing, ebooks would still be expensive. I suspect most of the cost of books goes to marketing and promotion, not printing and binding. http://www.millcitypress.net/book-printing-costs.aspx http://www.millcitypress.net/book-printing-costs.aspx
  - acgourley 15y ago
    also make sure to factor in shipping, which amazon often must bake into the price slightly.
  - StavrosK 15y ago
    Shipping, handling, etc isn't free, though.
  - scott_s 15y ago
    That's the difficulty with books. People fee like they've paid for the physical object in their hands, when really, they've paid for all of the work that went into making that object possible.
jannes 15y ago
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.
- nirvana 15y ago
  I agree it would be fair. I don't agree that it is unethical. But I think it is counter productive. Attempts to price electronic items higher than the physical ones will only result in those items being pirated. They have not yet learned this lesson because they clearly think that the higher price will lead to more sales of the printed items. I guess every industry needs to learn this lesson. On the upside, the more they get addicted to the revenue from the electronic versions, the more strategic it will become, and once it is sufficiently strategic to them-- rather than the experiment I think they see it as now-- they will start having to seriously compete. This will change the market dramatically, and most effectively. The alternative- forcing their prices to be lower will only result in them removing availability (e.g. they'll stop publishing ebooks.)
- cowboyhero 15y ago
  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.
- ben1040 15y ago
nirvana 15y ago
As as side project I helped a friend publish a small book on Amazon for the Kindle. At the time we looked into doing the iBooks Store, but it was not yet open to self publishing. Apple's requirements for pricing were as follows: 1. You could set whatever price you wanted. (e.g.: Apple doesn't fix the price at anything specific) 2. If you sell the book electronically elsewhere, you cannot sell it on iBooks Store for more than the price you sell elsewhere. 3. Apple gives you %70 of the sales. I don't see how this is price fixing, nor is it trying to keep the prices higher. You can sell on the kindle for the same amount as the iBooks Store. Amazon's terms: 1. You can set the price as you like. 2. You get a variable cut of the sales (sometimes it is %30 to you, %70 to amazon.) 3. Amazon can change the price if they want and sell your book for less, and pay you less. So, yes, it is true that Amazon can run specials where they sell your book for $0.99 to drive traffic to the store, and when they do it, they do it at your expense. I believe the facts don't support an allegation of price fixing. As to the idea that Apple was "trying to run the kindle out of business", that's an allegation that is true of every instance of competition. If someone prices an android tablet that is competitive with the iPad feature-wise at half the iPad's price, that's "trying to run the iPad out of business" as well. It is what you're doing when you compete for sales, you want all of them to go to you and none to your competitor.
- capnrefsmmat 15y ago
  The linked article has nothing to do with self-publishing and everything to do with books from large 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. Amazon's discount specials also are not relevant to the price-fixing claim.
  - nirvana 15y ago
    Self publishing is irrelevant to my point. The terms I mentioned are the terms both companies offered to everybody. Apple offered better terms, and specifically included in those terms that publishers couldn't jack up the prices compared to the price elsewhere. The only reason Amazon offered "lower prices" in the past is because they ran discount specials. Amazon also allowed publishers to set the price on the books, except when Amazon would run a lower price. Further, the complaint is to price fixing, and the reality is, both before and after the iBook Store came into being, neither company engaged in price fixing.
WoundedMarlin 15y ago
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 that people think they fixed the price which I agree they did. Instead of each one working with apple to come up with there own pricing. This whole price fixing thing came about when Amazon had 95% of the market share and was able to dictate the prices, since they where the only ones selling e-books in large amounts. Now that apple is in the market along with other people Amazon share is at about 55% so they have lost that ability to control the market. I do think Apple and the book companies came together to set a hire price and force Amazon to follow suit or risk not having all the books that Apple would have. I do not understand why the books have to cost that much. I agree with NathanKP in that they are just files and the cost to the publisher is almost nothing at all. I know they are wanting to make a profit but I think when you charge more then a paper book something is wrong. Go all e-books with a lot less paper books and call yourself the greenest in the business. I find that a lot of companies are scared of change and I am not sure why. I see change as a great thing that can propel the world in to new and better technology.
- floppydisk 15y ago
  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.
  - 15y ago
gdilla 15y ago
If you really want to dig deep into how the publishing industry works, how they think, and what the real story is behind ebooks and pricing, check out Mike Shatzkin's blog at http://www.idealog.com/blog/ http://www.idealog.com/blog/
fpgeek 15y ago
Even better (from the perspective of those suing), it appears that Apple and at least one publisher (Simon and Schuster) might be "cheating" on the agency model: http://theorangeview.net/2011/08/is-simon-and-schuster-cheating/ http://theorangeview.net/2011/08/is-simon-and-schuster-cheat... As the iBookstore seems to be the only bookstore with this kind of special deal, that certainly adds some evidence pointing towards collusion.

53 points by yariang 15y ago

I know I have bought less ebooks since the agency model came into play and a lot of paperback books on Amazon suddenly became three or four dollars less than the Kindle version. I certainly haven't stopped buying them altogether, but when it was priced at ten bucks or less it was in impulse buy territory.

NathanKP 15y ago

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 as paper books then I'm going to buy paper books. Apple and the ebook publishers are just shooting themselves in the foot.

nirvana 15y ago
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 iPads. Apple doesn't dictate prices - they let you set whatever price you want - because Apple realizes that central planning doesn't work. (Apple' can't know what the right price for frankenstein should be, and doesn't even try, while Amazon, as a retailer, does have pricing experts. Apple just want's %30, and for the market to be as robust and vibrant as it can be.) Amazon would cut prices against the publishers desires, and the publishers would get the lower revenue. Amazon did this to drive up popularity of the kindle. Apple doesn't believe in operating this way, and has a consistent policy- you set the price. I believe Apple's approach is superior because more people will sign up and there will be more availability of books. (and the iBook Store is probably much large now than the kindle store was at the same number of quarters after launch.) I don't know much about Amazon's balance sheet, but I do know that, while Apple does make money from iTunes, it is not strategic money. It is money that helps fund data centers, and stuff like that. Apple's not in the media business, it is in the devices business, and it operates a media business only to generate demand for devices. %30 is meant to show a slight profit, not to boost the bottom line.
- healsdata 15y ago
  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/ http://p.printingchoice.com/e-books-vs-real-books/) that wholesale price would be about $10 on average for both paper and ebooks and then the retailers could make decisions after that point.
  - nirvana 15y ago
    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.
    - fpgeek 15y ago
capnrefsmmat 15y ago
Printing cost of a paper book is only $3-4, so even eliminating the cost of printing, ebooks would still be expensive. I suspect most of the cost of books goes to marketing and promotion, not printing and binding. http://www.millcitypress.net/book-printing-costs.aspx http://www.millcitypress.net/book-printing-costs.aspx
- acgourley 15y ago
  also make sure to factor in shipping, which amazon often must bake into the price slightly.
- StavrosK 15y ago
  Shipping, handling, etc isn't free, though.
- scott_s 15y ago
  That's the difficulty with books. People fee like they've paid for the physical object in their hands, when really, they've paid for all of the work that went into making that object possible.

jannes 15y ago

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.

nirvana 15y ago
I agree it would be fair. I don't agree that it is unethical. But I think it is counter productive. Attempts to price electronic items higher than the physical ones will only result in those items being pirated. They have not yet learned this lesson because they clearly think that the higher price will lead to more sales of the printed items. I guess every industry needs to learn this lesson. On the upside, the more they get addicted to the revenue from the electronic versions, the more strategic it will become, and once it is sufficiently strategic to them-- rather than the experiment I think they see it as now-- they will start having to seriously compete. This will change the market dramatically, and most effectively. The alternative- forcing their prices to be lower will only result in them removing availability (e.g. they'll stop publishing ebooks.)
cowboyhero 15y ago
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.
ben1040 15y ago

nirvana 15y ago

As as side project I helped a friend publish a small book on Amazon for the Kindle. At the time we looked into doing the iBooks Store, but it was not yet open to self publishing. Apple's requirements for pricing were as follows: 1. You could set whatever price you wanted. (e.g.: Apple doesn't fix the price at anything specific) 2. If you sell the book electronically elsewhere, you cannot sell it on iBooks Store for more than the price you sell elsewhere. 3. Apple gives you %70 of the sales. I don't see how this is price fixing, nor is it trying to keep the prices higher. You can sell on the kindle for the same amount as the iBooks Store. Amazon's terms: 1. You can set the price as you like. 2. You get a variable cut of the sales (sometimes it is %30 to you, %70 to amazon.) 3. Amazon can change the price if they want and sell your book for less, and pay you less. So, yes, it is true that Amazon can run specials where they sell your book for $0.99 to drive traffic to the store, and when they do it, they do it at your expense. I believe the facts don't support an allegation of price fixing. As to the idea that Apple was "trying to run the kindle out of business", that's an allegation that is true of every instance of competition. If someone prices an android tablet that is competitive with the iPad feature-wise at half the iPad's price, that's "trying to run the iPad out of business" as well. It is what you're doing when you compete for sales, you want all of them to go to you and none to your competitor.

capnrefsmmat 15y ago
The linked article has nothing to do with self-publishing and everything to do with books from large 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. Amazon's discount specials also are not relevant to the price-fixing claim.
- nirvana 15y ago
  Self publishing is irrelevant to my point. The terms I mentioned are the terms both companies offered to everybody. Apple offered better terms, and specifically included in those terms that publishers couldn't jack up the prices compared to the price elsewhere. The only reason Amazon offered "lower prices" in the past is because they ran discount specials. Amazon also allowed publishers to set the price on the books, except when Amazon would run a lower price. Further, the complaint is to price fixing, and the reality is, both before and after the iBook Store came into being, neither company engaged in price fixing.

WoundedMarlin 15y ago

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 that people think they fixed the price which I agree they did. Instead of each one working with apple to come up with there own pricing. This whole price fixing thing came about when Amazon had 95% of the market share and was able to dictate the prices, since they where the only ones selling e-books in large amounts. Now that apple is in the market along with other people Amazon share is at about 55% so they have lost that ability to control the market. I do think Apple and the book companies came together to set a hire price and force Amazon to follow suit or risk not having all the books that Apple would have. I do not understand why the books have to cost that much. I agree with NathanKP in that they are just files and the cost to the publisher is almost nothing at all. I know they are wanting to make a profit but I think when you charge more then a paper book something is wrong. Go all e-books with a lot less paper books and call yourself the greenest in the business. I find that a lot of companies are scared of change and I am not sure why. I see change as a great thing that can propel the world in to new and better technology.

floppydisk 15y ago
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.
- 15y ago

gdilla 15y ago

If you really want to dig deep into how the publishing industry works, how they think, and what the real story is behind ebooks and pricing, check out Mike Shatzkin's blog at http://www.idealog.com/blog/ http://www.idealog.com/blog/

fpgeek 15y ago

Even better (from the perspective of those suing), it appears that Apple and at least one publisher (Simon and Schuster) might be "cheating" on the agency model: http://theorangeview.net/2011/08/is-simon-and-schuster-cheating/ http://theorangeview.net/2011/08/is-simon-and-schuster-cheat... As the iBookstore seems to be the only bookstore with this kind of special deal, that certainly adds some evidence pointing towards collusion.