7 ms·

You kiiiiiiind of forgot the central issue of the story: Amazon trying to tell publishers how much they can sell their books for. Amazon could continue offering

You kiiiiiiind of forgot the central issue of the story: Amazon trying to tell publishers how much they can sell their books for. Amazon could continue offering "retail management services" to these sellers, at a fixed percentage cut, like it does to sellers of countless other goods where it does not try to fix prices. Amazon and the publishers had a perfectly good agreement before, and Amazon decided to play hardball upon renewal, punishing readers and authors. That's unprecedented in the book business, and it is incumbent on Amazon to justify this. The only reason Amazon can pull this off is that they control half the retail book market, so it becomes an anti-trust issue.

icelancer 12y ago
> That's unprecedented in the book business The printed book business is about 50 years behind every other modern industry. This is always going to be true for the forseeable future. BTW I am an author who sells books and has no problem with Amazon trying to improve value for the customer.
joshkaufman 12y ago
It's the other way around, actually: by law in the US and most countries worldwide, suppliers are free to set whatever prices and terms they like, but retailers have the final authority to set the price that's presented to the retail customer. Suppliers can not unilaterally dictate to retailers the final sales price the retail customer pays. That's why "Manufacturer's Suggested Retail Price" (usually abbreviated MRSP) is a thing. The manufacturer / supplier suggests a price, but the retailer makes the final call. The only recourse suppliers have to this is pulling distribution from that retailer entirely, as long as they apply the same policy to all retailers - companies like Apple and Bose make credible threats to do this to suppliers that violate their guidelines, which is why their prices are so consistent across retailers. Otherwise, retailers have the final call on retail pricing unless they waive that right via negotiation: if they want to sell at a loss, or reduce their own margin to use lower prices as a marketing tool, they can. That's why Walmart and Target often sell bottles of Tide below cost - it's called a "loss leader" strategy, and it's very common as a way to attract new business. Amazon used loss leader pricing on bestselling titles to establish the Kindle platform, which is a major reason why it's the dominant ebook platform now. A big part of this dispute is that Hachette is demanding final authority on setting prices, and demanding that Amazon gives up the right to discount and use its ebooks as loss leaders - instead, they'd get a flat percentage (likely ~30%) of whatever Hachette decides to charge. This is a major part of what's now called "agency pricing," and the big 5 publishers and Apple colluded to force Amazon to adopt it several years ago. That's why the DOJ filed suit for antitrust / collusion / price fixing, and the publishers each lost or chose to settle. As a condition of the judgement / settlement, publishers now have to renegotiate their contracts with Amazon. Amazon, justifiably, isn't willing to agree to agency pricing without major concessions. Hachette won't agree to standard retail non-agency pricing. Hence the impasse. EDIT: also to clarify, wholesale non-agency pricing isn't "unprecedented in the book business." Barnes & Noble and independent retailers have operated on wholesale pricing for print books for decades. Otherwise, B&N wouldn't be able to place a "20% off" sticker on bestselling titles, or offer large discounts to move remaindered stock. Hachette is asking Amazon to agree to something no other book retailer has or would agree to. Retailers like Apple and B&N/Nook have agreed to agency pricing on ebooks in the hopes of shutting down Amazon's ability to discount, with the understanding that publishers were attempting to force Amazon to do the same. (Via collusion.) The larger game is that Hachette (and other large publishers) are attempting to protect their hardcover print sales by inflating the price of ebooks, which makes them less attractive to readers. Ebooks are more profitable, but it's a more difficult market to control, so publishers are fighting Amazon and doing what they can to slow ebook adoption as much as possible. It's not a smart strategy, IMO, but that's what they're doing.
- Alex_MJ 12y ago
  Both of these posts have been educational and I now understand the debate in far more detail than before. Thank you!
- growse 12y ago
  When Amazon decides to discount a product, who swallows the loss? Does the supplier still get a fixed cut per sale regardless of sale price, or do they get a fraction of whatever the sale price was? I ask because I believe in things like grocery retail, the retailers have immense power over the suppliers. If you see pasta sauce at 2-4-1, it's the supplier picking up the cost of that. Favourable placement in store? The supplier pays. The big retailers can hit the supplier over the head with the threat of simply stopping selling the suppliers entire catalog, which would cause massive revenue loss for the supplier. With this stick, the retailer can ensure that they're getting a fixed income for every unit sold, regardless of the actual unit sale price. They pretty much have the suppliers completely over a barrel. Seems like the balance of power between retailer and supplier is drastically different between sectors.
  - ghshephard 12y ago
    Amazon swallows the loss. For example, with eBooks, they were purchasing wholesale from the book publishers for $15, and then selling them to customers for $9.99. As much as I love my Kindle, and Amazon, and as much as I realize that the publishers probably extract more value from the entire chain than is reasonable given their contribution (as compared to the author, who I believe should be rewarded a great deal more) - I realize that we will face dark times in the future if Amazon is able to corner the eBook market.
    - pbhjpbhj 12y ago
      >Amazon swallows the loss. For example, with eBooks, they were purchasing wholesale from the book publishers for $15, and then selling them to customers for $9.99. // What were the books selling for in paperback? I'm guessing less than $15 - I know it's priced to the market and the utility improves the value, and thus a higher price can be attained. But, I didn't think that Amazon would let publishers rip them off in this way - paying more for something that costs less to produce. Amazon if ebooks are even marginally above paperback costs should just buy the paperback, format shift to ebook, sell the paperbacks as pulp. I don't think anyone wants to hand over the ebook market entirely to Amazon; all the publishing houses needed to do was not be evil and not try to squeeze the system dry ... oh well. Death and taxes and human greed can always be relied upon.
gdilla 12y ago
Well, really it's Amazon saying no more agency model for ebooks, so they can set the price (and change the price) to whatever they want. Just like they do now for physical books. So that is a wholesale model, and that is typically 50% of list price for physical books (if the price on the book jacket is 19.99, the publisher's proceed on a sale is roughly $10, and the retailer can set the price to show a discount, like $12.99). With agency being 70/30 split (like apps and mp3s), a publisher could net 70% of the list price on ebooks (Big pubs tend to sell ebooks at or near the physical books list price, which is a whole other debate). Now they're looking at close to 50% of list (maybe Amazon is pushing this even lower?). You'll see a world where all ebooks are cheaper on Amazon than on say iBooks, because Apple is not going to bother with anything but agency model. Big win for Amazon. Big suck for publishers.
electromagnetic 12y ago
Just an FYI because you seem wholly ignorant of what's actually gone on, but it was Apple and five of the Big Six (Hatchette included) who were sued by the DOJ in a civil antitrust case for ebook price fixing trying to push prices up by up to $5 to make ebooks more expensive than their hardback counterparts that, unlike the booming paperback sales, are falling of a cliff. Basically Hatchette and co was trying to illegally force up the price of eBooks for a company responsible for over half of all their sales. There's a reason why Walmart and Costco can make or break companies, and there's a reason why every other publisher so far has come to amicable terms with Amazon when their renewals came up and that's because they'd already fucked with Amazon. Hatchette is currently trying to use public pressure to extort Amazon into doing what Hatchette has already been sued for: price fixing. Amazon is a retailer, and retailers have every right to discontinue carrying any product they want at any time for any reason as long as it doesn't void a contract... and hey look! Hatchettes contract ran out. Amazon is currently being graceful by continuing to sell any of Hatchettes product. The notion that Amazon is the "bad guy" here is quite frankly idiotic. Hatchette tried to do something illegal to hurt consumers (you know the people who pay writers wages). Now again they're trying to negotiate elevated ebook prices and take away Amazons ability to discount books to hurt consumers (again, you know the people who pay writers wages through that 10-15% royalty). And now Hatchette is the one who's unable to agree to terms that the other publishers so far have managed to, and they've held in a deadlock for three months where their writers are seeing their incomes halved. Hatchette is part of a massive publishing conglomerate trying to prop up corporate profits as Hardback sales evaporate. They're in this out of their own interest and have clearly showed they're willing to use their authors as weapons and have the audacity to try to make public outrage against Amazon for their own actions. It was Amazon who offered to help pay the authors for their lost wages during the dispute, which Hatchette has failed to accept (because it would require them matching Amazon's contribution) - but Penguin accepted during their unheard of contract dispute a few months prior to this. So not only is Hatchette actively fucking their own authors with this contract dispute, they're not even TRYING to compensate them when "THE BAD GUY" is.

icelancer 12y ago

> That's unprecedented in the book business The printed book business is about 50 years behind every other modern industry. This is always going to be true for the forseeable future. BTW I am an author who sells books and has no problem with Amazon trying to improve value for the customer.

joshkaufman 12y ago

It's the other way around, actually: by law in the US and most countries worldwide, suppliers are free to set whatever prices and terms they like, but retailers have the final authority to set the price that's presented to the retail customer. Suppliers can not unilaterally dictate to retailers the final sales price the retail customer pays. That's why "Manufacturer's Suggested Retail Price" (usually abbreviated MRSP) is a thing. The manufacturer / supplier suggests a price, but the retailer makes the final call. The only recourse suppliers have to this is pulling distribution from that retailer entirely, as long as they apply the same policy to all retailers - companies like Apple and Bose make credible threats to do this to suppliers that violate their guidelines, which is why their prices are so consistent across retailers. Otherwise, retailers have the final call on retail pricing unless they waive that right via negotiation: if they want to sell at a loss, or reduce their own margin to use lower prices as a marketing tool, they can. That's why Walmart and Target often sell bottles of Tide below cost - it's called a "loss leader" strategy, and it's very common as a way to attract new business. Amazon used loss leader pricing on bestselling titles to establish the Kindle platform, which is a major reason why it's the dominant ebook platform now. A big part of this dispute is that Hachette is demanding final authority on setting prices, and demanding that Amazon gives up the right to discount and use its ebooks as loss leaders - instead, they'd get a flat percentage (likely ~30%) of whatever Hachette decides to charge. This is a major part of what's now called "agency pricing," and the big 5 publishers and Apple colluded to force Amazon to adopt it several years ago. That's why the DOJ filed suit for antitrust / collusion / price fixing, and the publishers each lost or chose to settle. As a condition of the judgement / settlement, publishers now have to renegotiate their contracts with Amazon. Amazon, justifiably, isn't willing to agree to agency pricing without major concessions. Hachette won't agree to standard retail non-agency pricing. Hence the impasse. EDIT: also to clarify, wholesale non-agency pricing isn't "unprecedented in the book business." Barnes & Noble and independent retailers have operated on wholesale pricing for print books for decades. Otherwise, B&N wouldn't be able to place a "20% off" sticker on bestselling titles, or offer large discounts to move remaindered stock. Hachette is asking Amazon to agree to something no other book retailer has or would agree to. Retailers like Apple and B&N/Nook have agreed to agency pricing on ebooks in the hopes of shutting down Amazon's ability to discount, with the understanding that publishers were attempting to force Amazon to do the same. (Via collusion.) The larger game is that Hachette (and other large publishers) are attempting to protect their hardcover print sales by inflating the price of ebooks, which makes them less attractive to readers. Ebooks are more profitable, but it's a more difficult market to control, so publishers are fighting Amazon and doing what they can to slow ebook adoption as much as possible. It's not a smart strategy, IMO, but that's what they're doing.

Alex_MJ 12y ago
Both of these posts have been educational and I now understand the debate in far more detail than before. Thank you!
growse 12y ago
When Amazon decides to discount a product, who swallows the loss? Does the supplier still get a fixed cut per sale regardless of sale price, or do they get a fraction of whatever the sale price was? I ask because I believe in things like grocery retail, the retailers have immense power over the suppliers. If you see pasta sauce at 2-4-1, it's the supplier picking up the cost of that. Favourable placement in store? The supplier pays. The big retailers can hit the supplier over the head with the threat of simply stopping selling the suppliers entire catalog, which would cause massive revenue loss for the supplier. With this stick, the retailer can ensure that they're getting a fixed income for every unit sold, regardless of the actual unit sale price. They pretty much have the suppliers completely over a barrel. Seems like the balance of power between retailer and supplier is drastically different between sectors.
- ghshephard 12y ago
  Amazon swallows the loss. For example, with eBooks, they were purchasing wholesale from the book publishers for $15, and then selling them to customers for $9.99. As much as I love my Kindle, and Amazon, and as much as I realize that the publishers probably extract more value from the entire chain than is reasonable given their contribution (as compared to the author, who I believe should be rewarded a great deal more) - I realize that we will face dark times in the future if Amazon is able to corner the eBook market.
  - pbhjpbhj 12y ago
    >Amazon swallows the loss. For example, with eBooks, they were purchasing wholesale from the book publishers for $15, and then selling them to customers for $9.99. // What were the books selling for in paperback? I'm guessing less than $15 - I know it's priced to the market and the utility improves the value, and thus a higher price can be attained. But, I didn't think that Amazon would let publishers rip them off in this way - paying more for something that costs less to produce. Amazon if ebooks are even marginally above paperback costs should just buy the paperback, format shift to ebook, sell the paperbacks as pulp. I don't think anyone wants to hand over the ebook market entirely to Amazon; all the publishing houses needed to do was not be evil and not try to squeeze the system dry ... oh well. Death and taxes and human greed can always be relied upon.

gdilla 12y ago

Well, really it's Amazon saying no more agency model for ebooks, so they can set the price (and change the price) to whatever they want. Just like they do now for physical books. So that is a wholesale model, and that is typically 50% of list price for physical books (if the price on the book jacket is 19.99, the publisher's proceed on a sale is roughly $10, and the retailer can set the price to show a discount, like $12.99). With agency being 70/30 split (like apps and mp3s), a publisher could net 70% of the list price on ebooks (Big pubs tend to sell ebooks at or near the physical books list price, which is a whole other debate). Now they're looking at close to 50% of list (maybe Amazon is pushing this even lower?). You'll see a world where all ebooks are cheaper on Amazon than on say iBooks, because Apple is not going to bother with anything but agency model. Big win for Amazon. Big suck for publishers.

electromagnetic 12y ago

Just an FYI because you seem wholly ignorant of what's actually gone on, but it was Apple and five of the Big Six (Hatchette included) who were sued by the DOJ in a civil antitrust case for ebook price fixing trying to push prices up by up to $5 to make ebooks more expensive than their hardback counterparts that, unlike the booming paperback sales, are falling of a cliff. Basically Hatchette and co was trying to illegally force up the price of eBooks for a company responsible for over half of all their sales. There's a reason why Walmart and Costco can make or break companies, and there's a reason why every other publisher so far has come to amicable terms with Amazon when their renewals came up and that's because they'd already fucked with Amazon. Hatchette is currently trying to use public pressure to extort Amazon into doing what Hatchette has already been sued for: price fixing. Amazon is a retailer, and retailers have every right to discontinue carrying any product they want at any time for any reason as long as it doesn't void a contract... and hey look! Hatchettes contract ran out. Amazon is currently being graceful by continuing to sell any of Hatchettes product. The notion that Amazon is the "bad guy" here is quite frankly idiotic. Hatchette tried to do something illegal to hurt consumers (you know the people who pay writers wages). Now again they're trying to negotiate elevated ebook prices and take away Amazons ability to discount books to hurt consumers (again, you know the people who pay writers wages through that 10-15% royalty). And now Hatchette is the one who's unable to agree to terms that the other publishers so far have managed to, and they've held in a deadlock for three months where their writers are seeing their incomes halved. Hatchette is part of a massive publishing conglomerate trying to prop up corporate profits as Hardback sales evaporate. They're in this out of their own interest and have clearly showed they're willing to use their authors as weapons and have the audacity to try to make public outrage against Amazon for their own actions. It was Amazon who offered to help pay the authors for their lost wages during the dispute, which Hatchette has failed to accept (because it would require them matching Amazon's contribution) - but Penguin accepted during their unheard of contract dispute a few months prior to this. So not only is Hatchette actively fucking their own authors with this contract dispute, they're not even TRYING to compensate them when "THE BAD GUY" is.