But the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.
When Macmillan changed to the agency model we did so knowing we would make less money on our e book business.
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Dear John Sargent,
I spent too much time reading in high school, and didn't pay much attention to the important subjects like math, so I need you to break something down for me. I thought $9.99 was too expensive for an electronic edition of a book, and now I read you're wanting to charge even more? This make no sense to me. It's overly greedy as I see it, but I am willing to concede I could be wrong.
With a traditional made-from-trees book I get to read it, put it on my shelf, and know it's mine forever. Or I can sell it, trade it, lend it, or just plain give it away. It's mine to do with as I please. I can point to it and say "I own that!"
With an electronic book I can do few of these things. There is no such thing as a used copy. It can't be resold, lent, or given away. It doesn't liven up a room. And in many instances I can only only view it as long as I have a device that supports the format I purchased it for. Drop that Kindle in the bathtub and I've not only destroyed one book, I have essentially destroyed all of them!
I understand that it costs money to make a book. There are transportation costs, distributors to be paid, warehousing costs, booksellers, and editors and authors, and marketing and design, etc.! Each additional book costs more money to make. This isn't the case with an electronic book. Once your initial investment is over each additional copy costs you nothing. Zero dollars.
So break it down for me. Why would I ever pay that much for an eBook? As long as they continue to be this expensive I'll keep waiting for the physical book to come up for used and buy that for less than the cost of a cup of coffee. Anything else doesn't make sense.
Christopher L. Jorgensen
So I take it that if there hadn't been any collusion amongst executives at the publishing houses, there wouldn't be an anti-trust suit?
Sold by: Random House Digital, Inc.
This price was set by the publisher
Sold by: Hachette Book Group
This price was set by the publisher
Sold by: Penguin Publishing
This price was set by the publisher
The real issue, Pozen [Justice Department antitrust official] says, isn’t the agency model, but secret agreements between competitors.
Confessions of a Publisher: “We’re in Amazon’s Sights and They’re Going to Kill Us”
But Jobs's proposal was not about price fixing. It was about treating book publishers like every other industry. This is the same 30% revenue share that Apple takes for selling newspapers, magazines and games on the iPad. Publishers didn't have to collude to accept it. While publishers ended up earning less per book because of the revenue share to e-reader companies, they regained control over their property.
Ironically, the government had spent much of the pre-digital 1980s and 1990s filing lawsuits arising from the wholesale model. The issue then was also technological change—advances in supply-chain logistics that created the then-giant booksellers including Waldenbooks, B. Dalton and Crown Books. Independent booksellers complained that publishers gave them a lesser discount than the volume discount they gave big chains. Years of antitrust litigation were a total waste of time: Almost every superstore has succumbed to competition from online sellers, chiefly Amazon.
Government lawyers failed to learn that industries undergoing massive change brought on by technology are likelier to be flailing for sustainable business models than flouting market power to fix prices. Book publishers are still trying to predict the full impact of technology. As consumer choice widens, some people want beautifully produced printed books, while others want enhanced e-books with video and other graphics. There are e-books selling for 99 cents and others at premium prices. Perhaps a hardcover should come with access to digital versions. Contrary to the assumption by government lawyers, there's no reason to think the price of e-books must be $9.99.
"Here's where it gets a little crazy: the DOJ alleges that from around September of 2008 to sometime in 2009, all the publishing CEOs would gather in the 'private dining rooms of upscale Manhattan restaurants' and talk business — specifically, how to handle Amazon. The most common of these private rooms was called 'The Chef's Wine Cellar,' in a restaurant called Picholene, but some were also held in a restaurant called Alto.
In late 2009 the publishers decided upon the agency model as their preferred tactic against Amazon. The emails about it were pretty blunt: 'Our goal is to force Amazon to return to acceptable sales prices through the establishment of agency contracts in the USA.'
Earlier in 2009, Apple was thinking about ebooks sales of its own. iTunes boss Eddy Cue sent Steve Jobs an email saying 'at this point it would be very easy for us to compete and I think trounce Amazon by opening up our own ebook store.' Apple also allegedly thought about illegally 'dividing up' the digital media market with Amazon — Apple would sell music and movies, and Amazon would sell books. This obviously didn't happen.
Apple decided that it didn't want to give up 30 percent of ebook sales, though, and it instead decided to allow the publishers to use iBooks and the iPad as significant leverage against Amazon and force the agency model onto the industry. Steve Jobs was allegedly quite blunt about how these negotiations should go: either the other retailers would agree to the agency model, or the publishers would say 'we're not going to give you the books.' The fear of Apple getting popular new books exclusively was apparently enough to force Amazon and others into agency deals.
Jobs also knew that the agency model would serve to raise prices, saying, 'you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that's what you want anyway.'
After a series of meetings with publishers, Eddy Cue reported back to Steve Jobs that the industry saw Apple as 'solving the Amazon problem." The only problem was that Apple's proposed prices were too low.
Apple also knew it was in a unique situation as the only company that could provide leverage against Amazon, so it pushed for higher commissions as well — 30 percent is 'significantly' higher than average. In the end, the publishers got higher prices and Apple got higher commissions.
Apple also swung its weight around by demanding 'most favored nation' clauses that required each publisher to match iBookstore prices with the lowest prices from other competitors — even where they didn't set prices. According to the DOJ, this 'was designed to protect Apple from having to compete on price at all,' while still netting the company a commission.
The DOJ says Apple 'knowingly served as a critical conspiracy participant' by promising all the publishers the exact same deal and keeping everyone informed about the status of negotiations. When Penguin explicitly said that it wouldn't sign unless at least three other companies signed, Apple 'supplied the needed assurances.'"
iTunes/iBooks version -- $48.99.
Amazon Kindle version -- $48.99 $27.92.
Amazon 'Hardcover' version (290 pages) -- $48.99 $40.42.
You can therefore imagine the fear that e-book prices instill in publishing executives' hearts. They're only saving a few dollars per copy in the switch to the e-book world, but the prices of books were slashed more than half: from $24.99 to $9.99 and even lower.
Kindle price: $12.99
Sold by: Simon and Schuster Digital Sales Inc
This price was set by the publisher
I never imagined that anyone was mad enough to be involved in literal secret back-room meetings. Much less putting anything in a ferchrisesakes e-mail that you know is so dangerous that it should be "double-deleted" Every grade-schooler I know knows better.
I didn't even realize this law had changed until Amazon, publishers, and authors began hurling mud at one another. Can anyone point me to an explanation of why it did? I've read about the Leegin case, but I don't understand the reasons. The supremes said that "the economic literature is replete" with arguments that "price maintenance" can be pro-competitive, but if they actually passed along any of those justifications, or even pointed them out, I can't find where.
To call this a charitable interpretation of Apple's motives would be an understatement. That condition was Apple's way of protecting themselves against a price war with Amazon (which they knew was unwinnable). If consumers could obtain books at a lower price from any other retailer, the iBookstore would have been a dismal failure at launch.
I have friends who work at several of the involved publishers, and they all say it's completely ridiculous to accuse their companies of colluding to fix prices. Apple offered each company a good deal, they recognized that good deal, they took it.
This may paint me as old-fashioned and out-of-touch, but the idea that we're moving to a place where things like professional editors and marketing departments are entirely cut out of publishing....makes me feel a little ill, honestly. And worried. I've complained many times about books that seem under-edited to me, but I've never experienced the opposite.
This is the part I don't get. How is it that Amazon's "wholesale pricing" method ended up screwing publishers? I figured Amazon just paid the publisher a flat price for each book sold, and any markup (or markdown) would be Amazon's profit or loss, alone. If the publishers wanted to increase their profits, couldn't they have simply bumped up their wholesale price slightly, and forced Amazon to adjust their prices / discounts accordingly?
Anyone want to start an online e-book only publisher with me?
Even if agency pricing for virtual goods is perfectly legal and acceptable, publishers colluding to more or less simultaneously switch to agency pricing is not. Publishers almost certainly did not meet together in a room to deliberate about how to use Apple to screw over Amazon, or even how to all switch to agency pricing. They probably didn’t exchange e-mails or phone calls or communicate with one another in any way. If they did, the case for collusion would be much simpler.
Authors absolutely cannot do their own editing. No way.
That can't be, because I've been repeatedly told creators and publishers would be losing untold riches if works were ever allowed to go into the public domain again.
Here's the picture with the correct text, here's the digitized text. Compare word by word. Rinse X times to catch-all the errors. It doesn't matter if the word you're checking is Thee, Thou or Ya'all... Final proofing? maaaaybe?
And the peculiar evil genius of Amazon is that Amazon seems to be trying to simultaneously establish a wholesale monopsony and a retail monopoly in the ebook sector.
By foolishly insisting on DRM, and then selling to Amazon on a wholesale basis, the publishers handed Amazon a monopoly on their customers—and thereby empowered a predatory monopsony.
The Educational Development Corporation, saying it was fed up with Amazon’s scorched-earth tactics, announced at the end of February that it would remove all its titles from the retailer’s virtual shelves....
"Amazon is squeezing everyone out of business," said Randall White, EDC’s chief executive. "I don’t like that. They’re a predator. We’re better off without them."
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