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Apple and the Big Five
April 11, 2012 9:50 AM   Subscribe

The U.S. has filed an antitrust lawsuit against Apple and five of the largest publishers, alleging a conspiracy to rig the pricing of e-books. Simon & Schuster, Hachette and HarperCollins have agreed to settle, though Macmillan, Penguin and Apple continue to contest the charges. Some background from WIRED: Bigger Than Agency, Bigger Than E-Books: The Case Against Apple and Publishers
posted by Artw (192 comments total) 30 users marked this as a favorite

 
Inside the DOJ's ebook price-fixing case against Apple: an analysis
posted by Artw at 9:54 AM on April 11, 2012


See also: an open letter from Macmillan's John Sargent regarding this case.
posted by Narrative Priorities at 9:54 AM on April 11, 2012


I was wondering when this would hit. DOJ vs Apple? Shit is getting real.

The Verge has a pretty good outline of the charges.
posted by kmz at 9:55 AM on April 11, 2012 [2 favorites]


Shit is, indeed, getting real. I suspect this is going to be a pretty big deal.
posted by Artw at 9:56 AM on April 11, 2012 [1 favorite]


For those wondering, Apple has enough cash on hand to fund the entire Department of Justice for four years.
posted by antonymous at 9:59 AM on April 11, 2012 [15 favorites]


Wow, taking something that could have been sold in droves at a discount and marking it up over and above the cost of paper bound books?

I wonder if there's a chart of e-book piracy vs level of price fixing, what a wonderful jab that would be at these assholes and their insistence that nothing but rebellious, piratical youth are responsible for their problems.
posted by Slackermagee at 9:59 AM on April 11, 2012 [6 favorites]


So what are the worst case/best case scenarios here for the consumer?
posted by griphus at 9:59 AM on April 11, 2012 [1 favorite]


But that 5th year it's back to Ramen & PBJs.
posted by cashman at 10:00 AM on April 11, 2012 [2 favorites]


This is the most obvious case in the history of obvious price fixing cases. Get'em, DOJ.
posted by 2bucksplus at 10:02 AM on April 11, 2012 [11 favorites]


Congratulations Apple, you've really made the grade.
posted by mazola at 10:03 AM on April 11, 2012 [1 favorite]


This is the most obvious case in the history of obvious price fixing cases. Get'em, DOJ.

No shit. Let's not get into an Apple good/bad derail here, I wouldn't care who is getting sued as long as big business stops screwing customers wrt electronic media inflated bullshit pricing.
posted by Meatbomb at 10:04 AM on April 11, 2012 [15 favorites]


For those wondering, Apple has enough cash on hand to fund the entire Department of Justice for four years.

Is Apple powerful enough to fend off the Department of Justice?
posted by KokuRyu at 10:06 AM on April 11, 2012


Is Apple powerful enough to fend off the Department of Justice?

Don't worry Mark Zuckerburg plans on buying the DOJ next week.
posted by Fizz at 10:07 AM on April 11, 2012 [5 favorites]


> Is Apple powerful enough to fend off the Department of Justice?

That all depends on the judge presiding over this case, really. Apple has the money to file motions, writs, stays, etc indefinitely, but the courts could tacitly side with the DoJ and get things moving.
posted by Burhanistan at 10:09 AM on April 11, 2012


The key thing here is that Apple worked with publishers to destroy Amazon's ability to sell Kindle book sat a low price. It seems blatantly an anti-trust infringement, down to the secret meetings in back rooms at restaurants. All I know is it's completely ridiculous that I pay more for a Kindle edition than a hard-back; and the Kindle edition doesn't even allow resale! I hope the DoJ comes down hard on Apple and the publishers for colluding to demand the agency model.
posted by Nelson at 10:10 AM on April 11, 2012 [10 favorites]


If you were really paranoid, you'd suspect the streak of negative publicity aimed at Amazon lately had something to do with this. Certainly everyone's been bringing out any "Amazon is terrible" stories they have in the last few weeks, no matter how dusty.
posted by Artw at 10:10 AM on April 11, 2012 [5 favorites]


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.
posted by ThePinkSuperhero at 10:12 AM on April 11, 2012 [1 favorite]


If the DOJ wins this suit it will be a green light for Amazon to put the publishers out of business. I don't see how that's good for anyone, other than Amazon shareholders.
posted by alms at 10:12 AM on April 11, 2012 [1 favorite]


I'd love to have a reasonable pricing model for e-books. There are great options for legally downloading music out there, and for video, but books remain prohibitively expensive.

Which sucks, because my mom has a hard time reading small print, and loves e-books, but can't really afford them. So she's stuck with headache-inducing library books. What I wouldn't give to be able to subscribe her to a Netflix-like e-book service, or a Rhapsody for books.
posted by MrVisible at 10:13 AM on April 11, 2012 [2 favorites]


I'd be more willing to believe Amazon did something sketchy than Apple, not because Apple are saints, or because I'm stupid, but because Apple knows that everyone is looking at their ass through a microscope all the time and really you have to be super super clean if you want to keep that Glossy Apple Shine. Which is to say, they might be dicks, but I am sure they have their ducks in a row legally.
posted by seanmpuckett at 10:14 AM on April 11, 2012


Yeah, Ebook pricing is currently ridiculous.
posted by adamdschneider at 10:14 AM on April 11, 2012 [4 favorites]


If the DOJ wins this suit it will be a green light for Amazon to put the publishers out of business.

Or maybe the publishers will have to charge a reasonable price for e-books (i.e. less than hardcover). It's hard to feel sorry for a business brought down by its own greed.
posted by stopgap at 10:16 AM on April 11, 2012 [20 favorites]


If the DOJ wins this suit it will be a green light for Amazon to put the publishers out of business. I don't see how that's good for anyone, other than Amazon shareholders.

eBook prices are crazy, but in a way, the way this is being done is really just the government helping out Amazon. It's not like Amazon's prices and terms are that much more reasonable, in comparison. And I say this as an owner of several Kindles and a fairly substantial library of Kindle books.
posted by Blazecock Pileon at 10:17 AM on April 11, 2012 [1 favorite]


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.

OTOH, I would have said it was ridiculous that the CEOs of competitors were meeting together once a quarter, but that's what they did.
posted by smackfu at 10:18 AM on April 11, 2012 [5 favorites]


Of course everyone here realizes it's not Apple that fixed the prices here but the beloved book publishers, right?

Apple will take hit for price-must-match-lowest-price-elsewhere but the spirit of that clause was to make sure their consumers had access to the lowest prices.
posted by mistersquid at 10:19 AM on April 11, 2012 [2 favorites]


MrVisible: "I'd love to have a reasonable pricing model for e-books. There are great options for legally downloading music out there, and for video, but books remain prohibitively expensive."

stopgap: "Or maybe the publishers will have to charge a reasonable price for e-books (i.e. less than hardcover). It's hard to feel sorry for a business brought down by its own greed."

You know shit is fucked up when the RIAA and MPAA can be cited for exhibiting reasonable compromise.
posted by namewithoutwords at 10:19 AM on April 11, 2012 [27 favorites]


I'm going to have to do some reading to get my head around the details of this situation, as I've only been half paying attention to it since Macmillan and Amazon were butting their heads together months back.

But generally speaking, I'm having a hard time deciding how I feel about this conflict. On the one hand, as a consumer, I want to be able to purchase books legally without spending unreasonable amounts of money. On the other, as a creative person who works in publishing and whose friends and colleagues work directly for some of the plaintiffs in this case, I'm worried that I'm watching the death of traditional publishing and the careers that it supports.

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.
posted by Narrative Priorities at 10:19 AM on April 11, 2012 [8 favorites]


If the DOJ wins this suit it will be a green light for Amazon to put the publishers out of business.

They seem to be doing a perfectly good job of that on their own, what with trying to take advantage of the e-book medium to roll back rights that readers have had for centuries (the right to re-sell or give away a used book, the right of a library to lend out its books). It's pretty rich that the publishers expect readers to side with them.
posted by enn at 10:20 AM on April 11, 2012 [6 favorites]


When Apple started selling its iPad, the publishers shifted from a "wholesale" model, under which retailers set the price of books, to an "agency" model in which publishers set the retail price and retailers take a cut.

The lawsuit included a remark by the late Steve Jobs, head of Apple, describing his company's strategy for negotiating with the publishers: "We'll go to [an] agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway."


So what happened was, instead of Amazon's model where Amazon sets the retail price of books, the publishers were allowed to run rampant and set the retail price of books. The incentive of raising the price of the books was the fact that under Apple's model, the wholesalers' only profit would be 30% of retail price of the book.

I'm trying to figure out how this was price-fixing, but I think it has to do with collusion among the publishers the set a common model for book sales, not a common price; and that Apple facilitating their collusion.

Basically, I think the allegation is that they all got together and said, "Hey, the only way we are going to sell e-books to anyone is to use the agency model that Apple proposes, and not the wholesale model," then shook hands, thereby screwing Amazon's model.

I need to get a better idea of how an Amazon's e-book "wholesale" pricing model works. I understand how it works for physical books: Amazon purchases truckloads of books at a set price, sticks them in a warehouse, and they sell them for whatever price tickles their fancy. The publishers are already paid before Amazon sells the book to you. I'm not exactly sure how that works for e-books, when there are no trucks and no warehouse.
posted by jabberjaw at 10:20 AM on April 11, 2012 [4 favorites]


“Publisher Defendants took steps to conceal their communications with one another, including instructions to ‘double delete’ e-mail and taking other measures to avoid leaving a paper trail.”
posted by Artw at 10:21 AM on April 11, 2012 [14 favorites]


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.

Are your friends board members or senior executives? I don't think rank and file employees would be privy to backroom deals.

‘double delete’ e-mail

But they were double-dog dared to do it!
posted by kmz at 10:26 AM on April 11, 2012 [3 favorites]


From the analysis article:
"According to the government, these publishers greatly feared Amazon's $9.99 Kindle book prices, which they called "wretched," and worked for years on a scheme to raise prices and limit competition. They also feared that consumers would get used to paying $9.99 for bestsellers and ultimately decrease publishing profits."

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?
posted by ShutterBun at 10:28 AM on April 11, 2012 [1 favorite]


Which sucks, because my mom has a hard time reading small print, and loves e-books, but can't really afford them. So she's stuck with headache-inducing library books.

This may not be available from your public library, but mine has started lending out ebooks (still a 2 week lend, and they control how many people have them at the same time - but that's the same as codices).
posted by jb at 10:29 AM on April 11, 2012


Macmillan's CEO John Sargent openly communicates
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.
which is just so much mealy-mouthed doublespeak I can barely stand it. The publishers know they entered the eBook business because they were afraid of the example of the movie and music industries and rather than allow their "disintermediation" (Sargent's word) they made sure none of them using the agency model would set eBook prices below a certain bar, thus destroying Amazon's so-called "monopoly" position.

Apple has a hand in facilitating the price-fixing and should be punished accordingly.

The book publishers, on the other hand, deserve to burn in hell.
posted by mistersquid at 10:29 AM on April 11, 2012 [6 favorites]


Also, it seems like they weren't colluding directly but using Apple as a middleman to signal between them. If you know your competitors are signing contracts with Apple, and you know they are the same as your contract, you know you are going to be in-step and safe.
posted by smackfu at 10:29 AM on April 11, 2012


Also from Sargent:
When Macmillan changed to the agency model we did so knowing we would make less money on our e book business.
Wha???
posted by smackfu at 10:30 AM on April 11, 2012


Hence "hub and spoke".
posted by Artw at 10:30 AM on April 11, 2012


My understanding of the scenario is the same as jabberjaws.

Oh, and this seems relevant: Some big-six publishers refuse to sign new contracts with Amazon (via Artw)
posted by entropicamericana at 10:30 AM on April 11, 2012


I sent out this letter:
John Sargent
c/o Macmillan
175 Fifth Avenue
New York NY 10010



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.

Sincerely,


Christopher L. Jorgensen
I got no response, and I still stand by the sentiment. As much as I like the idea of e-books, I just can't get behind them. Maybe once they come out with a waterproof iPad.
posted by cjorgensen at 10:32 AM on April 11, 2012 [17 favorites]


Are your friends board members or senior executives? I don't think rank and file employees would be privy to backroom deals.

Definitely a valid point. 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?
posted by ThePinkSuperhero at 10:33 AM on April 11, 2012


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.

I think that's a red herring. Let's consider two cases if e-books were priced exactly the same as hardcovers: imagine all sales are hardcovers or all sales are e-books. When all sales are hardcover, the publishers can obviously support gatekeeping, editors, marketing, etc. With e-books, the publishers make more sales because of restrictions on sales of used books and library lending. And without minimizing the costs of digital distribution, that side is self-evidently cheaper than with hardcovers. So what we have is a situation where the publishers (like the RIAA and MPAA before them) are trying to exploit a change in distribution technology by capturing all of the additional profit for themselves to the detriment of their customers.

Maybe part of the problem is dual overheads from maintaining both distribution systems. In that case I would expect some lean electronic-only publishers to get started that will eat the lunch of all the old publishers. That may be Amazon, but theres nothing stopping anyone else from filling that publishing role. In any case, denial and price fixing won't work.
posted by stopgap at 10:34 AM on April 11, 2012 [3 favorites]


The problem is that there has always been price fixing in book publishing. Most of it is small potatoes stuff that the DOJ wouldn't bother to sniff at. Amazon and B&N and Ingram and B&T of course are all involved in minor-level extortion with co-op deals & discount policies from day 1 (that's the bigger issue, imo). It's not until the largest company in the country gets involved with ebooks that you see an actual lawsuit like this.
posted by mattbucher at 10:35 AM on April 11, 2012 [4 favorites]


I am an attorney, but I am not your attorney. This is not legal advice.

This is the most obvious case in the history of obvious price fixing cases. Get'em, DOJ.

Not necessarily. There are really two separate allegations here. The first is that the publishers colluded in a horizontal price fixing scheme, possibly using Apple as an intermediary in a "hub and spoke" arrangement. This is what is known as a per se antitrust violation (i.e. one for which there are very few defenses). The factual allegations in the complaint look pretty bad on this score, but it's important to remember that such allegations are always carefully selected and worded to put the defendants in the worst possible light. One shouldn't take them at face value.

The second allegation is that Apple engaged in vertical price fixing with each publisher (aka resale price maintenance). In 2007 the Supreme Court overturned a long-standing precedent and changed vertical price fixing from a per se violation to a violation subject to the "rule of reason." Under the rule of reason a scheme does not violate the antitrust laws unless its anticompetitive effects outweigh its procompetitive effects. This usually comes down to a war of economic expert witnesses.

This second allegation will be much easier to fight, especially given that the defendants can afford top-notch expert witnesses. The overall argument will be that, whatever the anticompetitive effects of the agency model, the procompetitive effects outweigh them (e.g. preventing a race to the bottom, preventing Amazon from using loss-leader tactics, allowing all of the publishers to make a profit rather than only the largest ones surviving, keeping ebooks on par with print books, thus allowing regular bookstores to survive, etc).
posted by jedicus at 10:35 AM on April 11, 2012 [10 favorites]


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?
Keeping in mind that collusion in the form of price-fixing was suspected, was investigated, and is (now) being alleged, yes.
posted by mistersquid at 10:35 AM on April 11, 2012


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?

Amazon is happy to sell e-books at a loss as part of their long-term strategy of putting the publishers out of business (along with the few remaining independent book sellers, too). Authors should just publish their books directly, through Amazon. Publishers and local bookstores are nothing more than unnecessary artifact of an outdated business model.

I don't think that would be good thing. Amazon already has too much power in the book publishing business. I don't want to give them more.
posted by alms at 10:36 AM on April 11, 2012 [8 favorites]


This second allegation will be much easier to fight, especially given that the defendants can afford top-notch expert witnesses.

Do you have any thoughts on why several of the publishers seem to have settled already?
posted by smackfu at 10:38 AM on April 11, 2012


I'm not sure what will happen with this suit, but I feel pretty confident predicting that whatever happens the actual people who buy and read books will get screwed somehow.
posted by adamdschneider at 10:41 AM on April 11, 2012 [1 favorite]


I can't help feeling like "Big Publishing" is like those guys from the docks in season 2 of the Wire compared to the MPAA and RIAA's Avon and Stringer. I almost feel bad with how obvious their intentions are, and how straightforward their downward trajectory is. They just want to dredge the river, for godssake!
posted by lubujackson at 10:41 AM on April 11, 2012 [4 favorites]


Do you have any thoughts on why several of the publishers seem to have settled already?

Only speculation. Maybe they thought the case was a loser. Maybe they didn't have the money to spend on litigation. Maybe the DOJ offered them a sweetheart deal for settling quickly (shades of the prisoner's dilemma). Maybe they're just really risk averse or have pessimistic lawyers.

And it should be noted that if the defendants lose on the per se violation then it doesn't matter if they win or lose on the rule of reason. The possibility of winning on the rule of reason only comes into play if they can defeat the horizontal price fixing allegation, which (taking the complaint at face value) may be pretty difficult.
posted by jedicus at 10:44 AM on April 11, 2012 [2 favorites]


When Macmillan changed to the agency model we did so knowing we would make less money on our e book business.

Wha???


Because they knew they would sell less books if they raise prices, but, dammit, they needed to raise prices so people wouldn't get used to paying a normal decent lower price for books.

I'm guessing that, like with the music publishing industry, book publishers are working on an outdated model and simply have no way of addressing the newer model established by Amazon. Book publishers wouldn't be the first place Amazon effectively put out of business because they were using outdated methods of selling stuff.

Do you have any thoughts on why several of the publishers seem to have settled already?

Because settlement was maybe cheaper and allowed them to skip the bad PR. Settling does not necessary mean they thought they had done something illegal.
posted by jabberjaw at 10:45 AM on April 11, 2012 [4 favorites]


From Harper Collins:

“HarperCollins faced legal challenges on five separate fronts, including the DOJ investigation which was resolved today. The e-book market has grown over the last two years from a small e-ink market, dominated by one platform, to a $1B market with several competing platforms. HarperCollins made a business decision to settle the DOJ investigation in order to end a potentially protracted legal battle.”
posted by Artw at 10:49 AM on April 11, 2012 [3 favorites]


Is Apple powerful enough to fend off the Department of Justice?

Microsoft was (arguably) not, even with very high levels of cash and similar market cap.

AT&T was not in the 1970s.
posted by bonehead at 10:49 AM on April 11, 2012


Microsoft was stupid - it thought it could get away without paying off the right people. Everyones got lobbyists up to the hilt now.
posted by Artw at 10:50 AM on April 11, 2012


Because settlement was maybe cheaper and allowed them to skip the bad PR.

Yeah, Artw's link has a copy of the settlement agreement, and it looks like it is essentially no fine and going back to the pre-Apple status quo. I imagine they figured that would be the end result anyways, and probably a fine tacked on, so the end result would be the same but cost a lot more.
posted by smackfu at 10:53 AM on April 11, 2012


"Is Apple powerful enough to fend off the Department of Justice?"

Microsoft was (arguably) not, even with very high levels of cash and similar market cap.

AT&T was not in the 1970s.


IBM managed it, but it took 13 years.

Microsoft was stupid - it thought it could get away without paying off the right people. Everyones got lobbyists up to the hilt now.

For what it's worth, Apple's lobbying expenditures have pretty steadily increased over the past 14 years, but it's still pretty small compared to, say, Microsoft or Google.
posted by jedicus at 10:58 AM on April 11, 2012


Serious question here, but I understand if it's somewhat of a derail.

Is the "agency" style of sales/marketing coming under fire here or is it just the collusion from multiple publishers that's being addressed?

If it is the "publisher determines the pricing" thing that's disallowed then how does this fit into other markets, like handheld electronic devices? Apple, the manufacturer of iPhones, iPods, iPads, etc. and sets the price. There are other examples, but this one seemed the most obvious.
posted by Blue_Villain at 11:01 AM on April 11, 2012


What I would like to be able to do as a consumer: Buy a physical book and then have an nice ebook version. Nice means it should be professionally laid out, have a full search function, a linked chapters, index and glossary where appropriate and decent quality art.

I would be willing to pay an extra buck or three on the print edition to get all of this. If I just want the ebook edition it should be less than the print version. I'm willing to pay for updates to the book and the price can vary (but be less than the original price), based on scale and types of changes, which should be readily available in an easy to read change log.

I would like also like to be able to send out a few pages, no more than a chapter, to friends for a price. Say I could send Friend A chapter 12 of a book to their device. If they choose to accept that chapter (and of course, they should have to authorise it), they pay a small price, (the fractional amount should add up to the full physical book price i.e. if a book costs $12 bucks and has 12 chapters, then each chapters costs $1 to send), and I get a cut of that (30%?). My cut can be immediately deposited into a publisher's store, where I can choose to buy more of that publishers meida (doesn't have to be just books). Or I can transfer it out to my Paypal or bank account.

This may sound crazy and no doubt needs some fine tuning, but that's what I and my wallet want.
posted by Brandon Blatcher at 11:13 AM on April 11, 2012 [7 favorites]


Blazecock Pileon: eBook prices are crazy, but in a way, the way this is being done is really just the government helping out Amazon. It's not like Amazon's prices and terms are that much more reasonable, in comparison.

That's not Amazon's fault:
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
Notice a common theme there? That's called price-fixing. Amazon was much cheaper on e-books before being forced to sell them for more by the publishers. Apparently, per the DOJ, in collusion with Apple.
posted by Malor at 11:16 AM on April 11, 2012 [16 favorites]


antonymous: "For those wondering, Apple has enough cash on hand to fund the entire Department of Justice for four years."

Wherein Eric Holder performs a parody of Black Flag's Nervous Breakdown...

"I'm about to have a corporate shakedown..."

(I imagine that's what the more paranoid of the right-wing blogs are currently posting based upon your comment).
posted by symbioid at 11:18 AM on April 11, 2012 [1 favorite]


I got a Kindle last year, and I quickly discovered that I don't mind paying $7.99 for a brand new, non-DRM e-book direct from a small publisher. I've sent Black Library hundreds of dollars since they started selling e-books direct. I think that price is still too high, but it's worth it for the ability to get books the day they come out, to have them as actual files on my own computer rather than non-possessions floating in the cloud, and to use them however I want wherever and whenever I want.

Spending $13.99 on a locked-down copy of Watership Down from Amazon? That I mind. Scribner (Simon & Schuster) is asking for over two dollars more than the new-trade-paperback Amazon price for a forty-year-old classic which costs fifty cents at any library bookstore (and all of $4 used on Amazon, including $3.99 shipping). That's just crazy-talk, and I don't feel at all sorry for publishers who got caught colluding in order to set prices like these.
posted by vorfeed at 11:18 AM on April 11, 2012 [26 favorites]


I wish cstross or jscalzi were around to weigh in. I'm no fan of book publishers, but from what I've read at Mr. Stross' blog (this seems a decent summary), the assumption that ebook prices are full of fat from rent-seeking publishers is simplistic.
posted by yerfatma at 11:19 AM on April 11, 2012 [2 favorites]


Blue_Villain: Is the "agency" style of sales/marketing coming under fire here or is it just the collusion from multiple publishers that's being addressed?

From the Wired article:
The real issue, Pozen [Justice Department antitrust official] says, isn’t the agency model, but secret agreements between competitors.
So apparently the latter.
posted by jcreigh at 11:19 AM on April 11, 2012


That all depends on the judge presiding over this case, really. Apple has the money to file motions, writs, stays, etc indefinitely,

Kind of. There are only so many motions one can file. Granted, in an antitrust case there are bound to be a lot of such motions, but it's not like DOJ is paying its lawyers by the hour here.

Further, and most importantly, the judge is going to issue a scheduling order pursuant to Fed. R. Civ. P. 16. This will move the case along at a rate more-or-less agreed to by both parties. It's possible to get extensions and deviations from the scheduling order, but only for good cause, and judges don't really like doing it. The rules actually prohibit the granting of extensions if the other party is simply trying to stall, and judges have wide discretion in deciding whether that's happening.

So it will depend on the judge somewhat, but most federal judges run a pretty tight ship and won't tolerate any funny business about filing burdensome, redundant, and unnecessary motions.

This is in marked contrast to state court, where you can frequently get away with things for which one might be sanctioned for even thinking about in federal court.
posted by valkyryn at 11:21 AM on April 11, 2012 [1 favorite]


I wish cstross or jscalzi were around to weigh in

I imagine Mr. Scalzi, as El Presidente of the SFWA, needs to be somewhat careful about what he says. He had this to say last month, though.
posted by Pogo_Fuzzybutt at 11:23 AM on April 11, 2012 [1 favorite]


I wish cstross or jscalzi were around to weigh in.

cstross has tweeted about the settlements a little - the tl;dr of which would be that it's a BAD THING and sets Amazon up to be a monopoly and dooms publishes etc...

I am not so sure of that. When Apple dragged the big music companies into the present day with iTunes they did not suddenly cease to exist, and I don't see that it would be the case in publishing either.

Long term bookstores are just as doomed as record stores, of course, but that would be the case without Amazon.
posted by Artw at 11:25 AM on April 11, 2012 [1 favorite]


> Kind of. There are only so many motions one can file.

Hence the rest of my statement after the comment.
posted by Burhanistan at 11:26 AM on April 11, 2012


That's not Amazon's fault

Amazon was certainly responsible for setting its own onerous terms, well before Apple came along. What Apple did was take power away from Amazon to dictate terms to publishers, and once that happened, the publishers in turn dictated even higher prices to Amazon.
posted by Blazecock Pileon at 11:26 AM on April 11, 2012 [1 favorite]


Kind of a quid pro quo for Amazon doing the same to Apple's ability to dictate terms to the RIAA.
posted by entropicamericana at 11:27 AM on April 11, 2012


What I would like to be able to do as a consumer: Buy a physical book and then have an nice ebook version.

I can totally get behind this. I love purchasing 'real' books, but if there were an option to download an e-book version of it for a couple of dollars extra, I'd be all over that to use when I want to travel or whatever. In fact, I effectively do this by hunting out DRM free ebook versions of books I've already bought the physical version of, but I'd love to do this completely legally. But I won't pay full price twice for the same content, and I won't cease buying physical books simply in favour of the electronic ones.
posted by modernnomad at 11:31 AM on April 11, 2012 [4 favorites]


Great explanation on the hacker news thread. It's not the agency model being attacked, only the collusion between the big five to go to an agency model, without which it would have been unfavorable for all of them.
posted by symbollocks at 11:32 AM on April 11, 2012 [3 favorites]


I think perhaps Mr. Scalzi is incorrectly analyzing that. He's saying that he doesn't think Apple plus publishers colluded, but rather that Apple indicated publicly the terms they'd accept, and then publishers jumped on those terms.

What I think is the real issue here is agency pricing: agency pricing may, in and of itself, be collusion. No backroom deals required. The publishers are telling retailers what they MUST sell books for, and they're all setting their prices just about the same, even when Amazon was demonstrably willing to sell much lower.

Since it's so well-known that Amazon fought like a wolverine against this model, the DOJ obviously wouldn't sue them. Amazon only went with this model because they were forced to.

It's definitely okay for publishers to set the prices at which they'll sell their titles to Amazon. It may not be okay for them to dictate terms of further sale.
posted by Malor at 11:33 AM on April 11, 2012


When Apple dragged the big music companies into the present day with iTunes they did not suddenly cease to exist, and I don't see that it would be the case in publishing either.

Apple hasn't tried to put the music labels out of business. They are forcing them to change their business models and adapt to the Internet age, but Apple doesn't want to become a music label.

Amazon is different. They are acting very much like the want to put the publishers out of business. Publishers aren't necessary when Amazon can make any self-published author an instant best-seller simply by featuring them in their promotions.
posted by alms at 11:34 AM on April 11, 2012 [3 favorites]


C'mon people. This is the way the big boys play. Rules are for chumps, losers and workers. If you get caught, stroke a check and move on.
posted by Benny Andajetz at 11:36 AM on April 11, 2012 [1 favorite]


Amazon is happy to sell e-books at a loss as part of their long-term strategy of putting the publishers out of business

I still don't see how that worked. Why couldn't it just work something like this:

Amazon says "Publisher, we'd like to sell your e-book. How much will it cost us?"

Publisher: "We'll charge you $8.00 per copy for new releases, and $5.00 per copy for back catalog titles."

Amazon: "OK, that sounds good. By the way, we are going to sell everything for $9.99, which technically amounts to a net loss for us on new releases."

Publisher: "What the fuck do I care?"
posted by ShutterBun at 11:37 AM on April 11, 2012


Could someone clarify something for me? Under the wholesale model, was Amazon selling ebooks at a loss? If so, why?
posted by jcreigh at 11:37 AM on April 11, 2012


Publisher: "What the fuck do I care?"

'cos they figure it cuts into buggy-whip sales.
posted by Artw at 11:38 AM on April 11, 2012 [4 favorites]


jcreigh: On the hardback-equivalent titles, yes, they were taking a very tiny loss on each book. The purpose was apparently to drive customers to e-books. Presumably, this is because the ultimate margins in e-books should be far higher than paper books. Once a book is written, the cost of duplicating electronic copies is so close to zero that it's hard to measure.

If you can sell a million copies of something for only a little more than selling a hundred copies, well, another word for that would be 'growth market'.
posted by Malor at 11:42 AM on April 11, 2012


Could someone clarify something for me? Under the wholesale model, was Amazon selling ebooks at a loss? If so, why?

Step 1: Figure out what people want to pay for eBooks ($10).
Step 2: Sell ebooks for that price even at a loss to get them popular.
Step 3: Use the popularity to negotiate a wholesale cost that doesn't require a loss.
Step 4. Profit (at the expense of the publishers)
posted by smackfu at 11:44 AM on April 11, 2012


Step 4. Profit (at the expense of the publishers)

Remember, each additional copy has a zero marginal cost. Lower prices will increase volume. They would sell a lot of books if they were all four or five bucks again, like the old days.

If you can move 50,000 copies at $10, or 100,000 copies at $5, then you'd want the second option, even though it's the same amount of money and profit, because it's increasing your customer base. And, if Steam is any guide, volumes ramp up extremely quickly as you lower prices.
posted by Malor at 11:49 AM on April 11, 2012 [2 favorites]


So at step 3 why don't publishers just say NO?
posted by symbollocks at 11:50 AM on April 11, 2012


Publisher: "What the fuck do I care?"

As I understand this aspect of it, they're worried customers will get used to only paying $9.99 for a new e-book, which would put downward pressure on the prices for new hardback and paperback books, devaluing the market in a general way even though the supposed economies of production only apply to the e-books.
posted by mediareport at 11:53 AM on April 11, 2012 [1 favorite]


I'm tempted to just copy-and-paste the whole thing, but here's a link instead. It's worth reading if you want to understand Amazon's relationship with publishers.
Confessions of a Publisher: “We’re in Amazon’s Sights and They’re Going to Kill Us”
(According to the link, Amazon was losing $3-$4 per newly-released e-books before the agency model was put in place.)
posted by alms at 11:54 AM on April 11, 2012 [1 favorite]


So, the popularity of e-books made Amazon too influential and caused publishers to sign pricing contracts that didn't favor them. They couldn't have just told Amazon "sorry, the pricing remains the same"?

Meanwhile, Apple comes along with the novel concept of charging more (which has pretty much been their default position all along, for everything) and Amazon is licking its wounds because they make, what, slightly less now per book than they wanted to?

And the independent publishing houses are still worried, which is new?

I'm having a hard time seeing the whole picture here. Even the "Here's the deal: For Dummies" articles are kinda hard to parse. There's a lot of "this is what would happen" and not enough "here's why" for me, I guess.
posted by ShutterBun at 11:55 AM on April 11, 2012 [1 favorite]


Amazon was certainly responsible for setting its own onerous terms, well before Apple came along. What Apple did was take power away from Amazon to dictate terms to publishers, and once that happened, the publishers in turn dictated even higher prices to Amazon.

Wholesalers and end-manufacturers do this to their suppliers all the time. This is Walmart's entire business model, squeezing the supply side. Car makers, aerospace companies all have agreements that suppliers' prices will fall year-on year with a contract. Amazon was not behaving in an unusual way. This is a major driver for economic growth, btw.

The book publishing industry, in particular, has been forcing pricing increases at roughly twice the annual inflation rate (data here). It's reasonable to think that Amazon might have been able to realize some productivity gains from the publishers.

Sure, Amazon was working in their own self-interest, to attract customers with low prices the same way any retailer does. The book publishers, rather than try to contain costs, are alleged to have reacted by fixing prices to keep their accustomed above-average price increases to the consumer. Apple's possible guilt is in colluding with that scheme. The agency model isn't the problem, the price-fixing is.
posted by bonehead at 11:57 AM on April 11, 2012 [5 favorites]


So at step 3 why don't publishers just say NO?

Because then who's going to sell hundreds of thousands of copies of their books? Barnes & Noble? Ha!
posted by jabberjaw at 11:59 AM on April 11, 2012 [1 favorite]


So, the popularity of e-books made Amazon too influential and caused publishers to sign pricing contracts that didn't favor them. They couldn't have just told Amazon "sorry, the pricing remains the same"?

If it makes things clearer, we didn't really get to Step 3. That's the point at which Apple stepped in. McMillan started fighting back by demanding the agency pricing model, and Amazon pulled their books for a couple of days, which comes back to the complaint in quesiton. The DOJ's contention is that McMillan knew it could safely fight Amazon because they knew all the other publishers were also going to hold out for the same deal, because they had worked through Apple to come up with a common pricing structure.
posted by smackfu at 12:03 PM on April 11, 2012 [2 favorites]


alms: "Publishers aren't necessary when Amazon can make any self-published author an instant best-seller simply by featuring them in their promotions."

Isn't promotion a huge part of why people go with a publisher in the first place? If Amazon can promote better than the publisher, I fail to see the value in having a publisher. Write your book, hire a competent editor, and cut out the middleman.
posted by mullingitover at 12:07 PM on April 11, 2012 [2 favorites]


There are a few things that are going on; 1. on the physical side, the publishing industry has had this working model for book releases: Hardbacks are sold at a steep upcharge: $35-40 per book, followed by trade paperbacks at about half the price, finally followed by mass-market paperbacks. This is an implicit price discrimination strategy to get the maximum amount of value out of each tier of customers. As far as each book is completely a different product this would be the correct profit maximizing strategy strategy for a monopolist. If you assume that books are inter-changeable then you have to throw that out... but as an industry I doubt they've experimented very much to see if something better can work out for everyone.

Ebooks however presented a conundrum, they could not release them at the same time as the hard-backs and charge the same premium, and if they sold the ebook price at $10 while continuing to sell the hardback at 40, it would completely undermine their traditional strategy, as well as giving a profit cut to amazon.

So John Sargent's thoughts on book selling can only be understood with this approach in mind. They don't care about selling less books as long as they continue to treat each new release "as a premium product" while getting higher-per book profits on hard backs.

From a nice article by Virginia Postrel on the publishing industry:
" In a 2009 paper that looked at consumers using computer price-comparison systems, or shopbots, to buy physical books online, economists Erik Brynjolfsson, Astrid Andrea Dick and Michael D. Smith found that a 1 percent drop in price -- a mere 25 cents on a $25 book -- increased the number of units sold by 7 percent to 10 percent. Shopbot users tend to be more price-sensitive than most consumers, but that’s a huge difference.

Publishers resist such evidence. The standard response is that it’s hard to know anything about pricing because “every book is different.” Every title is a unique good, and every customer values each book a little differently. So you might as well trust your gut.

Every book is indeed different, but that’s no excuse for charging more than the market will bear. And, at least for digital copies, there’s a way around the “every book is different” problem: bundling a lot of books together, charging a flat fee, and letting customers use whichever ones they like best. Bundling eliminates some of the statistical variation and unpredictability in consumer behavior. The differences from person to person and book to book cancel each other out."

posted by stratastar at 12:12 PM on April 11, 2012


I still don't see how that worked. Why couldn't it just work something like this:

My non-insider understanding is that publishers use their markup on hardbacks to recoup fixed-cost losses like editing. The release structure is a form of price discrimination; people who are willing to pay more (because the book is more valuable to them) pay more for the 'nicer' quicker release. When you can get it cheaper quickly and arguably just as nice on your kindle, that blows up the useful price discrimination. The illusion that hardbacks 'should' cost that much is critical, otherwise people will balk at the higher price.

The same thing happens with netflix. It was both marginally cheaper AND more convenient to stream, which is terrible for DVD and ticket sales. It was cheaper and less convenient to do the discs-by-mail version, which is why it was a net good thing for studios.
posted by a robot made out of meat at 12:14 PM on April 11, 2012


Gordon Crovitz had an interesting take on this in the Wall St. Journal a few weeks ago:
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.
posted by BobbyVan at 12:16 PM on April 11, 2012 [1 favorite]


If Amazon can promote better than the publisher, I fail to see the value in having a publisher.

I see the value in having multiple publishers rather than just one publisher based in Seattle controlling 90% of the market.
posted by alms at 12:18 PM on April 11, 2012 [3 favorites]


Also its kinda funny that the wholesale price that the publishers used Apple to fight was the same fucking strategy that actually made online sales of music happen by Apple. The record labels fought tooth and fucking nail for an agency model for the same reasons the music publishers did, but it was the .99 / song / 10 / album wholesale sales strategy that won Apple song buyers. In the online music space it simply turned out that Apple and ipods were a much more powerful buyer of music than every single other music seller.

(Apple later allowed some variation to the Agency model in music)
posted by stratastar at 12:20 PM on April 11, 2012 [2 favorites]


alms: "I see the value in having multiple publishers rather than just one publisher based in Seattle controlling 90% of the market."

Me too. It's a good thing that never happened, and I'd argue never would've happened. The danger was never that publishers would go out of business, just that they'd have lower margins.
posted by mullingitover at 12:25 PM on April 11, 2012 [1 favorite]


No thread of this sort is complete without a reminder that Amazon is happy to play the bully when the other party can't kick back. (Worth noting, btw, that selling below cost is actually illegal in other countries.)

The book publishing industry, in particular, has been forcing pricing increases at roughly twice the annual inflation rate (data here).

Those seem to be scholarly titles only, notoriously expensive because of small print runs and captive academic libraries and corporate clients. Do you have stats for general trade books? Idly googling, I find claims all over the map, usually ending up at very little change adjusted for inflation.
posted by IndigoJones at 12:31 PM on April 11, 2012 [3 favorites]


But Jobs's proposal was not about price fixing.

From the filing, it sounds like Jobs was kind of into the price fixing. Mainly along the lines of "sure, we'll set a minimum of $12.99 for you in agreement with your competitors, we don't care if we get our 30%".
posted by smackfu at 12:42 PM on April 11, 2012 [1 favorite]


Information on general book trade price inflation appears to be available from these folks, but only as paid member. That's why I looked at library information.
posted by bonehead at 12:49 PM on April 11, 2012


Anybody know what the effect of this/position of Barnes and Noble is?
posted by boubelium at 1:02 PM on April 11, 2012


BTW, 16 states also filed an anti-trust suit, including CT.

Text of complaint (It covers mostly the same ground as the federal one, but has a bunch of redacted text, for added fun.)
posted by smackfu at 1:26 PM on April 11, 2012


I think this is going to crash and burn, it just seems wrong-headed. Publisher's have a state-granted monopoly on their products (copyright) which ought to put them in a pretty good negotiating position. That they looked for an ally to work against Amazon reflects at least as much on Amazon's power as Apple's.
posted by Wood at 1:47 PM on April 11, 2012


Anybody know what the effect of this/position of Barnes and Noble is?

Heh, Barnes and Noble turns up about 3/4 of the way through the states complaint I linked above (paragraph 109 on page 30). Random House wasn't one of the "conspiring publishers" and didn't move to the agency model, so the Penguin CEO put pressure on Barnes & Noble to cut off advertising support for Random House which they did. Not sure why.

Geez, this is a web of conspiracy!
posted by smackfu at 1:52 PM on April 11, 2012 [1 favorite]


Inside the DOJ's ebook price-fixing case against Apple: an analysis.

Thanks for the link. A great overview of the situation.
posted by ericb at 2:04 PM on April 11, 2012


I don't think rank and file employees would be privy to backroom deals.

Exactly.
"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.'"
Hmmm.
posted by ericb at 2:16 PM on April 11, 2012 [2 favorites]


Yup. Apple is the new Microsoft.
posted by 0xdeadc0de at 2:26 PM on April 11, 2012 [2 favorites]


I went online last night to find e-book pricing for 'Harper Lee's To Kill a Mockingbird: New Essays' by Michael J. Meyer.

Here's the results:
iTunes/iBooks version -- $48.99.

Amazon Kindle version -- $48.99 $27.92.

Amazon 'Hardcover' version (290 pages) -- $48.99 $40.42.
I, still, think $27.92 for a digital edition is way too expensive.
posted by ericb at 2:27 PM on April 11, 2012


That looks like a schoolbook, which don't have rational prices.
posted by smackfu at 2:30 PM on April 11, 2012


CNET: Why e-books cost so much.
posted by ericb at 2:41 PM on April 11, 2012 [2 favorites]


Yup. Apple is the new Microsoft.

Oh, obviously. Were you even alive in 1998?
posted by entropicamericana at 2:50 PM on April 11, 2012 [1 favorite]


Yup. Apple is the new Microsoft.

lolz
posted by Blazecock Pileon at 2:58 PM on April 11, 2012


Artw: "Long term bookstores are just as doomed as record stores, of course, but that would be the case without Amazon."

That's great news! I can stop worrying that the book store around the corner will close down. After all, the record store only slightly farther away is still open!

entropicamericana: "Oh, obviously. Were you even alive in 1998?"

I was, and I think the comparison is reasonable if Apple did in fact participate in this collusion. As now with Apple, there were then plenty of people who thought Microsoft did nothing wrong.
posted by wierdo at 2:59 PM on April 11, 2012 [1 favorite]


On not-preview: However, I don't think there were as many people who thought they could do no wrong, as there presently is with Apple.
posted by wierdo at 3:00 PM on April 11, 2012 [2 favorites]


CNET: Why e-books cost so much.

Pfft. It's not like once all the marketing and publicity and advances get recouped the cover price goes down. They charge what they think they can get away with, end of story.
posted by adamdschneider at 3:01 PM on April 11, 2012 [1 favorite]


Something doesn't quite add up about Amazon, though. Because they were selling books at a $3-4 per-copy loss back when Apple didn't have iBooks, then publishers were making the same money with Kindles as they do now with regular iBook releases. And if that's true, what motive would publishers have to collude? They'd make their money, either way. Something isn't adding up here.
posted by Blazecock Pileon at 3:04 PM on April 11, 2012


From the CNET article:
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.
The publishers should understand better than anyone how their industry is built on price tiers: hardcover, trade paperback, and mass-market paperback. The price of a hardcover book is unaffected by the change to e-books. A hardcover book carries a price premium over paperbacks because it represents a higher-quality physical product, just as it does when compared to an e-book. Traditionally, the release dates of the different tiers were staggered so the publishers could extract the most value from customers. If you want to be the first to read a new book, you have to pay the premium price. But to me, and I suspect many other consumers, the paperback price is the true price of the book. Maybe they should just hold off on releasing the e-book versions until the paperbacks come out, and then price accordingly (slightly below the paperback price). But e-books don't deserve a premium price.
posted by stopgap at 3:07 PM on April 11, 2012 [2 favorites]


That CNet piece also neglects many of the costs of the bookstore system not borne by ebooks: the 60-90 carrying costs for current invoicing, having to estimate print runs and the costs of over and under-supply, the associated print-strip-return system for paperbacks of all sizes.

On preview: the publishers didn't want to be dealing with only one wholesaler in Amazon. They were desperate for alternatives to "Amazon problem". If they'd found a competitive solution, no problem. The problem is, they could (apparently) only force their model on Amazon by collusion, mediated by Apple, indeed by Jobs personally, it the accounts are to be believed.
posted by bonehead at 3:09 PM on April 11, 2012


Maybe they should just hold off on releasing the e-book versions until the paperbacks come out, and then price accordingly (slightly below the paperback price).

Even simpler: the price of an ebook drops with time.

That's effectively the current hardback/paperback model now. There's a drop from a $25-$35 hardback to a $10-$12 paperback version after about a year. The trade paperback muddies the waters, but is usually release a few months after the hardback.
posted by bonehead at 3:12 PM on April 11, 2012 [1 favorite]


>the publishers will have to charge a reasonable price for e-books (i.e. less than hardcover). It's hard to feel sorry for a business brought down by its own greed.

This raises the question of what you're really buying, when you're choosing between an ebook and a physical book:

a) the cost of materials and physical production-- in which case, obviously, a physical book has much more of that precious precious woodpulp and ink; or,

b) immediate access, (sometimes) digital portability, and the need not to schlep down to a bookstore or wait a week for a book to come through the mail.

When it comes to information, value is usually determined less by physical factors than by perceived utility, and speed of access often matters when it comes to measuring utility. If you don't want to pay a premium for immediate digital access, you can certainly avoid it-- you can wait by your mailbox, or drive over to the bookstore.
posted by darth_tedious at 3:12 PM on April 11, 2012


Even simpler: the price of an ebook drops with time.

I'd be all for that, but the publishers haven't shown any interest in sane prices for even back-catalog e-books. See for example, The Great Gatsby (1925):
Kindle price: $12.99
Sold by: Simon and Schuster Digital Sales Inc
This price was set by the publisher
Are there a lot of costs left to recoup there?
posted by stopgap at 3:23 PM on April 11, 2012 [3 favorites]


Blazecock Pileon: And if that's true, what motive would publishers have to collude? They'd make their money, either way. Something isn't adding up here.

Come on, man. It's all over the thread already.

Publishers don't like low ebook prices because they think it will cannibalize their hardcover prices. They believe, probably correctly, that the overall price of books is going to drop to $10 for new releases, and they're terrified of this. (not realizing that this will drive big volume, and that this volume can scale to any size while barely moving the needle on their ongoing cost structure.) And they used Apple as a stick to hit Amazon with.

Per the DOJ, Apple was not only willing, but eager to coordinate the deal among the various booksellers and create a cartel to pressure Amazon into the agency model, so that the publishers could preserve their precious retail pricing.

It adds up perfectly, if you just set aside the preconceptions that Apple can't be evil, and that publishers can't be shortsighted.
posted by Malor at 3:36 PM on April 11, 2012 [11 favorites]


This all seems so odd - one of those bits of reality that would seem lame and half-plotted if you read it in a novel.

When the DOJ announced it's intention to file, I thought this might be a subtle case about using the arrangements with Apple as an implicit back channel of communication. Something where lawyers argue the meaning of commas and "legislative intent".

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.

If these were only a little bit brighter you could make Terry Pratchett characters out of them: "Here, Sir. Let me take your highly-noticeable long black cloak." As it is I'm not sure they rise above the level of Snidley Whiplash.
posted by CHoldredge at 3:51 PM on April 11, 2012 [2 favorites]


>not realizing that this will drive big volume, and that this volume can scale to any size

My sense is that price and demand don't always directly scale.

If you were to take Sgt. Pepper's, and double its price, while making it the sole means of getting any of the tracks on that album...

you'd probably still get at least fifty percent of the current sales volume, despite the doubled price.

In fact, the attraction of perceived exclusivity might sustain a fifty-five or sixty percent volume retention.

And along the same lines, if you cut the price of a recording of my cousin Fred's tuba stylings in half, it doesn't mean twice as many people will buy it.

Price and cost of production usually aren't the major factors in determining the market demand for works of art and information.
posted by darth_tedious at 3:57 PM on April 11, 2012



Also, up until 2007, there were only few pieces of anti-trust knowledge that most of us seemed to escape high school econ with. One of them was the fact that it was bluntly illegal for a manufacturer or distributor to tell a retailer what they had to charge you for a product. Even minimum advertised prices were carefully scrutinized and companies only dared impose them with the help of a brigade of lawyers.

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.
posted by CHoldredge at 3:57 PM on April 11, 2012


It adds up perfectly, if you just set aside the preconceptions that Apple can't be evil, and that publishers can't be shortsighted.

Hah, no thanks. I've been in these publisher threads from the start, calling out Amazon back when they were bilking libraries over licensing, so please lecture someone else, because I've been well aware and very critical of how greedy all parties have been when it comes to electronic book sales, and long before the news cycle made this a cause célèbre just because evil Apple users are involved. I'm just wondering why the publisher's figures still don't quite add up, that's all. Maybe we'll find out during discovery.
posted by Blazecock Pileon at 4:28 PM on April 11, 2012


Publishers aren't necessary when Amazon can make any self-published author an instant best-seller simply by featuring them in their promotions.

Why can't the publisher's do the same? Why can't publishers promote their own self publishing system and authors?

I see the value in having multiple publishers rather than just one publisher based in Seattle controlling 90% of the market.

Absolutely. So why don't the publishers go with a direct sell model, ala Apple with selling their hardware and software via the Apple Store (physical) and online? Presumably they have popular authors. Why is it they cannot leverage that?

No thread of this sort is complete without a reminder that Amazon is happy to play the bully when the other party can't kick back.

True. Is there seriously anyone in this thread who doesn't realize this?
posted by juiceCake at 4:33 PM on April 11, 2012


It's not like once all the marketing and publicity and advances get recouped the cover price goes down. They charge what they think they can get away with, end of story.

Sure it does (and sometimes even without them recouping their costs - a whole lot of publishing of hopes and dreams wind up getting pulped).

And what they can "get away with" is what readers are willing to pay - more for first run hard cover, less for paperback, less still for remainders, least of all for library. What the reader thinks he can get away with, if you like. If publishers got paid for every set of eyes that actually read a book, prices could go down dramatically. (Not that they would necessarily do so, at least not to the extent most of us would like, but still.) As it is, full retail book buyers now as always are carrying a whole lot of free readers.

Now that the ebook means print runs are less a factor, well, even so, you have to make a stab at figuring sales figures to cover the other aspects of publishing. There's a lot of assumption here that the new paradigm of drastically lower ebook prices is going to create huge sales figures for individual books. I'm not totally convinced, and were I a publisher, I would be real wary of making any assumptions based on scarcely than five years of ebook readership. It's got to take a few years of experience for both sides, publishers and consumers, to figure a reasonable price point for a well edited book. And just because a book is not physically pulped does not mean that it will ever, even at a low price, earn back its cost. Reason why publishing is such a gamblicious business (and why Snooki is on the best seller list.)

Myself, I would hate to see Amazon, a company that got into book business for the most mercenary of reasons, being the last provider standing.
posted by IndigoJones at 4:33 PM on April 11, 2012


Blazecock Pileon: and long before the news cycle made this a cause célèbre just because evil Apple users are involved.

That's completely disconnected from reality, Blazecock. To my knowledge, you are the first person to mention or even think about Apple users.
posted by Malor at 4:55 PM on April 11, 2012 [2 favorites]


Indigo, doing digital distribution isn't difficult. Just ask the Pirate Bay. I think it's extremely unlikely that Amazon could ever monopolize the e-book space. Any dork with webspace can enter that market.

It's just copying bits. That's easy. Any of the current publishers could build something like that, almost out of spare change in the couch, a la Baen Books. :)
posted by Malor at 4:59 PM on April 11, 2012


BP, that CNet article linked by ericb above gives the numbers you seem to be looking for. The publishers seem to be willing to forgo at least $2.50 a paperback to switch to agency pricing.
posted by bonehead at 5:07 PM on April 11, 2012


It's just copying bits. That's easy. Any of the current publishers could build something like that

Seriously. IMO the publishers should forget about making a physical product (or outsource that as a secondary function) and imagine that they are selling software. Each publisher could run something like an app store with titles ranging from $0.99 to $9.99 where they take 100% of the sales price. They just need to agree on a standard format and let third parties create hardware and software readers and library management tools.
posted by stopgap at 5:52 PM on April 11, 2012 [1 favorite]


I think y'all are significantly overestimating the ease of selling eBooks. The problem is the reader. Kindle is effectively proprietary, it's very awkward trying to sell a book to a Kindle other than via Amazon. Same with Apple's iBooks. Barnes & Noble has been trying to break into the eBook market for years with Nook with very limited success. The iPad is the only successful consumer book-like device that's open enough that you could imagine a third party bookstore. Even then, it's not happening.

The entire point of iBooks and Kindle is those vendors trying to get tight control over the whole book market, from author to reader. It's mostly working.

It's going to be interesting to see what happens with Pottermore. Too bad they didn't start it before the Potter books and movies were all released; could you imagine how hot that site would have been if you could buy the last Harry Potter book online but it was a Pottermore exclusive?
posted by Nelson at 5:56 PM on April 11, 2012 [2 favorites]


Kindle is effectively proprietary, it's very awkward trying to sell a book to a Kindle other than via Amazon.

To sell a book for the Kindle, you just need to format your book using a mobi editor and then sell the download. And all your customers have to do to get the resulting yourbook.mobi file onto the Kindle is email it to their free Kindle address. Like I said above, I do this all the time with books I buy from a small publisher's site, and I actually prefer it to the Amazon store because I get to keep the files. The Kindle is quite open in practice; epub is really the only format it won't convert, and that's easily converted on the desktop (and the Nook supports epub but not mobi, so this is no less a problem there).

The main problem here is a) a lot of casual Kindle owners don't know how to send things to the Kindle, because they've only ever bought from the Amazon store, and b) a lot of casual Kindle owners only ever buy from the Amazon store. But I don't think that's because the Kindle is "proprietary", it's because Amazon has by far the largest e-book store (and arguably the best e-reader to go along with it).
posted by vorfeed at 6:21 PM on April 11, 2012


Yeah, vorfeed, I think we're in agreement. It's technically possible but in practice most Kindle readers probably have no clue how to do it.
posted by Nelson at 7:29 PM on April 11, 2012


But I don't think that's because the Kindle is "proprietary", it's because Amazon has by far the largest e-book store (and arguably the best e-reader to go along with it).
posted by vorfeed at 8:21 PM on April 11


It's also a lot easier to find new things to read on Amazon. They've really optimized ways of connecting you to more and more stuff you should buy that's somewhat similar to what you just bought. A lot of people find my books through the other-people-who-bought-that-also-bought-this stuff. B&N and Apple oddly don't seem to concentrate on that sort of thing nearly as much.
posted by joannemerriam at 8:41 PM on April 11, 2012


I think y'all are significantly overestimating the ease of selling eBooks. The problem is the reader. Kindle is effectively proprietary, it's very awkward trying to sell a book to a Kindle other than via Amazon.

No, it's very easy. All you have to do is stick the .mobi file in a directory on the Kindle. Calibre does this for you, very nicely, and it would be fairly simple to write a little utility to do this for customers. Hell, they could probably license a custom version of Calibre, although that's turning into a ridiculously huge program.
posted by Malor at 9:00 PM on April 11, 2012 [1 favorite]


Myself, I would hate to see Amazon, a company that got into book business for the most mercenary of reasons, being the last provider standing.

Yeah, unlike those publishers who are doing it for the least mercenary reasons, namely: funsies and erudition for all! Snort. The large publishing houses are just as much ratfucking villains as anyone in Amazon or any other company. The promulgation of this "mom-and-pop" publisher as a cosign for *gigantic* multinational companies with a history of ruthless bastardry is a clever move by these publishers - in reality, it's a lot more nuanced and I've heard small publishers if not championing Amazon, certainly talking about what a boon the kindle as been for their sales and production model.
posted by smoke at 9:22 PM on April 11, 2012 [6 favorites]


At this point there are at least 4 major integrated book e-sellers : Amazon, I-tunes, B&N, Google's new Play Market (which includes a full ebook catalog). Forgetting the fact that the average use can't transparently move the same book between programs, if you can't get a force a somewhat competitive market between these sellers I'm not exactly sure what the hell the Justice Department hopes as an endgame here; its a fucked-up system with publishers unwilling to experiment with pricing and selling systems and the intermediaries not really competing on a cost-basis...

I'm honestly a little glad that Amazon is entering the market as a publisher here.

As an aside does Apple's "Most Favored Nation" status still hold? That was the sketchiest part of the entire backroom deals, and the one that I still haven't quite grocked, especially its effect on the market's pricing system.
posted by stratastar at 9:23 PM on April 11, 2012 [1 favorite]


What's to keep someone from buying used books for pennies, scanning them, then reselling them (with a mark-up) along with a non-DRM digital form? Seems like it would bypass the publishers and Apple/Amazon completely without technically violating copyright law, since you'd be selling a physical book along with the digital copy—effectively selling your scanning services, rather than the protected content.
posted by dephlogisticated at 9:42 PM on April 11, 2012


Apple will take hit for price-must-match-lowest-price-elsewhere but the spirit of that clause was to make sure their consumers had access to the lowest prices.

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.

FWIW, I'm an Apple fanboy
posted by identitymap at 9:44 PM on April 11, 2012 [1 favorite]


If any company would be well positioned to engage in a pricing war with Amazon, it would have to be Apple. They had more cash than God at the time and very healthy revenue streams to support such a venture. A year's worth of lost sales would have been less than a few percent of their cash on hand. They are one of the few companies entirely capable of competing with Amazon head-on.
posted by bonehead at 10:03 PM on April 11, 2012


Ah but Apple doesn't even have any skin in the game in a price-war!

From the verge article: "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."

So assume a world where Amazon didn't blink and remained on the wholesale model, continuing its price-leader model (where Amazon buys a book for $13 from the publisher, sells for 10 and takes a $3 loss on the book in pursuit of market share). On iTunes, with the agency model, the publishers are now forced to set the iTunes price to $10, while Apple still gets a 30% cut of the sale.

So it makes sense that Amazon had to drop its model, it tried to front for a bit in response to MacMillan, but after seeing that the other publishers had colluded to follow suit, it had to give up.

So its pretty clear that the publishers had to collude to get this outcome, I guess Apple can pretend it had No Idea what those guys were up to... but ... heh.
posted by stratastar at 10:27 PM on April 11, 2012 [1 favorite]


The weird thing about this is that Apple only controls 10% (at most) of the ebook market. Barnes and Noble (barely mentioned in this thread) controls at least twice as Apple.

Nook ebook prices are (to me at least) pretty reasonable, with the HC new releases tending to be around what you'd pay for the trade paperback (at least for the ones I've checked lately). There are good deals if you watch for them too.
posted by drezdn at 10:41 PM on April 11, 2012 [1 favorite]


Meanwhile, Google discontinues its e-book reseller program, a program that helped independent bookstores.
posted by drezdn at 10:44 PM on April 11, 2012


Dammit. We have to give our presentation on Barnes&Noble vs. Amazon tomorrow morning, and now I've got all this stuff to analyse and digest. :)

More seriously, thanks to everyone in the thread for all the info. Lots of good analysis here that I'll dig into.

I, too, am perplexed why the publishers, particularly the big ones with lots of titles and back-catalog, haven't tried to build their own direct-to-consumer online stores. Sure, it might not be as sophisticated as Amazon's setup, but if that's the way to get their books online, why not?

The most important thing for the publishers here is the loss of control over the value chain. With independent booksellers, much of the power rested with the publishers, who controlled access to the content, set the RRP, and understood how much of their titles were selling where. Then the superstores like Borders and B&N came along, and gained a lot of power because of the volume of books they sold. They were able to squeeze out the wholesalers and deal directly with publishers, often on better terms due to bulk discounts.

Amazon did the same thing to Borders and B&N: they built a high volume, lower cost business by not having fixed costs like bookstores. Today, unlike B&N (but like supermarkets) Amazon has negative cash-conversion-cycle, which essentially means they get paid for the book by you before they pay the supplier. They get books from publishers to the book buying public faster and more efficiently than with traditional means.

Amazon also controls the information flow. They know more about the book buying public than independent booksellers used to, and more than publishers. So now Amazon has the power. Bezos himself said "Ultimately, we’re an information broker. On the left side we have lots of
products; on the right side we have lots of customers. We’re in the middle making the connections. The consequence is that we have two sets of customers: consumers looking for books and publishers looking for consumers. Readers find books or books find readers."


All the retailers, including Apple, are trying to be in this position. I just don't understand why the publishers are letting them do this, when losing control of the information is the biggest competitive threat they face. Colluding with Apple is just changing the colour of their collar.

Anyone want to start an online e-book only publisher with me?
posted by But tomorrow is another day... at 11:40 PM on April 11, 2012 [1 favorite]


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.
It's amazing what people put in email.
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.
They are digital goods, though. Amazon doesn't literally have n*10,000 digital files sitting a hard drive waiting to get sent out, they only have one actual 'copy'. So unlike selling something they have, they're just distributing a digital copy.
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.
Apple could probably won an outright price war, they had tens of billions of dollars just sitting there.

---
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.
The deal apple offered them had nothing to do with the deals that they had with Amazon. All of the publishing companies, at the same time, changed their deals with Amazon to forbid Amazon from selling their books at a loss. That meant higher prices for consumers.

The only way that could happen at once is if there was an illegal price fixing deal.

It's pretty obvious, jobs was basically bragging about it on camera.
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.
Well, what does a publisher do? They don't write the book. They get paid for printing and distributing the book. But if that's not needed, then what's the point of having them? Authors can do their own marketing and editing. If they want to bring other people on board to help with those things, then they can do that. But fundamentally, why should there be a right to profit off other people's creative works?

Not that having the whole industry controlled by Amazon would be a good thing.
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?
Basically, what Amazon was doing was taking a hit on the prices of books in order to get people to buy kindles. They wanted to be the dominant player. If they were the dominant player, then they'd have more negotiating power with the publishers, thereby screwing them down the road.
Anyone want to start an online e-book only publisher with me?
It would be easy to start an 'indie' publisher selling file downloads for people to manually load into their kindles, but difficult to start the next amazon, or whatever.
posted by delmoi at 12:32 AM on April 12, 2012


Authors can do their own marketing and editing.

Authors absolutely cannot do their own editing. No way. Hell, just look at titles (this ties into authors doing their own marketing too, btw). Authors suck at creating titles. They suck. An author creates a title that is dear to them (the author). Whereas an editor creates a title for the reader. The work of an author is their precious little baby, and it has to be that way, otherwise it wouldn't get written. An editor has to then come and cut up the baby, make it into the reader's baby. The author cannot do this.

I'm not a big fan of editors, but they are a necessary evil. Without editors, every novel would wind up like a college art film in text form.
posted by BurnChao at 1:11 AM on April 12, 2012 [4 favorites]


Heh, from the Wired article:
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.
Heh.
Authors absolutely cannot do their own editing. No way.
Yeah, but on a dollar basis how much is that editing actually worth? How much less money would twilight have made it if hadn't properly edited? I don't think readers really care that much.

And if a writer is really terrible at editing, then why not link up with an editor directly, rather then through a publishing company?

Marketing is a bigger issue. Not every author wants to market. They may not even want to edit. But the question is why should the publisher have the power in the relationship? The author should be the one to hire and fire people - rather then mailing off manuscripts and waiting months for rejection letters.
posted by delmoi at 3:00 AM on April 12, 2012


The author should be the one to hire and fire people - rather then mailing off manuscripts and waiting months for rejection letters.

And the money to do this hiring and firing is coming from where?
posted by ominous_paws at 3:17 AM on April 12, 2012


Editors could work on commission, just as the publishing companies do.
posted by delmoi at 4:04 AM on April 12, 2012


Editors could work on commission, just as the publishing companies do.

And where do editors get the money to work while waiting for the commissions? There's also the risk that the product won't sell, so they'd have to start vetting incoming manuscripts to judge which will sell and are worth taking the chance on.

What they should probably do is band together with other editors, pool their money and hire some people to read the slush pile and judge which are worthwhile. Then, to help increase their commission, they could hire some marketers to help promote the eventual titles.

If that was successsful enough, they'd start going out and actively seeking new authors, or having titles written to order that they could publish.

Congrats, you've just reinvinted publishers.
posted by fightorflight at 4:32 AM on April 12, 2012 [2 favorites]


It would be easy to start an 'indie' publisher selling file downloads for people to manually load into their kindles, but difficult to start the next amazon, or whatever.

I'd need to do more research, obviously, but I'm not so sure about that. Amazon re-invented the bookselling market by distributing books in a new way. I wonder if a new player, unencumbered by existing baggage, might not be able to do the same thing?

Actually, starting is the easy part. Staying alive long enough to get big enough is the hard bit.

Barnes & Noble did launch an online store shortly after Amazon, after all. And they had a much longer history in the bookselling business, and Amazon lost money hand over fist for years. But B&N didn't commit to online and saw it as a way to get people into the shop. Does Amazon have that level of hubris? I dunno.

Hell, maybe you could convince Facebook to buy the indie store for $1B before the bubble pops this time, who knows?
posted by But tomorrow is another day... at 5:28 AM on April 12, 2012


The weird thing about this is that Apple only controls 10% (at most) of the ebook market.

Apple isn't the monopoly, Apple is just the go-between for the conspirators that have 50% of the book market. Instead of the publishers telling each other that they would lower prices together, they would tell Apple they planned to switch to agency, and then Apple would tell the others that everyone was planning to switch so it would be safe. Collusion via third-party.
posted by smackfu at 6:38 AM on April 12, 2012


>Yeah, unlike those publishers who are doing it for the least mercenary reasons

Correct. Talk to just about anyone in publishing and they will tell you that they went into it because they love books. Bezos – not so much. He famously went into it because books ranked top of a list he had made of market areas ripe for his kind of exploitation. Had beer or flowers ranked first, we would be having a different conversation here.

Sure, money men went into publishing some years back. They do so periodically, convinced they can make a serious killing. They are disappointed and start putting out things Snooki’s Greatest Hits. Sad culturally, but the upside is that she funds all the losing propositions that don’t quite turn a profit, but are still worth reading. Bezos accepts loss leaders for a specific purpose. I don't envision him doing so as a publisher.

I've heard small publishers if not championing Amazon, certainly talking about what a boon the kindle as been for their sales and production model.

These guys - not so much.

So its pretty clear that the publishers had to collude to get this outcome,


Given the experience of I.P.G. at the hands of Amazon, one might think that. But MacMillan apparently was able to face them down on its own.

I, too, am perplexed why the publishers, particularly the big ones with lots of titles and back-catalog, haven't tried to build their own direct-to-consumer online stores.

They have. Problem I suppose is getting people in the front door when they're used to heading to Amazon or B&N.

What's to keep someone from buying used books for pennies, scanning them, then reselling them (with a mark-up) along with a non-DRM digital form?

The same laws that prevent you from copying software and photocopying books (note those copy right notices on all public copying machines). The medium is the message. Nice try, though.

Yeah, but on a dollar basis how much is that editing actually worth? How much less money would twilight have made it if hadn't properly edited? I don't think readers really care that much.

You ever read an unedited book?

And this just in- it seems Amazon is preparing to twist the knife.

(Anyone know what prompted this whole investigation? And who made some of the unattributed quotes in the filing?)
posted by IndigoJones at 6:47 AM on April 12, 2012


There's really very little preventing authors from publishing on their own right now, and many do it, but you don't hear about them very much. There, of course, have been success stories with self-published books, but they're few and far between.

The most recent would have to be "50 Shades of Grey," which started out as a self-published print-on-demand/ebook. Once the book was popular, the author still decided to sign with a publishing company to re-release the books.

Besides editing and marketing, the filtering that publishers provide is useful. Sure, they definitely turn down some potentially great books, but like metafilter, they shelter us from crap (for the most part) and help promote some terrific works.

Without the filtering, you see more and more things like the ebook companies that just put together wikipedia articles polluting search results.
posted by drezdn at 7:05 AM on April 12, 2012


I called it.

Cut in E-Book Pricing by Amazon Is Set to Shake Rivals

But publishers and booksellers argue that any victory for consumers will be short-lived, and that the ultimate effect of the antitrust suit will be to exchange a perceived monopoly for a real one. Amazon, already the dominant force in the industry, will hold all the cards.

“Amazon must be unbelievably happy today,” said Michael Norris, a book publishing analyst with Simba Information. “Had they been puppeteering this whole play, it could not have worked out better for them.”

posted by Blazecock Pileon at 7:31 AM on April 12, 2012


Yeah, but on a dollar basis how much is that editing actually worth? How much less money would twilight have made it if hadn't properly edited? I don't think readers really care that much.

Well, how about this: a couple of years ago I took a multi-hundred-dollar class from a major info sec training organization. The written materials were so bad (e.g., typos, factual errors, failure to match the practical exercises, etc -- none of which the lecturer could correct because he wasn't the author!) that I demanded a refund. And then I offered to copy-edit their training materials for a couple of hundred bucks each. If every book that I edited saved them a single tuition refund -- and these books were used for quite a long time before revision/update -- then it was totally worth it.

/end_corner_case
posted by wenestvedt at 7:52 AM on April 12, 2012


Hmm, I'm kind of surprised to hear people taking the "Editors? We don't need no stinking editors!" position. I'm not an author, but whenever I hear an author mention their editor, it's usually in a sentence like "Thank God for my editor, who helped make my book so much better".

Of course, that's not to say that the whole publishing industry needs to remain as is, or even should remain as is. It's just that, in my opinion, there will probably remain some system for writers to hook up with editors, marketers, and graphic artists (those covers don't make themselves) as a package deal, rather than the writer having to go out and hire a bunch of freelancers. Although that will probably be an option too. Let a thousand flowers bloom.
posted by jcreigh at 8:09 AM on April 12, 2012


And then I offered to copy-edit their training materials for a couple of hundred bucks each.

Did you get the gig?
posted by Meatbomb at 8:23 AM on April 12, 2012


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 don't think the two things are mutually exclusive. Yes, Apple was ensuring that the iBookstore would have product that was not competitively priced. At the same time, if that product was identically priced everywhere, Apple would have also guaranteed that their users get the same (best) price.

Apple is a profit-making company and the way they make profit is by focusing on benefits to the user. User experience, user satisfaction, ease of use, etc. etc.

Anyone who does not understand this does not understand Apple after Jobs's return (i.e. Sculley years were a big bad blip). Apple does well because they prioritize the experience of users before everything else, and this priority does not conflict with their desire to have a big chunk of the ebook market.
posted by mistersquid at 8:33 AM on April 12, 2012


Yes, Apple was ensuring that the iBookstore would have product that was not competitively priced.
posted by mistersquid at 8:34 AM on April 12, 2012


I also want to note that those who believe it's easy to take print and turn it into an ebook do not understand the complexities of textual digitization. Even with current OCR techniques, accuracy floats somewhere between 95 and 99 percent accuracy.

An error every 100 characters works out to dozens of hours per title of simple proofreading. Once you have an accurate datafile, the data then needs to have order imposed upon it. Even if a startup were to adopt one of the existing date doctypes rather than rolling their own, the labor for a single could easily work out to thirty hours or more.

And this is work that cannot be done by non-native speakers. Linguistic usage in books changes from region to region and from epoch to epoch so proofing them in many cases takes someone with at least a Master's degree in the language in question. Titles in the back catalog are particularly vulnerable to losing the digitization costs vs. potential market ratio calculation when compared to newer titles that come (to publishers) replete with digital formats.
posted by mistersquid at 8:41 AM on April 12, 2012


Titles in the back catalog are particularly vulnerable to losing the digitization costs vs. potential market ratio calculation when compared to newer titles

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.
posted by entropicamericana at 9:04 AM on April 12, 2012 [3 favorites]


Indigo Jones: "They have. Problem I suppose is getting people in the front door when they're used to heading to Amazon or B&N."

No. Your link goes to a randomhouse page which sells the book directly (and not at a decent price links to 10 different ebook intermediaries all selling the book at the same price. You sell that book for $5 less on your own website and you're telling me that people won't buy from your servers and figure out how to load the books into the kindle app?

So why aren't/can't they do that? To buy themselves price stability (and higher prices) they had to give a lowest price guarantee to Apple. So the publishing industry has acted to ensure higher market prices. Again, their end-goal is not selling the most amount of books but in protecting their business model.

"Linguistic usage in books changes from region to region and from epoch to epoch so proofing them in many cases takes someone with at least a Master's degree in the language in question."

Ok I grant that I don't know what I'm talking about here and I get that its not a completely computerizable service, but I don't understand why you would even need / want a fluent worker to do the work. This is an attention problem, not a comprehension one (comprehension could even be deleterious to the enterprise, a reader engaged with the work may miss all sorts of things).

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?

Or hell. Sell the books super cheap as betas and crowd source the corrections. All I hear are excuses from an industry - that should be doing better by itself and its customers, that's letting itself get eaten alive.
posted by stratastar at 9:54 AM on April 12, 2012 [1 favorite]


On re-read : "the data then needs to have order imposed upon it." Oh the actual work is not in the proofing. Gotcha...
posted by stratastar at 9:57 AM on April 12, 2012


IMHO, Shelf Awareness says it best: "In a clash of concepts about what best serves the reader--the lowest possible prices or a healthy, diverse book industry--the federal government yesterday came down on the side of the book as a commodity."
posted by Toekneesan at 10:13 AM on April 12, 2012 [1 favorite]


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.
Good one.

I can't really speak for the mindset of publishers and copyright holders on aging (non-contemporary) works but it is odd that there is a strong aversion to allowing works to fall out of copyright. When such works do enter the "public domain" (which I scare quote out of deference to publishers who loathe the term) copyright holders usually issue a new codex with new front and back matter (forewards, introductions, bibliographies, afterwords, etc.).

When such reissues are considered to be of marginal profitability the fear of copyright lapse seems to me to be a salt-the-earth approach: i.e. "if we can't make a buck off this thing then we'll simply fight anyone who would presume even to attempt to do so." Spiteful copyright capitalism seems to describe the approach of many (large) publishers and copyright holders.

To clarify my position with respect to publishers: I spent a lot of time earning my degrees in English Language and Literature. As a former university faculty, I was responsible for the sale of thousands of books that benefitted publishers and retailers of all sizes.

Over the course of two decades, I spent between $15,000-$20,000 on paper books, many of which were reissues of one sort or another. I loved the smell, feel, and variety of codices of all sorts. I spent thousands of dollars moving my private collection from place to place. Publishers were my dealers and paper print was the drug.

In the last decade, with the affordance of digital media, I have given away much of these items because, quite frankly, they were more useful as decor than data.

I am all set to reacquire much of my paper-print library (as well as acquire anew) in the form of digital books, but I have no illusions about the players who stand to benefit from this repurchasing. I don't romanticize the wane of paper print and I am furious its taking so long for the copyright holders and publishers (incumbents) to figure something out.

I want reasonable pricing; publishers want a bloodletting.
posted by mistersquid at 10:20 AM on April 12, 2012


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?
In many cases of aged texts, the highest fidelity image of a page is horribly difficult to read. For all its durability, paper molds, rips, and ink bleeds. Also, because leaves are printed on both sides, digital imaging often captures the text on the other side. To figure out what these problem passages say, you have to understand the language, the context of the passage, and (basically) have an advanced degree in interpretation which will fill in the gaps with cultural references, historical context, and relevant idiom.

Accurately converting print texts is not for the faint of heart or the shallow of wallet.
posted by mistersquid at 10:25 AM on April 12, 2012


Congrats, you've just reinvinted publishers.

Yeah, but with way less power and a much lower commission. Rather then be a huge corporation a "publisher" could simply be one person working as an independent editor/marketer. And the authors wouldn't need them, rather they could find an editor and market the book themselves.

The key here is that they would not be middlemen.
posted by delmoi at 10:33 AM on April 12, 2012 [1 favorite]


I also want to note that those who believe it's easy to take print and turn it into an ebook do not understand the complexities of textual digitization. Even with current OCR techniques, accuracy floats somewhere between 95 and 99 percent accuracy.

I think I've mentioned this before, but this is why Amazon invented their Topaz format, to handle cases where the publishers said "we only have scans of this book", which is the case for a lot of back-catalog stuff. It uses a "font" derived from the scans which is backed by the OCR copy. 95% of the time, the backing text is correct, otherwise it is wrong, but crucially, the displayed page is always correct, and allows font size changes and arbitrary line breaks and such.

End users tend to complain "we can't change the font" or "the file size is too large for an e-book" without even realizing what the format is doing.
posted by smackfu at 10:39 AM on April 12, 2012 [1 favorite]


(More on that subject)
posted by smackfu at 10:42 AM on April 12, 2012 [1 favorite]


I can't really speak for the mindset of publishers and copyright holders on aging (non-contemporary) works but it is odd that there is a strong aversion to allowing works to fall out of copyright. When such works do enter the "public domain" (which I scare quote out of deference to publishers who loathe the term) copyright holders usually issue a new codex with new front and back matter (forewards, introductions, bibliographies, afterwords, etc.).

When such reissues are considered to be of marginal profitability the fear of copyright lapse seems to me to be a salt-the-earth approach:


Funny, that. In addition to its other benefits, public domain seems to protect publishers from themselves.
posted by entropicamericana at 11:15 AM on April 12, 2012


"public domain seems to protect publishers from themselves."

The same publishers and author's guild which fought tooth and nail to keep google from automatically assuming public domain status on questionably lapsed books?
posted by stratastar at 11:26 AM on April 12, 2012 [1 favorite]


mistersquid: Even if a startup were to adopt one of the existing date doctypes rather than rolling their own, the labor for a single could easily work out to thirty hours or more.

Okay, so assume that a book takes thirty hours of labor, and that someone to do that labor costs the company $50/hour, which equates to about a $75K/year salary plus benefits. That means it costs about $1500 to convert a book. That's all, $1500.

At $10/book, which is actually pretty cheap for e-books, they only have to sell 150 copies to recoup their costs. And every copy after that is pure profit.

E-books, in other words, are unbelievably overpriced.
posted by Malor at 11:44 AM on April 12, 2012


(I should say -- e-book conversions are ridiculously overpriced.)
posted by Malor at 11:44 AM on April 12, 2012


Malor: "(I should say -- e-book conversions are ridiculously overpriced.)"

Right. A brand new e-book is presumably already a digital file of some kind, say, RTF. It can't be that difficult to produce a reasonable quality e-book from that. So a new "indie" e-book publisher would need to focus on new works (obviously, since they can't possibly have a back catalog - they're new after all). The challenge is, as But tomorrow says, staying afloat long enough to get big enough to make any money. I gotta think there's a way to do that, I'm just not clever enough to flesh it out.
posted by that's candlepin at 12:24 PM on April 12, 2012


$1,500 for an ebook conversion is hilariously high. An excellent high-end US based firm charges $250 for an 800 page novel. Indian firms converting at volume will charge a fraction of that.
posted by nev at 6:05 PM on April 12, 2012


jscalzi, being sensible as always: Dear Consumers Who Apparently Think the Current Drama Surrounding eBooks is Like a Football Game: "Please stop, seriously. You’re driving me a little bit nuts."
posted by jcreigh at 6:54 PM on April 12, 2012 [1 favorite]


He should have just titled it "Dear Consumers, Stop Rooting for Amazon Over the Publishers." I mean, that's the intent, right?
posted by smackfu at 7:40 AM on April 13, 2012


No, I don't think that's the intent at all. The title could instead have been "Just because you're on their side doesn't mean they're on your side."
posted by Justinian at 10:24 AM on April 13, 2012


Isn't that what I said, practically speaking?

Or equally "Dear Consumers, Stop Rooting for Publishers over Amazon", but I don't think consumers are doing that...
posted by smackfu at 10:50 AM on April 13, 2012


Yeah, I guess so.
posted by Justinian at 4:14 PM on April 13, 2012


Here's what I'm rooting for; the justice department kicking some teeth in, and a competetive non-collusive industry that screws over consumers only in legally permissible ways. That and some ebook coupons for my fucking hardcover book purchases.
posted by stratastar at 10:06 PM on April 13, 2012


The only thing ebook related that annoys me more than no free ebook coupon with the print book (though how you'd work this out so people wouldn't steal codes/whatever would need to be figured out) is ebooks that cost as much as the print versions but don't offer access to the supplemental materials the print version comes with (ie. a print book that comes with a cd).
posted by drezdn at 10:18 PM on April 13, 2012


Charlie Stross has an insightful look at Amazon's ebook business. A couple of choice quotes
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.
posted by Nelson at 11:10 AM on April 15, 2012


Small Publisher Says Goodbye to Amazon:
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."
posted by alms at 2:05 PM on April 15, 2012


Great point by Stross on how the publishers enabled e-retailers to become monopsonist buyers. Just like the record labels' with Apple's DRM aac.

If I remember correctly, in the parallel music case, Apple insisted on dropping DRM once their mp3 players were in a market-leading position.

Amazon's dream end point in this scenario is basically getting B&W Kindles into customers hands for as close to free as possible. Once that happens: goodbye publishers.

You know, its interesting that this happened with Apple and music (never mind that they've continued to drive innovation with their products), that the book industry had this as a model and still fell into the same trap is a fucking travesty.
posted by stratastar at 3:57 PM on April 15, 2012


Scalzi, Stross, Shatzkin on DoJ, publishers, and Amazon
posted by Artw at 9:22 AM on April 16, 2012


Boy, did I ever call it.

The Justice Department Just Made Jeff Bezos Dictator-for-Life

In other words, Amazon will have two years to consolidate its hold over the fast growing eBook market by offering virtually any sort of discount it pleases -- a marketing strategy it can afford thanks to the volume of business it already does.

But if it screws over Apple users, that's all that counts!
posted by Blazecock Pileon at 6:02 PM on April 16, 2012


The thing is, I hate Kindle, but I rely on Amazon for so much. DRM-free mp3s for a start. I'm considering an Amazon Prime subscription for TV & Movies (considering the unfortunate trajectory of Netflix).

I tend to go back and forth between Nook and Kindle for my digital reading, depending on who has a better deal for my book. I've never purchased any books from Apple. Partly because I'm sore over their DRM music policy, and partly because books really aren't any cheaper and I'm already Kindling or Nooking everything.

I'm no fan of how Amazon is treating the publishers, but I'm also no fan of how publishers are treating readers. Two wrongs do not make a right, for certain, but there has to be a solution that prevents Amazon from monopolizing the e-book business. What that has to do with Apple, I don't know.

Apple offered a solution to publishers that was very pro-publisher; Amazon offered a solution to publishers that was very pro-consumer. I'm confused how Amazon got stuck with the Apple model, and I can only assume that if the publishers hadn't hob-knobbed about it there wouldn't be an issue. The better way would have been for MacMillan to start, then Simon & Schuster think "That's a swell idea" and follow suit.

If Amazon's model isn't sustainable, of course, we'll figure it out. Hopefully the DOJ will be just as gung-ho against Amazon as it is against the book publishers when the time comes.

Hasn't Amazon already cornered the books-on-tape market, by the way? I'm not happy with the Audible model (especially having a disabled parent whose only option is books on tape), but it works. It wouldn't work at all if I had less disposable income. It's definitely one of the things I cut when I need the money.
posted by jabberjaw at 7:37 PM on April 16, 2012


Why Apple's eBook Pricing Defense Is Wrong
posted by Artw at 12:09 PM on April 17, 2012 [1 favorite]


Why e-book DRM will die, and why this will make no difference to Amazon and Apple
posted by Artw at 2:26 PM on April 17, 2012


Here's an article by David Caar on competition in the industry.

Someone made a good point on twitter that its all besides the point: having a monopoly (or Amazon like market power) is not illegal, colluding to control prices is (Sherman Antitrust Act).
posted by stratastar at 2:19 PM on April 18, 2012


Ebook price-fixing: Apple, publishers face class action in Montreal
posted by Artw at 2:39 PM on April 20, 2012


Why Apple's eBook Pricing Defense Is Wrong.

This blog post should have been titled "Proof that I am not a lawyer and know nothing about antitrust law, but still think Apple is a meanie."
posted by alms at 7:37 PM on April 21, 2012 [1 favorite]


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