Connecticut AG To Grill Amazon, Apple Over E-Book Price Fixing 107
suraj.sun tips news that Connecticut's Attorney General has demanded a meeting with Apple and Amazon to discuss anti-competitive pricing methods in the e-book market. From Ars:
"Richard Blumenthal says that he wants representatives from both on-line giants in his office ASAP to discuss what Blumenthal calls their 'most favored nation' arrangements with big book companies like Macmillan and Simon & Schuster. The crux of the MFN concept is that a given product maker must offer a given distributor the lowest price it's offering anyone. If a competing distributor gets a price break, they get it too. 'The net effect is fairly obvious,' Blumenthal warned in his letter to Amazon (PDF), 'in that MFNs will reduce the publisher's incentive to offer a discount to Amazon if it would have to offer the same discount to Apple, leading to the establishment of a price floor for e-books offered by the publisher.'"
Re:Zero cost copying (Score:5, Informative)
Re:Zero cost copying (Score:3, Informative)
What you are talking about not "fixed prices," but "fixed costs." The cost of any good sold has a fixed cost and a variable cost, and technically an eBook has very low variable costs (in this case, mostly distribution) but similar fixed costs to deadwood (editing time, design/typography, etc).
Price fixing [wikipedia.org], on the other hand, is two companies joining forces to set prices in a market to maximize sales dollars or price out competition unfairly. The wikipedia link is a great reference on that.
Variable costs and Pricing are not necessarily related in non-commodity goods markets, because then artists would end up making nothing to produce creative works. It would be like saying I'm only going to pay $1 for Starcarft II, because that's what it cost to produce the disk, leaving out the R&D costs, testing, and (God forbid) that someone make some profit by producing a superior entertainment good that "can be copied infinitely at no cost."
Re:AUGH (Score:1, Informative)
Mass-produced paperbacks are dirt cheap to actually produce, the price you pay is mostly for writing, editing, and distribution
And a 200k text file with the odd tag is expensive? Pulp still requires warehousing, distribution, shelf space, retail overheads. An ebook is about the size of a single webpage plus all the jacascript and css crap it uses. Once a book hits paperback, there's absolutely no reason to not have ebooks under $1, especially as you can't resell them, give them away etc.
Folks it is election season! (Score:5, Informative)
Nuff said.
http://en.wikipedia.org/wiki/Richard_Blumenthal [wikipedia.org]
Re:Zero cost copying (Score:3, Informative)
Most Favoured Customer clauses are well known in economics to be a sign of a cartel.
Most-Favored-Customer Pricing and Tacit Collusion
Thomas E. Cooper
The RAND Journal of Economics, Vol. 17, No. 3 (Autumn, 1986), pp. 377-388
Abstract:
This article examines the role of the most-favored-customer pricing policy as a practice facilitating coordination in a dynamic model of price-setting duopoly. This policy is a promise by a firm that if it later lowers price, it will rebate to current customers the difference between the price they pay now and the lower future price. by reducing each firm's incentive to reduce price, the policy enables both firms to offer higher prices and to enjoy higher profits. Consequently, at least one firm offers the policy in equilibrium. We illustrate these general results in an example.
Re:Amazon? (Score:2, Informative)
Yes. And the reason the publishers forced the increase in prices was because of their contracts with apple. The mfn plays into it, but amazon was also forced to go to the agency model because apple said the other vendors couldn't sell to anyone else unless it was through the agency model if they wanted to do business with apple.