Amazon: Publishers Strong-Armed Us On E-Books 171
Nerval's Lobster writes "Strengthened by an agreement with Apple that set the prices for their respective e-books higher, publishers strong-armed Amazon into giving them similar terms, an executive for the online retailer has testified in Manhattan federal court. The U.S. Department of Justice has taken Apple to court over the alleged price-fixing, after reaching out-of-court settlements with five publishers (HarperCollins Publishers LLC, Simon & Schuster, Hachette Book Group, Penguin Group, and MacMillian). Apple, which competes with Amazon in the e-book space, refused a similar settlement. "Certainly if someone offered reseller, we would have taken them up on that offer," Russell Grandinetti, Amazon's vice president for Kindle content, testified before the court, according to Reuters. "Reseller" means a company sells goods to a retailer for a particular price (usually wholesale), allowing the retailer to set the actual sales price. Under the terms of that model, Amazon could sell e-books for super-cheap, even if it meant going beneath the publisher's wholesale price. Macmillan and Amazon ended up in conflict over the issue, with Amazon temporarily yanking the publisher's e-books from its digital shelves. "We will have to capitulate and accept Macmillan's terms because Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books," Amazon wrote in a statement at the time. "Amazon customers will at that point decide for themselves whether they believe it's reasonable to pay $14.99 for a bestselling e-book." But Amazon eventually relented to Macmillan's demands, along with those of other publishers, and submitted to the agency model, in which publishers have a heavier hand in setting retail pricing."
What is wrong with these folks? (Score:5, Insightful)
Why do they want even more than for a the paperback?
I am getting less in that I cannot resell it and no physical copy, yet they want even more. On top of that their costs are reduced, since they need not print, ship or deal with any of that.
I just end up not buying those books. It seems though all media folks are just too greedy for their own good, books the same as movies.
Re:What is wrong with these folks? (Score:5, Insightful)
Because it works. Most people buy into it. Why should I pay $20+ for a BluRay? Oh, because it comes with the DVD and a Media file. But I don't want the DVD and Media file!!!! Too bad. You can't buy it any other way (than used.) So consumers buy anyway. And the sellers sit back rub their hands together with a MUAHAHAHA!
As soon the majority just buys into it, it doesn't matter that the price level is higher.
Amazon undrestands books, publishers only control. (Score:2, Insightful)
Amazon has made a fortune by understanding the marketplace. Publishers only care about controlling the works they release. I think often they forget that the reason people purchase books, and just assume they'll buy them. There's a reason I frequent used bookstores and only pick up ebooks for free or for a very, very low price. I like lending my books, I like selling my books if I don't like them, and I like not having to worry about whether my device is charged.
People know when they're getting ripped off. $15 to copy a file which can be sold an unlimited number of times by the publisher with no further cost or effort is ridiculous, especially when compared to the price of waiting for a physical paperback or a used copy.
Re:grow some balls (Score:4, Insightful)
Re:What is wrong with these folks? (Score:5, Insightful)
Re:What is wrong with these folks? (Score:5, Insightful)
Because they want to keep you buying paper where publishers have all the control. In a digital book market you no longer need financiers able to absorb the cost of printing and distributing 10k copies and you don't need a marketing/sales department that can get your book onto an endcap at bookstores. You still want the people that work for publishers(editors, artists, etc) but you can contract for those directly.
If everyone switches to digital, the publishers' advantage of having a huge bankroll to be able to bet on multiple authors while keep the lion's share of the profit on the few winners is negated when Amazon will sell for anyone and the contract work can paid for like saving up for a car down-payment.
Re:What is wrong with these folks? (Score:5, Insightful)
tl;dr: to kill the medium before it can be born.
They're scared of it. They don't know what to do, or how it will affect their bottom line. They don't want it. They want people to stop using it. They want their control of the industry back.
The only way they know how to do this is to price the new way above the old way. Because they're still living in their old world, where supply is physical and limited physically. And in that world, changing the price of things changes demand.
Re:What is wrong with these folks? (Score:1, Insightful)
Because it costs a certain amount of money to write, edit, proof, print, and distribute a book. Eliminating the printing costs (already a small amount of the overall cost) doesn't reduce the cost of producing the book that much.
The costs of producing the book are generally recouped in the higher margins of the "early adopter" sales - hardcovers. Margins on paperbacks are smaller, and cost to produce them is lower, so they can afford to sell them cheap.
Now with e-books, you're eliminating hardcovers and paperback sales, and so the cost of sustainably producing a book must be amortized over the sales of a single edition of e-book. Most books don't see millions of copies because they've been endorsed by Oprah. From doing a little reading via google, it appears that the "average number of books sold" equals somewhere in the order of 20,000 - 50,000 copies for a "successful, major-publisher book."
Assume an average price of $10 for an ebook. That means a person selling 50,000 copies of a $9 ebook (a successful book!) nets $450,000. Wow, that's a lot, right!? Weeeeelllll...... not so much after you deduct author's living expenses while writing the book, the salaries of editors, typesetters, and other people involved in the production of that final .epub file, and less still after you calculate the distributor's cut - Amazon, Apple, B&N, and others don't sell that book for free.
When you consider the costs of something, you have to consider the total costs of producing the original, not the marginal cost of reproducing it. It's never been THAT expensive (relative to the retail price of the book) to print 50k paperbacks. It is, however, expensive to produce the first copy of the book that you're going to make copies of and sell.
Stop being cheap.
Comment removed (Score:5, Insightful)
Re:What is wrong with these folks? (Score:5, Insightful)
Because it works. Most people buy into it. Why should I pay $20+ for a BluRay? ....
I'm going to point out that when DVD's were newish, they were $20 new. And you are getting a much higher quality video in Bluray format then you are in DVD format. Give it 10 more years or 4k movies becoming popular to see the price of Bluray movies going down. VHS movies used to cost alot when new also, way back when.
And oddly enough, what you could do is buy a cheaper DVD version of a movie, then download a bluray version to watch. Sure, it's not legal, but you are paying what you feel the movie is worth, just not as much as they want.
More importantly... (Score:5, Insightful)
You don't set your price based on what it costs you to make/provide something. You set your price to maximize profits.
So it doesn't matter that eBooks are cheaper to make/distribute than hard copies. What matters is whether people are willing to pay the same price for an eBook as they are for a hard copy. eBooks are arguably better than hard copy books, so it stands to reason people will pay at least as much, if not more, for them.
Now, in a free market, you would expect a competitor to enter the market at lower pricing - but books are copywritten, so it's not exactly a free market. Even then, the justice department is examining whether competitors in the market illegally colluded to force the agency model on eBook retailers.
Re:What is wrong with these folks? (Score:3, Insightful)
This is, of course, subjective. I have a Nook, and in a lot of ways I prefer the "core reading experience" on the Nook to my mass-market paperbacks.
For one, I get to choose the font size (and font face, although this isn't so important since most paperbacks have a fine font). Font size is great, because I have some books with tiny type that is annoying to read.
Now, if the argument is that the editing on some ebooks is really, really awful, I will definitely grant that. There are some clear OCR-and-sell books out there.
Next, I don't ever have the problem of the print being too close to the margins, which can be a real problem with fat paperbacks.
I'm not sure how exactly you're defining "core reading experience", so I won't go into more detail. Suffice it to say, the act of reading itself on my Nook is at least as nice as reading a paper book. I never stop and think about the fact that I'm reading on a device; I just read.
Re:More importantly... (Score:2, Insightful)
They are cheaper to "copy and distribute." They are not any cheaper to "write and edit."
I'll give you two guesses which pair above drives the vast majority of the book's price. Hint: it's not "copy and distribute."
Lose, Lose (Score:3, Insightful)
When Amazon says that they'd like to sell some books below wholesale, and claims that the agency model prevents that, they are lying their asses off. They could easily get around that restriction. The simplest way being by offering an account credit on certain books. The problem with that approach from Amazon's perspective is that it would reveal how large the subsidy is. Doesn't matter to the consumer, but it is competitive information they wouldn't want public.
On the other hand, if the agency model prevents Amazon from negotiating a different wholesale price than Apple pays, then that is collusion. I'm not sure it rises to the level of needing a government crackdown, but it is slimy none the less.
And the flip side of this is that Amazon of course would be happy to subsidize book sales and Kindles to drive people to the Amazon store to buy other things. Which in turn could have the anti-competitive effect of making tablets from Apple, Samsung, and others over priced by comparison and push them out of the market.
It doesn't matter which way the courts rule on this one, the consumer loses.
Re:What is wrong with these folks? (Score:5, Insightful)
Even worse, if you do what I did and stop buying movies on discs (I'll wait til they show up Netflix), you are part of the "decline of sales that proves billions of dollars lost to piracy" ... even if you never pirate a goddamn thing. :/
Re:grow some balls (Score:5, Insightful)
As Amazon said, the publishers have a monopoly on works by their authors.
Re:More importantly... (Score:4, Insightful)
You haven't operated a printing press & delivery system then.
Re:More importantly... (Score:4, Insightful)
Pricing is based on utility as well as cost (Score:4, Insightful)
Pricing can be based on utility, rather than cost; see http://en.wikipedia.org/wiki/Utility [wikipedia.org]. I completely agree with you in principle, but I've found I am now just buying ebooks, even when I could get a paper copy for less, because:
- I get it instantly
- I tote my entire library around on a device that weighs 11 ounces
- I can read on multiple devices and it syncs my position automatically
And I recently gave >1000 books to the library when moving, so I know that despite my fears that Kindle as a platform might die, I'm not necessarily keeping all my books forever. (Although since my daughter is 11 and I'm now giving her books I bought when I was a kid... there is definitely some merit to it. If anything, this is the one thing that keeps me occasionally buying paper books; the loaning and hand-me-down factor.)
I'll be honest - I hate myself a little for capitulating, because on principle I completely agree with you. But I also drop $6 on triple lattes frequently and I just feel too busy to feel any rage over a few bucks here or there. I applaud everyone who goes for the cheaper option even if they'd prefer the e-book at that price.
The equivalent crap happens in movies as you point out. HD movies on iTunes being $15 instead of $10, or $20 instead of $15, say, seems fairly absurd, since the difference is perhaps $.02 of bandwidth. TV shows even more crazy, being $3 instead of $2.
The reality is, publishing is a completely shitty business. Macmillan's parent company (a publishing conglomerate) made a whopping 6.7% on 2.1B Euros in 2005 (BEFORE taxes). (2010 they were up to 2.25B euros)
That's not exactly rolling in the dough.
Re:What is wrong with these folks? (Score:4, Insightful)
E-books should still not be more expensive than the paper-back. Why is this so hard to fathom?
Re:What is wrong with these folks? (Score:4, Insightful)
servers are more expensive than a physical supply chain? you're crazy
Re:First Sale? (Score:4, Insightful)
That's exactly what Apple wanted to kill. Amazon was willing to sell eBooks with 5% profit margin because it cost them nearly nothing to sell them. Apple wanted 30% and they saw an opportunity to raise the prices and get more profit for Apple and the publishers. The 5 Publishers that have settled with the government all had record profits after they colluded with Apple to fix prices.
The funny thing is this is ALL in the emails, the intent to raise prices marketwide. The intent to limit competition so Apple could gain marketshare without price competition. The intent to raise prices more than the 30% margin so the publishers could rake in even more money than they do on paper books. It's all there, the government has all the evidence and that's the reason the Publishers all settled after denying they would. The publishers lawyers took one look at all the information the government has and told the publisher to settle or they would get killed in court.
Price fixing is illegal and if the government has the evidence to prove it you will get nailed. The reason you see so few prosecutions is the government rarely has good documentation, the collusion is often done orally behind closed doors with no notes or records of the conversation. Job's probably believed he had enough chutzpah to avoid a prosecution or he believed he was above the law. He was an egotistical asshole that didn't give a rats ass about ordinary people.