[PCWorld]

Post your comments for Apple vs. Amazon: Who Is Really Fixing E-Book Prices? here

[userjoe9066]

Great article, price fixing is definitely illegal and these companies need to pay, the problem is that like you said they don't want to cut out the fat or rather, update their old business models, you just can't sell an E-Book for 40 the same as a hardback book. There's almost no appeal to an E-Book buyer. Great article.

[jhenkinson]

"30% markup, which is not much", wow, I learned something new today! Would you kindly further educate me by telling me which planet did you come from?
Oh yeah, but then again, many of Apple products are priced with at least 40% markup anyway. Blood-suckers, I'd say, if you ask me.
Also, the argument that Apple's model is doing consumers good by breaking Amazone monopolistic position is also flawed. If the problem is just the lack of competition then why don't other ebooks retailers (Apple included) just simply enter a price war with Amazon then? I'm sure the majority, if not all, consumers would like that!
Apple's and publishers' current course of action is norlthing but for profits for themselves!

This post has been edited by jhenkinson: 17 April 2012 - 05:59 PM

[HankRearden]

One of the few articles that gets it right. I have seen virtually 100% of the web get this issue completely wrong. I just want to point out a few things.

1. The DOJ would have to prove that Apple sat in a room with publishers and engaged them together at the same time to make their case stick. Good luck with that. Even if Apple had the idea of the agency model and asked each publisher to sign with it, that is not illegal.

2. Some have said that those who have settled did so because perhaps they did meet in a room and jointly decide to do this. If that proves correct, then "they" are guilty of price fixing. Not Apple. They will have to pay a fine and perhaps agree to some terms.

3. What Amazon is doing is setting customer expectation of cost too low. What I hear and read time and time again is that these books "should" cost $9.99. And that is exactly what is wrong with what Amazon is doing. They are "teaching" consumers to have unrealistic expectations as to the price of eBooks.

The author here gets this absolutely correct in that all that does is destroy an industry. Once you set a price and force a company to live with it, they look to cut costs and find ways to make a profit within that price point. And yes, books will suffer for this. All at a time when the government is printing money, thus devaluing it, which causes input costs to rise, not lower.

I personally want eBooks to succeed. But I don't want a digital version of Walmart. I already work directly in an industry where WalMart can make or break you. It does not help artists or consumers. It merely forces everyone in manufacturing to figure out ways to make products as cheaply as possible. To a point where no one makes a profit and companies go out of business.

I was one of Amazon's first customers for a Kindle when it cost $399 or $499. Don't quite remember what I paid for it. And when Apple opened the iBook Store I, like many others, didn't quite grasp how Apple's model, with higher prices was supposed to work. It seemed odd to me. Dig a little deeper and you find that Apple basically wants publishers to agree on one model and not allow Amazon to buy books for less than Apple or anyone else buys books. The agency model basically says, book publishers set the prices for the book, and the reseller simply gets 30%. It sounds like price fixing but it's not. It's no different than BOSE saying you can't sell our speakers for less than what we tell you to sell them for. BOSE does this because they don't want to destroy their brand value.

What Amazon is doing is leveraging their sheer size and influence in the book space to essentially set the price "they" want for ebooks. If anyone else tries to compete with Amazon's profit margin, they will lose because Amazon isn't making a profit. Often they are selling the books at a loss. The idea is, you consumers get used to the price, and no one else is able to sell ebooks because no one else is willing to make less than zero on ebook sales to match Amazon. As a result, Amazon gains a monopoly on ebooks and can then really dictate to publishers what they want to pay. Right now, Amazon is dumping on the open market to kill off competitors and own it.

These publishers are very happy some entity like Apple came along and said, we don't want to put you guys out of business. We just don't want to be in a situation where you sell us a book for $20 and sell the same book to our competitor for $10. That's not price fixing. Apple isn't setting a price. They are selling it for whatever price the publisher sets. And the publishers don't have the same books. It's not like all publishers are agreeing to sell a Stephen King book for $15. Only one publisher has that particular Stephan King book. And if they feel that book is worth $15 from Apple, then Apple's Agency model says they can't sell that same book to Amazon for less. There is no fixing between publishers because multiple publishers can't agree on one price for the book since they don't have the book in the first place. Only one does.

Right now, we have a music industry which agrees to sell songs on iTunes for a fee and Apple takes a cut. We have AppStores from Microsoft, Amazon and Apple among others that use this same Agency model. In fact Amazon employs this same model on their AppStore. If you sell your App on the Amazon AppStore you can't sell it elsewhere for less.

This Agency model already exists and is in wide use. It is time tested and proven and NOT ILLEGAL. The DOJ's entire cases hints on one issue. Did Apple sit in a room with the publishers at the same time and ask for these terms together as a group or not? The model isn't the issue. The model is fine. The DOJ doesn't have a case and they know it. Three publishers, that settled may have sat together and discussed this as a group. As I wrote that makes them guilty. But others did not. One is not even part of the suit because they didn't agree until later, so you cannot prove collusion at all with them. No case is brought to them at all, even though they agree with the Agency model, further proving the model is fine.

So when you see people make an issue of the model, understand they are barking up the wrong tree. The only issue here is if they colluded together. Apple didn't, and not every publisher did either.

You'll all see soon enough. Apple will win the case against them. As will the hold out publishers. Those that did collude settled and paid a fine. The DOJ just wants to look like they are doing something. In fact, the case is already over. What we have now is a side show for the ignorant.

[DavidWogahn]

One fact that I have not seen mentioned is that a buyer doesn't own an eBook. They have a license. They can't sell it, or donate it. Even "lending", if the publisher and online seller allow it, is greatly limited relative to print books.

Speaking as a reader, I feel there needs to be a fair differential between ownership and a license. How much? I think that is up to the retailer who will price it based on cost and their merchandising strategy (loss leader?).

As to the arbitrariness of "$9.99", how did we decide that a song from Britney Spears is worth the same $1.29 that you'd pay for a classic from the Beatles?

[nonseq]

DavidWogahn, on 18 April 2012 - 06:01 AM, said:

One fact that I have not seen mentioned is that a buyer doesn't own an eBook. They have a license. They can't sell it, or donate it. Even "lending", if the publisher and online seller allow it, is greatly limited relative to print books.

Speaking as a reader, I feel there needs to be a fair differential between ownership and a license. How much? I think that is up to the retailer who will price it based on cost and their merchandising strategy (loss leader?).

As to the arbitrariness of "$9.99", how did we decide that a song from Britney Spears is worth the same $1.29 that you'd pay for a classic from the Beatles?

Actually that's true of physical books as well. You buy the medium but the intellectual property rights (copyright) remain with the author/publisher.

[jhenkinson]

HankRearden, on 17 April 2012 - 07:06 PM, said:

One of the few articles that gets it right. I have seen virtually 100% of the web get this issue completely wrong.

Well, I once read a story that goes as this:

A worried wife called her husband telling him "I want you to be careful on your drive to work, I just heard from the breaking news that there is a crazy guy out on the road right now who are speeding in the wrong direction, it can be dangerous ..."

The husband responded with a laugh "No need to worry, I'm a very strong driver, in fact, I'm seeing hundreds of cars speeding in the wrong direction right now, and I'm still perfectly fine!"

-------------------------------------------

Oh, how our judgement could blind us ...

[nonseq]

jhenkinson, on 18 April 2012 - 06:46 AM, said:

HankRearden, on 17 April 2012 - 07:06 PM, said:

One of the few articles that gets it right. I have seen virtually 100% of the web get this issue completely wrong.

Well, I once read a story that goes as this:

A worried wife called her husband telling him "I want you to be careful on your drive to work, I just heard from the breaking news that there is a crazy guy out on the road right now who are speeding in the wrong direction, it can be dangerous ..."

The husband responded with a laugh "No need to worry, I'm a very strong driver, in fact, I'm seeing hundreds of cars speeding in the wrong direction right now, and I'm still perfectly fine!"

You know, I once read a story that started something like this...

"ONE day Henny-penny was picking up corn in the cornyard when--whack!--something hit her upon the head. 'Goodness gracious me!' said Henny-penny; 'the sky's a-going to fall; I must go and tell the king.'

So she went along and she went along and she went along till she met Cocky-locky. 'Where are you going, Hennypenny?' says Cocky-locky. 'Oh! I'm going to tell the king the sky's a-falling,' says Henny-penny. 'May I come with you?' says Cocky-locky. 'Certainly,' says Henny-penny. So Hennypenny and Cocky-locky went to tell the king the sky was falling

So they went along and they went along, and they went along, till they met Goosey-poosey. 'Where are you going to, Henny-penny, Cocky-locky, and Ducky-daddles?' said Gooseypoosey. 'Oh! we're going to tell the king the sky's a-falling,' said Henny-penny and Cocky-locky and Ducky-daddles. 'May I come with you?' said Goosey-poosey. 'Certainly,' said Hennypenny, Cocky-locky, and Ducky-daddles. So Henny-penny, Cocky-locky, Ducky-daddles, and Goosey-poosey went to tell the king the sky was a-falling.... "

http://www.sacred-te...g/eft/eft21.htm

BTW Hank, you are absolutely correct.

This post has been edited by nonseq: 18 April 2012 - 07:25 AM

[ChristopherMeeks]

I appreciate the article, but what I haven't seen mentioned is how the music industry lost nearly everything by pricing digital music too high. People, especially young people, went to get it for free. The book industry faces a similar challenge of setting a good price or risk losing sales. Amazon has shown that consumers are willing to pay for digital books at $10 or less. If eBooks get priced too high, some kid with a scanner will offer it for free.

[NVRick]

Amazon NEVER sold all e-books for $9.99. They sold NYT best sellers for that price, and even then, not all of them.
Apple entered the iBook market and decided that they, being the all-knowing source of all things, decided that they would like to eliminate a little of the inconvenient competition that they might encounter. They arm twisted the publishers (although it wasn't much arm twisting) and the agency model was forced upon Amazon.

[BobBainCom]

HankRearden, on 17 April 2012 - 07:06 PM, said:

3. What Amazon is doing is setting customer expectation of cost too low. What I hear and read time and time again is that these books "should" cost $9.99. And that is exactly what is wrong with what Amazon is doing. They are "teaching" consumers to have unrealistic expectations as to the price of eBooks.

How about Apple saying musical singles should only cost 99 cents. Two can play at that game.
Who says one song is worth 99 cents and not $2.00? Apple and now, Consumers.

An eBook realistically should never cost more than $6.99 and anyone who claims otherwise, they are uninformed.
There are no costs involved with eBooks. The profits are huge even at $6.99.

[HankRearden]

BobBainCom, on 18 April 2012 - 03:58 PM, said:

HankRearden, on 17 April 2012 - 07:06 PM, said:

3. What Amazon is doing is setting customer expectation of cost too low. What I hear and read time and time again is that these books "should" cost $9.99. And that is exactly what is wrong with what Amazon is doing. They are "teaching" consumers to have unrealistic expectations as to the price of eBooks.

How about Apple saying musical singles should only cost 99 cents. Two can play at that game.
Who says one song is worth 99 cents and not $2.00? Apple and now, Consumers.

An eBook realistically should never cost more than $6.99 and anyone who claims otherwise, they are uninformed.
There are no costs involved with eBooks. The profits are huge even at $6.99.

Oh, what costs are those? Care to share your knowledge of the cost and what the publisher is making? You're so informed, please tell me exactly what the figures are?

[HankRearden]

nonseq, on 18 April 2012 - 07:20 AM, said:

jhenkinson, on 18 April 2012 - 06:46 AM, said:

HankRearden, on 17 April 2012 - 07:06 PM, said:

One of the few articles that gets it right. I have seen virtually 100% of the web get this issue completely wrong.

Well, I once read a story that goes as this:

A worried wife called her husband telling him "I want you to be careful on your drive to work, I just heard from the breaking news that there is a crazy guy out on the road right now who are speeding in the wrong direction, it can be dangerous ..."

The husband responded with a laugh "No need to worry, I'm a very strong driver, in fact, I'm seeing hundreds of cars speeding in the wrong direction right now, and I'm still perfectly fine!"

You know, I once read a story that started something like this...

"ONE day Henny-penny was picking up corn in the cornyard when--whack!--something hit her upon the head. 'Goodness gracious me!' said Henny-penny; 'the sky's a-going to fall; I must go and tell the king.'

So she went along and she went along and she went along till she met Cocky-locky. 'Where are you going, Hennypenny?' says Cocky-locky. 'Oh! I'm going to tell the king the sky's a-falling,' says Henny-penny. 'May I come with you?' says Cocky-locky. 'Certainly,' says Henny-penny. So Hennypenny and Cocky-locky went to tell the king the sky was falling

So they went along and they went along, and they went along, till they met Goosey-poosey. 'Where are you going to, Henny-penny, Cocky-locky, and Ducky-daddles?' said Gooseypoosey. 'Oh! we're going to tell the king the sky's a-falling,' said Henny-penny and Cocky-locky and Ducky-daddles. 'May I come with you?' said Goosey-poosey. 'Certainly,' said Hennypenny, Cocky-locky, and Ducky-daddles. So Henny-penny, Cocky-locky, Ducky-daddles, and Goosey-poosey went to tell the king the sky was a-falling.... "

http://www.sacred-te...g/eft/eft21.htm

BTW Hank, you are absolutely correct.

Thank you.

[Nuke61]

BobBainCom, on 18 April 2012 - 03:58 PM, said:

An eBook realistically should never cost more than $6.99 and anyone who claims otherwise, they are uninformed.
There are no costs involved with eBooks. The profits are huge even at $6.99.

If you're talking about some Joe Schmoe who decides to self-publish a book about the costs of ebooks, you might be right. However, if you're talking about the NYTimes best seller list, several articles I've read peg the actual printing and handling costs at ~$2. The marketing, editing, typesetting, and other costs still apply. You made the claim that there are no costs associated with ebooks and that even at $6.99 the profits are huge. Got any corroborating evidence?

Quote

Now let’s look at an e-book. Under the agreements with Apple, the publishers will set the consumer price and the retailer will act as an agent, earning a 30 percent commission on each sale. So on a $12.99 e-book, the publisher takes in $9.09. Out of that gross revenue, the publisher pays about 50 cents to convert the text to a digital file, typeset it in digital form and copy-edit it. Marketing is about 78 cents.

The author’s royalty — a subject of fierce debate between literary agents and publishing executives — is calculated among some of the large trade publishers as 25 percent of the gross revenue, while others are calculating it off the consumer price. So on a $12.99 e-book, the royalty could be anywhere from $2.27 to $3.25.

All that leaves the publisher with something ranging from $4.56 to $5.54, before paying overhead costs or writing off unearned advances. http://www.nytimes.c...agewanted=print

[HankRearden]

Nuke61, on 18 April 2012 - 07:43 PM, said:

BobBainCom, on 18 April 2012 - 03:58 PM, said:

An eBook realistically should never cost more than $6.99 and anyone who claims otherwise, they are uninformed.
There are no costs involved with eBooks. The profits are huge even at $6.99.

If you're talking about some Joe Schmoe who decides to self-publish a book about the costs of ebooks, you might be right. However, if you're talking about the NYTimes best seller list, several articles I've read peg the actual printing and handling costs at ~$2. The marketing, editing, typesetting, and other costs still apply. You made the claim that there are no costs associated with ebooks and that even at $6.99 the profits are huge. Got any corroborating evidence?

Quote

Now let’s look at an e-book. Under the agreements with Apple, the publishers will set the consumer price and the retailer will act as an agent, earning a 30 percent commission on each sale. So on a $12.99 e-book, the publisher takes in $9.09. Out of that gross revenue, the publisher pays about 50 cents to convert the text to a digital file, typeset it in digital form and copy-edit it. Marketing is about 78 cents.

The author’s royalty — a subject of fierce debate between literary agents and publishing executives — is calculated among some of the large trade publishers as 25 percent of the gross revenue, while others are calculating it off the consumer price. So on a $12.99 e-book, the royalty could be anywhere from $2.27 to $3.25.

All that leaves the publisher with something ranging from $4.56 to $5.54, before paying overhead costs or writing off unearned advances. http://www.nytimes.c...agewanted=print

Thanks Nuke,

And just to add to your fine description, often books don't make any money at all. There are a few noted authors that can sell millions of books, but those get paid well. If you ever known anyone who wrote a book they get a little statement from the publisher showing actual sales against the advance on the first pressing. And often the publisher takes a bath paying for the advance, the effort of publishing, editing, page layout, etc.

I don't think publishing is such a great business. And in fact I'd even go as far as saying it's under threat right now the way things are. In the future, you may well see writers hiring their own proofers. You might see writers bidding out layout or even software that lets you write directly into a layout as with Apple's publisher app. And soon perhaps the publisher will not be needed. And in the world, I'd rather have an Agency model. The writer picks the price and the distributor takes their 30%. I wouldn't want Amazon telling me what price they want and if I disagree them telling me they won't sell my book. That's not a model I'd want to exist around.

I think these app stores took off the way they did because developers thought they could do well if they just charged a tiny fee for a tiny app that did one thing well. And it works. No one forced the developer in price. They decide that on their own. OmniGroup has apps for $49. Some have apps for $0.99. Either way it's up to them.

[nonseq]

HankRearden, on 18 April 2012 - 08:00 PM, said:

Nuke61, on 18 April 2012 - 07:43 PM, said:

BobBainCom, on 18 April 2012 - 03:58 PM, said:

An eBook realistically should never cost more than $6.99 and anyone who claims otherwise, they are uninformed.
There are no costs involved with eBooks. The profits are huge even at $6.99.

If you're talking about some Joe Schmoe who decides to self-publish a book about the costs of ebooks, you might be right. However, if you're talking about the NYTimes best seller list, several articles I've read peg the actual printing and handling costs at ~$2. The marketing, editing, typesetting, and other costs still apply. You made the claim that there are no costs associated with ebooks and that even at $6.99 the profits are huge. Got any corroborating evidence?

Quote

Now let’s look at an e-book. Under the agreements with Apple, the publishers will set the consumer price and the retailer will act as an agent, earning a 30 percent commission on each sale. So on a $12.99 e-book, the publisher takes in $9.09. Out of that gross revenue, the publisher pays about 50 cents to convert the text to a digital file, typeset it in digital form and copy-edit it. Marketing is about 78 cents.

The author’s royalty — a subject of fierce debate between literary agents and publishing executives — is calculated among some of the large trade publishers as 25 percent of the gross revenue, while others are calculating it off the consumer price. So on a $12.99 e-book, the royalty could be anywhere from $2.27 to $3.25.

All that leaves the publisher with something ranging from $4.56 to $5.54, before paying overhead costs or writing off unearned advances. http://www.nytimes.c...agewanted=print

Thanks Nuke,

And just to add to your fine description, often books don't make any money at all. There are a few noted authors that can sell millions of books, but those get paid well. If you ever known anyone who wrote a book they get a little statement from the publisher showing actual sales against the advance on the first pressing. And often the publisher takes a bath paying for the advance, the effort of publishing, editing, page layout, etc.

I don't think publishing is such a great business. And in fact I'd even go as far as saying it's under threat right now the way things are. In the future, you may well see writers hiring their own proofers. You might see writers bidding out layout or even software that lets you write directly into a layout as with Apple's publisher app. And soon perhaps the publisher will not be needed. And in the world, I'd rather have an Agency model. The writer picks the price and the distributor takes their 30%. I wouldn't want Amazon telling me what price they want and if I disagree them telling me they won't sell my book. That's not a model I'd want to exist around.

I think these app stores took off the way they did because developers thought they could do well if they just charged a tiny fee for a tiny app that did one thing well. And it works. No one forced the developer in price. They decide that on their own. OmniGroup has apps for $49. Some have apps for $0.99. Either way it's up to them.

Another factor that affects the Wholesale Model and physical books but is not a real issue to e-publishing is the reality of returns. Under the wholesale model, retailers do not have to eat the entire cost of those books that they are unable to sell. Those books can be and are are returned to the publisher for partial credit and end up in discount book store or travelling book trunk shows. Returns have a significant impact in the publishing and distribution of physical books.

This post has been edited by nonseq: 19 April 2012 - 05:43 AM

[jhenkinson]

All these arguments make me laugh. If anyone even hope for a brief moment that an average consumer will change his point of view and accept a high price level after reading all of these corporate nonsense, they are delusional.

No matter what kind of spins you put on it, all the arguments that are in favor of a higher level of prices all come back to one single sad truth: getting more money into the publishers' pockets. (they need some money, true, but as with anything, there is always a fair price point somewhere and I'm more than sure that they are getting more than their fair share out of ebook deals)

Now, if anyone around here is familiar with this curious thing that we call the economy at all, they will know that one of the most basic assumptions for any market for any kind of goods to function is that all parties are self-interested. So, naturally, we, the consumers (or most of us anyways, that means excluding those that have so much money that they don't even care), always want a lower price, always want the best bargain we can get. Raise the price and you move less stocks, lower the price your goods will move faster, that's all there is to it.

[dugan6415]

This article is a farce because you have no idea how much it costs Amazon to distribute digitally. Not that you care. If you were smart you would have dropped your AAPL holdings 2 weeks ago but instead you're trying to set public opinion in order to reduce your risk. You're full of [censored] and you know it. There's no reason most eBooks should cost more than $9

[jhenkinson]

dugan6415, on 20 April 2012 - 01:14 PM, said:

This article is a farce because you have no idea how much it costs Amazon to distribute digitally. Not that you care. If you were smart you would have dropped your AAPL holdings 2 weeks ago but instead you're trying to set public opinion in order to reduce your risk. You're full of [censored] and you know it. There's no reason most eBooks should cost more than $9

Ah, yes I agree with you. There should be more voices like us to show these people that we care about how much it costs us when we make purchases.

I've bought physical copies of books that cost just $5-7. What sense is there if ebooks are allowed to be sold for $9 or even more, considering they don't have the cost of printing, transportation, handling and storage? It's just insane!