Authors Group Urges Opposition to E-Book Settlement

[Ninjalawyer]

From the post by Shatzkin (who else?) in Stonetools' link:

My first concern is that there is a failure of recognition of the necessity for price-setting of individual titles across the ebook supply chain. Indeed, only by eliminating price as a basis of competition can we ultimately have balanced competition in the real world of publishing as digital change has remade it.

Only by eliminating a basis of competition, can we have competition. I can see why Stonetools is in love with this guy.

Originally Posted by stonetools

Hey, I was following ftorres' lead. He seemed dead certain about Amazon's "basket price" strategy. At least I qualified it by talking about the consensus about business analysts.

Bravo for holding yourself up to such a high intellectual standard. "Hey, someone else may have stated opinions as facts, so it's okay if I do too! And if that's okay, well I'll just claim that there's a consensus that doesn't exist, because why not?"

[Ninjalawyer]

Originally Posted by JoeD

Didn't the DoJ consider that in their filings and state that whilst amazon do sell some books at a loss, their overall book side of the business is turning a profit and can stand on its own two feet, it's not subsidised by the other sides of the business?

Pretty sure I read that, but it has been a while since I read the filings.

You're right. Amazon states that its ebook division has been profitable from the start. If true, it suggests that they weren't doing something unsustainable. Interestingly, it's worth noting that the DOJ was asked to investigate Amazon in 2009 and nothing came of it.

[speakingtohe]

Originally Posted by JSWolf

But part of the new system is eBooks cannot be sold at a loss. Amazon would have to make money on them.

Is that just directed at Amazon or anyone selling ebooks at a loss? Seems that it would affect the Indie sellers pretty negatively. Especially the new ones.

Helen

[fjtorres]

Originally Posted by Ninjalawyer

You're right. Amazon states that its ebook division has been profitable from the start. If true, it suggests that they weren't doing something unsustainable. Interestingly, it's worth noting that the DOJ was asked to investigate Amazon in 2009 and nothing came of it.

Which makes my statement a neglected fact *not* opinion. Hmph!

All the available (albeit limited) data is that Amazon makes a net profit off ebooks. And the fed settlement *forces* them to do it on a publisher by publisher basis instead of storewide so the whining is just empty noise anyway.

My statement stands: Amazon sells some books below-cost but they don't sell *all* books below cost and they make their ebook profits in the aggregate, not the specific.

No magic, folks: it is no different than pricing the first volume of a trilogy at $0.99 and the other two at $2.99. Not everybody that buys the first volume buys the other two but enough do that the net take is still higher than pricing all three at $2.99.

[Elfwreck]

Originally Posted by stonetools

I'm afraid your analysis is faulty. Amazon's strategy is to sell ebooks AS A WHOLE at loss, in order to draw customers so that they can sell NON-BOOK items at a profit. Now, as the suit progresses, it may come out that Amazon makes money on ebooks over all. But most business analysts think Amazon is losing money on ebooks over all. Since Amazon doesn't realease sales figures, we don't know for sure, but that's the way to bet.

Amazon does not sell ebooks as a whole at a loss.

John Lock made over a million dollars selling $.99 ebooks in five months... which means Amazon made over $2m on him alone in that time. That 35/70 % cut on indie ebooks means Amazon RAKES in money on small sales. They can afford to lose money on $12.99 bestsellers, because for every one of those they sell, they sell two dozen one-dollar ebooks... that makes them over sixteen dollars.

Maybe it's not 24 indies per bestseller... but they are selling a *lot* of small cheap ebooks. And at the percentage they make from them, they don't need to sell as many BPH high-priced ebooks.

[murraypaul]

Originally Posted by stonetools

Amazon CLAIMS that. I'm not sure the DOJ signed on to that claim in its filings. Most business analysts don't buy it.

At the end of discovery, we'll know for sure.

Amazon are not a party to the lawsuit, so I'm not sure what sort of discovery from them you are expecting.

[Elfwreck]

Originally Posted by murraypaul

Amazon are not a party to the lawsuit, so I'm not sure what sort of discovery from them you are expecting.

Records might be subpoena'd to support one side or the other.

[murraypaul]

Originally Posted by Elfwreck

Records might be subpoena'd to support one side or the other.

I would think a judge would be pretty unlikely to force a non-party to a suit to hand over such commercially sensitive information to the parties who in various ways are competitors to them. And to make it generally available for us to read?
More likely, if anything, is that they would be required to provide it to the DoJ, who would then just confirm or not general statements like whether the ebook business is profitable or not.

[Elfwreck]

Originally Posted by murraypaul

I would think a judge would be pretty unlikely to force a non-party to a suit to hand over such commercially sensitive information to the parties who in various ways are competitors to them. And to make it generally available for us to read?
More likely, if anything, is that they would be required to provide it to the DoJ, who would then just confirm or not general statements like whether the ebook business is profitable or not.

I'd expect some bits of information to be entered in the public record, but for those to be fairly limited and filtered. Percentage of increase or decrease of sales at certain prices might be released; number of ebooks available might be released; that kind of thing. But yeah, I don't expect any notable amount of Amazon's business history to become public information.

[SteveEisenberg]

Originally Posted by plib

It's virtually impossible to have a monopoly in retail, so comparisons to other high barrier to entry industries, or even transportation, are pretty meaningless.

I have thought a bit more about this.

The best point of comparison is WalMart. The book I've read that I'll be cribbing off a bit is The Wal-Mart Effect: How the World's Most Powerful Company Really Works - and How It's Transforming the American Economy.

WalMart does not dominate in general merchandise anywhere close to the degree that Amazon will dominate in books once the eBook revolution is more or less complete. And WalMart is just retail, whereas Amazon is more and more a publisher. But WalMart does have enough market share to hint at what could happen in a more extreme retail high-market-share situation.

WalMart can choose between raising prices a bit, or threatening suppliers with ruin unless they lower the wholesale price. Low prices are so ingrained in the WalMart culture that they mostly do the latter. And that's forced some good changes, such as an end to putting bottles of pills in unnecessary boxes.

But, in the case of books, continually pressuring suppliers to lower wholesale prices will not be so benign. Looking at Amazon as a publisher, I don't see them nurturing complex non-fiction projects. Instead, they are publishing the kind of books that could just as well be self-published. And publishers will be told to match that cost structure. I realize that this may or may not be a bad thing depending on what kind of books you read.

By the way, even WalMart dramatically raise prices from time to time. Does anyone remember how cheap it used to be get a cold soda there?

[SteveEisenberg]

Originally Posted by HansTWN

But the scenario some are painting here is that they will then raise the prices to clean up --- which again would make it very easy for someone else to come in and compete with them. So, which one is it?

Not that one. Because if you have a big enough market share, you can insist that your suppliers give you sweetheart deals unavailable to the new entrants.

[fjtorres]

Originally Posted by Elfwreck

Records might be subpoena'd to support one side or the other.

Why?
The lawsuit is about collusion--the reasons floated as rationale are factually irrelevant to the question whether the law was broken or not, which is what the court will be concerned about.

I can see the defense *trying* to drag Amazon in t with a discovery motion but I can just as easily see the judge read them chapter and verse of te law as written and throw the motions out, with prejudice.

All the people lining up behind the conspirators seem to have lost sight of the fact that the court is *not* looking for excuses.

All the court wants to see if evidence as to whether they conspired or not.
"It was justifed..." will have the same effect as "Yes, we're guilty..." so they sure as heck not be looking to that as their last line of defense. Those lawyers are going to be raking in a bounty in billable hours so they'd better come up with sometthing better than a disguised guilty plea.

[Fbone]

Originally Posted by Elfwreck

Amazon does not sell ebooks as a whole at a loss.

John Lock made over a million dollars selling $.99 ebooks in five months... which means Amazon made over $2m on him alone in that time. That 35/70 % cut on indie ebooks means Amazon RAKES in money on small sales. They can afford to lose money on $12.99 bestsellers, because for every one of those they sell, they sell two dozen one-dollar ebooks... that makes them over sixteen dollars.

Maybe it's not 24 indies per bestseller... but they are selling a *lot* of small cheap ebooks. And at the percentage they make from them, they don't need to sell as many BPH high-priced ebooks.

With the settlement as currently revealed to us it is by publisher that a profit has to be made. Self-published ebooks will not count toward the BPH's numbers. I suspect Amazon will need to do some long-range projections and more frequent price changes as we get toward the end of the court-fiscal year to comply. Or they don't have to and ignore the settlement demands and pay the fine.

Also, you need to subtract transaction costs from Amazon's small sales. Debit cards by law is 21-24 cents. Credit cards even higher.

[Fbone]

Originally Posted by fjtorres

Why?
The lawsuit is about collusion--the reasons floated as rationale are factually irrelevant to the question whether the law was broken or not, which is what the court will be concerned about.

I can see the defense *trying* to drag Amazon in t with a discovery motion but I can just as easily see the judge read them chapter and verse of te law as written and throw the motions out, with prejudice.

All the people lining up behind the conspirators seem to have lost sight of the fact that the court is *not* looking for excuses.

All the court wants to see if evidence as to whether they conspired or not.
"It was justifed..." will have the same effect as "Yes, we're guilty..." so they sure as heck not be looking to that as their last line of defense. Those lawyers are going to be raking in a bounty in billable hours so they'd better come up with something better than a disguised guilty plea.

Remember, this is a jury trial, if all parties don't settle first. The "court" don't need evidence. Anything and everything can be discussed in jury deliberations.

[fjtorres]

Originally Posted by SteveEisenberg

Because if you have a big enough market share, you can insist that your suppliers give you sweetheart deals unavailable to the new entrants.

Like the deals B&N and Borders were getting when Amazon started out?
Somehow, Amazon managed to grow past that Barrier-to-entry(TM).
So far, others (Kobo!) seem to be doing just fine and Baker and Taylor seem to think they can do fine despite a "fashionably late" start.

By the time this phase of the ebook evolution is over there will be others in the game and the whole "Amazon threat" thing will rank with the Red Threat of the 50's as examples of demagogic hysteria-mongering.