Clear overview of price war lawsuit

[fjtorres]

Originally Posted by kennyc

. I'm just hoping the judge makes her decision and announces it soon....

That will only unleash another wave of revisionistic FUD bemoaning how the special snowflake is now going to melt or (in the event the judge buys apple's hairsplitting, unlikely as it seems) more spin on how the heroic establishment stood up to amazon for the right to collude and ripoff consumers.

BTW, I figure next friday 5PM.

[tubemonkey]

Originally Posted by fjtorres

BTW, I figure next friday 5PM.

Late Friday afternoons are always a good time to release controversial information. That gives those responsible a few days for the news to die down.

[SteveEisenberg]

Originally Posted by murraypaul

What on earth does that have to do with my experience as a consumer?

I googled for a long-running series showing book price changes, and that's what I found.

It only has relevance, to your experience as a consumer, if you tend read the kinds of mainstream media reviewed books libraries acquire. If you've always been partial to self-published books (hard to imagine unless you are quite young), or limit yourself to bestsellers, it has less relevance.

If anyone can find a similar price series for all books sold, I would be interested.

[bgalbrecht]

The sales I got at Fictionwise allowed me to buy most of my books at about 25% of the price after the agency pricing went in. After agency pricing went in, a lot more books, especially backlist became available as ebooks, especially from publishers that were refusing to do ebooks, like Macmillan. I think since the lawsuit settlements, there have been a lot more sales, and I've been able get more books at price points comparable to used pbook prices.

While I think the publishers partially won, because they still have more control over prices than before 2010, they also lost because their insistence on DRM only served to reinforce Amazon's monopoly. I wonder if Macmillan's dropping DRM (at least at their Tor subsidiary) has affected the sales ratio, or if it's just too late now.

Also, I think the article is wrong in claiming that Amazon was selling all new hardcovers at a $9.99 price point during the wholesale pricing era. I recall they were only doing that for the NYT Best Seller list books, and the rest were selling at or above cost.

[AnemicOak]

Originally Posted by bgalbrecht

I wonder if Macmillan's dropping DRM (at least at their Tor subsidiary) has affected the sales ratio, or if it's just too late now.

Hard to say, but I'd guess not much has changed. The announced Tor ebook store never materialized and with Agency there's been no reason to shop elsewhere if you were already happy with your vendor. With the end of Agency Amazon is often either the cheapest or price matching the cheapest seller so again if you're happy buying there already there's not much reason to switch. Plus Amazon offers other benefits such as Whispersync for Voice discounts on a lot of Audible titles for Kindle version owners.

Originally Posted by bgalbrecht

Also, I think the article is wrong in claiming that Amazon was selling all new hardcovers at a $9.99 price point during the wholesale pricing era. I recall they were only doing that for the NYT Best Seller list books, and the rest were selling at or above cost.

It wasn't even all the NYT Bestsellers, just a lot of them. They always made an overall profit from their eBook sales.

[murraypaul]

Originally Posted by SteveEisenberg

It only has relevance, to your experience as a consumer, if you tend read the kinds of mainstream media reviewed books libraries acquire.

... and I only buy hardbacks.
... and I don't take advantage of any sales, discounts or coupons.

[SteveEisenberg]

Originally Posted by AnemicOak

They always made an overall profit from their eBook sales.

Whether this is true depends on how they do their accounting.

If you are selling at cost, you are losing a lot of money because of the many overall corporate costs that have to be shared between business lines, including staff salaries, computers, real estate, electricity (can be a big item for companies with server farms), debt service, and taxes.

[pwalker8]

Originally Posted by fjtorres

That will only unleash another wave of revisionistic FUD bemoaning how the special snowflake is now going to melt or (in the event the judge buys apple's hairsplitting, unlikely as it seems) more spin on how the heroic establishment stood up to amazon for the right to collude and ripoff consumers.

BTW, I figure next friday 5PM.

I see. So if the judge doesn't rule the way you want her to, then it's because she bought into Apple's hairspliting and spin, rather than, unlike you, she actually listened to and read all the evidence? Interesting. Regardless, I suspect that if she rules within the next few weeks, then it's a sign that she thinks the ruling is very straight forward rather than a close decision.

[fjtorres]

Originally Posted by SteveEisenberg

Whether this is true depends on how they do their accounting.

If you are selling at cost, you are losing a lot of money because of the many overall corporate costs that have to be shared between business lines, including staff salaries, computers, real estate, electricity (can be a big item for companies with server farms), debt service, and taxes.

But that is *exactly* where the myth flounders; Amazon was NOT selling *everything* at cost. They sold *some* books at a discount *sometimes*.

Anybody who's been around here long enough is aware that, pre-agency, it was *common* to find some books cheaper at Fictionwise, some cheaper at Amazon, some cheaper at BoB or Diesel or even Sony, all depending on the sales and promos going on. The consensus was that *on average* Amazon had lower prices but that if you were willing to shop around and spread your buys you could save money over just going straight to Amazon. Agency did away with that for BPH titles and made Amazon the absolute low-cost source *all the time*. Plus it kept BPH titles out of the indie ebookstores leading o the demise (so far) of Fictionwise and BoB.

The whole "Amazon predatory pricing" myth is based on a 19th century accounting model where every single item sold is supposed to bring in some profit in that transactin instead of modern retailing and accounting where you take a holistic look at entire lines of business and allow for sophisticated marketting techniques such as basket pricing to *increase* sales and overall profits.

BTW, speaking of ebook accounting, there is also *this*:
http://seekingalpha.com/article/1528...orted-revenues

When accounting for the sale of an ebook through an agency agreement, Amazon.com booked as revenue only the commission it got from the publisher, say 30%. All of this commission was booked as revenue at 100% gross margins, much like Amazon.com does with all the other third party (3P) sellers.

Now, upon ending these agency agreements, Amazon.com will be booking those same revenues as a merchant. What's the difference? Amazon.com will book as revenue 100% of the ebook's price, and then consider it has 30% gross margin on it. This means that -- for the same level of ebook sales -- Amazon.com will:

• Book significantly higher revenue, for instance, for what were previously $300 million in ebook revenues Amazon.com will now book $1 billion in revenues;
• Book a higher 1P revenue growth rate, as many ebooks will no longer be 3P sales, they'll migrate to 1P;
• Book a lower 3P revenue growth rate, as many ebooks will no longer be 3P sales;
• Book the same gross margin, but a lower gross margin percentage as the same gross margin will be applied on higher revenues. This is the opposite effect to the effect that was inflating gross margins, due to the fact that 3P revenues are booked at 100% gross margins;
• The change won't impact operating profits or net profits.

Revenue won't be comparable

The impact from ebook sales migrating from 3P to 1P will be significant on overall revenues. Jeff Bezos has said that ebooks are a "multi-billion" dollar category. As such, Amazon.com is selling more than $500 million per quarter on average. Each $100 million that migrates from 3P to 1P will turn into $333 million in revenues, or an additional $233 million in revenues on sales that are physically unchanged. For $0.5 billion, the total potential would be for revenues to be inflated by $1.17 billion in a single quarter, or 7.4% of the present consensus estimate for Q2 2013.

Expect a lot of handwringing over this although nobody fretted when Agency went into effect and we saw the opposite effect.
(Or *didn't* because, since Amazon doesn't break out ebook numbers, those details stayed in-house. )

[fjtorres]

Originally Posted by pwalker8

I see. So if the judge doesn't rule the way you want her to, then it's because she bought into Apple's hairspliting and spin, rather than, unlike you, she actually listened to and read all the evidence? Interesting. Regardless, I suspect that if she rules within the next few weeks, then it's a sign that she thinks the ruling is very straight forward rather than a close decision.

Pretty much.

I'm not a judge so my judgment is on the common sense reading of the testimony; the BPHs *only* went to Agency because they coordinated through Apple to make sure they were *all* doing it. Otherwise they wouldn't have. That puts Apple clearly inside the conspiracy as the leader of the scam.

Apple's legal position is that since they themselves are not publishers their serving as coordinators is not enough to *legally* put them *inside* the conspiracy circle.

I grant that that might have a small chance of holding legal water; it might actually be legally possible to participate in a clear conspiracy but not be legally liable if you are clever enough to let all the legal onus fall on the suckers you partner with. Stranger things have happened in courts. (It's not unlike a gang leader having somebody killed and letting an underling take the fall.)

I do agree that the quicker the judge rules--after allowing a discrete period to make sure the ruling is properly grounded in law--the more likely that she will reject Apple's position. Thus my expectation for a ruling this week or next depending on the holiday and vacation time she has coming.

[pwalker8]

Or it's quite possible that there is no conspiracy at all. Agency pricing is quite legal.

[DiapDealer]

Originally Posted by pwalker8

Or it's quite possible that there is no conspiracy at all. Agency pricing is quite legal.

Aaaaaand we're back full circle.

Look. The legality of an agency pricing model is not in question. The legality of agency pricing is, in fact, completely irrelevant to the charge of conspiracy, here. It's quite possible to illegally conspire to bring about an otherwise perfectly legal pricing model. Why is that so hard to grasp?

[fjtorres]

Originally Posted by DiapDealer

Aaaaaand we're back full circle.

Look. The legality of an agency pricing model is not in question. The legality of agency pricing is, in fact, completely irrelevant to the charge of conspiracy, here. It's quite possible to illegally conspire to bring about an otherwise perfectly legal pricing model. Why is that so hard to grasp?

It is hard when it is *apple* up in irons walking the plank.
And when all the evidence points at St Stephen of Jobs as the instigator and ringleader.

If it were B&N on the docket the same folks would be tsk-tsking with the rest of us.

[pwalker8]

Actually since it came out in the trial the B&N was the first to start talking agency model with the various publishers, the answer is no I wasn't tsk-tsking. The real question is would you be so fast to grab the pitchforks and torches if Apple wasn't involved?

For me, the basic question is how can one be guilty of conspiracy to set prices, if one agrees not to set prices? Answer, you can't unless someone is able to show that the publishers agreed among themselves to set prices and Apple was party to that. As far as I know, that was never even alleged in this case, much less shown. Pretty much all Apple agreeing to agency pricing did was give the individual publishers leverage against Amazon.

[John F]

Originally Posted by pwalker8

...

For me, the basic question is how can one be guilty of conspiracy to set prices, if one agrees not to set prices? Answer, you can't unless someone is able to show that the publishers agreed among themselves to set prices and Apple was party to that. As far as I know, that was never even alleged in this case, much less shown. Pretty much all Apple agreeing to agency pricing did was give the individual publishers leverage against Amazon.

Does this help:

http://appleinsider.com/articles/13/...ning-arguments