Apple + Agency Pubs Colluded on Price?

[stonetools]

Originally Posted by bgalbrecht

My point all along has been that the book industry has 4 price points, hardcover, trade paperback, mass market paperback, and used (approximately half MMPB price), and book buyers tend to choose their price based on how long they're willing to wait to buy it. The publishers want to ignore the used price point. I suspect that it's because they're convinced that if they sell ebooks that are now out of print in paper at used book prices, it will cannibalize the new book sales.

Even more outrageous are all of the "contemporary classics", which have been in print in one form or another since they were first published sometime within the last 50 years, which get a trade paperback price for the ebook edition. I think most of these books would end up recovering the cost of creating ebook editions faster if they priced them to be between used and MMPB. I know the high prices stops me from replacing my paper copies with ebooks.

New car dealers don't directly compete with used car dealers on price: why should sellers of new books compete directly on price with used books? That just doesn't make sense to me. I've never understood the argument that because you can pick up a used book at a library sale for 10 cents, therefore a new hardback edition of the same book should be priced accordingly, which seems to be your argument.

[rhadin]

Originally Posted by stonetools

As a consumer, I don't like agency pricing, but let's face it- everybody except Amazon welcomed agency pricing.

You state that as fact but I think it is more of an assumption. Amazon certainly gave the impression that it was opposed to the agency system, but it really did little to fight its implementation. Amazon was certainly in a position to exert significantly more pressure on the publishers in opposition to agency pricing, but it didn't.

Let us not forget that agency pricing has been good for Amazon financially and I suspect that Amazon's protestations were pro forma and designed to lull consumers rather than a stout-hearted attempt to influence the issue.

[rhadin]

Originally Posted by stonetools

In any case, this is moot. The lawsuit will most likely fail, because there is simply no EVIDENCE that Apple and the Big Six publishers colluded to fix prices: innuendo and conspiracy theories aren't evidence.

A prima facie case can be made based on the discussions and public announcements of Apple and the original Agency 5. The real crux of the issue, I think, is whether the courts will decide that all books can be considered a single product or each book has to rise and fall on its own. If the former, then the possibility of collusion exists; if the latter, collusion on pricing would be impossible to prove because each book has no competition. Publishers can rightly claim that the newest Terry Brooks release is not a substitute for the newest Stephen King release so there can't be collusion even if the price is the same.

[the.Mtn.Man]

Originally Posted by carld

I've seen it with a number of books. It's insane that an ebook costs more than a hardback, but it definitely happens.

That's because the publishing industry is locked into the concept of scarcity, the idea that books exist in limited quantities because of the time and expense necessary to produce them. Of course this doesn't apply to ebooks because once the ebook file has been created, there are no further production costs associated with that particular book. But apparently the publishing industry is unwilling to abandon traditional financial models and so they treat ebooks just like they do regular books with the exception that there's less incentive to put books on sale because there's no pressing need to clear out existing inventory to make room for new stock, and so prices stay high while the prices of physical books tend to fluctuate.

[stonetools]

Originally Posted by rhadin

You state that as fact but I think it is more of an assumption. Amazon certainly gave the impression that it was opposed to the agency system, but it really did little to fight its implementation. Amazon was certainly in a position to exert significantly more pressure on the publishers in opposition to agency pricing, but it didn't.

Let us not forget that agency pricing has been good for Amazon financially and I suspect that Amazon's protestations were pro forma and designed to lull consumers rather than a stout-hearted attempt to influence the issue.

Shatzkin on winners and losers from agency pricing:

Barnes & Noble (Nook), Google, and Kobo all benefited enormously from Apple’s arrival on the scene in April 2010 because they brought with them the “agency” sales model that leveled pricing across all outlets for the ebooks that come from the biggest publishers. Without agency, many believe (and I’m one of them) that Amazon Kindle’s aggressive loss-leader pricing policies on the biggest books would seriously have diminished the competition.

B&N needs every penny it can spare to invest in device development and marketing; they’d be seriously handicapped if they had to give away margin to compete for consumers.

Google has signed up about 300 independent stores in the US to be partners in its ebook program. They might not have 10% that many if the indies thought they had to compete with loss-leader pricing on the biggest books even to play. When Random House switched over to agency at the beginning of March this past year — 11 months after it began — one of the motivations they cited was to respond to the desire of independent stores to sell ebooks which they heard over and over again depended on agency pricing.

Kobo has always had a global strategy that could enable them to thrive even if they had also-ran status in the US market. But they were trying hard to compete with Amazon pricing in the pre-agency days and as the smallest of the big global ebook players, they would have to be considered the most vulnerable in an environment characterized by loss-leader price warfare.

[stonetools]

Originally Posted by rhadin

A prima facie case can be made based on the discussions and public announcements of Apple and the original Agency 5. The real crux of the issue, I think, is whether the courts will decide that all books can be considered a single product or each book has to rise and fall on its own. If the former, then the possibility of collusion exists; if the latter, collusion on pricing would be impossible to prove because each book has no competition. Publishers can rightly claim that the newest Terry Brooks release is not a substitute for the newest Stephen King release so there can't be collusion even if the price is the same.

Even on your theory, you still would have to find evidence that Apple and the publishers got to together and said , "Ebook prices are naturally too low; we have to band together to push them higher!" I think you will find lots of talk that Amazon was pricing ebook bestsellers below cost to drive competitors out of the ebook market ( which is what was happening) and that Amazon needed to be stopped. That's not an illegal agreement to raise prices, though.

[Elfwreck]

Originally Posted by stonetools

Fictionwise is owned by Barnes & Noble-a supporter of agency pricing. As for consumers, well, of course, they like low prices in the short term! I was talking about publishers and booksellers, as you well know.

If your notion of "everyone in the industry" ignores the people providing the money, it's very flawed.

Yet Fictionwise still exists.

Fictionwise is dying; B&N is not bothering to support it--even to fix its growing list of outdated links and inaccurate statements--and that isn't likely to change unless agency pricing is overthrown, because its underlying framework relies on features no longer available.

I don't know what Fictionwise's long term prospects are now: I do know that they would have been unlikely to survive a price war with Amazon, which would have eaten the big fish first, then the little fish.

FW had a strong feature in a potential war against amazon: Format flexibility. The non-DRM'd ebooks are offered in several formats--they can say, "you can use multiformat books on your next device as well." But removing all the agency books gutted the catalog too much for that to be a compelling point for the majority of customers.

Anyway, I know there is no way to convince ebook consumers who are focused on low prices that agency pricing could possibly be good, so I'm not going to try.

I don't need to be convinced; I'm not running short of things to read. If Macmillan and Random House vanish tomorrow, I still won't be short of things to read. I'm looking at it from the outside (because agency pricing or no, I'm not dealing with DRM) and thinking, "huh. that can't last."

In any case, this is moot. The lawsuit will most likely fail, because there is simply no EVIDENCE that Apple and the Big Six publishers colluded to fix prices: innuendo and conspiracy theories aren't evidence. Now something may turn up in the discovery process as the lawsuit goes forward, but if nothing does, then the case will be dismissed. That's the likely result, by at least 4 to 1.

I find it very likely that Apple & publishers colluded to arrange the agency pricing, because it doesn't work well if only one or two of them participates. I suspect at the very least emails coordinating the date for the switch--connecting to Apple's ibookstore opening; it's pretty obvious that 5 companies didn't spontaneously decide to drastically change their business model.

Whether multiple supposedly-competing businesses changing business structures all in the same way at the same time is an anti-trust violation is for the courts to sort out.

It's possible they used illegal tactics to convince Random House to join them; I'm not sure what kind of business pressures are legal. I'm not sure if Apple's language about "buy this book from us" (or whatever's actually used) is legal for agency arrangements--not sure if they've got an obligation to inform the customers that they're acting as an agent, not a retailer. And that's without assuming they did anything overtly threatening or otherwise shady.

But in the long term, we are better off with lots of players with the ability to set pricing, rather than one BIG player, who can lower prices short term, then jack them up long term.

We are better off when STORES can set pricing, not manufacturers. The manufacturers can't respond fast enough to market shifts, and have a hundred-plus year history of business practices based on simple, stable transactions; they sold by the truckload for a set price, managed returns often by formula. Now they're dealing with individual sales, and botching their accounting, and annoying a lot of consumers.

Y'know, the people who pay them? The ones who are keeping them in business? The ones who don't know DRM exists until they "upgrade" their K2 to a Nook Color and discover none of their "ebooks" can be read on their new "ebook reader" and want to know why.

The closure of Borders should have high-ranking executives in all 6 agency publishers sweating bricks. Because they're going to *need* ebook customers, who are only going to get more aware of $3 indie author books as time goes by.

ou still would have to find evidence that Apple and the publishers got to together and said , "Ebook prices are naturally too low; we have to band together to push them higher!"

There's public evidence of them saying "ebook prices are too low! We cannot allow $10 ebooks to continue!" I'm less sure about the "we must band together" part in public--but they certainly managed to all switch over at the same time.

[elcreative]

"We are better off when STORES can set pricing, not manufacturers." As fatuous statements go that takes some beating... all stores are of course altruistic with the best needs of their customers paramount...

Consumers may benefit from cheaper prices but lose out on choice every time... supermarkets drive out small local shops, book chains destroy independent book stores and it's all done for altruistic reasons not to get rid of competition by using loss leading selling to ensure small outlets can't compete... we now have cheap food (but factory farming), cheap bestsellers (but a loss of expertise and sellers interested in their stock) and these are all benefits to us all...

[MovieBird]

Originally Posted by elcreative

"We are better off when STORES can set pricing, not manufacturers." As fatuous statements go that takes some beating... all stores are of course altruistic with the best needs of their customers paramount...

Consumers may benefit from cheaper prices but lose out on choice every time... supermarkets drive out small local shops, book chains destroy independent book stores and it's all done for altruistic reasons not to get rid of competition by using loss leading selling to ensure small outlets can't compete... we now have cheap food (but factory farming), cheap bestsellers (but a loss of expertise and sellers interested in their stock) and these are all benefits to us all...

Yes, we are better off with stores setting prices. They react much more quickly to changing economic conditions, but more importantly, there is more price competition when stores compete against other stores with the same product.

If consumers truly valued eclectic local shops over chains, they would have paid the higher prices in aggregate. Because they didn't, we can surmise that a lower price point is more important to most consumers than supporting the local shop.

This in turn, leads them to having more money in their pocket which they can give to someone else for goods or services. Sounds like a win to me.

[rhadin]

Originally Posted by stonetools

Shatzkin on winners and losers from agency pricing:

Note Shatzkin says "I believe". Belief does not necessarily equal fact.

[advocate2]

There has been much press about various states investigating agency pricing. It is possible that the class action attorneys wanted to piggy-back on the state investigations in order to lock in an attorney's fee.

Yes, it happens.

Class action attorneys are a different breed.

[JSWolf]

Originally Posted by Elfwreck

Several million customers did not "welcome" agency pricing. Fictionwise did not welcome agency pricing.



Agency pricing has basically destroyed Fictionwise; their entire economic model was based on features that are incompatible with agency pricing. It's damaged several other sites that counted on the ability to offer coupons and promo discounts to compete with larger ebook stores.

CyberRead was one of those sites driven out of business due to the agency model. Without the ability to give discounts, they could not sustain their business.

[elcreative]

Originally Posted by MovieBird

If consumers truly valued eclectic local shops over chains, they would have paid the higher prices in aggregate. Because they didn't, we can surmise that a lower price point is more important to most consumers than supporting the local shop.

This in turn, leads them to having more money in their pocket which they can give to someone else for goods or services. Sounds like a win to me.

Which is why rural communities are now screaming about loss of amenities in their areas because all the shops are closed/closing since anyone with a car goes to a supermarket and anyone without has to beg help just to get their food, why the same people are trying to grab public (lottery and other grants) to subsidise their local volunteer run outlets. Consumers do not always win just because prices are cheaper... the affluent can easily benefit but those who are not so well off end up losing out but that doesn't matter because if you can't afford a 50" Plasma out of spare cash then you don't matter...

[JD Gumby]

Originally Posted by elcreative

"We are better off when STORES can set pricing, not manufacturers." As fatuous statements go that takes some beating... all stores are of course altruistic with the best needs of their customers paramount...

Consumers may benefit from cheaper prices but lose out on choice every time... supermarkets drive out small local shops, book chains destroy independent book stores

No big loss as the small local shops and independant book stores generally have worse selection, worse quality, and worse prices.

[MovieBird]

Originally Posted by elcreative

Consumers do not always win just because prices are cheaper... the affluent can easily benefit but those who are not so well off end up losing out but that doesn't matter because if you can't afford a 50" Plasma out of spare cash then you don't matter...

You've got it backwards, it's generally the affluent that shop at the local farmers market for organic produce, or that really neat independent book store downtown, because they have the disposable income to pay more to assuage their guilt.

It's the unwashed masses that shop at Walmart out of necessity.