Apple: we broke "Amazon's monopolistic grip" on e-book industry

[plib]

Originally Posted by curtw

That is absolutely false. Apple did not sell digital music at a loss, hoping to "outlast" the competition. They offered music at a fair price, with a published profit margin. What the market decided was that this was a fair price and a superior user experience, and people flocked to it.

Amazon's $9.99 price was *only* designed to eliminate the competition, no matter how much you feel it benefited you, the customer. In the long run, if Amazon had been able to establish a monopoly in e-books, how much do you think books would cost?

Amazon didn't sell e-books at a loss either, as DiapDealer just pointed out. And Apple spent two years selling iPods which they knew damn well were being filled with music at the best price of all - free. Once they'd established that "ecosystem" then they decided to get into music sales after twisting the arm off record companies that were desperate for some legal form of digital music.

Amazon's $9.99 price had a lot more to do with selling Kindles and developing an "ecosystem" than creating a monopoly. It worked on some people, not others - including me. I don't happen to believe that Amazon will ever be in a position to arbitrarily raise e-book prices to an inordinate level, there are too many easy ways to create alternative distribution systems, but if they do engage in abusive practices they're just as likely to get a visit from the DOJ as Apple and the BPH did.

The DOJ, quite rightly, is unwilling to accept current abusive practices on the basis that they might, possibly, maybe prevent some other abusive practice in the future.

[DiapDealer]

Originally Posted by plib

The DOJ, quite rightly, is unwilling to accept current abusive practices on the basis that they might, possibly, maybe prevent some other abusive practice in the future.

That's how I see it all boiling down as well.

[Fbone]

"ebook distribution system"

Does that include Kindle research and development, its manufacturing, marketing and support?

[plib]

Originally Posted by Fbone

"ebook distribution system"

Does that include Kindle research and development, its manufacturing, marketing and support?

US Department of Justice

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Correspondence to the Department, including the Attorney General, may be sent to: U.S. Department of Justice
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Washington, DC 20530-0001

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Department of Justice Main Switchboard - 202-514-2000

[DiapDealer]

Originally Posted by Fbone

"ebook distribution system"

Does that include Kindle research and development, its manufacturing, marketing and support?

Fair question.

[leebase]

Originally Posted by Barcey

It's ironic that Amazon basically copied the iPod model play by play and now Apple critisizes their monopoly. I'm sure this isn't lost on anyone and Apple's official statement is just laughed off.

Not at all. Apple worked WITH the music publishers. The publishers may have wanted higher prices...but Apple didn't sell a thing without getting the publishers to agree. Apple did NOT just sell the top 100 songs all the time at a loss.

The publishers were NOT happy with what Amazon was doing. Amazon was threatening the publishers business.

Lee

[Andrew H.]

Originally Posted by curtw

Amazon's $9.99 price was *only* designed to eliminate the competition, no matter how much you feel it benefited you, the customer.

No, it was designed to get people to buy e-book readers in the first place. Amazon made e-readers mainstream by providing both an e-reader and a well-stocked store. That's what gave them their initial 90% marketshare - the fact that there was no real competition.

And note that the $9.99 price was applied to NY times bestsellers - a group of about 40 books out of the million or so books offered.

The Nook was the first real competition to the Kindle, using a similar model plus (initially) cheaper hardware prices. The Nook quickly took about 1/4 of the market. By the time the iPad was introduced, Amazon was down to about 65% of the US e-book market. Note that agency pricing hasn't really reduced Amazon's marketshare (it may be 60% now), but it has driven a lot of independent competitors out of business.

Apple's claim that they were fighting an evil monopoly is basically just self-serving hot air. While I think it might be more difficult to pin price fixing on Apple as opposed to the publishers, they certainly weren't doing consumers any favors.

In the long run, if Amazon had been able to establish a monopoly in e-books, how much do you think books would cost?

They would cost exactly the same. If Amazon (or any company) is able to successfully get 90% of the market by charging low prices, they aren't going to start charging high prices and lose market share.

There is this tinfoil-hat conspiracy holding that it's bad for a company to offer low prices because then they will outcompete the competition and, when they are gone, raise prices. However, this *never* happens. People have been claiming this about Walmart for decades, and we're still waiting for them to raise prices.

[SteveEisenberg]

Originally Posted by plib

if they do engage in abusive practices they're just as likely to get a visit from the DOJ as Apple and the BPH did.

I suspect that Amazon will be an anti-trust target one day. If so, commentators will blame the current case for having led to that one.

[HappyMartin]

Showing up with a product "that just works" before anyone else bothers to do so constitutes evil monopolistic behavior? One day another company will bother to roll out a reader with an ecosystem to the rest of the planet and they will find Amazon already there. I guess they will then also cry foul against Amazon.

This is about Apple and the big 6. Dragging Amazon into it and making accusations against them is just muddying the water.

[Barcey]

Originally Posted by curtw

That is absolutely false. Apple did not sell digital music at a loss, hoping to "outlast" the competition. They offered music at a fair price, with a published profit margin. What the market decided was that this was a fair price and a superior user experience, and people flocked to it.

Amazon's $9.99 price was *only* designed to eliminate the competition, no matter how much you feel it benefited you, the customer. In the long run, if Amazon had been able to establish a monopoly in e-books, how much do you think books would cost?

You don't know Amazon's intent any better then I do. I don't believe they were selling at a loss to eliminate competition. They haven't demonstrated this behaviour with any other media. Why does everyone think they have it out just for the book publishers? Why haven't they done this with music or movies? Surely there is more money to be made by establishing a monopoly on movie sales.

I happen to believe they were selling best sellers at $9.99 because they knew what they were paying for the equivalent hard cover and were knocking off a couple of bucks. Real cost savings from not having to deal with delivering paper. Once they demonstrated to the publishers it was the correct price they should have been able to renegotiate their contract. The publishers just refused to pass on the savings. I don't believe for a minute that this was life or death for the publishers. It was about maximizing profit.

If Amazon develops a monopoly I expect the price to be the market price. Jeff Bezos understands customer loyalty. Watch the Charlier Rose interview from when the Kindle was launched. He said that customers are loyal until someone else offers them a better price or better service. Any company with a large e-commerce site can sell ebooks and would be happy to jump on an opportunity of Amazon trying to drive up the price.

I've never bought a book from Amazon so I don't believe they'll ever get a true monopoly. If they maintain market dominance they will be able to demand favourable terms from the suppliers but if the authors sign exclusive deals with Amazon they'll get what they deserve.

Originally Posted by leebase

Not at all. Apple worked WITH the music publishers. The publishers may have wanted higher prices...but Apple didn't sell a thing without getting the publishers to agree. Apple did NOT just sell the top 100 songs all the time at a loss.

The publishers were NOT happy with what Amazon was doing. Amazon was threatening the publishers business.

If you think that the music publishers were happy with Apple's pricing you must have been living under a rock. The difference was that the music publishers didn't band together to all back out of iTunes at once. Apple could negotiate favourable terms with each of them independently. You know, the way negotiations are supposed to work.

The music industry was only selling complete albums rather then individual songs. Their $20 album was the equivalent of the book publishers hard cover price. Apple allowing customers to pay 99 cents for a single song was viewed as the death of their industry too but it was the only strategy that was working for digital music.

[Xoanon]

Originally Posted by curtw

Amazon's $9.99 price was *only* designed to eliminate the competition, no matter how much you feel it benefited you, the customer. In the long run, if Amazon had been able to establish a monopoly in e-books, how much do you think books would cost?

If you read the internal email extracts released by the DoJ you can see that the publishers were afraid that $9.99 would become in the eyes of their customers the expected price for their new releases - including their precious hardbacks.

The publishers colluded together because they were afraid that Amazon *wouldn't* raise the cost of ebooks.

This fantasy some people are clinging to where the brave publishers and Apple fight against the Evil Amazon Empire to prevent them gaining a monopoly so they can raise prices is just PR bollocks.

[Kumabjorn]

Originally Posted by Andrew H.

There is this tinfoil-hat conspiracy holding that it's bad for a company to offer low prices because then they will outcompete the competition and, when they are gone, raise prices. However, this *never* happens. People have been claiming this about Walmart for decades, and we're still waiting for them to raise prices.

Disclaimer: Not American, not living in the US.
Now, despite that;

I do think Wal-Mart is charging higher prices when they gain a monopolistic position in a local market. Granted, they don't do it by raising prices, they do it by squeezing suppliers. It is much more efficient for a retailer to lower their purchasing costs (no uproar in media) then raising their sales price. In the end, the consumer doesn't benefit from Wal-Mart's lower costs.

[stonetools]

Originally Posted by Andrew H.

No, it was designed to get people to buy e-book readers in the first place. Amazon made e-readers mainstream by providing both an e-reader and a well-stocked store. That's what gave them their initial 90% marketshare - the fact that there was no real competition.

And note that the $9.99 price was applied to NY times bestsellers - a group of about 40 books out of the million or so books offered.

The Nook was the first real competition to the Kindle, using a similar model plus (initially) cheaper hardware prices. The Nook quickly took about 1/4 of the market. By the time the iPad was introduced, Amazon was down to about 65% of the US e-book market. Note that agency pricing hasn't really reduced Amazon's marketshare (it may be 60% now), but it has driven a lot of independent competitors out of business.

Apple's claim that they were fighting an evil monopoly is basically just self-serving hot air. While I think it might be more difficult to pin price fixing on Apple as opposed to the publishers, they certainly weren't doing consumers any favors.

They would cost exactly the same. If Amazon (or any company) is able to successfully get 90% of the market by charging low prices, they aren't going to start charging high prices and lose market share.

There is this tinfoil-hat conspiracy holding that it's bad for a company to offer low prices because then they will outcompete the competition and, when they are gone, raise prices. However, this *never* happens. People have been claiming this about Walmart for decades, and we're still waiting for them to raise prices.

Most of the business press disagrees with your version of events and do trace Amazon's sharp decline in market share to the advent of agency pricing. They also expect amazon to regain market share at th expense of everyone else in the next 2 years. I'm going to go with the consensus on this.

Walmart has financially strong competitors like Target and Tesco to deal with. BN , Amazon's biggest competitor, isn't financially strong at all and may go bankrupt like Borders. If that happens, expect the terms of the settlement to be revisited.

Amazon will at least first do what Walmart has been doing and press down on suppliers margins. First publishers and then authors will lose money. According to Mike Shatzkin, consumers are likely to see lower prices and less quality nonfiction and fiction . We'll see a sort of Smashwordsification of the book market. Great if you like that sort of thing I guess.
Everyone But Amazon will simply grit their teeth and hold on for the next 2 years and then return to full on agency pricing and then deal with a bigger and more powerful Amazon then..

[Kali Yuga]

Originally Posted by Andrew H.

The Nook was the first real competition to the Kindle....

Actually Sony was the first big player in the market and a serious competitor long before the Nook launched. A few small stores like Fictionwise and Mobileread (bought by Amazon) were also in the market.

Originally Posted by Andrew H

the $9.99 price was applied to NY times bestsellers - a group of about 40 books out of the million or so books offered.

Amazon underpriced both Sony and B&N on a variety of titles for several years in a row.

Originally Posted by Andrew H

....agency pricing hasn't really reduced Amazon's marketshare (it may be 60% now), but it has driven a lot of independent competitors out of business.

Who was driven out of business by Amazon losing the ability to out-price them? Fictionwise? Smashwords? Scribd?

Originally Posted by Andrew H

Apple's claim that they were fighting an evil monopoly is basically just self-serving hot air. While I think it might be more difficult to pin price fixing on Apple as opposed to the publishers, they certainly weren't doing consumers any favors.

"Breaking a monopoly" and "lowering prices" are two very different things.

Setting minimum retail prices isn't automatically illegal, by the way, per Leegin vs PSKS.

Originally Posted by Andrew H

They would cost exactly the same. If Amazon (or any company) is able to successfully get 90% of the market by charging low prices, they aren't going to start charging high prices and lose market share.

If Amazon gains 90% of the market, then B&N will go bust, and Sony will probably exit the market. If they did jack up prices, there won't be anyone left to pick up any lost customers.

Amazon might not subsequently raise prices, but they will very likely put the squeeze on authors, self-publishers and publishers so they can increase their margins. They could also rail on new competitors, and nip the competition in the bud.

When Standard Oil was broken up, it wasn't because "consumer prices were too high," nor did the breakup necessarily result in lower consumer prices. The perceived problem was that Standard Oil was too big and put the squeeze on a whole industry. AT&T and T-Mobile's merger might have resulted in lower prices for the consumer, but would also have concentrated too much of the mobile business into a small number of companies.

[JD Gumby]

Originally Posted by curtw

Amazon's $9.99 price was *only* designed to eliminate the competition, no matter how much you feel it benefited you, the customer. In the long run, if Amazon had been able to establish a monopoly in e-books, how much do you think books would cost?

In most jurisdiction, a monopoly's effect on competitors is legally immaterial. All that matters is their effect on consumers.