Stars fall in Amazon protest about ebook prices

[Worldwalker]

Originally Posted by Seli

Could you (or someone) please explain in which way Amazon or any of the ebook-sellers act as a retailer?
In my view they have found a no-risk niche (depending on the exact accounting practices), no expensive to store stock, no money to the producer to obtain the stock, no risk of having un-sellable stock. And if they keep the money they obtain for sold products for a couple of days they can sell the product without mark-up and still make a profit due to interest.

Until the cabal made their demands, Amazon acted fully as a retailer. They purchased ebooks from the publishers at the wholesale price the publishers set, and sold them to the end-users at the price they (Amazon) set. That's what a retailer does: buys wholesale, sells retail.

Whether someone is a retailer or not depends on their sales model, not on whether their stock is expensive to store.

[tammycravit]

Originally Posted by Xanthe

That doesn't explain why paperbacks cost less than hardcover.

A lot of times, I think, when you buy a hardcover book you're paying a premium for the privilege of getting the book earlier than you would in paperback. People for whom cost is a primary consideration usually opt to wait (a year or so, typically) to get the book in paperback.

The New York Times had an interesting article about what it actually costs to produce a book, and what kind of profits the publisher actually makes. Food for thought, whether or not you think current ebooks are overpriced.

[Sil_liS]

Yes, it was an interesting article.

For cover design, typesetting and copy-editing, the publisher pays about 80 cents.

Without accounting for such write-offs, the publisher is left with $4.05, out of which it must pay overhead for editors, cover art designers, office space and electricity before taking a profit.

So the article counts the cover and formatting twice: once for the work, another time for the worker.

Plus they count only the storage on the publisher's side of the expenses.

[cjottawa]

Originally Posted by Ken Irving

Here's the basic problem. When I pay for a digital edition, I neither own it nor control it in the way I do a copy of the print edition. A print book I can keep for the rest of my life, lend it to a slow-reading friend for six months (and then another friend, and another, until I run out of literate friends), sell it used at a yard sale, or sell it for a profit to a collector if it happens to be a first edition of a well-known book.

The digital edition (if I follow all the rules and laws that apply in my country) may be good for the life of the company I bought it from, the company that runs the rights server, or the device I must read it on - whichever comes first. I can lend it, once, for two weeks, to someone who has the same reading device I do, and I can't legally resell it to anyone for love or money. And the formatting of said ebook may be way south of that of the print book, due to garbled scans, lack of editing, etc., or so my experience so far tells me. So if the publisher selling it wants to price it the same as, or for more than, the print edition, I'm paying the same price and getting much, much - MUCH - less. And the publisher is getting much, much more, while probably at the same time (as we've seen in the U.S.) trying by hook or crook to trick most authors (except for the "cream" who have tough agents, large sales, and a fleet of lawyers) into accepting the same royalty for a digital book that they would be getting for the print edition, even though the publisher's costs on an ebook do not include typesetting, printing, binding, warehousing, spoilage, shipping, etc. The record of certain agency-model publishers in that last respect is pretty shoddy, as we can see from a series of recent confrontations with the Authors Guild.

So while Amazon and other ebook sellers don't necessarily have pure motives for wanting to put ebook prices at a level that will maximize their cash flow, and perhaps allow them to monopolize the digital market, the publishers are the ones with the truly unclean hands in situations like this. They shouldn't let Amazon fix the prices (as Apple did with iTunes), but they should understand that trying to fix prices at print levels under the pretext of protecting their print business and acting as white knights for the very people - their authors - they are screwing will just squeeze both themselves and their authors out of the e-market for sure, and possibly out of a segment of the print market as well...

Bang on Ken.

There's an implication that we don't "own" but we've paid for the right to use the content.

It could be argued, along with the right to use the content, is the right to use it on whatever device we want, however, whenever, so long as we aren't making duplicates and spreading them around.

In Canada, the right to make a back-up of copyrighted material was challenged and the consumer won.

Of course the publishers are going to disagree and this will probably have to go to court before it's settled.

The "copyright tax" on blank media in Europe which gave tacit approval to make backup copies failed in Canada (North America?) because the content creators saw the precedent and didn't want to give that tacit approval to make a legal backup.

[Grimm]

Originally Posted by orwell2k

Why try to find a torrent of an mp3 when you can grab it for $0.99 or whatever.

Devil's Advocate here. Why? Because in the same time it takes to search on iTunes it can likely be found on any number of torrent sites. Oh, and some people (myself) refuse to use any device that has an Apple on it. Not saying I pirate, but I most certainly WOULD pirate before I'd use Apple.

[Seli]

Originally Posted by Worldwalker

Until the cabal made their demands, Amazon acted fully as a retailer. They purchased ebooks from the publishers at the wholesale price the publishers set, and sold them to the end-users at the price they (Amazon) set. That's what a retailer does: buys wholesale, sells retail.

Whether someone is a retailer or not depends on their sales model, not on whether their stock is expensive to store.

Did they? Did they really buy a supply of ebooks (or licenses)?? That would mean the industry is even weirder than I imagined.

[BWhite]

Originally Posted by Seli

Did they? Did they really buy a supply of ebooks (or licenses)?? That would mean the industry is even weirder than I imagined.

I would think you would be safe in saying the industry is "weird" right now, period. Because it is in flux and everyone is trying to push their own perception of how the future should be.

Content creators, as represented by publishers, studios etc. supposedly want to move to licensing where the consumer owns nothing, but purchased a license for a one-time viewing, reading, listening on a specific device. Of course when an individual writer, artist, movie star is contacted they may have their own view.

The majority of consumers (from what I read on blogs/forums) still want some form of property rights, licensing leaves them cold. Younger consumers seem to be adapting to the notion of pay once, view once though - we will have to watch how this trend continues to develop.

As has been stated elsewhere on these forums the consumers exact legal rights are still being decided in the courts; various judges are making it up as they go along. In the USA it appears you can be breaking a license by removing DRM, but if you have already paid for the ebook neither the publisher nor the writer are out a cent. This specific court case... don't think one has even been initiated.

Some State Attorneys are looking into Agency 5 pricing, but as to whether Amazon being an "agent" for the publishers when the remainder of the Amazon.com site is a retailer, whether this will stump the state attorneys' investigations into the matter remains to be seen.

Yes. I think you would be quite safe in declaring things to be 'weird' right now. Sort of like going to a theater and seeing an opera performance, comedy, drama and symphony all taking place up on stage at the same time.

But what you are talking about specifically... probably every time Amazon used to sell an ebook for Penguin, etc. they owed the publisher a 'cut', which 'cut' was non-percentage based. So if Amazon wanted to take a loss on an ebook sale that was Amazon's option.

I am just guessing, it could have worked some other way entirely different. Maybe the publishers were/are running their own servers and every ebook comes with its own software-generated license, hidden away in a file in the background, far from the consumer's eyes.

And maybe among twenty publishers there are twelve different ways of doing things - at least under the old scheme of things.

[BWhite]

I am more interested in where things are headed; which is to say I like to try to read the future.

Stars being knocked off - the title of this thread - is all very interesting but it seems like this sort of protest movement will not have a broad impact.

I do not see the Agency 5 budging unless one or more State Attorneys actually announce they are bringing suit.

Someone on these forums mentioned you can perform your own little survey and ask a person you meet on the bus, train, plane what he/she thinks about DRM in that book they are reading on their iPad - and you will most likely draw a blank stare. I believe them. As to pricing, well ebooks are growing so I do not really see pricing as holding back growth.

So I am not even sure there will be a "shake out" of ebooks in the short term. Nothing significant in regards to pricing nor restrictions on consumption. That is what I am most interested in. The question of what we see now - a sort of limited chaos - is this all we get for the next few years?

I personally believe the answer to be 'yes'. And consumption restrictions... I am old school, a book USED to be something you did not consume with a single reading, but seems like we are being shepherded in that direction by the publishers.

I don't really see this changing short term either.

[Kali Yuga]

Originally Posted by JSWolf

The other issue Kali is not really dealing with is the issue that Agency 5 eBooks are not allowed to be put on sale....

I guess, although that seems to fall under the rubric of blocking retailers from competing based on price. I'd say this is a major reason why I am a bit more on the fence about agency pricing than most. However, it also makes a lot more sense to me as a general model than treating ebooks exactly like pbooks (post on this to come).

In addition, allowing only one retailer to offer a discount on specific titles could be interpreted as anti-competitive favoritism (see above post).

Originally Posted by JSWolf

That is an issue that is causing all sorts of problems. Some eBook stores were never designed to allow sales on only certain publishers and the only way they can deal is to no longer offer sales.

I really cannot imagine that skipping discounts is really going to cause a retailer a technical issue.

Originally Posted by JSWolf

The Agency 5 sets the price, screws the customer and wants us to be happy about it.

I, uh, have mentioned that in my opinion, the problem isn't who sets the prices, it's the perception that prices are higher, that is ticking people off right?

[Kali Yuga]

Originally Posted by Barcey

Kali, we seem to disagree again.

Oh, the horror!

I don't mind disagreements, by the way.

Originally Posted by Barcy

It does matter who sets the price. Especially when the purpose is to raise prices.

"Especially" or "primarily?"

To be a bit more expansive, I believe that the overwhelming majority neither know nor care who's setting the price -- hence some of the "one-star protests" blame Amazon instead of, or in addition to, the publishers. This is "how the sausage is made" stuff that few people bother to dive into, even when it upsets them.

Also, I can see why you as a consumer do not want to pay higher prices. Heck, I'd love to have a brand-new BMW roadster for $15,000. However, that desire does not mean that BMW has an obligation to recognize my demand for a lower price as a "right of the consumer," or that it's a good idea for them to sell their roadsters at $15k, even though there is no question that in the short run I will benefit from that arrangement.

Originally Posted by Barcy

If a publishing house wants to stop selling through retailers and sell direct then they can set the prices..... If they want to sell through a retail chain and then tell them they can't change the price then it's a problem.

Is it? Is it really?

Just imagine for a moment that -- even though there is no way this will happen -- Penguin decides that as of today, all their ebooks are a flat $5, no matter where you buy it. Do you genuinely believe people would accuse Penguin of price fixing, of slaughtering and oppressing retailers, and of being money-grubbing fiends?

Originally Posted by Barcy

If General Mills is concerned that Walmart is "devaluing" the price of tasty toasted oats and decide to tell all the grocery stores that they can no longer change the price of Cheerios I would have the same problem with it.

I see. So is it OK if General Mills says "we found this great biotech oat which produces twice the yield at half the cost, and we insist our retailers pass the price on to the consumers, and we won't sell to any grocery chain that charges too much."

Or, is it OK if Walmart says to General Mills, "cut your price on Cheerios by 20% or we won't carry it, and we have 50% of the grocery market by the way." (And yes, they do this to their vendors all the time.)

[Kali Yuga]

Originally Posted by Worldwalker

Until the cabal made their demands, Amazon acted fully as a retailer. They purchased ebooks from the publishers at the wholesale price the publishers set, and sold them to the end-users at the price they (Amazon) set. That's what a retailer does: buys wholesale, sells retail.

Wow. Is this really what you think happens? Does Amazon have to deal with "digital returns," too?

The paper book biz is a weird and highly inefficient beast. Retailers can order a massive number of books (or, with a company like B&N or Amazon, demand the publisher do a large print run or they won't stock it). The retailer can send back the unsold titles at any time a 100% return of the publisher's cost. The publishers will also hold an author's royalties until the returns are sorted out (which is preferable to trying to claw back delivered royalties).

Does any part of that process even remotely make sense when dealing with a digital good?

With ebooks, the retailer really is working like an agent. They are not purchasing blocks of ebooks and reselling them, and getting stuck with or returning the unsold portion; that would be patently absurd and just replicate the massive inefficiency of the paper inventory process. Instead, Amazon collects the payment and sends its contractually obligated cut to the publisher, who can then send the author's royalties without concerns about returns.

The similarity to the standard model is in the contractual payments and pricing abilities. To wit: The retailer sells one ebook copy of a book. They collect the payment from the buyer, and send the publisher their cut. In the standard model, the publisher's cut is a formula based on the cover price, and the retailer can sell the ebook at any price. If the ebook's cover price is $25, and their obligation to the retailer is $12, and the retailer sells it for $10, then the retailer is taking a $2 loss -- i.e. subsidizing the consumer's low price. This can work in a digital realm, but doesn't strike me as anywhere near as simple as a basic 70/30 split, where the publishers and authors don't lose out because the retailer wants to screw a competing retailer.

By the way, Amazon lets self-publishers and small publishers set the price on ebooks all the time with a 70/30 split with the Digital Text Platform -- so they basically help develop and popularize agency pricing. Isn't there some famous phrase about being hoist upon one's own petard?


And let's be clear about something here: Amazon isn't Fighting the Good Fight for the sake of the consumer and the free markets; they were routinely getting blasted around here (and occasionally defended by yours truly) prior to the agency pricing change. They're fighting for the right to dominate the ebook market and squeeze the life out of their competitors. This is not necessarily a bad thing, but it is best to recognize that what's really going on is that your desires ("cheaper ebooks") are temporarily aligning with Amazon's goals ("increase market share").

[Barcey]

Companies don't normally enter into anti-competitive business practices to lower prices. If you have any examples I'd love to hear it.

The retail marketplace is built on competing with price and service and restraint of either is anti-competitive. If they want to fix the prices then sell direct. Don't pretend there is competition. If you want to leverage the retail chain then let them compete.

[Blue Tyson]

Originally Posted by Grimm

Devil's Advocate here. Why? Because in the same time it takes to search on iTunes it can likely be found on any number of torrent sites. Oh, and some people (myself) refuse to use any device that has an Apple on it. Not saying I pirate, but I most certainly WOULD pirate before I'd use Apple.

And maybe iTunes is the only place that is selling it - but you would never know that because you have to install an application to find it, as opposed to a website search. If you don't have an ipod, why would you bother with their software at all?

Google - click torrent link is much, much faster than any of that.

[HamsterRage]

If people get annoyed enough at what they perceive as gouging on the ebook prices, then piracy is going to become a significant issue. That might change the game, once a critical mass of people have ereaders.

[sabredog]

Well the agency pricing system is spreading. Lately the UK and now it looks like Australia is the next victim.

http://bookbee.net/australian-ebooks...y-model-creep/