Stars fall in Amazon protest about ebook prices

[Madam Broshkina]

Personally I think Amazon should have separate reviews for eBooks and Print Books. If want to give an ebook one star because you do not like the price it could be posted under the Kindle edition of the book. I see know reason to pollute the print reviews with factors that have no bearing on the book itself.

[JSWolf]

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.

A retailer's site may only be set to allow a site wide discount and not just on specific publishers. Maybe only specific books but not specific publishers. So really, it could be an issue and it could be why we get less discounts now then before the agency 5.

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

It's not a perception. It's a fact. But I do agree that if the prices were set to be reasonable, it would not matter who set them.

[GreenMonkey]

Originally Posted by Kali Yuga

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.

Amazon is still a retailer. As far as their part...they are still providing:

Advertising
Payment processing
Server bandwidth to run their site, and bandwidth to provide the downloads
Customer service for orders
Tech support assistance (for Kindles or Kindle apps)

etc. Rather than physical storage of books.

They're just providing different services than a physical book seller would be providing.

I don't have any compunctions if publishers decided they would only sell their ebooks on a site they own at full MSRP. I do take issue with their ability to tell an independent retailer what they must sell it for.

[LakeLoon]

Originally Posted by GreenMonkey

Amazon is still a retailer. As far as their part...they are still providing:

Advertising
Payment processing
Server bandwidth to run their site, and bandwidth to provide the downloads
Customer service for orders
Tech support assistance (for Kindles or Kindle apps)

etc. Rather than physical storage of books.

They're just providing different services than a physical book seller would be providing.

I don't have any compunctions if publishers decided they would only sell their ebooks on a site they own at full MSRP. I do take issue with their ability to tell an independent retailer what they must sell it for.

For anyone who regularly shops at Amazon, you cannot but be aware that Amazon sells products from lots of sources. A given product (not an ebook, but virtually anything else) might have a dozen purchase links at different prices, one of which might be "sold by Amazon" or "fulfilled by Amazon" and the rest of which are fulfilled by another store, storefront, or individual selling stuff.

For such products, Amazon provides payment processing, server bandwidth, a certain amount of customer service (they do keep tabs and make sure third parties ship your order; I've been impressed). You could view the service as akin to "advertising" because it takes advantage of Amazon's heavy traffic.

Who do you think sets the price when Amazon is selling products from "other sellers"? Hint: not Amazon, although Amazon does have policies regarding shipping/handling. Amazon in these cases is truly acting as an agent, not a retailer. It gets a cut from processing the transaction and offering the types of services GreenMonkey mentions. Does anyone really think it's "price-fixing" when Amazon sells a widget from Buy.com at a price set by Buy.com?

This is why the "agency" model should not be dismissed so lightly. We like Amazon acting as an agent in certain circumstances. It's saved me money more than once. Yes, I will concede that the ebook situation is a bit different, but perhaps it is not quite as different as you think.

Oh, and lest anyone think otherwise, even true "agency" is not necessarily enough to shield the "agency 5" arrangements from various state "unfair competition" laws. Many of these laws are not framed in terms of "agreement." Actually, the state laws can be a bit of a wilderness for a company to comply with, because they are so broad and vague.

[brecklundin]

something to not forget, which is really what set off the alarms, was that the five companies acted in concert at the same time. How likely is it that spontaneously five competing companies all decide to change their vendor agreements to the same terms? If you recall there was the animated discussion between Jobs and execs from at least one company at the last CES during/after some product announcement, I think it was about the iPad but I don't remember the details though they are in a thread somewhere here.

[LakeLoon]

Originally Posted by brecklundin

something to not forget, which is really what set off the alarms, was that the five companies acted in concert at the same time. How likely is it that spontaneously five competing companies all decide to change their vendor agreements to the same terms? If you recall there was the animated discussion between Jobs and execs from at least one company at the last CES during/after some product announcement, I think it was about the iPad but I don't remember the details though they are in a thread somewhere here.

Well, if you need a reason for this parallel conduct, I would start by pointing a finger at Steve Jobs. IF (and this is speculation) he went around to all of the publishers at around the same time, giving them the same pitch--"agency pricing is good for you and good for me"--it is entirely plausible that each of them independently decided, "you know what? That does sound like a good idea, and in fact we'll try to get Amazon to agree to the same thing, because they are cutting prices and we hate that." And that's legal.

I will add that "conspiracy" laws regarding these types of circumstances are one of the more complex areas of antitrust law. The line between what you can do and what you can't is sometimes extremely fuzzy. The publishers are certainly legally allowed to observe, in a hands-off way, what the other publishers are doing, and make their own decisions about whether or not to do the same thing. They are also legally allowed to hope that all the other publishers make the same decision.

That said, if you had proof that the publishers got together in some smoke-filled room and said "let's all agree to force Amazon to accept agency pricing," you may be talking about a crime, for which people can (and do) go to jail. You might reach the same result if you could prove that Steve Jobs acted as a "gofer" to implement such a conspiracy, although I strongly doubt Jobs is that stupid. The man is smart, rich, and his company is going gangbusters; I cannot imagine why he would risk jail time for something like this.

But, I have to be careful here, because the world of copyright is, simply put, different. Court cases have recognized that ASCAP and BMI can coordinate "blanket licenses" for music performances. This is really a form of price-fixing--the copyright owners are getting together and jointly agreeing on a price--but it's legal because special circumstances engender special rules.

Fun fact: it is almost IMPOSSIBLE to tell, simply by viewing the outcome, whether parallel pricing decisions by competitors is the result of independent decisions or a conspiracy--even if the price changes are exactly the same and happen almost simultaneously. The Supreme Court has recognized this again and again.

[murraypaul]

Originally Posted by LakeLoon

For anyone who regularly shops at Amazon, you cannot but be aware that Amazon sells products from lots of sources. A given product (not an ebook, but virtually anything else) might have a dozen purchase links at different prices, one of which might be "sold by Amazon" or "fulfilled by Amazon" and the rest of which are fulfilled by another store, storefront, or individual selling stuff.

Which is the exact opposite of the situation with eBooks, where different retailers cannot sell at different prices.

[brecklundin]

Originally Posted by LakeLoon

Well, if you need a reason for this parallel conduct, I would start by pointing a finger at Steve Jobs. IF (and this is speculation) he went around to all of the publishers at around the same time, giving them the same pitch--"agency pricing is good for you and good for me"--it is entirely plausible that each of them independently decided, "you know what? That does sound like a good idea, and in fact we'll try to get Amazon to agree to the same thing, because they are cutting prices and we hate that." And that's legal.

I will add that "conspiracy" laws regarding these types of circumstances are one of the more complex areas of antitrust law. The line between what you can do and what you can't is sometimes extremely fuzzy. The publishers are certainly legally allowed to observe, in a hands-off way, what the other publishers are doing, and make their own decisions about whether or not to do the same thing. They are also legally allowed to hope that all the other publishers make the same decision.

That said, if you had proof that the publishers got together in some smoke-filled room and said "let's all agree to force Amazon to accept agency pricing," you may be talking about a crime, for which people can (and do) go to jail. You might reach the same result if you could prove that Steve Jobs acted as a "gofer" to implement such a conspiracy, although I strongly doubt Jobs is that stupid. The man is smart, rich, and his company is going gangbusters; I cannot imagine why he would risk jail time for something like this.

But, I have to be careful here, because the world of copyright is, simply put, different. Court cases have recognized that ASCAP and BMI can coordinate "blanket licenses" for music performances. This is really a form of price-fixing--the copyright owners are getting together and jointly agreeing on a price--but it's legal because special circumstances engender special rules.

Fun fact: it is almost IMPOSSIBLE to tell, simply by viewing the outcome, whether parallel pricing decisions by competitors is the result of independent decisions or a conspiracy--even if the price changes are exactly the same and happen almost simultaneously. The Supreme Court has recognized this again and again.

yup, I mentioned a few pages back that I just had the feeling it was Jobs being the puppet master in orchestrating this whole overnight sea change. And the complete intent was to force Amazon, as well as B&N, even Sony, into the same price structure for the major portion of the content sold.

I could see something as simple as Jobs telling each publisher he already had other publishers on board, even if he did not, and dangling that price control in front of them in exchange for that one part of the agreement about nobody being able to sell or pay a lower price than Apple, I forget which were the exact terms that leaked out and need to look them up. That is the weird part of the agreement that makes zero sense as it seems very risky to alienate Amazon, probably their biggest source of income these days. But with that simple part of the agreement, it all changed and Amazon could not do a thing without risking losing their lead in sales. Apple would not seem to have any real interest in selling ebooks, today. Just look up the iBookstore content info around the web, it's nothing. For Apple at this point in time there is just not enough money to be had in ebook sales....in five years, who knows since this agreement has really changed the landscape.

And yeah, based on the way wireless telco's all the made same pricing changes to SMS pricing, and a few other prices, in a suspiciously serendipitous fashion for many people, but it would be near to impossible to prove without that smoking gun...

As to why Jobs would risk something like this, ego and hubris...it's really that simple. Look at what Martha Stewart did for a few grand. It's not a far stretch that Jobs has a plan off in the future around how iPad content will go. This current situation could be be a way to impede Amazon, and to a lesser degree B&N, from owning the ebook market while iBookstore flounders due to the inability to sell enough content. Jobs has already indicated he wants to bring a more multi-media type of book to the people. The iPad can do this, standard ereaders can't. I don't believe it's about ebooks as they exist today but about new multi-media/interactive content from these same publishers in five years or so.

Aren't conspiracy theories fun? I find it even more fun with Jobs in his real life role as El Diablo...or perhpas as El Chupacabra? Loki?

[MaggieScratch]

Originally Posted by Catlady

I want The Best of Everything, by Rona Jaffe (published 1958), which is $12.99 as an e-book (on sale for $6 for paperback at Amazon).

It's full of OCR errors, too. Exclamation points are rendered as lower-case Ls.

[LakeLoon]

Originally Posted by murraypaul

Which is the exact opposite of the situation with eBooks, where different retailers cannot sell at different prices.

Sorry, I don't think I'll agree with "opposite." It is pretty analogous actually. The issue is whether Amazon is allowed to act as a "storefront" for somebody else who actually sets the price. Ebay is in the same situation. Would you have a problem with a publisher setting up a storefront on ebay instead of Amazon?

If you want to look for a root cause why there is no used/secondary market for Kindle books, you need to go back to the copyright laws that permit and legally enforce DRM restrictions, and that give copyright owners the exclusive right to make copies. If you want to start a petition to repeal the DMCA, let me know and I might sign it. I am talking about what is legal, not what is desirable.

Put another way: copyright law is about creating monopolies, not creating competition. You cannot expect to see the same type of markets for monopoly goods.

[Sil_liS]

Originally Posted by brecklundin

Aren't conspiracy theories fun? I find it even more fun with Jobs in his real life role as El Diablo...or perhpas as El Chupacabra? Loki?

I'd go for a theory that Amazon was in on it the whole time. Sure, Amazon looks innocent enough, but they sell the ebooks of the evil publishers. The buyers aren't sure who to blame, but Amazon is pointing the finger at the publishers, saying "they made me raise the prices". By the time the dust settles, the publishers would have increased the prices of pbooks (they sold less books, so they have to have higher prices), and reluctantly agree to sell ebooks 5% less than the pbook. Amazon comes out of this as the hero of readers everywhere.

So yes, this is fun. Anyone have a different theory?

[bobavey]

There is no doubt that e-books cost less to produce and, therefore, should be sold at a price that reflects the lower cost of production. However, it's not the author's fault that the publishers are overcharging.

[LakeLoon]

Originally Posted by Sil_liS

I'd go for a theory that Amazon was in on it the whole time. Sure, Amazon looks innocent enough, but they sell the ebooks of the evil publishers. The buyers aren't sure who to blame, but Amazon is pointing the finger at the publishers, saying "they made me raise the prices". By the time the dust settles, the publishers would have increased the prices of pbooks (they sold less books, so they have to have higher prices), and reluctantly agree to sell ebooks 5% less than the pbook. Amazon comes out of this as the hero of readers everywhere.

Not entirely crazy! But I am a little skeptical, because Amazon stands to gain quite a bit by being able to compete on price with other ebook stores. That sells content, which sells Kindles, which sells more content from Amazon. A double-edged sword, but nobody said market forces were benevolent.

I'm more inclined to believe that Apple and the publishers were taking aim at Amazon. That's playing hardball, but it is not necessarily illegal.

[Kali Yuga]

Originally Posted by 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.

Uh... it's not that you "illegally collaborate with the intent of making prices lower." It's that you "lower prices with an anticompetitive intent."

You also have situations with "predatory pricing," where a company will intentionally lower prices in order to eliminate the competition -- which is pretty much what Amazon was doing prior to the agency model. However, it is worth noting that this is a very expensive strategy, and as such rarely works.

Originally Posted by Barcey

The retail marketplace is built on competing with price and service and restraint of either is anti-competitive.

Not necessarily. That was the point of the Leegin ruling.

If you can prove in court that your actions end up offering an overall benefit to competition, then it is legal. E.g. offering every retailer the exact same costs and prices does prevent retailers from using price to compete against one another -- but it can also be seen as leveling one playing field, and leaving it to the retailers to compete on other grounds like customer service, advertising and so forth.

In addition, the publishers are not using agency pricing to restrict the competition of the non-agency publishers. E.g. Penguin is not pulling its books with the demand that Apple refrain from selling O'Reilly titles.

Originally Posted by Barcey

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.

Oh?

Remember travel agents? They do not set any prices, and are not subsidiaries of the vendors they offer. Yet their existence was not evidence of "anti-competitive behavior" on the parts of the airlines, cruise lines or hotels. You could go to 2 different travel agents and wind up paying the exact same cost for the same itinerary.

Plus, the retailers still benefit. Not only do they get their cut, but they are now in direct competition with the publishers -- as evidenced by Amazon cutting deals directly with authors.

Should Amazon strictly act as a retailer, and not try to become a publisher as well...?

[Sil_liS]

Originally Posted by LakeLoon

Not entirely crazy! But I am a little skeptical, because Amazon stands to gain quite a bit by being able to compete on price with other ebook stores. That sells content, which sells Kindles, which sells more content from Amazon. A double-edged sword, but nobody said market forces were benevolent.

I'm more inclined to believe that Apple and the publishers were taking aim at Amazon. That's playing hardball, but it is not necessarily illegal.

But the market is unstable. If the prices for ebooks are low now, it will be very difficult to compete later. Plus I keep thinking that the extra costs that are related to ebooks only also contain the cost of adding DRM. Sort of like saying: "I can only sell this book to you if I chain it down. You are going to have to pay for the chain." What if Amazon wants to have more expensive chains?