Authors Group Urges Opposition to E-Book Settlement

[JSWolf]

Originally Posted by rhadin

How does the DOJ enforce that when Amazon is not a party to the lawsuit and hasn't agreed to open its books to anyone?

By looking at the records for sales of eBooks.

[Elfwreck]

Originally Posted by JSWolf

I can see Amazon being a publisher not in Amazon's favor. I can see that if the BPHs want to stop selling to Amazon, all they have to do is claim that since Amazon is a publisher, that they are the competition and they don't sell to the competition. I think they could get away with that pretty easily.

They don't have to sell to Amazon. They could pull their books from Amazon entirely with no legal repercussions. They *want* to sell at Amazon... they want Amazon's publicity engine and sales rankings and the convenience of not having to stock bookstores. They just don't want Amazon to influence the customers' ideas of how books work and what they're worth.

There's some metaphor about cake that belongs here. I'm sure it's one of these:

1) The cake is a lie.
2) Cake or death?
3) They want to have their cake and eat it too.

This is why BPH's statements about how they "had to do something to stop Amazon" fall flat. They *had* something they could do... stop selling through Amazon. Saying that Amazon was "destroying books" by selling so many of them that there were no other viable markets is a fascinatingly convoluted statement.

[rkomar]

@Elfwreck: I'm ignorant about what these ebook selling arrangements look like. With paper books, I could guess that a publisher could limit how much a store sold by capping how many paper copies they gave them. Do they have the same sort of leverage with electronic copies? Or does the store get to sell as many as they can get away with once they have a copy of the ebook file? If the latter, it would leave the publishers' other markets more vulnerable to Amazon's price-cutting than it did with paper books, wouldn't it?

[BuddyBoy]

Originally Posted by Elfwreck

This is why BPH's statements about how they "had to do something to stop Amazon" fall flat. They *had* something they could do... stop selling through Amazon. Saying that Amazon was "destroying books" by selling so many of them that there were no other viable markets is a fascinatingly convoluted statement.

Yes, and it also highlights the disingenuous "protect the bookstores" argument from the Authors Guild. If you want to protect independent bookstores, then apply the agency pricing model to your printed books. If everybody has to sell at the same price, then the local store that is currently being walloped by Costco and Walmart, far more so than by Amazon, would have a fighting chance. Of course, that would drastically impact sales, and earnings for authors, but it would protect all those bookstores those all too altruistic autors want to save.

[rhadin]

Originally Posted by JSWolf

By looking at the records for sales of eBooks.

And how do they get the sales records from Amazon? Amazon is not a party to the lawsuit and thus cannot be forced to provide the data.

[Elfwreck]

Originally Posted by rkomar

@Elfwreck: I'm ignorant about what these ebook selling arrangements look like. With paper books, I could guess that a publisher could limit how much a store sold by capping how many paper copies they gave them. Do they have the same sort of leverage with electronic copies? Or does the store get to sell as many as they can get away with once they have a copy of the ebook file? If the latter, it would leave the publishers' other markets more vulnerable to Amazon's price-cutting than it did with paper books, wouldn't it?

Currently, Amazon sells as many copies as they can as fast as they can, based on a single original file. However, publishers *could* negotiate contracts that limit sales, capping them at a certain number or certain pace. It's just never come up before; publishers have never wanted stores to be sold out of something that could be making money.

And they don't want to say "Amazon can only sell 3000 copies/week of the new bestseller." They know that'll annoy customers. Instead, they want to push the price up so that customers will consider buying a hardcover or TPB instead. (Which, for backlists, is really missing the point, since used paperbacks are often $.01+shipping. If they want to clobber Amazon, they need to sell lots of ebooks at *less than that shipping cost,* which Amazon keeps most of.)

Originally Posted by BuddyBoy

Yes, and it also highlights the disingenuous "protect the bookstores" argument from the Authors Guild. If you want to protect independent bookstores, then apply the agency pricing model to your printed books. If everybody has to sell at the same price, then the local store that is currently being walloped by Costco and Walmart, far more so than by Amazon, would have a fighting chance. Of course, that would drastically impact sales, and earnings for authors, but it would protect all those bookstores those all too altruistic autors want to save.

It's also been pointed out that the BPHs had nothing bad to say when Amazon sold hardcovers below cost. Somehow, that wasn't "destroying the bookstores," but selling something that bookstores cannot offer, is.

And yeah. If they switched to mandatory minimum pricing *everywhere,* small bookstores would have the advantage of knowledgeable staff and curated selection, and big chains would have a broader range of popular books and possibly quicker access, because they'd get the new hot books faster than little stores deciding whether to carry them.

They don't want that, either. They *like* their cozy deals with big distributors and bulk discounts. And they have some idea, as little as they want to acknowledge it, how much readership of new books would drop if those 30-60% discounted hardcovers disappeared.

[VioletVal]

Originally Posted by rhadin

No, that was never claimed by the DOJ; the DOJ no more knows for certain than do the analysts as Amazon has never divulged the information. The only thing known for certain is that on the $9.99 bestsellers, Amazon was selling them below cost. In fact, as part of the settlement, Amazon will have to show at least breakeven. However, since Amazon is not a party to the lawsuit or the settlement, I can't figure out how the DOJ will enforce that.

The DOJ won't need information from Amazon to enforce breakeven sales. If Amazon sells ebooks at below cost, one of the publishers could file a complaint and provide that information, along with supporting records, to the DOJ.

[Elfwreck]

Originally Posted by VioletVal

The DOJ won't need information from Amazon to enforce breakeven sales. If Amazon sells ebooks at below cost, one of the publishers could file a complaint and provide that information, along with supporting records, to the DOJ.

If the publishers are paid on the wholesale model, where they make a certain amount per sale, regardless of Amazon's price, they'd have to track all their books to find out if any are being sold below retail price--and then they'd need a way to force Amazon to hand over the record of how many they sold at the lower price.

Since Amazon's not a party to the lawsuit, I don't see how they can be required to comply with this. The DOJ doesn't have the ability to require businesses to change their record-keeping and accounting methods because someone else was found guilty of breaking a law.

I don't see how Amazon can be required not to sell books below cost, either. I can see publishers being allowed to have contracts that require Amazon (or any other vendor) not to sell below cost, or not to sell more than a certain number below a certain price--but going against that becomes breach of contract, not a violation of any specific law. The contracts would need to include language explaining how those measures will be enforced, and the penalties for violating them.

[crossi]

Originally Posted by Elfwreck

If the publishers are paid on the wholesale model, where they make a certain amount per sale, regardless of Amazon's price, they'd have to track all their books to find out if any are being sold below retail price--and then they'd need a way to force Amazon to hand over the record of how many they sold at the lower price.
.

THe settlement didn't say "any" book it said Amazon "must show a profit overall for all the books it sells from that publisher’s catalogue". The publisher will know how much they paid Amazon in that month or year. All they need to know is how much of Amazon's income came from that publisher's ebooks in that period. Say Amazon got $20,000 from Hachette sales and in the same month they paid Hachette $18,000 they overall made a profit of $2,000. Some books may have been sold at a loss but that doesn't matter. They don't need to provide numbers for individual titles.

[Elfwreck]

Originally Posted by crossi

THe settlement didn't say "any" book it said Amazon "must show a profit overall for all the books it sells from that publisher’s catalogue". The publisher will know how much they paid Amazon in that month or year. All they need to know is how much of Amazon's income came from that publisher's ebooks in that period.

They don't have the right to demand that information. Amazon, like any other store, is under no requirement to tell its suppliers how profitable they've been for it.

It's possible they'll try to negotiate contracts that will require that kind of info... but Amazon isn't required to sign any contracts with them. If Amazon decides not to turn over that data, they may have a choice of go without, or don't sell on Amazon.

I could see a court ordering Amazon to play along--but I can't see how that'd happen here, since Amazon isn't a party in the case, as much as the Price-fix Six would like to claim otherwise. I can't figure out how the court plans on insisting vendors can't sell below cost, or can't sell lower than a certain percentage below retail price, since the vendors aren't subject to the lawsuit.

If Coke and Pepsi decided too many sodas are being stolen from Walmart, and made a plan to use poisonous materials in their 12-pack boxes (which is totally neutralized by a spray that the register clerks all have), and got tried for attempted murder... the resulting lawsuit won't be able to say "you can't use poison paper anymore, but Walmart has to install locked soda cases to prevent thefts."

If the BPHs think Amazon is not good for the future of books... nobody's making them sell through Amazon. Any future unhappiness with the way Amazon conducts its business can be met by not selling through Amazon, rather than requiring Amazon change its business practices. If enough publishers pull away, they'll have to change their strategy.

(Note: I don't think Amazon is "the good guys" in this; I despise their homophobic policies and lack of transparency about standards, and several other aspects of their ebook business. However, Amazon's not the company on trial, and being sleazy, greedy, and dismissive of complaints are not crimes in the US business world.)

[Kirtai]

Originally Posted by Elfwreck

...being sleazy, greedy, and dismissive of complaints are not crimes in the US business world.)

More's the pity

[crossi]

I still don't think it's impossible for the publishers to determine if Amazon is selling their books at a loss in aggregate. They know how many of any specific title is sold in any month. They have to know because Amazon pays them for each sale. They know how much Amazon paid them for those books. They know the price Amazon was selling them for. It's on Amazon's web site. They can do the math.

[Andrew H.]

Originally Posted by Ninjalawyer

And with respect to your scholarly knowledge of U.S. laws, note that Canadian law and American law are generally very similar as both countries use the Common Law system (well, Quebec uses French Civil Law, but that's an annoyance for another day)

Louisiana uses French Civil Law, too. Which I do find pretty bizarre.

Originally Posted by Elfwreck

They don't have to sell to Amazon. They could pull their books from Amazon entirely with no legal repercussions.

Actually, they do have to sell to Amazon. If a bunch of producers get together and agree not to sell to a particular retailer... well, they've just colluded to reduce competition, which will violate Sec. 1 of the anti-trust act and put them right back where they are now, except facing greater sanctions.

They would also be prohibited (under the Robinson-Patman Act) from charging Amazon different prices for their goods from other retailers. (In the 90's, Penguin had to pay $25 million to independent booksellers for repeatedly violating the R-P Act).

[Elfwreck]

Originally Posted by crossi

I still don't think it's impossible for the publishers to determine if Amazon is selling their books at a loss in aggregate. They know how many of any specific title is sold in any month. They have to know because Amazon pays them for each sale. They know how much Amazon paid them for those books. They know the price Amazon was selling them for. It's on Amazon's web site. They can do the math.

They know what price Amazon is selling them for right now; they won't know if Amazon runs short-term sales unless they're tracking every single title they sell and have a constant feed updating when the price changes.

If Amazon has a "summer study special: all books with 'school' in the title are marked down 10% this week," publishers don't have a way of tracking that. If Amazon decides to discount "all books with keyword 'zombie apocalypse,' again, unless the publishers are tracking each of their titles, they don't have a way to tell. If Amazon discounts "all NYT Bestsellers"... that's a small enough list that publishers can tell, and high-profile enough to notice, but they still don't have a way of knowing how many were sold *at the sale price* as opposed to at other prices. When exactly did that sale start, and when did it end?

Originally Posted by Andrew H.

Actually, they do have to sell to Amazon. If a bunch of producers get together and agree not to sell to a particular retailer... well, they've just colluded to reduce competition, which will violate Sec. 1 of the anti-trust act and put them right back where they are now, except facing greater sanctions.

They would also be prohibited (under the Robinson-Patman Act) from charging Amazon different prices for their goods from other retailers. (In the 90's, Penguin had to pay $25 million to independent booksellers for repeatedly violating the R-P Act).

They can't *collude* to stop selling at Amazon. They can independently decide to walk away from a retailer. Some publishers have done that--IGN avoided Amazon until they got better contract terms.

They might not be able to sell to Amazon at different prices, but they can do other things to support other vendors, if they wanted: windowed releases (not bloody likely, but possible); non-DRM at other vendors, DRM-only at Amazon (ditto); possibly offering bulk discounts to other vendors that Amazon doesn't get (not sure where those fall into the mess); support with prizes and coupons--buy the book from Diesel and get a code good for a free bonus download from the publisher website--and so on. They could *support* other vendors, seek out stores that they want to improve.

Instead, they seem to want to deal with one big store, and the publicity and simplicity that brings, but not the market influence that brings. Makes sense. What they want to deal with, what their business model is based on, is working through a *distributor*, and having that company sell to retailers. They don't like having to deal directly with dozens of retailers, much less the horror of dealing directly with millions of customers.

[rhadin]

Originally Posted by VioletVal

The DOJ won't need information from Amazon to enforce breakeven sales. If Amazon sells ebooks at below cost, one of the publishers could file a complaint and provide that information, along with supporting records, to the DOJ.

First of all, the settlement doesn't prevent Amazon from selling at below cost. It requires that across an entire publisher's line that Amazon at least breakeven. Consequently, Amazon could sell a book at a loss as long as over all of the books by the publisher it sells it breaks even.

Second, how would the publisher know whether Amazon is at least breaking even over its entire line? Amazon changes pricing almost hourly. A publisher would have to have the data to know that Amazon sold x copies at y price, z copies at b price, etc., something no publisher could possibly know. The only way to be certain would be with data from Amazon.

In the absence of agency pricing, publishers would need to return to a wholesale model. Under the wholesale model, Amazon would pay the wholesale price regardless of what it retails a book for. For example, if the wholesale price is 50% of the list price and the list price is $20, Amazon would pay the publisher $10 for every copy it sold regardless of whether Amazon sold 75% of the copies for $1.99 and 25% for $12.

The publishers could not monitor Amazon's sales. There is no way for a publisher to know that during the hours of 7 to 11:59 a.m. Amazon sold 1,000 copies at $1.99 each but that during the hours of 12 noon to 12 midnight it sold 100 copies at $12.49, even though the wholesale price is $10.

Publishers would only know that Amazon sold 1,100 copies at a wholesale price of $10 each.

The information needs to be provided by Amazon, which it won't provide considering it to be a trade secret.