Publishers Claim Apple Order Illegally Hobbles Return to Agency Model

[AnemicOak]

When they struck their e-book price-fixing settlements in 2012, the five agency publishers believed that, in two years, they would be free to negotiate a return to a “no-discount” agency model for e-books. But in appeal filings last week, lawyers for Simon & Schuster and Macmillan contend that Judge Denise Cote’s 2013 final order against Apple has made a timely return to a straight “no-discount” agency model all but impossible.

http://www.publishersweekly.com/pw/b...ncy-model.html

[fjtorres]

Depends on what you consider timely.

[Greg Anos]

They want to return to the model that got Apple busted?

Coach - How many finger do you see?
Player - Thursday...

[AnemicOak]

Originally Posted by Ralph Sir Edward

They want to return to the model that got Apple busted?

Publishers have indicated pretty much all along that they planned to go back to agency as soon as their settlements allowed. It's not an illegal model, it's the way that they went about implementing it that was the problem.

[Apache]

So book publishers are less smart than music publishers?
Apache

[Sil_liS]

Originally Posted by AnemicOak

http://www.publishersweekly.com/pw/b...ncy-model.html

How would they be impeded from negotiating “no-discount” agency model contracts? They can do that with everyone except Apple and Apple doesn't want to give discounts.

[TimW]

Originally Posted by Sil_liS

How would they be impeded from negotiating “no-discount” agency model contracts? They can do that with everyone except Apple and Apple doesn't want to give discounts.

That article correctly points out that Apple has been discounting Hachette books since the kerfuffle began. This emphasizes why Amazon would be unwise to sign a no-discount agency deal with Hachette while Apple still has the ability to discount.

[fjtorres]

Originally Posted by TimW

That article correctly points out that Apple has been discounting Hachette books since the kerfuffle began. This emphasizes why Amazon would be unwise to sign a no-discount agency deal with Hachette while Apple still has the ability to discount.

And why HC and Macmillan are whining.
They are next in line to the negotiation table and, not surprisingly, ever sneaky Randy Penguin chose to go last.
No need for the Penguin house to make an unseemly public spectacle of themselves, they can wait and see how the fight ends up and then go with the flow.

[SteveEisenberg]

Originally Posted by Apache

So book publishers are less smart than music publishers?

CD's and MP3 album downloads have uniform pricing? I don't think so. I have gotten steep discounts on Broadway shows in the past couple years, and before.

The comparison is with companies that require retail price maintenance, including Sony and Apple. Imagine how rich Apple would be if they allowed retailers to make the iPad a loss leader, so that smart purchasers waited to see what the deals would be on Thanksgiving week! (I don't think that, but it would be a more plausible argument for your POV here than the music comparison.)

[pwalker8]

Originally Posted by AnemicOak

Publishers have indicated pretty much all along that they planned to go back to agency as soon as their settlements allowed. It's not an illegal model, it's the way that they went about implementing it that was the problem.

This pretty much shows what happens when a judge who knows nothing about business attempts to micromanage a business. There are all sorts of unexpected consequences for third parties.

I might be wrong, but I believe that Apple has kind of a hybrid agency model on the music side of the iTunes store. Publishers are free to sale music at several different price point as long as they don't sale it cheaper elsewhere. The don't sale cheaper clause of the contract is, of course, what makes the agency model work.

What the story doesn't say and a quick google search doesn't show is what this appeal is in respect to. Is this part of Apple's appeal? Is this their own appeal of Judge Cote's ruling? If so, are they appealing to the 2nd Appeals Court?

[fjtorres]

Sony allows discounts. They try to minimize them on consoles and TVs (not too successfully on the latter) but everything else is fair game.

Apple, on the other hand, practices a different strategy that isn't classic price maintenance.
Instead of discounts, they offer up low-spec versions of their products so they can offer lower price points and then upsell the consumer on a slightly more useful (and expensive) version. Want a $100 iPod? You can have it. It won't be comparable to the full iPod touch but it's an iPod. Same thing with keeping the iPad2 around so long. It gave them a cheap iPad to fend off the androids. It works beautifully because a lot of their customers are looking to buy the brand or buy into the ecosystem rather than a specific feature set.

There's more to modern retailing than just discounting or price fixing.
A vast middle ground toolkit of sophisticated moves is available to both vendors and retailers savvy enough to exploit them.

If you look at the pricing of the XBOX 360 over the past 8 years you'll find that as Sony was trimming features of the PS3 to get pricing in line with buyer expectations, Microsoft actually raised their average selling price *twice* while dropping their advertised pricing, all through upselling consumers.
Even now that you can get a 360 for as low as $149, the bulk of the units are selling for $249 and $299.

Consumer product retail pricing is an art Apple and Amazon and Wal-Mart all excel at in different ways. Microsoft is good and getting better but still not top tier.

Publishers? Not so much. Putting a gun to the buyer's head doesn't buy you many friends.

[pwalker8]

I would point out that Publishers don't really set retail price on books, they only set the price that they change the retailers. That's why they want to go to the agency model. If you want to accuse someone of putting a gun to the buyer's head with regards to book prices, then it's all on Amazon and other book retailers.

[fjtorres]

Originally Posted by pwalker8

I would point out that Publishers don't really set retail price on books, they only set the price that they change the retailers. That's why they want to go to the agency model. If you want to accuse someone of putting a gun to the buyer's head with regards to book prices, then it's all on Amazon and other book retailers.

They don't today but they did from 2010-2013 or are memories that short?

And they want to return to the exact same "buy it on our terms or do without" approach.

Which neither Apple, nor Sony practice.
Their price maintenance is predicated on a good-better-best upsell retailing model where they promote the entry level and try to get buyers to stretch their budget for the next higher version. There, if they fail to upsell they still move the cheaper model and they don't lose the customer.

[SteveEisenberg]

Originally Posted by fjtorres

Sony allows discounts.

Apparently now. I was going by this 2008 Wall Street Journal article:

On Dec. 1, Sony Computer Entertainment America, Sony Corp.'s SNE -0.47% U.S. unit, sent out a notice to its regional and district managers listing minimum-advertised prices for nearly two dozen products, according to a copy of the document.

Originally Posted by fjtorres

Apple, on the other hand, practices a different strategy that isn't classic price maintenance.

My source is The Everything Store. According to the book, the reason Amazon does not sell most Apple products (except through third party sellers) is that Apple forbids most deep discounting.

There's a reason why you don't hear about such vertical price fixing much, and it is explained in my Wall Street Journal link:

Manufacturers often don't like retailers to discuss their pricing agreements publicly. A 2008 MAP agreement from electronic learning-aids manufacturer LeapFrog Enterprises Inc. LF +0.40% states, "This policy is considered confidential and should be respected as such relative to conversations with LeapFrog competitors."

It would be interesting to see what stores have to sign to stock the current model WiFi Paperwhite, a product that doesn't seem to be discounted by even 20 percent.

Originally Posted by fjtorres

Their [Apple] price maintenance is predicated on a good-better-best upsell retailing model where they promote the entry level and try to get buyers to stretch their budget for the next higher version.

That's not Apple's price maintenance policy. It's just charging different prices for different products.

A vast middle ground toolkit of sophisticated moves is available to both vendors and retailers savvy enough to exploit them.

You can call it a toolkit, but if it limits discounts, I'd still call it a minimum price requirement AKA vertical price fixing. If Hachette agree to allow eBook discounts up to 20 percent off a set list price, would you say that agency pricing is gone? I wouldn't.

[pwalker8]

Originally Posted by fjtorres

They don't today but they did from 2010-2013 or are memories that short?

And they want to return to the exact same "buy it on our terms or do without" approach.

Which neither Apple, nor Sony practice.
Their price maintenance is predicated on a good-better-best upsell retailing model where they promote the entry level and try to get buyers to stretch their budget for the next higher version. There, if they fail to upsell they still move the cheaper model and they don't lose the customer.

No, my memory isn't that short, but then again the word "putting" isn't normally used in the past tense.

I would also point out that most business in the US have a "buy it on our terms or do without" approach. When was the last time you bargained with Amazon over the price of an ebook? You either pay their price, or you do without.