Amazon vs. Hachette Update - It's About Price

[eschwartz]

Originally Posted by pwalker8

Or Amazon by wanting Hatchette to reduce the price they charge Amazon per ebook sale, so Amazon can make more money selling at a reduced rate.

Amazon seems to feel that they have established $10 as the new standard for best seller ebooks, and now they are pushing back on the publishers to accept a reduced rate based on that price point.

Well, yes. Hachette demanded agency pricing, and afterward, Amazon demanded something right back. So as I said, who started this?

If you are going to continue arguing with me, at some point I will want to see you actually acknowledge what I say. Your continued pretending that Hatchette just woke up one day with Amazon knocking on the door saying "give us more money" is getting really tiresome. Your arguments say nothing new and shed no light on anything down to and including your thought processes. You continually give the same one-sided view of things and do not even take into consideration the idea that there may be two sides to the issue, and until you do, we cannot possibly have a meaningful discussion.

[ottdmk]

Hmnn. Anecdotal evidence like that letter really makes me wonder if Amazon is heading towards monopsony power. Seems like it, but more evidence (preferably solid & numbers based) is required...

[pwalker8]

Originally Posted by eschwartz

Well, yes. Hachette demanded agency pricing, and afterward, Amazon demanded something right back. So as I said, who started this?

If you are going to continue arguing with me, at some point I will want to see you actually acknowledge what I say. Your continued pretending that Hatchette just woke up one day with Amazon knocking on the door saying "give us more money" is getting really tiresome. Your arguments say nothing new and shed no light on anything down to and including your thought processes. You continually give the same one-sided view of things and do not even take into consideration the idea that there may be two sides to the issue, and until you do, we cannot possibly have a meaningful discussion.

Oh I've acknowledge what you are saying. You are saying that since Hachette wants agency pricing, that Amazon wants something back. I don't think that is correct. My understanding is that Amazon is telling Hachette, not only are we not going to give you agency pricing, we want to reduce how much we pay you for ebooks so we can make money at the $10 price point that we prefer. I don't pretend that Hachette just woke up one day with Amazon knocking on the door saying "give us more money". I'm sure that Hachette fully expected Amazon to do this. It's a natural progression from Amazon's preferred price point and Judge Cote's decree that the publishers have to negotiate in a staggered fashion. It is also standard hardball negotiation by Amazon.

Now that I've acknowledged all that, how about you acknowledge that Hachette has a legitimate concern that Amazon is devaluing Hachette's product by selling it at a price point lower than Hachette thinks it's worth? The issue here isn't that Amazon is evil and Hachette is good. It isn't even that Amazon is good and the publishers are evil, regardless how some may feel. It's that Amazon's business model isn't necessarily in the best interest of the publishers (or authors) and that the publishers have a legitimate right to try to negotiate a contract that works for them rather than simply roll over and take whatever Amazon wants to give them.

[eschwartz]

http://www.hughhowey.com/david-gaugh...mazonhachette/

[TCSimpson]

Originally Posted by pwalker8

Oh I've acknowledge what you are saying. You are saying that since Hachette wants agency pricing, that Amazon wants something back. I don't think that is correct. My understanding is that Amazon is telling Hachette, not only are we not going to give you agency pricing, we want to reduce how much we pay you for ebooks so we can make money at the $10 price point that we prefer.

It's that Amazon's business model isn't necessarily in the best interest of the publishers (or authors) and that the publishers have a legitimate right to try to negotiate a contract that works for them rather than simply roll over and take whatever Amazon wants to give them.

Um, no. Amazon is telling Hachette, we don't want agency in OUR store, AND we'll ACCEPT the rate of 30% that you enforced on us DURING agency.

"Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% -- we did have a big problem with the price increases."
http://www.amazon.com/forum/kindle?_...x3J0JKSSUIRCMT

And it's Amazon's site. Amazon has a right to demand whatever they want. Doesn't mean they will get it. The publishers can go elsewhere just like a free agent negotiating a contract with a given team.

[DuckieTigger]

Originally Posted by ottdmk

Hmnn. Anecdotal evidence like that letter really makes me wonder if Amazon is heading towards monopsony power. Seems like it, but more evidence (preferably solid & numbers based) is required...

Heading towards monopsony? Amazon is said to abuse its power already by applying monospsony.

Interesting opinion article in NYT (How Book Publishers Can Beat Amazon) that is clearly anit-Amazon, but not with enough fact to back it all up. It says for example that the last time around in 2010 it used its monopsony power to:

Amazon exercised what has been described as its “nuclear option”: It promptly deleted the “buy” buttons in the Amazon online store for all of Macmillan’s books. In an instant, Macmillan’s entire business was in jeopardy

And then recommends to the current event that it is time for:

publishers will have no choice but to employ their own nuclear option: pull all their books from Amazon and throw their weight behind a law-abiding alternative. Perhaps the best solution would be an online marketplace controlled by the publishers

Give the power to the publishers to fight Amazons monopsony by implementing an oligopoly? The publishers had their chance and missed it a long time ago to enter the ebook market. They cannot directly compete with other publishers as they don't sell the same books. And they cannot compete on price with their own books - one book cannibalizing sales of another book they are trying to sell as well? What is left is retailers that sell different publishers books and competing on price and service. Price not so much if they get their way with agency pricing.

Another article that is not as drastically anit-Amazon (Burying the Hachette) has similar numbers as the first article I mentioned concerning market share today:

Although data are hard to come by, Amazon is thought to handle 15-30% of big publishing houses’ sales in America, more than twice as much as the next-largest seller. It is said to control 60% of the market for e-books. Though shop owners can choose how to run their business, they may not abuse a dominant market position. A new chapter in the book trade has just begun.

Amazon has power in negotioation, but not clearly enough to call it illegal monopsoly.

If anything the publishers went down this rabbit hole all by themselves back in 2010 by leaning on Amazon. Now Amazon is leaning back. Amazon is somewhat protected from ever beeing accused (legally) for monopsony: they will never aim for a monopoly on ebook sales. And as long as they do not have a monopoly on ebook sales, how can they have a monopsy in ebook buying?

[tubemonkey]

I sad for poor publishers

Spoiler:

NOT!!!

[DuckieTigger]

Originally Posted by eschwartz

http://www.hughhowey.com/david-gaugh...mazonhachette/

Very interesting, especially the comments as well. One of them leads to this petition to stick it to Hachette with a lot of supporters:

https://www.change.org/petitions/aut...-our-readers-2

[eschwartz]

Originally Posted by DuckieTigger

Very interesting, especially the comments as well. One of them leads to this petition to stick it to Hachette with a lot of supporters:

https://www.change.org/petitions/aut...-our-readers-2

Yeah, but:

how about you acknowledge that Hachette has a legitimate concern that Amazon is devaluing Hachette's product by selling it at a price point lower than Hachette thinks it's worth? The issue here isn't that Amazon is evil and Hachette is good. It isn't even that Amazon is good and the publishers are evil, regardless how some may feel. It's that Amazon's business model isn't necessarily in the best interest of the publishers (or authors) and that the publishers have a legitimate right to try to negotiate a contract that works for them rather than simply roll over and take whatever Amazon wants to give them.

I mean, it isn't like it might be obvious that it is in no one's best interest to lose the ability to gouge consumers and authors, which would explain quite handily how some people around here are entirely right that it is not in Hachette's best interest. Competitive pricing rarely is, for the monopoly.

[SteveEisenberg]

Originally Posted by DuckieTigger

The publishers had their chance and missed it a long time ago to enter the ebook market.

Not only did they enter the market. They let eBooks be sold on day one when the hardback edition was sold. And they did it at lower prices, closer to paperback, even though the eBook buyers, being able to afford mobile reading devices, are likely more affluent than other book buyers -- and even though eBooks have features superior to that of paper books -- notably, adjustable font size.

I'm not sure why you are saying publishers didn't enter the eBook market. I guess I'll soon find out

Originally Posted by eschwartz

I mean, it isn't like it might be obvious that it is in no one's best interest to lose the ability to gouge consumers and authors . . .

It seems to me that you are equating consumers as a whole with the minority of planetary readers who buy books the same year they are published.

The traditional system where books are only available in expensive hardcover editions at first, and gradually become available at lower prices through paperback publication, the used book market, and libraries, was characterized by extraordinary social justice. Consumers who could afford to pay top dollar got the book first, but their reading experience wasn't materially superior to that of the less affluent. Just the timing was different.

Is that model threatened? Maybe. But maybe not. Amazon-like tactics don't seem to have been the salvation of Borders and Barnes & Noble. And publishers, while swinging from profit to loss to profit from year to year, still seem generally more profitable than Amazon. Hachette and Random House may yet survive by making money at publication date while letting the world's less affluent folks in on the game just a few years later.

[DuckieTigger]

Originally Posted by SteveEisenberg

Not only did they enter the market. They let eBooks be sold on day one when the hardback edition was sold. And they did it at lower prices, closer to paperback, even though the eBook buyers, being able to afford mobile reading devices, are likely more affluent than other book buyers -- and even though eBooks have features superior to that of paper books -- notably, adjustable font size.

I'm not sure why you are saying publishers didn't enter the eBook market. I guess I'll soon find out

Selling ebooks to a retailer is different than setting up an ebook shop. They created ebooks, but were not interested in directly selling them to end-customers. I should have probably phrased it: they had a chance to compete with Amazon by entering the ebook-retail market.

I think it is interesting that the prices were lower at first. What happened to that?

[TCSimpson]

Originally Posted by DuckieTigger

I think it is interesting that the prices were lower at first. What happened to that?

Demand and technology. I equate it to what's happened in the telephone industry, speaking as guy who spent his career there. While hardwire data was always at basically a premium price, as could be seen by T1 costs, and then lowered with cable/fiber-to-the-curb prices, CELLULAR data was considered not a part of the market. Remember when you had to pay an arm and a leg for minutes? When you would make agreements for peak vs offpeak hours and tell folks to only call you off-peak because then the cost was lower or free? And at the same time you had an unlimited data contract for a measly 10 to 20 bucks, data that you would hardly ever use.

Fast forward to today. Companies are now trying to do away with unlimited data and charging as much as 100 bucks for TWO GBS of data. Folks are in an uproar, but since the communications industry in the US is regulated for the most part, then a finite number of companies hold all the keys and get to charge what they feel like including and giving the shaft to net neutrality all the while providing service that is far behind parts of Europe, Korea, Japan et al. In a comparison to Japan that has been deregulated since 1999, we are so far behind that it's atrocious. Example, hardwired you could get 160 mbs in Japan for about $60 as of 2009. 150 down on FIOS is currently $129 in the US.

[AnemicOak]

Originally Posted by DuckieTigger

Selling ebooks to a retailer is different than setting up an ebook shop. They created ebooks, but were not interested in directly selling them to end-customers. I should have probably phrased it: they had a chance to compete with Amazon by entering the ebook-retail market.

You do realize that all of the big publishers sold ebooks directly before the Kindle even existed right? They had shops back when Amazon and B&N sold ebooks the first time around (before they stopped selling them originally). A few pubs stopped selling ebooks later after the Kindle was so popular, but many never stopped and still do sell them. They just aren't all that good at it. S&S used to have a pretty nice setup which they eventually ruined by redesigning it and raising prices.

I think it is interesting that the prices were lower at first. What happened to that?

What's "at first"? Most ebooks had a a list price that closely matched their paper book equivalent originally (back in the days of Fictionwise, etc.). The only thing that often made them as cheap or cheaper than a paper book was the street price after the retailer had discounted the book.

[Fbone]

Originally Posted by AnemicOak

You do realize that all of the big publishers sold ebooks directly before the Kindle even existed right? They had shops back when Amazon and B&N sold ebooks the first time around (before they stopped selling them originally). A few pubs stopped selling ebooks later after the Kindle was so popular, but many never stopped and still do sell them. They just aren't all that good at it. S&S used to have a pretty nice setup which they eventually ruined by redesigning it and raising prices.



What's "at first"? Most ebooks had a a list price that closely matched their paper book equivalent originally (back in the days of Fictionwise, etc.). The only thing that often made them as cheap or cheaper than a paper book was the street price after the retailer had discounted the book.

Don't forget the retailers had MFN clauses in their contracts. The publishers were not permitted to undercut their retail partners. Might as well let them handle the transaction, expense and customer service.

[AnemicOak]

Originally Posted by Fbone

Don't forget the retailers had MFN clauses in their contracts. The publishers were not permitted to undercut their retail partners. Might as well let them handle the transaction, expense and customer service.

Eventually they did, but there was a time when buying direct from S&S was generally the best price out there (barring a big sale somewhere like Fictionwise). For me that was the only reason to buy direct from a big publisher.