Amazon vs. Hachette Update - It's About Price

[pwalker8]

Originally Posted by DuckieTigger

Amazon will sell ebooks no matter if it is agency or non-agency. Hachette has to decide how important agency pricing is to them, or rather how much they are willing to pay for it. If they go agency pricing with Amazon, and try to do non-agency with everybody else that should void the contract with Amazon - Amazon would be really stupid not to include such a clause. If they go non-agency with Amazon now, no other retailer would agree to agency pricing. The whip that Amazon has is the power to decline any agency pricing contract with Hachette now until it is clear which way they go when negotiating with Apple. Maybe Hachette is hoping for Apples appeal to go through and lift the limit of them having to negotiate alone.

I highly doubt it will happen in time before Hachette has to reveal their hand. Amazon may happily screw over Hachette, but don't for a second believe that Hachette wouldn't happily screw over Amazon.

What in the world makes you think that Hatchette would insist on agency pricing with Amazon and not with anyone else? Publishers want agency pricing with everyone, not just Amazon.

[DuckieTigger]

Originally Posted by pwalker8

What in the world makes you think that Hatchette would insist on agency pricing with Amazon and not with anyone else? Publishers want agency pricing with everyone, not just Amazon.

Of course they wouldn't And that is the only thing you read? The big thing is that they ultimately decide yes or no to agency. If they make a mistake and have a bad contract for them in agency, I don't think the others will still be supportive. They will either get a much better agency deal or a still better non-agency. No matter what, it won't be all BWM united anymore depending on how big mistakes Hachette makes. And without support from their big buddies they will.

[darryl]

I'm not going to refer to any particular post here. But the idea recurs throughout this thread, at least on one side of the argument, that to limit a publishers right to sell its goods as it sees fit, including particularly the setting of prices, is not in accordance with a free market. This reached its extreme in the hysterical communism post, but even a relatively recent post stated that Hachette should be able to set its prices and consumers should decide whether to buy at that price.

What such arguments imho fail to take into account is that competition is at the very heart of a free market. A free market is distorted where there is no competition. It is competition which prevents consumers always being gouged. There is no meaningful competition amongst the BWM on price. Agency Pricing sought to and succeeded in removing price competition completely. We saw the effects. If you want to see the effects right now search in Australian stores for new releases, as I highlighted in another thread. You will see consistently high prices at every store. This is because retailers literally cannot offer discounts without the publishers approval. The publishers have literally taken over the setting of retail prices. What the US D.O.J. and Courts did was simply act to try to restore competition and the proper functioning of the free market. There is no free market with agency pricing in this industry, as the BWM is an oligopoly which has no wish to compete with each other in any meaningful fashion.

I am no expert on Australian competition law, let alone its US counterpart. However, I do know that such laws are notoriously difficult to apply to industries dominated by a duopoly or oligopoly. Australia has a history of these types of arrangements, and our ACCC is subjected to much criticism because it seems unable to do anything about what appear to be very obvious collusive conduct. Last time Apple's conduct alone was enough to sink the conspiracy. This time the BWM seem to think they will be able to get away with it. And this is a very real risk. How do Amazon deal with an argument that Apple's intervention acted as a wake-up call to them, and they have all now decided independantly and without reference to each other that they must fight to the death for agency pricing.

I am not privy to Amazon's plans but am sure they are well aware what is happening. I hope they have an excellent counter prepared. Failing this, one possibility is a repeat where Amazon is forced to capitulate to the BWM. In this case the BWM will use all of its political clout to try to prevent any action by the DOJ. If there is action by the DOJ, then victory against the BWM is of course possible but by no means certain. But there will surely be a vigorous political battle before there is ever a court battle.

Another possibility is all out war. Amazon dumps the BWM and aggressively pursues its authors. A nightmare for both sides and for the authors. Is Amazon sufficiently diversified to go down this path? Are the BWM?

We live in interesting times.

[darryl]

Originally Posted by cfrizz

I would think that the BWM stalling until all were out of contract to present a united front would have the JD and Judge Cote dragging them right back to court for collusion again! Wasn't that the whole idea of having the end of contract dates staggered in the first place?

We can only hope so. But competition law seems to be an area where it is often claimed black is white and vice versa but nothing is proven. As I said in a previous post, I wonder how the argument that having woken up to a necessity for agency pricing, the BWM members are pursuing it vigorously but totally independently. To us, it may seem obvious but will a court be convinced? They are often not.

Correct me if I am wrong but I don't think the contract dates were deliberately staggered. I think it was just the accident of when the contracts were made.

[DuckieTigger]

darryl, They are court order staggered for Apple

http://www.publishersweekly.com/pw/b...l-survive.html

[TCSimpson]

While I find all of this entertaining and there are reasonable points made for and against both parties, there seems to be the prevailing theme that Amazon shouldn't be able to tell the publishers what price they want in THEIR store. Isn't that Amazon's right? To say, "Hey, Amazon is ours, and we won't accept an ebook priced over 9.99 except in special cases that we agree upon." When did the retailer lose the right to tell someone, "Nah, the price you're pitching is too high so I won't sell that in my store."? Aren't the publishers free to say, "Welp, you don't want our goods at our price, then we're moving on." and just go peddle their wares elsewhere."?

Perhaps I'm being to simplistic, but isn't that the long and short of it? Forget the press releases, rhetoric, and propaganda from BOTH businesses, when this is broken down to the very basic level, it is as simple as two sides exercising their right to influence supply and demand for the benefit of themselves. Each has as much right as the other. Hachette has a certain product, Amazon has the store distribution. Neither is technically wrong for making the demands that benefit themselves. As far as who gets hurt in the process or who has been getting hurt all the while, well, that's a different story.

[HarryT]

Originally Posted by TCSimpson

While I find all of this entertaining and there are reasonable points made for and against both parties, there seems to be the prevailing theme that Amazon shouldn't be able to tell the publishers what price they want in THEIR store. Isn't that Amazon's right? To say, "Hey, Amazon is ours, and we won't accept an ebook priced over 9.99 except in special cases that we agree upon."

Why on Earth would Amazon want to say that? They have never had a policy of charging a maximum price of $9.99 (I assume you mean US$ - your post didn't say) for ebooks.

[darryl]

Thanks for the correction and the link Duckie. Much appreciated.

[DuckieTigger]

Originally Posted by darryl

Thanks for the correction and the link Duckie. Much appreciated.

Sure, no problem. Only had my phone on me, so could not cut and paste the essential quote out of it.

[TCSimpson]

Originally Posted by HarryT

Why on Earth would Amazon want to say that? They have never had a policy of charging a maximum price of $9.99 (I assume you mean US$ - your post didn't say) for ebooks.

Um, isn't that the gist of the press release in the OP in Amazon's statement? That they want ebooks priced at $9.99 or less except in specialized cases?

"Any author who's trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower."

"Is it Amazon's position that all e-books should be $9.99 or less? No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99."

All I'm saying to those who say Amazon shouldn't be able to dictate the price is that isn't Amazon's retail site to do with what they will? As it is Hachette's right to say, no, we want $14.99?

[HarryT]

Originally Posted by TCSimpson

Um, isn't that the gist of the press release in the OP in Amazon's statement? That they want ebooks priced at $9.99 or less except in specialized cases?

"Any author who's trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower."

But Amazon aren't saying that they insist on it; simply that they recommend that the author should insist. If a publisher wants to sell a book on Amazon for $500 they're free to do so - but it probably won't sell many copies.

[pwalker8]

Originally Posted by TCSimpson

Um, isn't that the gist of the press release in the OP in Amazon's statement? That they want ebooks priced at $9.99 or less except in specialized cases?

"Any author who's trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower."

"Is it Amazon's position that all e-books should be $9.99 or less? No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99."

All I'm saying to those who say Amazon shouldn't be able to dictate the price is that isn't Amazon's retail site to do with what they will? As it is Hachette's right to say, no, we want $14.99?

Oh course Amazon has a right to insist on being able to set prices in their own store, just as the publishers have a right to insist on being able to set prices for their own products. That's what the contract negotiation is about. Both sides have valid business reasons for preferring their method of selling. That doesn't make one side evil and the other side good.

Just as a side note, I saw an article, I think in the WSJ, about a small publisher who finally signed a one year contract with Amazon after a year and a half long contract negotiation. This negotiation may go on for a long time and I don't think it will be because Hachette is dragging their feet like Amazon says. Amazon, like Walmart, has a reputation for playing extreme hardball when it comes to contract negotiations.

[crossi]

If Hachette wants Amazon to sell ebooks at a higher price why don't they raise, double or even triple, the wholesale price they charge Amazon. Amazon would have to raise the retail price and the publishers and authors would get more money per book. No one has ever said that the publisher or any wholesaler shouldn't set the wholesale price they charge a retailer. Of course, if they only raise the wholesale price for one retailer, Amazon, and none of the others that might create some problems for them.

[DuckieTigger]

Originally Posted by crossi

If Hachette wants Amazon to sell ebooks at a higher price why don't they raise, double or even triple, the wholesale price they charge Amazon. Amazon would have to raise the retail price and the publishers and authors would get more money per book. No one has ever said that the publisher or any wholesaler shouldn't set the wholesale price they charge a retailer. Of course, if they only raise the wholesale price for one retailer, Amazon, and none of the others that might create some problems for them.

Huh? How much profit margin do you think Amazon has?

[Barcey]

Originally Posted by crossi

If Hachette wants Amazon to sell ebooks at a higher price why don't they raise, double or even triple, the wholesale price they charge Amazon. Amazon would have to raise the retail price and the publishers and authors would get more money per book. No one has ever said that the publisher or any wholesaler shouldn't set the wholesale price they charge a retailer. Of course, if they only raise the wholesale price for one retailer, Amazon, and none of the others that might create some problems for them.

That is of course what the publishers were trying to do pre agency and it's where the whole "Amazon was selling ebooks at a loss comes from."

Rather then set a list price at $15 to $19 where retailers could have a small profit margin with a $9.99 (51% wholesale discount) they inflated the list price to $22 - $28. Amazon took the loss and it just allowed them to further grow market share. It wasn't sustainable and both Amazon and the publishers knew it. There's nothing stopping Hachette going back to that though. They can try to squeeze Amazon below the 30% to maintain a better profit margin themselves.