Lawsuit Against Agency Model Balloons

[Pinecone]

Back about 20 years ago, the airlines were discussed as having fixed prices, as flihgts between most two cities was the same on all the airlines.

In a FLURRY, they changed their prices to stop any action under anti-trust statutes.

This will be interesting.

[murraypaul]

Originally Posted by Fbone

If the courts decided agency pricing must end, what stops the publishers from raising their wholesale prices or delaying ebook availability?

If they individually decide to do it, fine. If they decide together to do it, they are right back in the same trouble.
Agency pricing isn't the issue. 6 publishers (almost) simultaneously moving to Agency pricing at the same price is.

[JeremyR]

Originally Posted by Rob Lister

i'm surprised the DOJ hasn't filed a criminal suit.

The DOJ is a very political organization, and well, what major politician in either party doesn't have a huge book deal with one of the major publishers

[murraypaul]

Originally Posted by JeremyR

The DOJ is a very political organization, and well, what major politician in either party doesn't have a huge book deal with one of the major publishers

Or, just perhaps, the eBook discussion isn't actually that important?

[Fbone]

Originally Posted by murraypaul

If they individually decide to do it, fine. If they decide together to do it, they are right back in the same trouble.
Agency pricing isn't the issue. 6 publishers (almost) simultaneously moving to Agency pricing at the same price is.

So then there may be no change in retail prices. They can raise wholesale to $12 and blame the retailers for high prices.

Only Amazon and maybe Google can afford to discount. B&N, Sony, Kobo and BoB can not.

[stonetools]

That neither the DOJ or any of the states have joined in is telling. The way I see it, this is the Hollywood version of how the suit ends.

Court: You are alleging that the publishers, Apple , and Amazon are colluding to raise prices above the market level?
Plaintiffs: Yes
Court: And your evidence is that :

1.The publishers thought that Amazon was pricing ebooks below market value.
2.They and Apple changed the relationship between booksellers and publishers to an agency relationship, so that they could establish prices for their products at what they considered to be market level
3.That prices generally rose for bestsellers, while remaining steady or falling for other books.
4. That the only evidence of what the market price of best sellers are is the price of hardcover bestsellers, which are generally twice the new price of the corresponding ebooks.
5. That ebook sales, especially of bestsellers, have doubled in the past year, despite agency pricing, and are forecast to double again next year.
6.That there is no evidence that the publishers met secretly to fix prices on bestsellers or indeed any books.

Is that your evidence?"

"Yes, your honor"

Judge bangs gavel.

"Case dismissed!!"

(Of course, non-Hollywood, the judge would simply send out an order granting the defense motion to dismiss, but the Hollywood version is spicier).

Its not enough to show that the publishers pushed for agency agreements or indeed that the publishers wanted higher prices. You have to prove a conspiracy to "restrain competition" . I don't see that here, yet.

[CWatkinsNash]

Originally Posted by stonetools

Its not enough to show that the publishers pushed for agency agreements or indeed that the publishers wanted higher prices. You have to prove a conspiracy to "restrain competition" . I don't see that here, yet.

It's a little soon to call it seeing as how discovery is just getting underway, and it's unlikely that either side will play their hand too early. Sit back and enjoy the show, it's a lot more fun than crapping on the parade.

[Elfwreck]

Originally Posted by ilovejedd

Don't see why Amazon is included in the lawsuit when they were against agency pricing in the first place. It just so happened they couldn't do anything but comply with the publishers' edict.

Presumably, the argument is that the sales terms of "you can't sell it elsewhere cheaper than here", puts them in collusion with their supposed competitors to keep prices high everywhere.

Refusing to allow people to offer ebooks for free--but dropping them to free if they're sold that way at Smashwords--may also play into it; that shows they're not unwilling to offer free ebooks, but are engaging in pricefixing for books only sold through them.

(Speculation only. IANAL.)

[Elfwreck]

Originally Posted by stonetools

4. That the only evidence of what the market price of best sellers are is the price of hardcover bestsellers, which are generally twice the new price of the corresponding ebooks.

Depends on what you mean by "best sellers." Johh Locke's sold quite a few books at $1 each; what makes those "not best sellers?"

6.That there is no evidence that the publishers met secretly to fix prices on bestsellers or indeed any books.

January 29, 2010: Mossberg asks Jobs why someone would pay $14.99 for an eBook from Apple when they could buy the same book from Amazon for $9.99. Jobs answer is very compelling:

“That won’t happen,” Jobs says. “The prices will be the same..."

[HomeInMyShoes]

^Lol. Good find.

[bfisher]

Originally Posted by Fbone

If the courts decided agency pricing must end, what stops the publishers from raising their wholesale prices or delaying ebook availability?

There is nothing that would stop a publisher from witholding an e-book version or raising prices, other than their economic interests.

If readers have the choice of buying Title A at $20.00 or Title B at $10.00, and they are equally appealing, the seller of Title B will likely make more profits. Unlike paper books, the marginal cost of producing and selling an ebook is a pittance. It is in the interest of a vendor to sell as many copies as possible to a) recover the fixed costs of publishing the book (avoiding a loss) and increase profits by the additional revenue from every extra copy sold.

On the other hand, if every book is priced at $20.00 perhaps it becomes more attractive for many people to spend their money on something else, like renting a movie.

Agency pricing looks like a price-fixing cartel. Cartels can work only if you can truly control supply. I don't think that it is possible for the book publishing industry to do that.

[Hellmark]

Originally Posted by bfisher

There is nothing that would stop a publisher from witholding an e-book version or raising prices, other than their economic interests.

If readers have the choice of buying Title A at $20.00 or Title B at $10.00, and they are equally appealing, the seller of Title B will likely make more profits. Unlike paper books, the marginal cost of producing and selling an ebook is a pittance. It is in the interest of a vendor to sell as many copies as possible to a) recover the fixed costs of publishing the book (avoiding a loss) and increase profits by the additional revenue from every extra copy sold.

On the other hand, if every book is priced at $20.00 perhaps it becomes more attractive for many people to spend their money on something else, like renting a movie.

Agency pricing looks like a price-fixing cartel. Cartels can work only if you can truly control supply. I don't think that it is possible for the book publishing industry to do that.

People always say that the per unit costs are a pittance for ebooks, but in the various breakdowns I've seen, they're not that far off from those of printed books. The largest expenses are the fixed ones that have to be amortized.

[Elfwreck]

Originally Posted by Hellmark

People always say that the per unit costs are a pittance for ebooks, but in the various breakdowns I've seen, they're not that far off from those of printed books.

Then why hasn't Baen gone bankrupt? For ten years, they've been selling ebooks cheaper than paperbacks. You'd think that, if the breakdowns were accurate, Baen would feel horribly squeezed by their ebook sales, rather than casually saying, "here, have another CD's worth of free ebooks."

One Australian publisher did a price breakdown for a specific book; publication costs (print, storage, delivery) were about 30% of cover price.

"Big 6" Publishers who release price breakdowns are very careful to never mention quantities; they say that editing & formatting are $.80/book for either... but that's only true if they sell the same number of books for ebook & print. Editing costs per book decrease as sales increase; printing costs per book don't.

Also: shouldn't editing costs be split between pbooks & ebooks? If they release the book in multiple formats, they're not paying for an editor for each format. They're not paying separately for advertising, either. They seem to be giving a breakdown for "new hardcover" and "new ebook with no paper release"... which none of the Agency 6 are doing.

Having worked in a related industry, I suspect that the "print/store/ship = $3.25/book" cost is flat costs of paper + stamps, not costs of:

• paper +
• someone to put the books in shipping containers +
• someone to track inventory of what's sold vs what's still coming in +
• cost of boxes to ship books +
• cost of software to keep up with shipments in progress

... and so on.
Because while it's just about as cheap to package 50 books for shipment as it is for one, it's not just as cheap to package 1500. Someone's getting a living wage for stuffing all those books into boxes, and someone's paying for the cardboard and wrapping and printing the shipping labels. (Labels cost effectively nothing. The software that produces the labels, costs a trained operator a few minutes--at probably more than minimum wage.)

And of course, returns aren't on the breakdown lists at all. Those cost charts assume every book that gets printed, gets sold.

[sabredog]

Four years ago I was paying US$30 for a ebook latest release. The ebook version was priced as per the hardcover.

Publishers were running along individually with the business practice of comparable pricing before they colluded together to fix prices.

[DiapDealer]

Four years ago I was paying US$30 for a ebook latest release. The ebook version was priced as per the hardcover.

While it's true that the ebook was being sold for the exact same price as the hardcover at the time, I don't think many people were paying list price for that hardcover... which is what $30 sounds like to me.

But yeah, there was no difference in price between the ebook and the physical book in the early days. Which is why I still feel I'm getting a bit of a bargain under the Agency Model. I'm just not getting as much of a bargain as I was when Amazon stirred things up with $9.99 new releases.