Apple: we broke "Amazon's monopolistic grip" on e-book industry - Page 3

tomsem · 04-15-2012, 04:03 PM

Just to clarify, Amazon made a profit when considering each publisher's offerings independently.

From Mike Shatzkin's blog:

Quote:

8. “Loss-leading” sales were addressed by Justice in a very creative way. They are banned, not on a “per-sale” basis, but rather on a “aggregate” basis. So retailers can give away ebooks. Heck, they can pay customers to take some ebooks, as long as they make back the margin they shed on other ebook sales from the same publisher. Since Amazon has never done anything else (they told me very clearly, and not under NDA, two years ago that they discount a small percentage of the total titles that constitute a big minority slice of total sales and their overall ebook sales deliver positive margin) and nobody else could afford to, that’s a restriction without any real meaning.

http://www.idealog.com/blog/after-th...re-do-we-stand

6charlong · 04-15-2012, 05:00 PM

The thread has moved on but it should be noted that we already knew that Amazon was unlikely to be losing money selling best-sellers for $9.99. The new price for best-sellers that the Agency group wanted was $12.99. We already knew that 30% of the sales price went to the retailer. If we assume the agency model's new price for releases:

12.99 minus (30% of 12.99) = 9.093. Even under the agency model's higher prices Amazon would earn $0.897 per book if they were allowed to sell for $9.99. However, Apple's profit margin would be cut by almost $3 if they had to compete with Amazon's $9.99 price.

Am I the only one that thinks the agency model was a move to both reduce Amazon's presence AND increase Apple's profit? It's hard to see how it can be seen as an altruistic attempt to help consumers.

tomsem · 04-15-2012, 05:15 PM

I think Apple is bloviating about their claim that they 'broke Amazon's monopolistic grip'. If we go back to the pre-agency period (pre-2010), it's true Amazon was encountering little competition at that point (unless you count Microsoft or Sony). But B&N had just launched Nook, Kobo and Google's efforts were well underway (as well as Apple and dozens of smaller retailers). They all saw the opportunities associated with a rapidly expanding market, and were eager to jump in. Who actually was discouraged by Amazon's early dominance? Microsoft, maybe. Who has jumped in since then, attracted by the allure of agency pricing? Arguably, nobody of any size.

But in any case, these competitive plans were already underway in the pre-agency environment and would have come to fruition in any case. There was going to be competition without Apple's involvement.

I think Apple insisted on agency model because it was working for them in music, video, and apps, and they didn't want to invent anything new. Their expertise is in creating the ecosystem, not retailing, playing around with prices, putting on 'sales', etc. So $12.99/$14.99 was their attempt to standardize pricing of books so it looked more like music, video, apps are priced. They like "pretty pricing" to go along with their pretty products. They made the deals that would allow them to do this, and convinced publishers it was in their interest as well. Jobs and his reality distortion field, etc.

Going forward, it seems agency pricing will continue, though diminished. We will have a sort of natural experiment, where we'll be able to compare the fates of the 3 major publishers who continue with agency vs the 3 that have agreed to abandon it.

pwalker8 · 04-15-2012, 05:40 PM

Certainly, it's not like the DOJ has never overstated their case, or even flat out lied in any previous attempts to nail someone. The DOJ has a pretty poor record as far as monopoly charges go, typically if the case actually goes to trial (most settle just to avoid the expense of going to trial), the defendant tends to win.

In this particular case, the DOJ has a problem from the stand point of Apple isn't even remotely close to Amazon when it come to ebook sales. They have a problem from the price fixing point of view in that there isn't a price that has been fixed. I can buy ebooks at all sorts of different prices at both Apple and Amazon. Apple simply has a contract with each of the publishers saying, "Ok, I'll let you set the price as long as you don't sale it elsewhere at a lower price". Price fixing would be if the publishers got together and agreed to sale all their books, or all the books in a certain category at a given price.

Of course, we have the usual suspect jumping into the suit given that we have a defendant (Apple) with very deep pockets, so everyone is in the mood for a little legal extortion.

plib · 04-15-2012, 05:55 PM

Quote:

Originally Posted by pwalker8

Certainly, it's not like the DOJ has never overstated their case, or even flat out lied in any previous attempts to nail someone. The DOJ has a pretty poor record as far as monopoly charges go, typically if the case actually goes to trial (most settle just to avoid the expense of going to trial), the defendant tends to win.

As at least one former DOJ prosecutor has been quoted as saying that in this case the DOJ has "the kind of evidence prosecutors dream about", I wouldn't hold my breath if I were you.

mrscoach · 04-15-2012, 06:01 PM

I think the DOJ has been way too specific about what they know to NOT have something backing them up. Names, dates and phone call lengths? Sounds like they haven't overstated their case.

I could be wrong, but you don't release that much information without having even more stored away.

tompe · 04-15-2012, 06:35 PM

Charles Stross discus Amazon and what they are doing:

http://www.antipope.org/charlie/blog...-strategy.html

stonetools · 04-15-2012, 07:00 PM

DoJ's complaint consists of allegations, not statements of facts. I expect the defense's answer will deny that Amazon was making a profit at 9.99.
After discovery, we'll have some firm figures and then there will be dueling economists. A judge will eventually make the call.

stonetools · 04-15-2012, 07:02 PM

Quote:

Originally Posted by plib

As at least one former DOJ prosecutor has been quoted as saying that in this case the DOJ has "the kind of evidence prosecutors dream about", I wouldn't hold my breath if I were you.

He's on the DOJ team in the current case. Not surprisingly, he likes the DOJ case.

plib · 04-15-2012, 08:57 PM

Quote:

Originally Posted by stonetools

He's on the DOJ team in the current case. Not surprisingly, he likes the DOJ case.

Well, it seems a bit more substantial than "I made my decision completely absent any outside influence after meditating on my exercise bike at 4:00am".

I think 12 Angry Men would be on the side of the DOJ so far.

Fbone · 04-16-2012, 02:33 AM

Quote:

Originally Posted by 6charlong

The thread has moved on but it should be noted that we already knew that Amazon was unlikely to be losing money selling best-sellers for $9.99. The new price for best-sellers that the Agency group wanted was $12.99. We already knew that 30% of the sales price went to the retailer. If we assume the agency model's new price for releases:

12.99 minus (30% of 12.99) = 9.093. Even under the agency model's higher prices Amazon would earn $0.897 per book if they were allowed to sell for $9.99. However, Apple's profit margin would be cut by almost $3 if they had to compete with Amazon's $9.99 price.

Prior to Agency Amazon was losing a few dollars on many bestsellers. This is public knowledge and not disputed by Amazon.

Wholesale prices were half of list about $12-15. So Amazon was selling below their cost for some titles. It's possible they were making up the difference on other titles.

But what about Kindle R&D, support, and marketing. Also, the KDP Select funds of $600,000/mos?

pl001 · 04-16-2012, 10:45 AM

Quote:

Originally Posted by stonetools

DoJ's complaint consists of allegations, not statements of facts. I expect the defense's answer will deny that Amazon was making a profit at 9.99.
After discovery, we'll have some firm figures and then there will be dueling economists. A judge will eventually make the call.

Whether or not Amazon was selling books at a loss shouldn't affect this lawsuit one bit. Even if it is proven that they were, that would NOT exempt Apple and the publishers from engaging in illegal behavior.

JoeD · 04-16-2012, 11:59 AM

Quote:

Originally Posted by plib

Well, it seems a bit more substantial than "I made my decision completely absent any outside influence after meditating on my exercise bike at 4:00am".

I think 12 Angry Men would be on the side of the DOJ so far.

To be fair, maybe he did make the decision sat on his exercise bike at 4:00am.

But he was likely up at that time due to having a sleepless night weighing up all the information the other CEOs, Apple and other employees may have provided during their months of discussions

It's one of the stupidest lines I've read as a reason why he didn't "collude", it just makes no difference what so ever to whether they've met/discussed/planned prior to finally going all in. Much like Apples, we were breaking Amazon's monopoly... line doesn't excuse illegal behaviour (if proven true)

johnnyb · 04-16-2012, 01:10 PM

Again, I think Apple's main motivation was certainly not consumer-oriented, heck, it maybe wasn't even greed... They have enough cash, even more than Amazon, to establish eBook prices at 9,99, yet, like someone in this thread, and I before said, it would have been an inconvenience in their relatively undisturbed ecosystem... So the deal with the BPHs secured them "the lowest" prices while it meant little effort in terms of sales strategy... I think factors like "shopping style" play a far bigger role in their behavior than some coupon mums on this board could think of...

04-15-2012, 05:15 PM	#33
tomsem Grand Sorcerer Posts: 6,905 Karma: 27013865 Join Date: Apr 2009 Location: USA Device: iPhone 15PM, Kindle Scribe, iPad mini 6, PocketBook InkPad Color 3	I think Apple is bloviating about their claim that they 'broke Amazon's monopolistic grip'. If we go back to the pre-agency period (pre-2010), it's true Amazon was encountering little competition at that point (unless you count Microsoft or Sony). But B&N had just launched Nook, Kobo and Google's efforts were well underway (as well as Apple and dozens of smaller retailers). They all saw the opportunities associated with a rapidly expanding market, and were eager to jump in. Who actually was discouraged by Amazon's early dominance? Microsoft, maybe. Who has jumped in since then, attracted by the allure of agency pricing? Arguably, nobody of any size. But in any case, these competitive plans were already underway in the pre-agency environment and would have come to fruition in any case. There was going to be competition without Apple's involvement. I think Apple insisted on agency model because it was working for them in music, video, and apps, and they didn't want to invent anything new. Their expertise is in creating the ecosystem, not retailing, playing around with prices, putting on 'sales', etc. So $12.99/$14.99 was their attempt to standardize pricing of books so it looked more like music, video, apps are priced. They like "pretty pricing" to go along with their pretty products. They made the deals that would allow them to do this, and convinced publishers it was in their interest as well. Jobs and his reality distortion field, etc. Going forward, it seems agency pricing will continue, though diminished. We will have a sort of natural experiment, where we'll be able to compare the fates of the 3 major publishers who continue with agency vs the 3 that have agreed to abandon it. Last edited by tomsem; 04-15-2012 at 05:58 PM.

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04-15-2012, 05:00 PM	#32
6charlong friendly lurker Posts: 896 Karma: 2436026 Join Date: Apr 2007 Location: US Device: Kindle, nook, Apple and Kobo	The thread has moved on but it should be noted that we already knew that Amazon was unlikely to be losing money selling best-sellers for $9.99. The new price for best-sellers that the Agency group wanted was $12.99. We already knew that 30% of the sales price went to the retailer. If we assume the agency model's new price for releases: 12.99 minus (30% of 12.99) = 9.093. Even under the agency model's higher prices Amazon would earn $0.897 per book if they were allowed to sell for $9.99. However, Apple's profit margin would be cut by almost $3 if they had to compete with Amazon's $9.99 price. Am I the only one that thinks the agency model was a move to both reduce Amazon's presence AND increase Apple's profit? It's hard to see how it can be seen as an altruistic attempt to help consumers.

04-15-2012, 05:40 PM	#34
pwalker8 Grand Sorcerer Posts: 7,196 Karma: 70314280 Join Date: Dec 2006 Location: Atlanta, GA Device: iPad Pro, iPad mini, Kobo Aura, Amazon paperwhite, Sony PRS-T2	Certainly, it's not like the DOJ has never overstated their case, or even flat out lied in any previous attempts to nail someone. The DOJ has a pretty poor record as far as monopoly charges go, typically if the case actually goes to trial (most settle just to avoid the expense of going to trial), the defendant tends to win. In this particular case, the DOJ has a problem from the stand point of Apple isn't even remotely close to Amazon when it come to ebook sales. They have a problem from the price fixing point of view in that there isn't a price that has been fixed. I can buy ebooks at all sorts of different prices at both Apple and Amazon. Apple simply has a contract with each of the publishers saying, "Ok, I'll let you set the price as long as you don't sale it elsewhere at a lower price". Price fixing would be if the publishers got together and agreed to sale all their books, or all the books in a certain category at a given price. Of course, we have the usual suspect jumping into the suit given that we have a defendant (Apple) with very deep pockets, so everyone is in the mood for a little legal extortion.

04-15-2012, 06:01 PM	#36
mrscoach Guru Posts: 767 Karma: 4837659 Join Date: Aug 2009 Location: San Angelo Texas Device: Samsung Galaxy tab	I think the DOJ has been way too specific about what they know to NOT have something backing them up. Names, dates and phone call lengths? Sounds like they haven't overstated their case. I could be wrong, but you don't release that much information without having even more stored away.

04-15-2012, 06:35 PM	#37
tompe Grand Sorcerer Posts: 7,452 Karma: 7185064 Join Date: Oct 2007 Location: Linköpng, Sweden Device: Kindle Voyage, Nexus 5, Kindle PW	Charles Stross discus Amazon and what they are doing: http://www.antipope.org/charlie/blog...-strategy.html

04-15-2012, 07:00 PM	#38
stonetools Wizard Posts: 2,016 Karma: 2838487 Join Date: Oct 2010 Location: Washington, DC Device: Ipad, IPhone	DoJ's complaint consists of allegations, not statements of facts. I expect the defense's answer will deny that Amazon was making a profit at 9.99. After discovery, we'll have some firm figures and then there will be dueling economists. A judge will eventually make the call.

04-16-2012, 01:10 PM	#44
johnnyb Cloud Reader Posts: 1,124 Karma: 4000066 Join Date: Aug 2010 Device: Kindle Oasis, Kindle Scribe, iPad Pro 11	Again, I think Apple's main motivation was certainly not consumer-oriented, heck, it maybe wasn't even greed... They have enough cash, even more than Amazon, to establish eBook prices at 9,99, yet, like someone in this thread, and I before said, it would have been an inconvenience in their relatively undisturbed ecosystem... So the deal with the BPHs secured them "the lowest" prices while it meant little effort in terms of sales strategy... I think factors like "shopping style" play a far bigger role in their behavior than some coupon mums on this board could think of...

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