DOJ suing Apple over ebooks.

[JoeD]

Originally Posted by Elfwreck

I am not sure at all. I could understand a legal argument of "we HAD to raise prices to protect the industry." Basically, a "self-defense" argument... "we didn't really raise prices; it just looks that way. We protected The American Public by shifting funds from one area of the industry to another."

I can understand why they'd want to do so, but I'm not sure it could be used to justify price fixing. IANAL though, we'll see when the case goes to trial how they're going to argue, imo I think they'll try to show that there wasn't collusion although having read the DOJ filing, that could be tricky.

But even if that were a valid potential argument, they'd have to explain why they had to raise prices *this* way, and why all of them had to raise prices to the same levels,

I don't think* that raising the prices and moving to agency is really the problem, it's how they all did so as one and whether there was an agreement between them to all do so.

I really am looking forward to the doublespeak that Apple, Macm and Penguin will use in their briefs.

yeah, same here Be interesting to read between the lines on both sides.

*IANAL so it may turn it that it was that, just based on my current reading of the various articles suggests it's more the discussion/agreement between them.

[murraypaul]

Originally Posted by Kali Yuga

It's a bit more mixed than that.

I'm not sure what you mean?
Do you disagree with my figures?

[fjtorres]

Originally Posted by Elfwreck

However, "convince the public that they should pay more" is not a valid reason for collusion, especially when the public statements kept saying "it's not about our profits; it's about people not paying enough, because then they don't value all our hard work."

Businesses are not allowed to break laws to get people to "value their work." And if the problem was "Amazon was dominating the industry! We needed to stop them!" the solution was simple... stop selling to Amazon, and support other retailers.

The various US domestic Airlines routinely raise prices on specific routes almost in lockstep. *Almost*. The way they do it is one will raise prices (usually claiming higher fuel costs) and over the next few days the rest will match. They get away with it because they also *lower* prices that way; one will drop the rate and the rest will match. And because every once in a while one or more airlines *refuse* to raise the price, which forces the others the cancel the increase.

Consumers and regulators are thus reassured that pricing changes are independently set.

Note that, for now at least, RANDOM HOUSE gets to keep their agency model distribution unchallenged because *they* wisely distanced themselves from the conspiracy and adopted it later, independently. At a minimum, *their* lawyers knew how to avoid the *appearance* of lawbreaking.

[tompe]

Originally Posted by fjtorres

Different people (in different countries) experience different realities.

Me, I just reported some basic facts in reply to a question.
Interpret the facts as you will.

And the intepretation is that your original claim or questiion about why publisher does not use the Amazon model was bogus or not an honest question.

[plib]

Originally Posted by Kali Yuga

These kind of maneuvers aren't an option for big pubs. As I mentioned above, Amazon would have a field day blaming the publishers for denying Amazon customers access to their books, and publishers would lose sales. It'd be an unmitigated disaster.

So, all their arguments about "breaking monopolies", "no quality literature without the BPH", "protect your favourite author's income", "the future of a civilized society", etc. are worthless? Either that or they don't have the courage of their convictions (or balls, as stonetools puts it) to make their case.

Personally I think they recognize their arguments have little merit or acceptance, so it's probably a sensible decision. Still it would be nice to see one of them have the balls to stop sneaking around in the dark and actually come out in the open with what they're trying to force on the reading public.

[fjtorres]

The apologist wave of "analysis" over, now we get equal time for the optimists:
http://ohnotheydidnt.livejournal.com/57365550.html

http://paidcontent.org/2012/04/16/wh...r-readers-now/

Justice notes that agency pricing “prevented e-book retailers from experimenting with innovative pricing strategies…such as offering e-books under an ‘all-you-can-read’ subscription model where consumers would pay a flat monthly fee,” bundles or buy-one-get-one-free promotions. The settlement opens the door for those types of promotions on Hachette, HarperCollins and Simon & Schuster titles.

For example, retailers could bundle frontlist and backlist titles from those publishers for a flat fee. They could offer a free e-book with the purchase of a print book. They could offer, say, romance or mystery bundles with titles from multiple publishers. They could even give e-books away for free. And, presumably, Amazon can start including Hachette, HarperCollins and Simon & Schuster titles in the Kindle Owners’ Lending Library for Amazon Prime members — if it does what it did with titles from some other publishers and pays the wholesale price each time an e-book is borrowed. (In other words, the three settling publishers wouldn’t have to agree to offer their books in the KOLL. Amazon can now just go ahead and do it.)

I’d expect to see B&N and Kobo rolling out increased loyalty programs and other perks to try to keep readers shopping with them. For instance, Barnes & Noble could offer two free titles to anyone who buys a new Nook. They could start other membership, loyalty or subscription programs. Barnes & Noble already has the ability to bundle e-books with print transactions from its in-store cash registers and might start offering more e-book specials to in-store shoppers.

Me, I want to see the Book Clubs *finally* get into ebooks.
Discounts, special Book Club-only omnibus editions, bundles...

[ProfCrash]

As long as the DRM is there, BN and Kobo are not likely to lose many customers. They would have to learn how to strip DRM and convert to buy from Amazon and for many people that is a step too far.

Now, if Amazon has better deals people might choose the Kindle over the Nook out of the gate and that would be bad for BN and Kobo and Sony.

[rhadin]

Originally Posted by plib

Personally I think they recognize their arguments have little merit or acceptance, so it's probably a sensible decision. Still it would be nice to see one of them have the balls to stop sneaking around in the dark and actually come out in the open with what they're trying to force on the reading public.

Perhaps they think it i easier to give the DoJ what it wants for 2 years than to spend millions of dollars fighting the case. After 2 years, they are free to revert to the agency pricing.

Besides there are numerous problems with the terms of the settlement. Consider just this one: The publishers have to allow Amazon to discount to whatever price it wants as long as Amazon makes a profit over the publisher's book line in the aggregate.

• What constitutes the book line? Is it every imprint that a publisher has or does each imprint stand on its own?
• How will they get Amazon to disclose the sales data? No one has been able to get Amazon to be forthcoming to date and Amazon is not a party to the settlement.
• What constitutes "profit"? If Amazon sells all of S&S books for a total of $10,000,000 and all of the ebooks together bought by Amazon from S&S cost $9,999,999.99, so that there is a 1-cent "profit", is that sufficient under the terms of the settlement?
• Although the publishers cannot use the agency system for 2 years, there is no requirement that the revert to the previous wholesale model. They could devise some other model or change the discount terms of the wholesale model, perhaps give only a 30% discount off retail and instead increase co-op fees for physcial displays in front entrances of b&m stores.

There are a lot of unknowns. Everyone assumes that Amazon will get to sell all the books it wants and at whatever discount price it wants, but there are a lot of outstanding issues that need to be tackled. Let's not forget that one of the settlement requirements is that the current contracts be terminated within 30 days. There is no requirement that the publishers enter a new contract with Amazon or do so under specific terms other than no agency pricing, free to discount, profit over the line, and no most-favored clause.

S&S might decide that Amazon's demands are too onerous and announce it will no longer sell its ebooks through Amazon. Two days later, Hachette might follow suit. No collusion, just an independently made business decision.

[murraypaul]

Originally Posted by rhadin

[*]How will they get Amazon to disclose the sales data? No one has been able to get Amazon to be forthcoming to date and Amazon is not a party to the settlement.

The publishers already have access to Amazon sales figures for their books, and they are the only ones who need to know.

[Kali Yuga]

Originally Posted by rhadin

After 2 years, they are free to revert to the agency pricing.

Publishers/retailers can still use agency pricing (publisher sets price, retailer gets a percentage). Random House, for example, uses agency pricing on the exact same terms as everyone else, but isn't named in the lawsuit. The illegal part is the alleged collusion.

The settlement agreement specifies that retailers can continue to use agency pricing. They can't block retailer discounts and can't offer "most favored" status, but otherwise it's the same model. The DoJ even explicitly said it doesn't want to limit business models.

Originally Posted by rhadin

What constitutes the book line?

I'd assume that will include all the imprints. Individual imprints don't have their own contracts with Amazon (afaik).

Originally Posted by rhadin

How will they get Amazon to disclose the sales data?

I'm certain Amazon is are already providing that kind of info to the publishers. They're paying publishers per sale, so basic sales figures must be included. It's the more sophisticated demographic data (e.g. zip code, age, other purchases) that Amazon will continue to withhold.

The info doesn't need to be public, either. It just has to be available for the DoJ to review, if a publisher denies discounts on the basis that "Retailer X is losing money on our products."

Originally Posted by rhadin

What constitutes "profit"?

Not discounting so much that there's a loss. And yes, in theory a 1¢ profit is a profit, but that would also skate very close to the line.

It's unclear how closely or proactively this will be supervised, so it could be a toothless provision.

Originally Posted by rhadin

...they could devise some other model or change the discount terms of the wholesale model, perhaps give only a 30% discount off retail and instead increase co-op fees for physcial displays in front entrances of b&m stores.

Again, they can keep using the agency model.

The provisions against discriminating against a retailer based on anything other than volume are still in effect. So the publishers can't offer anyone "most favored" status, but also can't really offer any one retailer significantly better deals than another.

Originally Posted by rhadin

....There is no requirement that the publishers enter a new contract with Amazon or do so under specific terms other than no agency pricing, free to discount, profit over the line, and no most-favored clause.

The settling publishers' hands are a bit tied. Amazon is getting what it wants, the publishers have very little leverage left, so I'm sure the dust will settle quickly.

The publishers can't afford to ditch Amazon, the backlash against them would be huge. The "nuclear option" is not an option.

In a few weeks, Amazon will be discounting lots of ebooks as heavily as they can get away with. B&N will be screwed -- if they cut prices, their margins evaporate; if they don't, their market share and sales will deteriorate.

Apple is one of the few who can afford to match Amazon. The thing is, they don't have to match Amazon. Apple makes its revenues from hardware sales, not content sales. Their real motivation in pushing for undifferentiated ebook prices isn't to make money from ebooks, it's to stick a big fat thumb in Amazon's eye.

The other is Google, because like Apple they have a massive war chest and earn almost all of their money from search. However, that also means they don't have much incentive to compete in this space. Why throw away perfectly good money on something that people can already run searches on, when the mobile market is slipping away?

I agree there are lots of unknowns, but for the settled publishers it's minor details, that will give a clue to the nature of possible future settlements or penalties.

[stonetools]

The apologist wave of "analysis" over, now we get equal time for the optimists:

Heh, looking at that link, I am reminded of the adage that when it comes to war gaming, amatuers discuss tactics while professionals diScuss logistics. Sure , Germany could have defeated Russia and Japan the USA in WW2 if you assume equal resources. In reality, though...

All those discounting schemes are certainly possible. The issue is , Are they AFFORDABLE for Amazon's cash-strapped competitors? If not , then they are of purely academic interest. What's more, anything they do, Amazon can do, only more so. Example: the Nook Color and the Nook ST. BN was first to maarket with the NC/ Nook ST , but despite great expense the NC hardly made a dent in Amazon's market share- and then Amazon came back bigger and better next year with a whole line of Kindles and the KF, thereby swamping BN's efforts. Frankly, I don't see that BN's innovations helped it at all.
Buried in the article are such lines as...

They may not be able to afford to discount a wide range of e-books as deeply as Amazon can

Retailers could have been doing many of these things all along

Why didn't they do these things pre-agency? The obvious explanation is that they couldn't afford to. Now since then, Kobo has been bought by a big multi-national so maybe ththey can go toe to toe with Amazon. BN may not be able to . Doubt if Apple and Google want to.
Again, my analysis may seem pessimistic, but its based not on what thse businesses COULD do, but what-given their ecomomic constraints- what businesses are LIKELY to do.

[stonetools]

Originally Posted by ProfCrash

As long as the DRM is there, BN and Kobo are not likely to lose many customers. They would have to learn how to strip DRM and convert to buy from Amazon and for many people that is a step too far.

Now, if Amazon has better deals people might choose the Kindle over the Nook out of the gate and that would be bad for BN and Kobo and Sony.

Now here is an interesting argument in favor of DRM.
Thanks to DRM, non-Amazon retailers won't lose customers too precipitately once Amazon begins to out-discount them .

Yay, DRM , right. Actually, not so yay. The majority of ebook readers don't read only on a dedicated ereading device, so they can shift easily between bookstores. Besides, what's the cost of moving between bookstores? $79 -the cost of a dinner for two at a nice restuarant . That's not nothing, but it isn't an insurmountable wall locking the consumer into a device .

[Elfwreck]

Originally Posted by stonetools

The majority of ebook readers don't read only on a dedicated ereading device, so they can shift easily between bookstores.

Translation: who cares about the reading habits of early adopters and the minority of customers who buy the majority of the books? What's good enough for most readers, meaning, "the ones who buy up to 10 books/year," should be good enough for everyone.

Besides, what's the cost of moving between bookstores? $79 -the cost of a dinner for two at a nice restuarant . That's not nothing, but it isn't an insurmountable wall locking the consumer into a device .

Translation: it's no burden to carry around three or four mobile devices instead of three or four physical books, so that the one you want to read next is at hand. Nobody should have any problems with owning and using a Kindle, Nook, Kobo, and Sony, and keeping them all charged and keeping track of what's on each of them.

(Also: $80 is a dinner for two? Not on the budget of most people who were unable to take the risk of a new device until the price of ebook readers to drop below $100.)

----
The whole point of an ebook reader is *not* having to carry around a bunch of different things to read multiple books. Having to remember which collections are on which device makes them a lot less useful.

Your constant harping on what "the majority" do or want or will accept is getting old. The majority never asked for ebooks at all, and if BPHs want to cater only to "the majority," they're welcome to drop the digital branch of their business. Sorting out the buying and usage habits of the majority is useful market data--that's your baseline profits--but those people won't tell you what'll be profitable in three years. A company or industry-watch group that only pays attention to "the majority" will find itself constantly playing catch up when new trends appear.

The majority doesn't care about tech issues that don't affect them. Which DRM doesn't... until they want to change platforms, or something goes wrong with their account, or there's a gap in the distribution chain.

People who bought ebooks from Amazon between 2005 and 2007 got screwed. People who bought PDFs on the pre-ADE system no longer have access to those books, unless they cracked them. And so on.

And while "most people" don't care about rereading most ebooks, especially years later, you can bet that there'd be plenty of outcry if ebooks were sold with a tag that says "you may not be able to read this in three years; do not buy with the intention of leaving it on your digital shelf until you feel like reading it because it may not work then."

[stonetools]

(Also: $80 is a dinner for two? Not on the budget of most people who were unable to take the risk of a new device until the price of ebook readers to drop below $100.)

You think $80 for a dinner for two is a budget buster for someone living in the Bay area?
I find that a bit much.Also, I notice you have THREE devices, two of which are the (premium priced)Sony.
My point is that since DRM is not all that much of a lock-in anymore, ( because of falling prices and increasing options) , its not going to either help or hurt Amazon and its competitors going forward. That might be controversial round these parts, but there you are.

[ProfCrash]

Can some one explain to me why Amazon should care about BN, Apple, or Google and their resources or lack of interest in competing?

If BN cannot afford to provide a discount program or discount e-books because of its current financial position, why should Amazon and its customers be punished? If Apple and Google don't see the e-bookstore business as something that they are really interested in pursuing, why should Amazon and its customers be punished?

The argument I am reading is that the DOJ is wrong to go after Apple and the Five Publisher for collusion because the action protected BN, Apple, and Kobo from a competitor that had the resources to discount books and was interested enough in the market to work at building the Kindle brand name and eco system.

Amazon is a threat because Amazon had spent the time and resources developing its brand name, a part of that meant discounting books. Apple and Google do not seem all that interested in competing. They will play as long as they don't have to work at the game (Give Apple MFN status and raise e-book prices), make them actually compete and they are likely to walk away because, well they don't want to spend the time responding or innovating in their bookstores. BN cannot compete because it does not have enough cash to be able to match Amazon.

So as a customer of Amazon, I should be ok with higher e-book prices in the name of providing artifical competition in the e-book market?