Apple files appeal

[DiapDealer]

Originally Posted by Sil_liS

How does adding another ebook retailer supposed to preserve their hardcover profits?

Just adding a retailer wouldn't.

It was the raising of ebook prices across the board that was to accomplish that. The worry was that the decidedly cheaper ebook prices would eventually tempt even the most stalwart proponents of paper away from the hardcover (which represented the bulk of their work, expenses, and profits). They couldn't risk that happening. The new ebooks sales would have meant profits for them too, but they just weren't ready (and probably still aren't) for the upheaval that THAT particularly quick currency substitution could have on their fairly inflexible industry model. They have no desire to "retool." That's hardly surprising (or even particularly blameworthy), but you can't avoid upgrading infrastructure forever.

[Sil_liS]

Originally Posted by DiapDealer

Just adding a retailer wouldn't.

It was the raising of ebook prices across the board that was to accomplish that. The worry was that the decidedly cheaper ebook prices would eventually tempt even the most stalwart proponents of paper away from the hardcover (which represented the bulk of their work, expenses, and profits). They couldn't risk that happening. The new ebooks sales would have meant profits for them too, but they just weren't ready (and probably still aren't) for the upheaval that THAT particularly quick currency substitution could have on their fairly inflexible industry model. They have no desire to "retool." That's hardly surprising (or even particularly blameworthy), but you can't avoid upgrading infrastructure forever.

But this still wouldn't preserve their hardcover profits. People wanting lower prices can get the book used, or in paperback form, or from the library. Paying extra for the hardcover is good for those who specifically want the hardcover or they want any paper version but don't want to wait for cheaper alternatives.

[DiapDealer]

Originally Posted by Sil_liS

But this still wouldn't preserve their hardcover profits. People wanting lower prices can get the book used, or in paperback form, or from the library. Paying extra for the hardcover is good for those who specifically want the hardcover or they want any paper version but don't want to wait for cheaper alternatives.

I'm not saying it was a logical strategy. Only that it WAS a part of the strategy. They saw $10 ebooks as a threat to their flagship hardcover line. Plain and simple. They didn't see them as quite the same threat at $13-15. *shrug*

[bgalbrecht]

Originally Posted by Sil_liS

But this still wouldn't preserve their hardcover profits. People wanting lower prices can get the book used, or in paperback form, or from the library. Paying extra for the hardcover is good for those who specifically want the hardcover or they want any paper version but don't want to wait for cheaper alternatives.

You have to understand that the publishers weren't worried about Amazon undercutting mass market paperback (MMPB) prices. The ebook price when there was a paperback edition available was typically no more than 10% off, if that, because the ebook price was already under $10, which was what Amazon was setting as a soft high price for ebooks. Amazon wasn't even discounting all $10+ ebooks, mostly just best sellers as loss leaders, which is also the practice in hardcovers.

What the publishers were concerned about is that NYT bestsellers in hardcover were already in the $20-25 range, and often discounted to about $15 or so. When Amazon was selling the bestsellers in ebook for $10, nearly as soon as the book was released, the publishers were afraid that the consumers would stop buying hardcovers, switch to ebooks, and demand that ebooks be priced at no higher than $10 (i.e., close to MMPB prices). Since a couple of breakout hardcover bestsellers (or some from bestseller authors) typically pay not only for themselves, but also subsidize most of the rest of the books they publish, a transition from hardcover to $10 ebooks would kill their primary profit center.

With Amazon selling 90% of the ebooks, they were afraid that Amazon would push them to sell all new ebooks for $10 or less even when just released, and with such a price differential between hardcover and ebook, switch to ebook. With Apple entering the marketplace, and Apple making agreements with the publishers to enter into agency pricing (with Apple getting their 30%) with the proviso that if Apple's prices were undercut by a competitor, the publishers would drop the price at Apple. Apple would still profit even if Amazon sold a loss leader best seller for a couple dollars under cost. Also, with Apple in place with a 20%-30% market share, it would be much harder for Amazon to say to the publishers, "You're pricing this ebook too high, you need to sell it to me for $X" where X is substantially less than 50% of the hardcover price.

I don't think anyone ever claimed Amazon was forcing the publishers to sell them ebooks for less, but clearly the fear was that they had the clout to do so. The precedent for that is that even though Wal-Mart does not have a monopoly, it often has enough clout to dictate prices to its suppliers.

[Sil_liS]

Originally Posted by bgalbrecht

You have to understand that the publishers weren't worried about Amazon undercutting mass market paperback (MMPB) prices. The ebook price when there was a paperback edition available was typically no more than 10% off, if that, because the ebook price was already under $10, which was what Amazon was setting as a soft high price for ebooks. Amazon wasn't even discounting all $10+ ebooks, mostly just best sellers as loss leaders, which is also the practice in hardcovers.

What the publishers were concerned about is that NYT bestsellers in hardcover were already in the $20-25 range, and often discounted to about $15 or so. When Amazon was selling the bestsellers in ebook for $10, nearly as soon as the book was released, the publishers were afraid that the consumers would stop buying hardcovers, switch to ebooks, and demand that ebooks be priced at no higher than $10 (i.e., close to MMPB prices). Since a couple of breakout hardcover bestsellers (or some from bestseller authors) typically pay not only for themselves, but also subsidize most of the rest of the books they publish, a transition from hardcover to $10 ebooks would kill their primary profit center.

With Amazon selling 90% of the ebooks, they were afraid that Amazon would push them to sell all new ebooks for $10 or less even when just released, and with such a price differential between hardcover and ebook, switch to ebook. With Apple entering the marketplace, and Apple making agreements with the publishers to enter into agency pricing (with Apple getting their 30%) with the proviso that if Apple's prices were undercut by a competitor, the publishers would drop the price at Apple. Apple would still profit even if Amazon sold a loss leader best seller for a couple dollars under cost. Also, with Apple in place with a 20%-30% market share, it would be much harder for Amazon to say to the publishers, "You're pricing this ebook too high, you need to sell it to me for $X" where X is substantially less than 50% of the hardcover price.

I don't think anyone ever claimed Amazon was forcing the publishers to sell them ebooks for less, but clearly the fear was that they had the clout to do so. The precedent for that is that even though Wal-Mart does not have a monopoly, it often has enough clout to dictate prices to its suppliers.

I didn't say that the publishers were worried about Amazon undercutting mass market paperback (MMPB) prices, I mentioned paperbacks (PB not MMPB) as a paper alternative to hardcovers.

The NYT hardcover range was $24-$28, sold to retailers with a 50% discount, and in the case of ebooks, retailers (not just Amazon) would discount them below the $12-$14 that they would pay the publishers. Article from May 16, 2009:

Of course, Amazon is not the only retailer in the e-book market: Sony sells popular new releases for its Reader device for an average of $11.99. Fictionwise, recently bought by Barnes & Noble, offers New York Times best sellers for $9.95, though it charges hardcover prices for some e-books.

I was wondering why would anyone expect Apple to get to a 20%-30% market share when they would be selling ebooks at the same price as everybody else? And then I found out that in February 2010 the NYT reported this:

But according to at least three people with knowledge of the discussions, who spoke anonymously because of the confidentiality of the talks, Apple inserted provisions requiring publishers to discount e-book prices on best sellers — so that $12.99-to-$14.99 range was merely a ceiling; prices for some titles could be lower, even as low as Amazon’s $9.99.

[bgalbrecht]

Originally Posted by Sil_liS

I didn't say that the publishers were worried about Amazon undercutting mass market paperback (MMPB) prices, I mentioned paperbacks (PB not MMPB) as a paper alternative to hardcovers.

The books the publishers were worried about were hardcover editions for which there were no MMPB/Trade PB editions released yet. One of the reasons why the publishers were especially upset with Amazon's ebook pricing was that Amazon started getting a lot of 1-star reviews by people who didn't buy the ebook whenever an ebook sold for more than $10. This meant that Amazon was setting an upper limit expectation for ebook prices that limited publishers' ability to set ebook prices at or near parity to hardcover prices when only the hardcover and ebooks were available.

[Sil_liS]

Originally Posted by bgalbrecht

The books the publishers were worried about were hardcover editions for which there were no MMPB/Trade PB editions released yet. One of the reasons why the publishers were especially upset with Amazon's ebook pricing was that Amazon started getting a lot of 1-star reviews by people who didn't buy the ebook whenever an ebook sold for more than $10. This meant that Amazon was setting an upper limit expectation for ebook prices that limited publishers' ability to set ebook prices at or near parity to hardcover prices when only the hardcover and ebooks were available.

No, publishers could set the ebook prices at whatever they wanted. The limit was set on Amazon's ability to make a profit.

[bgalbrecht]

According to Publisher's Weekly, Apple has asked Judge Cote to recuse herself from the proceedings that could determine Apple’s money damages for e-book price-fixing on the bases of showing bias in her stay of the external monitor because she included in her decision the comment that “consumers of e-books—including Apple’s own consumers—suffered hundreds of millions of dollars in harm,” and that “the federal Government and the plaintiff States were forced to expend taxpayer money to bring the harm to an end.” Also, two economists, one of whom testified on Apple's behalf in Apple's case against Samsung, have filed an amicus curae brief on Apple's behalf arguing that Apple was just acting in its own best interests.

So the Judge who found Apple guilty is showing bias. Yup. That's what we keep hearing from Apple supporters and now from the Apple lawyers was well.

[pwalker8]

I would be surprised if she does.