Author Earnings sheds light on ebook Agency redux

[dickloraine]

I'm from germany and here like in many European countries book prices are set by the publisher. It is of course not price fixing, but the effect is similar. Most books are priced the same, competition is not about price.
I just think that this is not the best way to sell goods. Of course it gives some stability and is quite comfortable for the companies. But it has in my opinion two flaws: First it makes you vulnerable to new companies that act different. Since the market is not really competitive disruption is easy and profitable. Look at highly competitive markets to see how difficult it is to enter them, like supermarkets. Wallmart for example did not manage to disrupt the german market, because of this.
Second it is in my opinion simply not the best way to sell. Retailers are specialized in selling. If they are good, they know their customers. They excell in finding the best price for most profit. That is one reason why this way of pricing is seldom used (of course many other factors are very important too, like infastructure etc. This is of course changing too, since you now could sell directly without a middle man). Publishers simply don't make the maximum profit they could with agency.
Of course there are many more factors and there are reasons why the publishers take less profit now, since they think they will make more money long term by agency. Who is right and what thinking is correct I don't know, but for point 1 I think it will backfire again.

[darryl]

Originally Posted by pwalker8

No, the legal definition of price fixing is when multiple competitors come together to decide on a price that everyone will charge. So price fixing is when two or more publishers come together and say we are going to charge X dollars for our books. Agency pricing is _NOT_ price fixing and has been upheld by the courts as perfectly legal, even if that doesn't follow the evil publishers narrative that some are so fond of pushing. The publishers have never admitted to conspiring to price fixing. They have never been charged with price fixing. They were charged with anti-trust on the charge that they got together to insist on agency pricing. They settled the case without admitting guilt.

It is admittedly somewhat unusual, but I find I agree with several of your points. I agree Agency Pricing is not price fixing per se. Nor is it inherently evil. I agree that the Publishers have never admitted to price fixing, at least not formally and explicitly. And the DOJ's complaint was not about price-fixing per se.

However, what happened was worse than price fixing. They conspired to take control of retail pricing from the retailer, for the purpose of eliminating retail competion. The retailer had always had control of retail prices previously. Proof that they can in fact embrace change in the right circumstances. And although they never admitted or were convicted, as you put it, of price fixing per se, price fixing is what occurred. You may recall that the Apple "contracts" set pricing tiers and effectively prevented any discounting. Applying your amateur definition of price fixing above it is difficult to see how this behaviour escapes it. Prices did go up. Discounting stopped. The conspirator's authors suffered, as did the book-buying public. And arguably, the evidence of the activities of various publishing executives and Apple personnel, right up to Steve Jobs, effectively amounts to an admission.

Agency Pricing is not price fixing per se. But Price Fixing there was in its first publishing industry incarnation. In this, its second incarnation, this time achieved by negotiation, we have not been privy to the thoughts or correspondence of the various parties including executives involved. We are not even privy to the contracts between Amazon and the individual cartel members. Price fixing cannot be proved. But I strongly suspect it, with I think very good reason. Perhaps it is time that some of the Pro-Publishing Pollyanna's removed their rose coloured glasses and acknowledged some fairly obvious facts. But I won't be holding my breath.

[eschwartz]

Originally Posted by pwalker8

No, the legal definition of price fixing is when multiple competitors come together to decide on a price that everyone will charge. So price fixing is when two or more publishers come together and say we are going to charge X dollars for our books. Agency pricing is _NOT_ price fixing and has been upheld by the courts as perfectly legal, even if that doesn't follow the evil publishers narrative that some are so fond of pushing. The publishers have never admitted to conspiring to price fixing. They have never been charged with price fixing. They were charged with anti-trust on the charge that they got together to insist on agency pricing. They settled the case without admitting guilt.

I am trying to understand your logic here. According to you:

price fixing == multiple competitors, agreement, set prices.
agency pricing == individual acts to set prices.
publishers accused of == multiple competitors, agreement, agency pricing
==>
publishers accused of != price fixing.


For the purposes of this discussion, it is important to note that "setting a minimum price" is an instantiation of "setting prices".


Aside: I see you feel it important to point out that they settled without admitting guilt. Just curious, what difference you feel that actually makes to anyone on the planet?

[murg]

Originally Posted by eschwartz

I am trying to understand your logic here. According to you:

price fixing == multiple competitors, agreement, set prices.
agency pricing == individual acts to set prices.
publishers accused of == multiple competitors, agreement, agency pricing
==>
publishers accused of != price fixing.


For the purposes of this discussion, it is important to note that "setting a minimum price" is an instantiation of "setting prices".


Aside: I see you feel it important to point out that they settled without admitting guilt. Just curious, what difference you feel that actually makes to anyone on the planet?

For those of us humans reading the above:

• == means equals
• != means not equals

I think that ==> means therefore...

[pwalker8]

Originally Posted by darryl

It is admittedly somewhat unusual, but I find I agree with several of your points. I agree Agency Pricing is not price fixing per se. Nor is it inherently evil. I agree that the Publishers have never admitted to price fixing, at least not formally and explicitly. And the DOJ's complaint was not about price-fixing per se.

However, what happened was worse than price fixing. They conspired to take control of retail pricing from the retailer, for the purpose of eliminating retail competion. The retailer had always had control of retail prices previously. Proof that they can in fact embrace change in the right circumstances. And although they never admitted or were convicted, as you put it, of price fixing per se, price fixing is what occurred. You may recall that the Apple "contracts" set pricing tiers and effectively prevented any discounting. Applying your amateur definition of price fixing above it is difficult to see how this behaviour escapes it. Prices did go up. Discounting stopped. The conspirator's authors suffered, as did the book-buying public. And arguably, the evidence of the activities of various publishing executives and Apple personnel, right up to Steve Jobs, effectively amounts to an admission.

Agency Pricing is not price fixing per se. But Price Fixing there was in its first publishing industry incarnation. In this, its second incarnation, this time achieved by negotiation, we have not been privy to the thoughts or correspondence of the various parties including executives involved. We are not even privy to the contracts between Amazon and the individual cartel members. Price fixing cannot be proved. But I strongly suspect it, with I think very good reason. Perhaps it is time that some of the Pro-Publishing Pollyanna's removed their rose coloured glasses and acknowledged some fairly obvious facts. But I won't be holding my breath.

No, it's somewhat more complex than that. Apple's contract had what is called a most favored nation clause, which said that the publishers could not charge less somewhere else than they did at Apple. They were and are quite free to discount prices as much as they want. Indeed, they do discount prices on a regular basis. I purchased David McCullough's "The Wright Brothers" from the Amazon Kindle store for $14.99, which is a 50% discount from the list price and $3 less than the hardback price. There is even a great big "This price was set by the publisher" on the page.

Much of the publishers' angst and desire to control price comes from the fact that Amazon has a monopolistic position when it comes to ebooks. The publishers really want to have alternate sales channels and not to worry about being held hostage by Amazon.

The real issue is that the true narrative isn't all that straight forward and certainly isn't "Sainted Amazon and Evil Publishers". Both sides are large corporations that play hard ball. Amazon wants to squeeze the suppliers (i.e. publishers) just like Walmart, while the publishers want to maintain their current business model. Neither is particularly concerned about the people who buy the individual books to read.

[pwalker8]

Originally Posted by eschwartz

I am trying to understand your logic here. According to you:

price fixing == multiple competitors, agreement, set prices.
agency pricing == individual acts to set prices.
publishers accused of == multiple competitors, agreement, agency pricing
==>
publishers accused of != price fixing.


For the purposes of this discussion, it is important to note that "setting a minimum price" is an instantiation of "setting prices".


Aside: I see you feel it important to point out that they settled without admitting guilt. Just curious, what difference you feel that actually makes to anyone on the planet?

I'm having trouble understanding why you are struggling with the idea that individual publishers setting their own prices is not the same as price fixing. The individual publishers compete for a share of the other all book market. Penguin Books published Chernow's 2011 Biography of George Washington for $10.74 in the Kindle store. Simon & Schuster publishes McCullough's 2001 Biography of John Adams for $12.99 in the Kindle store. Two different publishers publish different books at different price points. Price fixing would require that the price points be the same. It's pretty straight forward.

Settling without admitting guilt is actually quite important. Generally speaking, when one settles without admitting guilt, it's a strong indication that the prosecutor is more interested in collecting fines and counting coup than bringing the guilty to justice (or even caring if the accused is innocent or guilty). This is a major problem with the current legal system. Prosecutors can strong arm companies into paying fines without regard to guilt or innocence simply by stringing enough charges together that the company would be ruined if they went to trial and lost. Most trial lawyers would tell you that any time you go to trial, it's a gamble regardless of the facts. One never knows what a judge or jury is going to do.

[murg]

Originally Posted by pwalker8

No, it's somewhat more complex than that. Apple's contract had what is called a most favored nation clause, which said that the publishers could not charge less somewhere else than they did at Apple. They were and are quite free to discount prices as much as they want. Indeed, they do discount prices on a regular basis. I purchased David McCullough's "The Wright Brothers" from the Amazon Kindle store for $14.99, which is a 50% discount from the list price and $3 less than the hardback price. There is even a great big "This price was set by the publisher" on the page.

No one is claiming that the publishers don't discount. Occasionally. Sometimes. Rarely. What they don't allow is the seller to discount independently of the publisher. So, for example, Amazon or Kobo, can't offer a 10% off all ebooks sale, even if they take the 10% out of their portion of the revenue.

Originally Posted by pwalker8

Much of the publishers' angst and desire to control price comes from the fact that Amazon has a monopolistic position when it comes to ebooks. The publishers really want to have alternate sales channels and not to worry about being held hostage by Amazon.

I thought the publisher's desire to control prices was to protect the price levels of physical books. And to maximise their revenue (regardless of whether this actually maximises their revenue or not).

Originally Posted by pwalker8

The real issue is that the true narrative isn't all that straight forward and certainly isn't "Sainted Amazon and Evil Publishers". Both sides are large corporations that play hard ball. Amazon wants to squeeze the suppliers (i.e. publishers) just like Walmart, while the publishers want to maintain their current business model. Neither is particularly concerned about the people who buy the individual books to read.

Actually, as a buyer of ebooks, Amazon is looking out for my interests much more than the publishers are. Amazon is actively trying to reduce the amount that I pay for ebooks.

[dickloraine]

Nobody claims that amaon is sainted. You just change the layer of the conversation to suit you. We all know the reasons why they did collude. But even if they are valid, the solution can not be to break the law. In that way the story is quite straight. Of course we can discuss the concerns of the publishers and the market situation. But that is not a justification of breaking the law. Please, talk about how evil amazons business practices are, how good the old publisher business is etc. But don't use it as an excuse for breaking the law.

[SteveEisenberg]

Originally Posted by murg

Actually, as a buyer of ebooks, Amazon is looking out for my interests much more than the publishers are. Amazon is actively trying to reduce the amount that I pay for ebooks.

Loyal Amazon marketeers likely want to increase the amount you pay for eBooks by getting you to buy more books. As far as I can tell, they don't worry themselves about the quality of the books, or even if they are long enough to be more than a short story.

Big publishers are trying to come up with books you and I want to read. That's in my interest as as a library borrower and used book buyer, just as it is in your interest as a buyer of current eBooks.

Originally Posted by pwalker8

Neither is particularly concerned about the people who buy the individual books to read.

And one -- the big publishers -- seems to be a whole lot more concerned than the other over whether the books they publish will be greatly liked by readers.

[murg]

Originally Posted by SteveEisenberg

Loyal Amazon marketeers likely want to increase the amount you pay for eBooks by getting you to buy more books. As far as I can tell, they don't worry themselves about the quality of the books, or even if they are long enough to be more than a short story.

Whether to purchase more books or not is my decision, not Amazon's. Amazon, however, is trying to push the price of each book I do buy lower. Of course they are going to try to make it easy for me to buy more books, so are the publishers (except if you've seen their websites). If I can buy two BPH books under Amazon's preferred pricing scheme, versus one BPH book under agency, then I'm better off.

And the publishers aren't concerned about the quality of the ebooks they are selling. Just finished a BPH published ebook that was riddled with scan errors, typos, character name changes (!), and other indications of publisher that doesn't care, at all, about the reader/purchaser. Doesn't even care enough to proof-read the ebook, which, in theory, is one of the most basic tasks that a publisher should perform.

Originally Posted by SteveEisenberg

Big publishers are trying to come up with books you and I want to read. That's in my interest as as a library borrower and used book buyer, just as it is in your interest as a buyer of current eBooks.

Ok. That's the publisher's role.

Actually, Big publishers are trying to come up with books that you and I want to buy.

Originally Posted by SteveEisenberg

And one -- the big publishers -- seems to be a whole lot more concerned than the other over whether the books they publish will be greatly liked by readers.

Sorry, I was talking about the price of the books I've decided to purchase. While I appreciate the publishers looking out for my interest, at least as far a producing likeable books, they aren't looking out for my interest as much as Amazon is. Especially when it comes to pricing. Besides, it's pointless to have a likeable book that priced too high.

[cfrizz]

Originally Posted by SteveEisenberg

Loyal Amazon marketeers likely want to increase the amount you pay for eBooks by getting you to buy more books. As far as I can tell, they don't worry themselves about the quality of the books, or even if they are long enough to be more than a short story.

You mean that Amazon leaves the decision up to ME as to what I want to read and to decide if the quality of the book is good enough, and if I'm willing to pay the price they charge?

Thank you so much Amazon for treating me like someone who has a brain and can decide for themselves these issues!

[SteveEisenberg]

Originally Posted by murg

And the publishers aren't concerned about the quality of the ebooks they are selling. Just finished a BPH published ebook that was riddled with scan errors, typos, character name changes (!), and other indications of publisher that doesn't care, at all, about the reader/purchaser. Doesn't even care enough to proof-read the ebook, which, in theory, is one of the most basic tasks that a publisher should perform.

While it's hard to describe what I mean by quality, it has only a smiggen to do with copy editing errors.

I read about fifty eBooks a year, and, except for a few uncorrected scans gotten from openlibrary.org, I've never noticed a major publisher Overdrive (or 3M, or Axis360, or OneClickDigital) eBook as bad as you describe.

Then, I'm not a good copy editor myself, so maybe I'm just lucky in unconsciously ingoring the errors.

[darryl]

Originally Posted by pwalker8

No, it's somewhat more complex than that. Apple's contract had what is called a most favored nation clause, which said that the publishers could not charge less somewhere else than they did at Apple. They were and are quite free to discount prices as much as they want. Indeed, they do discount prices on a regular basis. I purchased David McCullough's "The Wright Brothers" from the Amazon Kindle store for $14.99, which is a 50% discount from the list price and $3 less than the hardback price. There is even a great big "This price was set by the publisher" on the page.

Much of the publishers' angst and desire to control price comes from the fact that Amazon has a monopolistic position when it comes to ebooks. The publishers really want to have alternate sales channels and not to worry about being held hostage by Amazon.

The real issue is that the true narrative isn't all that straight forward and certainly isn't "Sainted Amazon and Evil Publishers". Both sides are large corporations that play hard ball. Amazon wants to squeeze the suppliers (i.e. publishers) just like Walmart, while the publishers want to maintain their current business model. Neither is particularly concerned about the people who buy the individual books to read.

Back to normal. Virtually nothing I can agree with in your whole post. Thank you. I'm very relieved.

What you call a "most favored nation" clause appeared in every contract, and had a simple purpose. To ensure that Apple never had to compete on price with Amazon or any other store.

As for list price and hardback price, these have long been largely irrelevant. As other posts on Mobileread testify, hardback's are often discounted right from day one. List prices are set in the expectation of discounting. During the Hachette negotiations, Authors United members were not exactly ecstatic about Amazon charging the list price for their books. The Wright Brothers? You were ripped-off. Wake up. Prices have in fact risen substantially.

Amazon has a very powerful market position. But, as has been pointed out many times, it is far from a monopoly. However, the Big 5 publishing Cartel is an oligopoly, though one which is increasingly failing as Indie's and Self-Published ebooks become more popular. Their particular implementation of Agency Pricing is likely to hasten this process.

Of course the situation is not totally black and white. No one posting on this site seems to be saying this. But far from squeezing the Publishers, it appears that Amazon have been discounting out of its own share to the point that it was making nothing on Big 5 ebooks. And no, this is not because of their love of the ebook buying public. It is because they do not share the Big 5 strategy to seek to retard EBook growth to preserve the failing PBook market. They rightly see the future market as being dominated by EBooks, and wish to encourage rather than retard their growth. A very rational business goal. They want to set EBook prices at a point which maximises revenues, rather than a point close to PBook prices. Amazon aim to lower EBook prices. The Big 5 want higher EBook prices, and are using Agency to try to get them. Readers want lower EBook prices. At this point in time the interests of Consumers align with those of Amazon. This may not always be the case. If Amazon does ultimately eliminate competition (which include Apple, Google and Kobo) and in fact becomes a Monopoly, then history tells us they will likely abuse their monopoly power. Then again, Amazon is quite a unique company in many ways, and has an aggressive focus on customer service and satisfaction. Perhaps not. But it will be better to have a strong Amazon with some real competition.

[eschwartz]

Originally Posted by pwalker8

I'm having trouble understanding why you are struggling with the idea that individual publishers setting their own prices is not the same as price fixing. The individual publishers compete for a share of the other all book market. Penguin Books published Chernow's 2011 Biography of George Washington for $10.74 in the Kindle store. Simon & Schuster publishes McCullough's 2001 Biography of John Adams for $12.99 in the Kindle store. Two different publishers publish different books at different price points. Price fixing would require that the price points be the same. It's pretty straight forward.

It's pretty straightforward that they at one point conspired together to control the price floor. But I guess you are to busy trying to distract the issue.

(Aside -- biographies should all catch fire and die.)

Settling without admitting guilt is actually quite important. Generally speaking, when one settles without admitting guilt, it's a strong indication that the prosecutor is more interested in collecting fines and counting coup than bringing the guilty to justice (or even caring if the accused is innocent or guilty). This is a major problem with the current legal system. Prosecutors can strong arm companies into paying fines without regard to guilt or innocence simply by stringing enough charges together that the company would be ruined if they went to trial and lost. Most trial lawyers would tell you that any time you go to trial, it's a gamble regardless of the facts. One never knows what a judge or jury is going to do.

Thank you for your pointless legalistic technicalities and can-bes. However, the case brought all kinds of interesting details to light and it is, after all, marginally possible that we the readers can read between the lines... and observe the known details, including the Apple conviction... and notice pricing trends all on our own... etc.

[eschwartz]

Originally Posted by SteveEisenberg

While it's hard to describe what I mean by quality, it has only a smiggen to do with copy editing errors.

I read about fifty eBooks a year, and, except for a few uncorrected scans gotten from openlibrary.org, I've never noticed a major publisher Overdrive (or 3M, or Axis360, or OneClickDigital) eBook as bad as you describe.

Then, I'm not a good copy editor myself, so maybe I'm just lucky in unconsciously ingoring the errors.

What does errors in publisher books have to do with OverDrive per se?
To name one example of why this is a lousy yardstick: I myself have noticed a depressing lack of backlist in OverDrive. Backlist -- THE most likely kind of ebook to be utterly mistreated by publishers.

And I read far, far more than 50 books a year, and I don't focus on niche books (I believe you read a lot of academic-funded works?), and I have noticed the same trend as murg. And it isn't even limited to backlist.