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Amazon exec says Apple's agency model was designed to hinder Kindle

post #1 of 105
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During the third day of the U.S. Department of Justice's antitrust suit against Apple, a high ranking Amazon executive said the agency model used by Apple and five major book publishers was meant to slow down the success of online retailer's popular e-book reader.

Kindle


According to in-court reports from Reuters, Amazon's vice president of Kindle content Russell Grandinetti testified that his company told publishers it may have to modify business relationships as a result of adopting the agency model.

Further, Gardinetti said publishers came to Amazon with an "ultimatum" after reaching deals with Apple in 2010, demanding they be allowed to set e-books prices on Amazon.com. Unless an agreement was made, Amazon would have been barred from selling Kindle-ready e-books on the same day that hardcover versions of the titles were released, he said.

Citing a particular offer from MacMillan in 2010, Grandinetti said the pubisher's CEO Jon Sargent offered a choice between moving to the agency model or being forced to delay an e-book's sale until seven months after a hardcover version had been on the market. "I think I expressed how unpalatable the choice presented was." - Russell Grandinetti, Amazon VP of Kindle content

"I think I expressed how unpalatable the choice presented was," Grandinetti said.

On Tuesday, Penguin Books CEO David Shanks described a similar discussion he had with Amazon over a proposed pricing strategy shift.

"They yelled and screamed and threatened," Shanks said. "It was a very unpleasant meeting."

Shanks also noted that Amazon would routinely price new titles at $9.99 through its Kindle store, when the same book would sell for $26 as a hardcover. Wholesale pricing was cannibalizing profitable hardcover sales, he said.

Amazon resisted the pressure exerted by the publishing houses for a short time before finally submitting to their demands, inking a 3-year deal based on the agency model.

"We wanted to avoid losing most or all of their titles from our store," Gartinetti said of MacMillan.

Amazon


The agency model, and its most favored nations clause, is central to the Justice Department's case against Apple, which alleges the company colluded with five major book publishers to fix e-book prices in the iBookstore. As part of its argument, the DOJ has framed Amazon as one of the parties hurt by Apple's purported scheme, asserting that the company's wholesale model was impacted by the alleged conspiracy.

Under Amazon's wholesale pricing, retailers buy content from publishers in bulk and are able to set resale prices at or below cost. In some cases, this strategy resulted in highly discounted e-book pricing for new books which would otherwise sell for much more. Amazon used the savings to move Kindles, which according to court documents controlled as much as 90 percent of the market by 2009.

Other publishers began to move to the agency model in what Grandinetti believes were decisions made, at least in part, to "slowdown the success of the Kindle." Amazon apparently made attempts to stop the exodus from wholesale, at times threatening to end relationships with certain publishers.

In another testimony on Wednesday, Simon & Schuster CEO Carolyn Reidy said that Grandinetti himself issued a threat against her company after it moved to Apple's agency model, reports CNET. Reidy testified that Grandinetti said, "If you're going to do this, we have to look at the whole business."

She recalled that the first two calls regarding the shift in pricing strategy were amiable, it was in the third that Grandinetti "threatened [their] business."

Wednesday's proceedings ended with Grandinetti on the stand, meaning he will once again testify on Thursday.
post #2 of 105
Quote:
Originally Posted by AppleInsider View Post

During the third day of the U.S. Department of Justice's antitrust suit against Apple, a high ranking Amazon executive said the agency model used by Apple and five major book publishers was meant to slow down the success of online retailer's popular e-book reader.

Yep - the objective here is clear. The DOJ wants to slander Apple to try to make themselves look good.

There are multiple problems with the above testimony:

1. How in the world would an Amazon executive know what the objective of Apple's agency model was? His views of what they were trying to accomplish must be hearsay.

2. Even if it were true, there's nothing illegal about Apple trying to slow down a competitor.

3. It it was true that Apple was trying to slow Amazon down, that's what competition is all about. So Amazon is complaining about having competition. No surprise there.
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post #3 of 105
Let me get this straight: Amazon has razor thin margins on the kindle, offers the kindle app on iOS, and is crying foul when it has to offer ebooks at the same price as Apple?
post #4 of 105
How do the dealings between the book publishers and Amazon have anything to do with apple?

So as a new man to the game Apple had all the power? pulled the strings?

looks to me like it was the five major book publishers greed and their agreement with Apple to not sell to anyone else for a lower cost. The publishers could just let apple sell for 9.99 not 12.99, right?
post #5 of 105
And yet somehow the Kindle app appeared for iOS at the same time iBooks was released. Wouldn't a company so concerned with Kindle sales not want to yield such an obvious competitive advantage?

What a crock of sh*t.
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post #6 of 105
Quote:
Originally Posted by jragosta View Post

2. Even if it were true, there's nothing illegal about Apple trying to slow down a competitor.

But it's illegal for Amazon to slow down the competition? What hypocrisy
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post #7 of 105
Quote:
Originally Posted by TheMacadvocate View Post

And yet somehow the Kindle app appeared for iOS at the same time iBooks was released. Wouldn't a company so concerned with Kindle sales not want to yield such an obvious competitive advantage?

What a crock of sh*t.

At the same time or before? I'm pretty sure it was on iOS before.
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post #8 of 105

Experts can help me here, but am I thinking this right way?

Lets take one example.

There are two real estate brokers X and Y selling lots of homes named  1,2,3,4,5

X charges commission of $100 and says price of home 1 is $1000+$100 = $1100 to buyer (Consumer)

Y guarantees seller that he will get his $1000 but on condition that Y takes 30% profit and he has to change price to $1300 to buyer (Consumer)

Now Seller of home 1(to5) forces agent X to raise price of 1 to be $1300 as well else he will not list his home with X.

 

Is this analogy correct?

Aren't the consumer at loss here?

 

I am sorry if I thought this wrong way, may be end consumer will think wrong way like me and needs to corrected similarly.

post #9 of 105
When does the agent control the price. If it is my book, I want to sell it at a profitable level. Allowing Amazon to sell below market and destroy my hard cover sales is unfair. As publisher, I think I can say sell it for x or no books for you.
post #10 of 105

Makes sense. Owner of book looses in-turn hardcover sales due to low digital price.  My thought was Amazon was taking less profit to sell books at lower price.

So case doesn't makes sense. But in reality do people really buys hardcover books? How many percentage of hard cover vs digital as of now?

As end consumer, anyone would always go for lower price for exactly same digital item.

post #11 of 105
Quote:
name="shahhet2" url="/t/157880/amazon-exec-says-apples-agency-model-was-designed-to-hinder-kindle#t_2339583"]Experts can help me here, but am I thinking this right way?
Lets take one example.
There are two real estate brokers X and Y selling lots of homes named  1,2,3,4,5
X charges commission of $100 and says price of home 1 is $1000+$100 = $1100 to buyer (Consumer)
Y guarantees seller that he will get his $1000 but on condition that Y takes 30% profit and he has to change price to $1300 to buyer (Consumer)
Now Seller of home 1(to5) forces agent X to raise price of 1 to be $1300 as well else he will not list his home with X.

Is this analogy correct?
Aren't the consumer at loss here?

I am sorry if I thought this wrong way, may be end consumer will think wrong way like me and needs to corrected similarly.

Amazon wasn't taking a commission on certain books, they were actually taking a loss but you pretty much got the gist of it.

What I'd like to know is what if there was no Amazon and Apple was first to market what prices would have Apple forced on the publishers? They didn't give the music industry the benefit of setting their own price and now we're supposed to believe Apple is concerned about the publishers and has their best interest in mind?
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post #12 of 105
Quote:
Originally Posted by TheMacadvocate View Post

And yet somehow the Kindle app appeared for iOS at the same time iBooks was released. Wouldn't a company so concerned with Kindle sales not want to yield such an obvious competitive advantage?

What a crock of sh*t.

 

If 2009 and 2010 are the same time then no.


The kindle app was first released for the iphone/ipod touch back in March 2009.

http://appleinsider.com/articles/09/03/04/amazon_brings_kindle_ebook_library_to_the_iphone.html

 

ibooks was announced in January 2010, and debuted with the launch of the ipad in March 2010.

post #13 of 105
Quote:
Originally Posted by dasanman69 View Post


At the same time or before? I'm pretty sure it was on iOS before.

You (and I) are half-right. iBooks was announced in January 2010 with the iPad, released at the end of March and made available for iPhone/iPod Touch in June with iOS 4. The Kindle app was also released in June.

 

I was wrong about them being simultaneous, but the dates actually makes my point more emphatically: if Amazon was so concerned with Kindle sales, and iBooks was already in the wild, why release the Kindle app for iOS? Amazon was/is more interested in pushing content than hardware, that's why.    

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post #14 of 105
Quote:
Originally Posted by ufwa View Post

 

If 2009 and 2010 are the same time then no.


The kindle app was first released for the iphone/ipod touch back in March 2009.

http://appleinsider.com/articles/09/03/04/amazon_brings_kindle_ebook_library_to_the_iphone.html

 

ibooks was announced in January 2010, and debuted with the launch of the ipad in March 2010.

That's what I get for using Wikipedia as a source. :/

 

"In June 2010, Amazon released a "Kindle for Android" version. With the Google Android application release, versions for the Apple iPhone, the iPad, Windows and Mac computers, and BlackBerry cellphones are also available"

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post #15 of 105
On the surface nothing being done is illegal. It's not illegal to adopt agency pricing. It's not illegal for the publisher to set minimum retail pricing. It's not illegal to get a favored nation clause.

What would potentially make it illegal is how the agreements came into being. If Apple et al got together and worked it out between all the parties. Or if the publishers got together and worked it out amongst themselves. But, If Apple worked out individual agreements, without the colusion, it should be legal.

The publishers settling prior to trial could be a result of the colluding separately from Apple. Something like... You gonna do it? I'll do it if you do it. Well, I'll do it if he does. And they all did it.
post #16 of 105
Quote:
Originally Posted by dasanman69 View Post


But it's illegal for Amazon to slow down the competition? What hypocrisy

 

Nah. The principle here is "It's only evil when Apple does it."

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post #17 of 105
Quote:
Originally Posted by dasanman69 View Post

Amazon wasn't taking a commission on certain books, they were actually taking a loss but you pretty much got the gist of it.

What I'd like to know is what if there was no Amazon and Apple was first to market what prices would have Apple forced on the publishers? They didn't give the music industry the benefit of setting their own price and now we're supposed to believe Apple is concerned about the publishers and has their best interest in mind?

Actually, if you remember, all songs were 99¢ and albums were $9.99. Record labels wanted to charge the same as they did for CDs. Apple wanted realistic prices.

When it came to books, all Apple did was say, "What ever the lowest price you, the publisher, set the price at is what we have it at. At no point was Apple setting the price.
post #18 of 105
Quote:
Originally Posted by CustomTB View Post

On the surface nothing being done is illegal. It's not illegal to adopt agency pricing. It's not illegal for the publisher to set minimum retail pricing. It's not illegal to get a favored nation clause.

What would potentially make it illegal is how the agreements came into being. If Apple et al got together and worked it out between all the parties. Or if the publishers got together and worked it out amongst themselves. But, If Apple worked out individual agreements, without the colusion, it should be legal.

The publishers settling prior to trial could be a result of the colluding separately from Apple. Something like... You gonna do it? I'll do it if you do it. Well, I'll do it if he does. And they all did it.

This man gets it.
post #19 of 105
I think Amazon would have been looked at for monopolistic behavior for selling books at or below cost to drown the smaller competition had Apple not jumped into the mix. But now there is real competition.
post #20 of 105
Quote:
Originally Posted by TheMacadvocate View Post

You (and I) are half-right. iBooks was announced in January 2010 with the iPad, released at the end of March and made available for iPhone/iPod Touch in June with iOS 4. The Kindle app was also released in June.

 

I was wrong about them being simultaneous, but the dates actually makes my point more emphatically: if Amazon was so concerned with Kindle sales, and iBooks was already in the wild, why release the Kindle app for iOS? Amazon was/is more interested in pushing content than hardware, that's why.    

I was one of the first one to use Kindle on my device and I believe it was first week of March 2009.

post #21 of 105
Quote:
Originally Posted by Suddenly Newton View Post

Nah. The principle here is "It's only evil when Apple does it."

I admit that it does seem to be the case.
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post #22 of 105
Quote:
Originally Posted by Hayward Taylor View Post

When does the agent control the price. If it is my book, I want to sell it at a profitable level. Allowing Amazon to sell below market and destroy my hard cover sales is unfair. As publisher, I think I can say sell it for x or no books for you.

What you're describing was illegal per se (in all cases) for decades. In 2007 the Supreme Court ruled that price fixing is not illegal per se, and that it depends on the circumstances.

For instance, it's not illegal (most likely) if Manufacture A tells Reseller B that they can't sell their product for less that $XX.xx in order to protect against intrabrand competition and foster interbrand competition. The rationale being that if consumers don't like it, they can go to another brand.

It is still potentially illegal if Manufacturer A has a product that is hard to find a comparable competing brand, or if Manufacturer A makes a deal with Manufacturers B-D to all set their prices at a certain level (collusion).

I'm guessing the same principles apply to digital content. Not sure how it works with the agency model, but it seems essentially the same.
post #23 of 105

No one in the publishing world thinks Amazon is a victim here. This is just DOJ's BS and waste of tax dollars. I'm glad to see Apple putting up the fight against this nonsense.

 

IF anything at all, the outcome will only prove these publisher CEOs were guilty as charged. Apple only provided a platform for them as an excuse to team-up against Amazon. The guilt is with these CEOs. Amazon's low-ball pricing practices basically forces these CEOs in a position to doing something, anything to stop their loses. If only one or two publishers changed to agency model, it wouldn't have the impact to affect Amazon. This is competition. The kind of stuff politicians argues for in a "free market".

 

The way I see this, DOJ is wasting resources here. I'm still waiting for wall street and greedy bankers put away behind bars.

post #24 of 105
Quote:
Originally Posted by CustomTB View Post

I think Amazon would have been looked at for monopolistic behavior for selling books at or below cost to drown the smaller competition had Apple not jumped into the mix. But now there is real competition.

Amazon for sure is the reason for fall of big stores like Circuity City, Best Buy, CompUSA and many many more and all jobs related to that.  (By avoiding sales tax )

In my state, I still save tax on Amazon purchase but as far as I find price same, I prefer to buy from local store then giving all business to Amazon.

I hate Amazon in that regard. Maybe they would have done same thing to small book-sellers if Apple didn't joined the business.

So even if Apple did it right way or wrong way, I like it that way which avoids monopoly of one source.

post #25 of 105
Quote:
name="starbird73 url="/t/157880/amazon-exec-says-apples-agency-model-was-designed-to-hinder-kindle#post_2339604"]
Actually, if you remember, all songs were 99¢ and albums were $9.99. Record labels wanted to charge the same as they did for CDs. Apple wanted realistic prices.

When it came to books, all Apple did was say, "What ever the lowest price you, the publisher, set the price at is what we have it at. At no point was Apple setting the price.

And how did Apple get the 'realistic price' for albums?
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post #26 of 105
Quote:
Originally Posted by shahhet2 View Post

Amazon for sure is the reason for fall of big stores like Circuity City, Best Buy, CompUSA and many many more and all jobs related to that.  (By avoiding sales tax )
In my state, I still save tax on Amazon purchase but as far as I find price same, I prefer to buy from local store then giving all business to Amazon.
I hate Amazon in that regard. Maybe they would have done same thing to small book-sellers if Apple didn't joined the business.
So even if Apple did it right way or wrong way, I like it that way which avoids monopoly of one source.

And how about all the music stores gone now because of iTunes?
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post #27 of 105
Quote:
Originally Posted by dasanman69 View Post


And how about all the music stores gone now because of iTunes?

Apple is to blame there. I am not taking any sides, just saying the facts here.  (Did We really had music stores:) Maybe too long ago,  don't recall many big B&M music stores!!!)

post #28 of 105
Quote:
Originally Posted by yousuck View Post

Apple freaks here are amazing when it comes to their unconditional love toward Apple. We're talking about Apple conspiring to charge more money to you and us. These people will ask Apple did you like it if Apple rapes their girl friend.

Once Amazon owned the market, how long do you think they'd keep their razor margins or lose money on best sellers?

Would you rather Amazon have a near monopoly? Because that's where things were headed.
post #29 of 105
Quote:
Originally Posted by CustomTB View Post

On the surface nothing being done is illegal. It's not illegal to adopt agency pricing. It's not illegal for the publisher to set minimum retail pricing. It's not illegal to get a favored nation clause.

What would potentially make it illegal is how the agreements came into being. If Apple et al got together and worked it out between all the parties. Or if the publishers got together and worked it out amongst themselves. But, If Apple worked out individual agreements, without the colusion, it should be legal.

The publishers settling prior to trial could be a result of the colluding separately from Apple. Something like... You gonna do it? I'll do it if you do it. Well, I'll do it if he does. And they all did it.

 

Hence publishers pleaded guilty. DOJ is just dragging everyone out to play along against Apple to squeeze a few more dollars out of them. As if that tax return BS wasn't enough of a show from our politicians. The way I see it, Apple can easily prove their point by stopping all sales of consumer ebooks for a year or require all sales of ebooks be created with iBook Author. Problem solved. 

 

Let's see how much more these same publishers will go back to crying again. Less buying options, more power to Amazon again...and they are the victim how??? 

post #30 of 105
Simply unbelievable. Amazon engaged in predatory pricing, plain and simple. From the Wikipedia article on predatory pricing:

"In business and economics, predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly."

Many small retailers and even online book sellers have complained about Amazon's predatory pricing. Amazon sells books at a loss to gain market share and exclude competition. Amazon sold it's first book in 1995 and didn't post a profit until 2001. How many competitors could loose money for 6 years and still stay in business?

Selling products below cost, if sustained, and used to corner a market is called "dumping" and at least in the U.S. is an anti-trust violation. In fact, just yesterday France's cultural Minister accused Amazon of dumping and being a "quasi-monopoly", and called it a "destroyer of bookshops".

http://www.ft.com/cms/s/0/213fc8ce-cc9d-11e2-9cf7-00144feab7de.html#axzz2VP4O244t

Yes, it is absolutely true at in the short term Apple's actions caused e-book prices to rise. And that hurts the consumer. But they rose to their fair market value. And in a open competitive market, eventually competition drives prices down again. 200 years of capitalism has proven it time and again.

I really hope Apple accuses Amazon of dumping and predatory pricing. The publishers in this case are testifying to the power (without Apple) that Amazon commands in the publishing market to force publishers into unfavorable terms. Amazon was using e-book pricing (selling at a loss) to push Kindle into the market and exclude other e-book competitors who do not have the financial power of Amazon to receive in-kind wholesale pricing.

It's a travesty of justice. The company in the DOJ's crosshairs should be Amazon, not Apple.
post #31 of 105
"I'd lay my head on the railroad tracks
and wait for the double-E
but the rail road don't run no more
poor, poor, pitiful me
Lord, have mercy on me
woe is me"

said Russell Grandinetti
post #32 of 105
It is all about profits..
Amazon wants to give things away and destroy everyone on the production side.
Apple says everyone needs to make a profit in the lineup..... And with a bit higher price everyone wins..
Not just the consumer.
Amazon has no regard for those who make a living producing things!
post #33 of 105
Quote:

Originally Posted by shahhet2 View Post

 

... So case doesn't makes sense. But in reality do people really buys hardcover books? How many percentage of hard cover vs digital as of now?

As end consumer, anyone would always go for lower price for exactly same digital item.

 

So a family of four goes to a new movie at a local theater, cost for the evening - $70, including refreshments. Compare with, a family of four stays home and rents a movie online, cost, $15, including refreshments from their cupboards. Same item, same content owner, different venue/format.

 

So I ask you - does the owner of the content have a right to decide how the content is distributed? Does the owner of the content decide how long after the theatrical release the movie is available as a rental, as a DVD?  Does the owner of the content have a right to cleverly maximize profits in whatever why they can according to what the market will bear, even if that means a consumer has to wait for a digital rental? Is a digital rental of a new release on the same day as a theatrical release a right that the government should protect because its cheaper for the consumer?

 

{As a disclaimer, when it comes to books, which I value immensely, I buy hard covers of a few choice titles, a buy paperbacks of others, I buy used paperback copies of others, and some I buy as ebooks. It depends on the title and whether I want to spend a lot of time with it, use it as a reference, use it as a gift, take it traveling, etc etc.}

post #34 of 105
no sheet sherlock. of course it was. But it doesn't equal Apple having anything to do with the publishers deciding they had a better deal and could lose Amazon without a fuss

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post #35 of 105
Quote:
Originally Posted by dasanman69 View Post

What I'd like to know is what if there was no Amazon and Apple was first to market what prices would have Apple forced on the publishers? 

 

Possibly the same they are now. Publishers don't have fully free reign with Apple. there are limits. 

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post #36 of 105
Quote:
Originally Posted by CustomTB View Post

I think Amazon would have been looked at for monopolistic behavior for selling books at or below cost to drown the smaller competition had Apple not jumped into the mix. But now there is real competition.

 

Certainly if they are going to try to dump on Apple for the favored nation clause they need to look at Amazon's deals which had the same clause

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post #37 of 105
Quote:
Originally Posted by shahhet2 View Post

Experts can help me here, but am I thinking this right way?
Lets take one example.
There are two real estate brokers X and Y selling lots of homes named  1,2,3,4,5
X charges commission of $100 and says price of home 1 is $1000+$100 = $1100 to buyer (Consumer)
Y guarantees seller that he will get his $1000 but on condition that Y takes 30% profit and he has to change price to $1300 to buyer (Consumer)
Now Seller of home 1(to5) forces agent X to raise price of 1 to be $1300 as well else he will not list his home with X.

Is this analogy correct?
Aren't the consumer at loss here?

I am sorry if I thought this wrong way, may be end consumer will think wrong way like me and needs to corrected similarly.

anti trust is not just about consumers, it's about competitors too. Broker X has 90% of the market and charges only $10 per sale. How can broker Y or any other broker compete with that?
Quote:
Originally Posted by yousuck View Post

Apple freaks here are amazing when it comes to their unconditional love toward Apple. We're talking about Apple conspiring to charge more money to you and us. These people will ask Apple did you like it if Apple rapes their girl friend.

Almost had a point until you used "rape". A lot of us are stockholders too.
post #38 of 105
Quote:
Originally Posted by shahhet2 View Post

Experts can help me here, but am I thinking this right way?

Lets take one example.

There are two real estate brokers X and Y selling lots of homes named  1,2,3,4,5

X charges commission of $100 and says price of home 1 is $1000+$100 = $1100 to buyer (Consumer)

Y guarantees seller that he will get his $1000 but on condition that Y takes 30% profit and he has to change price to $1300 to buyer (Consumer)

Now Seller of home 1(to5) forces agent X to raise price of 1 to be $1300 as well else he will not list his home with X.

 

Is this analogy correct?

Aren't the consumer at loss here?

 

I am sorry if I thought this wrong way, may be end consumer will think wrong way like me and needs to corrected similarly.

 

I think a more appropriate analogy would be:

 

A farmer sells his apples in bulk to retailers.

Retailer X (Amazon), buys this fruit in bulk for $1000 per 1000 lbs, then turns around and sells it for 95 cents per lb (taking a loss of $50 per 1000 lbs), but they are getting people into their store to buy other stuff.

Retailer Y (Apple), takes shipment of fruit from buyer, allowing them to set their own price, but taking a 30% commission on the sale, setting the price at $1.42 lb (70% of $1.42 is $1)

 

This does raise the price to the consumer and creates a profit to all involved in the process, rather than taking a loss in the hopes of selling other products.

This analogy does not work entirely, as the idea behind the publishers view, is that Amazon was selling books at a discounted price at the same time as the hardcover release, taking away would be buyers and additional profit to them.

 

Yes, the price goes up to consumers, but Amazon is creating a unnatural low price to consumers by taking a loss. That is certainly their right, but it also effectively boxes out the competition that are unwilling to take a loss selling books below cost, and screws those who actually produce a product. Look at all the PC manufacturers selling their computers for pennies, but making no profit. 10x the work than apple in volume, but 10x less profit. The question is, is that a sustainable practice and what are the trade offs. Amazon has been in business for a while and treated like a champion of industry, yet they make no money. Q4 2012, they earned $97 million on ~22 BILLION in revenue. That means they earned 0.0044 cents of profit per dollar of revenue.  in March 2013, Apple reported $9.5 BILLION in profits on $43.6 BILLION of revenue, earning 0.2178 cents profit per dollar revenue. Can Amazon continue to practice its operations making no money? 

post #39 of 105
Quote:
Originally Posted by dasanman69 View Post


And how about all the music stores gone now because of iTunes?

Wrong. All the smaller music store are gone because they couldn't compete with the likes of big B&M like Walmart, Target, Best Buy and Costco. And of course online Amazon. These big retailers were selling CDs as lost leaders to drive customers into their stores. These store could make up the lost of selling cheap CDs by the sales of other high profit items that they sell in their stores

 

How can you possibly say that iTunes was responsible for the demise of small music stores when iTunes only accounted for less than 10% of music sales when most these stores went under. Including the bigger Tower Records. It's only been since last year that digital downloads began surpassing physical CD's.    

post #40 of 105
Quote:
Originally Posted by dasanman69 View Post


And how did Apple get the 'realistic price' for albums?

I believe $9.99 was about the average the music label made per CD (that sold from $12.99 to $16.99 retail) after deducting the cost of pressing, packaging, shipping, storing and returns of a physical CD. So the music label was making the same amount by selling a digital CD for $9.99. Anything above that would be look as getting greedy because most consumers already thinks that it cost next to nothing to sell a digital download. 

 

Edit- Now that think about it, the $9.99 is what is split between the retailer and music label. So when Apple take their cut from the $9.99, the music label will be making about the same amount.


Edited by DavidW - 6/5/13 at 9:59pm
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