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Book publishers challenge DOJ e-book penalties against Apple - Page 3

post #81 of 82
Originally Posted by H2P View Post

I realize that high volume Retailers like Amazon negotiate lower prices in exchange for a promise of guaranteed volume. But in the end, the Publisher's product price has to be set (at least somewhat) by the Publisher. (Even in the example of Amazon's Print-on-Demand publishing -- the author has a minimum price they must set for their book -- depending on whether the inside has black/white pics [ie. $12.99] or color pics [ie. $21.99].)


Is this traditional Wholesale/Retail model gone? Are the publishers Mandated to take a percentage of actual sales price (agency)? Does Amazon REALLY have the POWER to DICTATE the price of the Publishers product? Yikes! It's not Amazon's product -- why should THEY have this power?


The publisher's problem is that hardcover books generate most of their revenues. These hardcover books are typically $15 to $25, with typical sell-in to the wholesaler/retailer at $12 to $15. The publisher's arrangement for ebooks were likely similar, they sold ebooks to Amazon at around $12, probably thinking that Amazon would sell them for one or two dollars cheaper than brick and mortar retailers selling hard covers, like they usually do for hard covers.


With Amazon selling bestselling ebooks at $10, it basically killed hard cover sales at brick and mortar stores which were selling them for more, sometimes 2x or more. Publishers got their money and weren't hurting like the brick and mortar retailers, but they were then looking down the barrel of gun with their revenues decreasing as it was doubtful to them that Amazon would continue to sell $12 ebooks at $10. Eventually, Amazon would have come calling to have the wholesale price to them reduced to $6 or $8 or something. This was what the retailer was worried about, and that Amazon was killing their distribution network.


I don't think this is an unusual tactic for Amazon, and this may be one of their strategies to always get the best wholesale price possible. Amazon has quite the negotiating power as they are the dominant paper book seller too, a divorce from Amazon would be very costly to them, and the publishers are basically wimps. By the time of Apple's entry into the eBook market, was Borders still alive? Don't recall, but suffice it to say, brick & mortar book retail was dying and B&N is in its death throes. With them dead, what negotiating power would the publishers have against Amazon?


Maybe there is an argument that cheaper prices meant more people would read (novels, books, etc). But Steve Jobs was right about people not reading books anymore. Before the digital revolution, reading books was a much bigger thing. There wasn't many things competing for your time. Now, everything competes for your time. Low demand definitely means the prices of books were going to go down regardless of models. Yes, the DOJ is basically the Javert character from Les Miserables here. Well, at least before he developed a conscience.

post #82 of 82
Originally Posted by dasanman69 View Post

Of course they were profitable, it was mainly the best sellers that they sold at cost or at a loss. The DoJ wants to make sure that Amazon doesn't abuse it by selling a publishers entire ebook lineup at cost or for a loss.


I believe it is more complicated than this, and will doubt the DOJ until they lay AMZN's eBook division financials to really see. Amazon, as a company, rarely posts a profit, so skepticism about the eBook division's profitability should be warranted until they prove otherwise. As it stands today, we only have the word of the DOJ saying that Amazon's eBook business is profitable.


It's complicated as isn't Kindle hardware part of Amazon's eBook division? Kindle hardware is quite expensive relative to eBooks, and a small slice of margin can cover a loss in the sales of eBooks themselves. So, I really need a proper accounting to corroborate what the DOJ is saying.


The publishers' problem isn't with the profitability of a retailer's profitability selling their eBooks. It's managing their transition from paper books, their primary source of revenue, to a digital one. Selling best sellers at loss hurt hard cover sales. Amazon can manage to zero or slight profitability, but they are going to kill the publishers and B&M along the way doing this.


Obviously, like I said earlier, Apple can just employ the same model Amazon is using, the model by which the DOJ wants the eBook business to be run, and run at break even. Assuming the publishers are willing to do that deal with Apple and Apple is willing to break even.

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