EU investigating Apple for anticompetitive e-book pricing

Posted:
in iPad edited January 2014
Apple joins five book publishers as the target of a European Union investigation into anticompetitive practices in the e-book market.



The European Commission is looking into alleged illegal agreements restricting competition, according to the BBC. In addition to Apple, the investigation is targeting Hachette Livre, Penguin, Harper Collins, Simon & Schuster, and Verlagsgruppe Georg von Holzbrinck.



Apple entered the e-book business with the launch of its iPad in 2010. Since then, the iBookstore has also become available on the iPhone and iPod touch.



In March of this year, the commission conducted "unannounced inspections" of companies in several European countries to conduct its investigations. The deals made by Apple and book publishers "are to be examined for breaches of EU rules on cartels, the Commission said."



Many of the same companies, including Apple, were targeted in a U.S. lawsuit filed in August, accusing them of illegal price fixing. That class-action suit alleges that Apple facilitated a change in e-book pricing to what is known as the "agency model" because of competition from the Amazon Kindle.



The agency model allows book publishers to set consumer prices for e-books that they publish, and also allows the company serving the content to take a cut of sales. That allows Apple to take a 30 percent share of titles sold on the iBookstore.







That differs from the "wholesale model," where publishers simply suggest a recommended retail price. But with the wholesale model, booksellers are free to set their own prices and offer discounts if they choose.



A similar anticompetitive inquiry was initiated in the U.S. in August of 2010. Connecticut Attorney General Richard Blumenthal, after finding that prices of bestsellers on Amazon's Kindle and Apple's iBooks platforms, expressed concerns that the deals made with book publishers could be anticompetitive.
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Comments

  • Reply 1 of 46
    Connotes for people that read this and are still scratching their heads:
    • Amazon was allowing customers to subsidize the cost of their Kindle with cheap eBooks (e.g. if each eBook is $10 cheaper than the paperback equivalent after you buy 10 books the Kindle has "paid for itself")

    • The publishers didn't like this because the money used to subsidize the Kindle was coming out of their pockets.

    • Apple didn't like competing with "free" hardware.

    • Allegedly under Apple's guidance the publishers colluded to change the pricing model to increase prices and screw Amazon over.

  • Reply 2 of 46
    Quote:
    Originally Posted by Firefly7475 View Post


    Connotes for people that read this and are still scratching their heads:
    • Amazon was allowing customers to subsidize the cost of their Kindle with cheap eBooks (e.g. if each eBook is $10 cheaper than the paperback equivalent after you buy 10 books the Kindle has "paid for itself")

    • The publishers didn't like this because the money used to subsidize the Kindle was coming out of their pockets.

    • Apple didn't like competing with "free" hardware.

    • Allegedly under Apple's guidance the publishers colluded to change the pricing model to increase prices and screw Amazon over.




    Thanks! I was hoping someone would decipher the above for me.
  • Reply 3 of 46
    gwydiongwydion Posts: 1,067member
    Quote:
    Originally Posted by Firefly7475 View Post


    Connotes for people that read this and are still scratching their heads:
    • Amazon was allowing customers to subsidize the cost of their Kindle with cheap eBooks (e.g. if each eBook is $10 cheaper than the paperback equivalent after you buy 10 books the Kindle has "paid for itself")

    • The publishers didn't like this because the money used to subsidize the Kindle was coming out of their pockets.

    • Apple didn't like competing with "free" hardware.

    • Allegedly under Apple's guidance the publishers colluded to change the pricing model to increase prices and screw Amazon over.




    It's slightly different. Prior to the agency model, Amazon was free to price the books as they like, even at a loss. After the agency model was set, Amazon has to sell the books at the prices that publishers say
  • Reply 4 of 46
    aplnubaplnub Posts: 2,586member
    Quote:
    Originally Posted by Firefly7475 View Post


    Connotes for people that read this and are still scratching their heads:
    • Amazon was allowing customers to subsidize the cost of their Kindle with cheap eBooks (e.g. if each eBook is $10 cheaper than the paperback equivalent after you buy 10 books the Kindle has "paid for itself")

    • The publishers didn't like this because the money used to subsidize the Kindle was coming out of their pockets.

    • Apple didn't like competing with "free" hardware.

    • Allegedly under Apple's guidance the publishers colluded to change the pricing model to increase prices and screw Amazon over.




    And your last point is partially mentioned in the Steve Jobs biography.
  • Reply 5 of 46
    charlitunacharlituna Posts: 7,215member
    Quote:
    Originally Posted by Firefly7475 View Post


    Connotes for people that read this and are still scratching their heads:

    [*]The publishers didn't like this because the money used to subsidize the Kindle was coming out of their pockets.



    There was also the feeling that the prices devalued many books which publishers didn't like. It's hard to get someone to buy a $35 hardcover new release when you can get the ebook for $10.
  • Reply 6 of 46
    saareksaarek Posts: 1,127member
    Still annoys me that many e-books are the same price as paperback books, it's pure profiteering.



    At the end of the day e-books do not have to be printed & then shipped, sure you'll still have Apple/Amazon's mark up but then you'd have that at a bookstore. As it's digital delivery Apple/Amazon don't have to have retail stores full of staff that needs to be paid for.



    E-books, just like all downloadable content should be cheaper full stop!
  • Reply 7 of 46
    Quote:
    Originally Posted by charlituna View Post


    There was also the feeling that the prices devalued many books which publishers didn't like. It's hard to get someone to buy a $35 hardcover new release when you can get the ebook for $10.



    Considering there are no material costs, printing costs, shipping costs, storage costs, costs to rent space on a store shelf, etc., the ebook should cost significantly less. $35 for a hardcover is and always has been royally outrageous. But $14.99 for the Steve Jobs biography on iBooks? Seems like a much fairer price to me.
  • Reply 8 of 46
    Quote:
    Originally Posted by charlituna View Post


    There was also the feeling that the prices devalued many books which publishers didn't like. It's hard to get someone to buy a $35 hardcover new release when you can get the ebook for $10.



    Suggested fix for that statement: It's hard to JUSTIFY a $35 hardcover new release when you can get the ebook for $10.



    Still don't understand why, if all the typesetting is electronic now, the ebook should cost the same as a paper release. Are you telling me that paper & binding is free?
  • Reply 9 of 46
    Quote:
    Originally Posted by saarek View Post


    Still annoys me that many e-books are the same price as paperback books, it's pure profiteering.



    At the end of the day e-books do not have to be printed & then shipped, sure you'll still have Apple/Amazon's mark up but then you'd have that at a bookstore. As it's digital delivery Apple/Amazon don't have to have retail stores full of staff that needs to be paid for.



    E-books, just like all downloadable content should be cheaper full stop!



    While I believe ebook prices should be lower, I also believe the authors need to and should be paid for the time spent writing/researching/being creative. We pay $8-$15 dollars for an album on iTunes, what's wrong with paying the same for a book? I'm sure the author spent the same, if not more time making it as the musician/band did on their album.
  • Reply 10 of 46
    saareksaarek Posts: 1,127member
    Quote:
    Originally Posted by hittrj01 View Post


    While I believe ebook prices should be lower, I also believe the authors need to and should be paid for the time spent writing/researching/being creative. We pay $8-$15 dollars for an album on iTunes, what's wrong with paying the same for a book? I'm sure the author spent the same, if not more time making it as the musician/band did on their album.



    I don't mind paying a fair price, and feel that someone should be rewarded for their hard work.



    But, let's say that a new book is £8 at a book store, why should it also be £8 on iBooks or the Kindle Store.



    What's more I find that digital contect frequently works out more expensive than traditional media as time goes on. DVD's for example after a year or so they drop into the bargain buckets at £2-3 but are still on iTunes for £9-10.



    I know that I have the choice to purchase the traditional media and rip it, frequently I do just this.



    But it shouldn't be this way, digital should be cheaper!
  • Reply 11 of 46
    jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by Firefly7475 View Post


    Connotes for people that read this and are still scratching their heads:
    • Amazon was allowing customers to subsidize the cost of their Kindle with cheap eBooks (e.g. if each eBook is $10 cheaper than the paperback equivalent after you buy 10 books the Kindle has "paid for itself")

    • The publishers didn't like this because the money used to subsidize the Kindle was coming out of their pockets.

    • Apple didn't like competing with "free" hardware.

    • Allegedly under Apple's guidance the publishers colluded to change the pricing model to increase prices and screw Amazon over.




    You left off one thing:

    Apple lets the authors/publishers set whatever price they want and is not involved in setting prices.



    So how is Apple guilty of anti-competitive actions? Seems to me that letting the 10,000 publishers set their own prices is PRO-competition.



    Quote:
    Originally Posted by saarek View Post


    Still annoys me that many e-books are the same price as paperback books, it's pure profiteering.



    At the end of the day e-books do not have to be printed & then shipped, sure you'll still have Apple/Amazon's mark up but then you'd have that at a bookstore. As it's digital delivery Apple/Amazon don't have to have retail stores full of staff that needs to be paid for.



    E-books, just like all downloadable content should be cheaper full stop!



    You've left off a couple of big ones:



    - Let's say you think your book will sell 100,000 copies, so you print 100,000 copies. But only 50,000 are sold. You've got 100,000 units worth of cost, but only 50,000 sales, so the cost per unit is actually doubled. That problem doesn't exist for eBooks.



    - Retailer markup is substantial. In most retail businesses, a 100% markup (50% margin) is common. Apple is taking only 30%.



    That said, I disagree with your conclusions. I believe that the publishers should be able to charge whatever they want. The eBook has greater convenience, instant gratification, and doesn't take up space on a bookshelf in your living room. You don't have to dust them, either. So, for some people, the eBook is even MORE valuable than a print book. I believe it should be up to the publishers to try to determine the price that the market will bear. If they guess too high, sales will be low and they may lower their price. The only one with a right to set the price of an item is the owner/publisher. The consumer then gets to say "yes" or "no" (or "I would buy it for $x, but not for $y").
  • Reply 12 of 46
    Quote:
    Originally Posted by jragosta View Post


    - Retailer markup is substantial. In most retail businesses, a 100% markup (50% margin) is common. Apple is taking only 30%.



    Exactly. Books are generally the worst of any product in terms of price markups. It's insane, some of the MSRPs these knuckleheads think we'll pay.
  • Reply 13 of 46
    Quote:
    Originally Posted by jragosta View Post


    I believe that the publishers should be able to charge whatever they want. The eBook has greater convenience, instant gratification, and doesn't take up space on a bookshelf in your living room. You don't have to dust them, either. So, for some people, the eBook is even MORE valuable than a print book. I believe it should be up to the publishers to try to determine the price that the market will bear. If they guess too high, sales will be low and they may lower their price. The only one with a right to set the price of an item is the owner/publisher. The consumer then gets to say "yes" or "no" (or "I would buy it for $x, but not for $y").



    Couldn't you say the same thing with music? I know there is some pricing flexibility in itunes now, musicians and lables are still restricted on how they price/sell their albums. So why the double policy? Why is it wrong for Amazon to want to offer all books at 9.99, but it was great for apple to price all songs at .99. Unless you want to argue that individual books can be of different value but not individual songs. I prefered itunes when it was .99 for everything, just like I preferred amazon when i knew buying an ebook would only cost me 10 dollars. With amazon's buy 3 get 4th free on paperbacks, you pay more for ebooks than you do for paper books, which(IMHO) should never be the case.
  • Reply 14 of 46
    nasseraenasserae Posts: 3,156member
    So Apple is guilty of letting publishers and copyright owners set the price for their own content?!
  • Reply 15 of 46
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  • Reply 16 of 46
    gwydiongwydion Posts: 1,067member
    Quote:
    Originally Posted by NasserAE View Post


    So Apple is guilty of letting publishers and copyright owners set the price for their own content?!



    No, Apple is not guilty of anything, Apple and 5 publishers are being investigated because it seems they have been engaged in anti-competitive practices.
  • Reply 17 of 46
    pendergastpendergast Posts: 1,358member
    Quote:
    Originally Posted by saarek View Post


    Still annoys me that many e-books are the same price as paperback books, it's pure profiteering.



    At the end of the day e-books do not have to be printed & then shipped, sure you'll still have Apple/Amazon's mark up but then you'd have that at a bookstore. As it's digital delivery Apple/Amazon don't have to have retail stores full of staff that needs to be paid for.



    E-books, just like all downloadable content should be cheaper full stop!



    Sigh. Do people understand how the western world's chosen economic system works? The price to a consumer has NOTHING to do with cost. The price, at a macro level, is set by market forces; basically, the price is set at what consumers are willing to pay. It has much more to do with the value proposition.



    eBooks may cost the publisher less, but as long as the provide the same value to a consumer, the price will remain the same. If consumers value an eBook less, then the price will eventually fall. Obviously, perceived costs, or lack thereof, may influence the perception of value. But this is countered by other value-added components, like convenience.



    It's contrary to capitalism to feel that companies should pass their savings onto their customers.



    (Please note that obviously cost does have a bearing on price in that companies have to at least make money. But the equilibrium price is set by market forces; if a company releases a product at the thinnest of margins yet that product is still perceived as a poor value proposition, that product will fail as the price is too high.)
  • Reply 18 of 46
    jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by Baka-Dubbs View Post


    Couldn't you say the same thing with music? I know there is some pricing flexibility in itunes now, musicians and lables are still restricted on how they price/sell their albums. So why the double policy? Why is it wrong for Amazon to want to offer all books at 9.99, but it was great for apple to price all songs at .99. Unless you want to argue that individual books can be of different value but not individual songs. I prefered itunes when it was .99 for everything, just like I preferred amazon when i knew buying an ebook would only cost me 10 dollars. With amazon's buy 3 get 4th free on paperbacks, you pay more for ebooks than you do for paper books, which(IMHO) should never be the case.



    Apple no longer prices all songs at $0.99. There is some flexibility in the pricing. I'm not sure how pricing is set and there may be some inconsistency in Apple's policy. For the sake of consistency, publishers should also be able to choose their prices for songs if they're not already able to do that. Still, it's easier to argue that songs are more similar to each other than books are, so songs might not require as much variation in pricing as books do.



    I guess it comes down to whether you believe that someone who produces intellectual property should be able to decide what to sell it for. I happen to believe that.
  • Reply 19 of 46
    I support Amazon at this. I'm not buying ANY book from Apple until prices are equal or lower than Amazon's prices. Kindle books are great, and Apple is greedy (as usual). GO GO AMAZON!
  • Reply 20 of 46
    Understand also, that publishing houses (not unlike music labels) are looking at this from a higher level. If you publish 50-60 authors in your house, not all of these are recognized and popular authors. Some are niche authors, or new ones you are taking a gamble on to develop into popular authors. You need to make a minimum run to get enough content on shelves to justify(and hopefully cover) expenses. Thes authors don't just support themselves they support an editorial team, layout teams, cover artists, sales staff, marketing and advertising and of course actual print operations that make the hard/analog copies. On top of that they have to do some R&D to see what (if any) additional content should be included in the digital versions, as well as covering specialized versions (coffee table pictorials, kids versions, braille versions, serialized back story versions). So you gamble on new authors, on formats, on book sellers themselves, with your profits.
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