DoJ seen as unlikely to win antitrust e-book suit against Apple

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  • Reply 61 of 114
    christophbchristophb Posts: 1,457member
    Quote:
    Originally Posted by freckledbruh View Post


    You still assume that the publishers MUST go back to the wholesale model which is not true. Each publisher can still insist on the agency model. The difference is that the publishers must establish their prices on their own as opposed to working together.



    And if I were one of those publishers, I'd be telling amazon today that I'm happy to sell them all the ebooks they want. . . . at 2x wholesale.
  • Reply 62 of 114
    alnormalnorm Posts: 37member
    Quote:
    Originally Posted by freckledbruh View Post


    Nope. Apple didn't force the publishers to not allow other retailers to discount. It made a deal where IF a retailer does discount, then Apple can match the price. Guess what? Stores do this all of the time.



    But those outcomes are different and should not be compared when matching prices under agency vs wholesale. Under an agency model, the percentage cut to the retailer (in this case, 30%) and the percentage to the publisher/distributor/manufacturer (in this case, 70%) remains static. So if the publisher set the price at $1 somewhere else and Apple matches that price, then Apple (on agency) still gets its 30%, or 30 cents.



    Under a wholesale model, if the wholesale price is the same between two retailers (let's use $10 for an example) and retailer A discounts the retail price to $9, then retailer B CAN (but is not required) to match that price. The difference is, unlike the agency model where a positive profit is assured when matching prices, under a wholesale model, the price matching retailer must decide whether it also wishes to take a loss. The price matching retailer must decide whether it is advantageous to price match, whereas it is typically a wash when price matching under agency.





    Quote:

    Again, nope. It would void agency contracts with other retailers which would need to be renegotiated which doesn't mean an automatic wholesale model (and even if it did, Apple would still have the right to match the price).



    Not sure what you are saying nope to. The settlement of the three publishers DID void the contracts with Apple. Do you want me to link it? The settlement also returned discounting power to the retailer. Under the agency model, the retailer was not allowed to discount. The final price was placed in the hands of the publishers.



    This needs repeating. Under the agency model that was in place, retailers could not discount. Amazon, Apple, B&N, etc could discount titles from said publishers under the agency model. Final price is firmly in the hands of the publishers.





    Quote:

    You assume that Apple NEEDED to compete with Amazon. I disagree. If you can point me to a link where a huge percentage of iPad buyers purchased it mostly for ereading, I may change my mind.



    Apple did and does compete with Amazon, and in the grand scheme of things, this wasn't about books. Apple was smart. It saw what the Kindle would eventually become. It probably didn't worry about the first model Kindles; it worried about the generational line of Kindle products--the Fire and onward. By nullifying the advantage of the early model Kindles, Apple would weaken the advantage of the subsequent line of Kindle models.



    Think about it. Kindle had a few advantages on the iPad. One was the store interface, so Apple made its own store. One was the ebook selection, so Apple signed up the publishers. The last, and the biggy, was the price of ebooks sold in the store. Once Apple took that advantage too, then it practically took everything except the price point of the hardware itself.





    Quote:

    Again, this is an issue for the publishers and not Apple.



    It is an issue for Apple if it is required to compete on price. Price on ebooks is one of the advantages Amazon had.





    Quote:

    You still assume that the publishers MUST go back to the wholesale model which is not true. Each publisher can still insist on the agency model. The difference is that the publishers must establish their prices on their own as opposed to working together.



    The publishers who settled MUST go back to a wholesale model. Once a retailer can freely discount, the power to set a firm price is removed from the publisher, and it is no longer an agency model. Whether Apple abides by the suggested price is irrelevant; it has the option to discount. Hence, it is a wholesale model. Just because you call it agency or allow the publisher to set the price does not make it agency. What defines a model is who sets the final, firm price. The settlement requires publishers to allow retailers to discount, thus the final price is in the hands of the retailer.
  • Reply 63 of 114
    http://finance.yahoo.com/blogs/break...162205873.html



    Looks like the Government never loses..
  • Reply 64 of 114
    alnormalnorm Posts: 37member
    Quote:
    Originally Posted by SolipsismX View Post


    Ignoring all the other crap, you've just stated that the agency model allowed them to compete (despite being able to sell eBooks for a loss just like Amazon if they had chosen to) and that they can't compete with the agency model. Does not compute.



    Allow me to clarify.



    You are a publisher who now must allow retailers to discount. You sell to Amazon on a wholesale basis. Your product has a wholesale static dollar amount attached to it. For our example, let's say it is $12 per ebook (Amazon's cost). We'll also go ahead and assume Amazon is making a profit on each book--just for this example.



    Apple is another retailer that sells your books, but Apple sells on an agency model.



    Amazon prices their book at 12.99, thus making 99 cents profit, while Apple matches the price.



    Under the agency price match, if the 30/70 split is firm, you the publisher are going to make only 9.10 on a 12.99 ebook. Are you going to be happy with this, or are you going to ask Apple to pay the $12?



    Another option, which I doubt Apple would go for, is for you to ask Apple to raise the price until your dollar amount cut is identical to Amazon's wholesale price. In that case, the ebook price would need to be around $17. The consumer is probably going to buy the 12.99 book when presented with those option.



    And even another option is to ask Apple to lower its percentage take. Think they will?



    So when placing a wholesale model against a 30/70 agency model, the agency model retailer or publisher is going to get shafted. And once Amazon catches wind that another company is paying less per ebook, it will also demand the same price, in which case the price goes down even more.



    That is why I say agency is not very compatible with wholesale on the same product at different retailers.
  • Reply 65 of 114
    Quote:
    Originally Posted by ALNorm View Post


    But those outcomes are different and should not be compared when matching prices under agency vs wholesale. Under an agency model, the percentage cut to the retailer (in this case, 30%) and the percentage to the publisher/distributor/manufacturer (in this case, 70%) remains static. So if the publisher set the price at $1 somewhere else and Apple matches that price, then Apple (on agency) still gets its 30%, or 30 cents.



    Under a wholesale model, if the wholesale price is the same between two retailers (let's use $10 for an example) and retailer A discounts the retail price to $9, then retailer B CAN (but is not required) to match that price. The difference is, unlike the agency model where a positive profit is assured when matching prices, under a wholesale model, the price matching retailer must decide whether it also wishes to take a loss. The price matching retailer must decide whether it is advantageous to price match, whereas it is typically a wash when price matching under agency.



    Not sure what you are saying nope to. The settlement of the three publishers DID void the contracts with Apple. Do you want me to link it? The settlement also returned discounting power to the retailer. Under the agency model, the retailer was not allowed to discount. The final price was placed in the hands of the publishers.



    This needs repeating. Under the agency model that was in place, retailers could not discount. Amazon, Apple, B&N, etc could discount titles from said publishers under the agency model. Final price is firmly in the hands of the publishers.



    Yes. I actually would like a link. It makes no sense to dissolve Apple's contract and not Amazon's contract. And if BOTH contracts were dissolved, the prior contract with Amazon doesn't automatically go into place AFAIK.







    Quote:
    Originally Posted by ALNorm View Post


    Apple did and does compete with Amazon, and in the grand scheme of things, this wasn't about books. Apple was smart. It saw what the Kindle would eventually become. It probably didn't worry about the first model Kindles; it worried about the generational line of Kindle products--the Fire and onward. By nullifying the advantage of the early model Kindles, Apple would weaken the advantage of the subsequent line of Kindle models.



    Think about it. Kindle had a few advantages on the iPad. One was the store interface, so Apple made its own store. One was the ebook selection, so Apple signed up the publishers. The last, and the biggy, was the price of ebooks sold in the store. Once Apple took that advantage too, then it practically took everything except the price point of the hardware itself.



    Errr, Apple had a store loooong before the Kindle. Also, Apple would not need to compete on content price since: 1) it already did in music (and lost!) but still sold more, 2) ebooks wasn't/isn't a big selling factor for the iPad (again, if you or anybody else presents a link that says that consumers purchased an iPad mostly for ereading, I may change my position), 3) the Fire doesn't even share the same NAME as the kindle much less any branding, 4) you overlook that kindle and other ereader apps were available





    Quote:
    Originally Posted by ALNorm View Post


    It is an issue for Apple if it is required to compete on price. Price on ebooks is one of the advantages Amazon had.



    See above.





    Quote:
    Originally Posted by ALNorm View Post


    The publishers who settled MUST go back to a wholesale model. Once a retailer can freely discount, the power to set a firm price is removed from the publisher, and it is no longer an agency model. Whether Apple abides by the suggested price is irrelevant; it has the option to discount. Hence, it is a wholesale model. Just because you call it agency or allow the publisher to set the price does not make it agency. What defines a model is who sets the final, firm price. The settlement requires publishers to allow retailers to discount, thus the final price is in the hands of the retailer.



    And that changes things how? Amazon discounts and then Apple does as well (or doesn't). Who cares? Apple isn't making sure that the lights stay on due to ebook prices.
  • Reply 66 of 114
    christophbchristophb Posts: 1,457member
    Quote:
    Originally Posted by ALNorm View Post


    Allow me to clarify.



    You are a publisher who now must allow retailers to discount. You sell to Amazon on a wholesale basis. Your product has a wholesale static dollar amount attached to it. For our example, let's say it is $12 per ebook (Amazon's cost). We'll also go ahead and assume Amazon is making a profit on each book--just for this example.




    The publisher is allowed to set sell price on a per distributor basis. Again, I'd sell to amazon at 2x wholesale and see if they can match iBook prices. Turnabout is fair play.
  • Reply 67 of 114
    alnormalnorm Posts: 37member
    Quote:
    Originally Posted by freckledbruh View Post


    Yes. I actually would like a link. It makes no sense to dissolve Apple's contract and not Amazon's contract. And if BOTH contracts were dissolved, the prior contract with Amazon doesn't automatically go into place AFAIK.



    This link has a breakdown plus the actual pdf of the settlement terms. http://blog-admin.wired.com/epicente...tlement-ebook/





    Quote:

    Errr, Apple had a store loooong before the Kindle. Also, Apple would not need to compete on content price since: 1) it already did in music (and lost!) but still sold more, 2) ebooks wasn't/isn't a big selling factor for the iPad (again, if you or anybody else presents a link that says that consumers purchased an iPad mostly for ereading, I may change my position), 3) the Fire doesn't even share the same NAME as the kindle much less any branding, 4) you overlook that kindle and other ereader apps were available



    Apple did not have the iBookstore before the Kindle. The Kindle came out in 2007, and the iBookstore opened in early 2010. And as I mentioned, this wasn't about books. Apple makes money on hardware. Amazon was a potential competitor to Apple in the hardware market. One way to nullify competitive advantage is to provide identical services as your competitor. And no, I didn't overlook the Kindle App. In fact, allowing the Kindle App was another way to nullify the benefits of the Kindle. "Hey, look, my hardware does what theirs does."





    Quote:

    And that changes things how? Amazon discounts and then Apple does as well (or doesn't). Who cares? Apple isn't making sure that the lights stay on due to ebook prices.



    It changes things because Apple, if it must go to a wholesale model, may have to take losses, which, according to reports, it did not want to get into a price war with Amazon.
  • Reply 68 of 114
    alnormalnorm Posts: 37member
    Quote:
    Originally Posted by ChristophB View Post


    The publisher is allowed to set sell price on a per distributor basis. Again, I'd sell to amazon at 2x wholesale and see if they can match iBook prices. Turnabout is fair play.



    See Robinson-Patman Act.
  • Reply 69 of 114
    Quote:
    Originally Posted by ALNorm View Post


    This link has a breakdown plus the actual pdf of the settlement terms. http://blog-admin.wired.com/epicente...tlement-ebook/









    Apple did not have the iBookstore before the Kindle. The Kindle came out in 2007, and the iBookstore opened in early 2010. And as I mentioned, this wasn't about books. Apple makes money on hardware. Amazon was a potential competitor to Apple in the hardware market. One way to nullify competitive advantage is to provide identical services as your competitor. And no, I didn't overlook the Kindle App. In fact, allowing the Kindle App was another way to nullify the benefits of the Kindle. "Hey, look, my hardware does what theirs does."









    It changes things because Apple, if it must go to a wholesale model, may have to take losses, which, according to reports, it did not want to get into a price war with Amazon.



    1) Thanks! So basically the settled publishers must nullify ALL contracts and start anew with wholesale model. Well, if the pricing results in the way you propose, I will change my mind when iPad sales drop (which I doubt).

    2) You said store and not iBookstore. Apple had a store for music looong before the Kindle and selling ebooks is simply a natural extension of the music and app store.

    3) Losses on content would be MUCH less than losses on hardware so I don't see where Apple is at some BIG disadvantage
  • Reply 70 of 114
    alnormalnorm Posts: 37member
    Quote:
    Originally Posted by freckledbruh View Post


    1) Thanks! So basically the settled publishers must nullify ALL contracts and start anew with wholesale model. Well, if the pricing results in the way you propose, I will change my mind when iPad sales drop (which I doubt).

    2) You said store and not iBookstore. Apple had a store for music looong before the Kindle and selling ebooks is simply a natural extension of the music and app store.

    3) Losses on content would be MUCH less than losses on hardware so I don't see where Apple is at some BIG disadvantage



    Just to address #3. That's why I think Apple should just settle this case. Get it over with. Finish it. Put it behind them. It won't get its money back from the costs of a successful defense. And as another poster linked, you don't want the DoJ snooping around your other businesses.



    Other than principle, I see no reason to drag this out when there is no guarantee Apple will win. Ebook sales are a drop in the bucket for Apple. Plus it has already lost half of its contracts with the major publishers. What is it trying to save? Even if it wins, those settlements are still in play.
  • Reply 71 of 114
    Quote:
    Originally Posted by ALNorm View Post


    Just to address #3. That's why I think Apple should just settle this case. Get it over with. Finish it. Put it behind them. It won't get its money back from the costs of a successful defense. And as another poster linked, you don't want the DoJ snooping around your other businesses.



    Other than principle, I see no reason to drag this out when there is no guarantee Apple will win. Ebook sales are a drop in the bucket for Apple. Plus it has already lost half of its contracts with the major publishers. What is it trying to save? Even if it wins, those settlements are still in play.



    True and you have been consistent in that position.
  • Reply 72 of 114
    christophbchristophb Posts: 1,457member
    Quote:
    Originally Posted by ALNorm View Post


    See Robinson-Patman Act.



    Is a book a commodity in that same sense? Being a copy of a single work with ownership retained by the author/publisher. It seems that amazon was the party attempting to commoditize and the publishers gaining a distribution competitor to add competition in the marketplace. Seems odd that this act could be used to prevent competition.



    If this applies, I'll change my stance. Publishers should just not sign agreements with amazon. Is there an act that says they have to if they deem it destructive to their business?
  • Reply 73 of 114
    alnormalnorm Posts: 37member
    Quote:
    Originally Posted by ChristophB View Post


    Is a book a commodity in that same sense? Being a copy of a single work with ownership retained by the author/publisher. It seems that amazon was the party attempting to commoditize and the publishers gaining a distribution competitor to add competition in the marketplace. Seems odd that this act could be used to prevent competition.



    If this applies, I'll change my stance. Publishers should just not sign agreements with amazon. Is there an act that says they have to if they deem it destructive to their business?



    Under the current case, it would seem as such (that ebooks fall under the definition of a typical commodity item).



    As for your second take. Yes, a manufacturer is free to decide with whom it wishes to do business. But that goes both ways.



    You have to look at the bigger picture, and it harks back to the collusion case. Ebooks are a smaller piece of the publishing landscape (most estimates have it below 20%). You still have that other 80%, which is print, and Amazon is a massive market for those titles (estimates give it near 40-60% of the total publishing retail market). If an individual publisher took on Amazon, Amazon could then kill 40-60% of their business overnight by pulling print titles.



    According to the allegations, publishers wanted the agency model because it allowed them to price their ebooks higher, which in turn protected print sales. You see, print distribution is what the large publishers have as their ace card. Everything else they do can be outsourced (editing, marketing, contracts), but not everyone can get their print titles into a brick and mortar bookstore. Kill a publishers hold on print distribution, by killing brick and mortar bookstores, and you kill the publishers' business model.



    A publisher removing ebooks, which could make Amazon remove print books of that publisher, is exactly what they fought against. It takes a different path, but it in essence has the same effect; it kills print.
  • Reply 74 of 114
    cash907cash907 Posts: 893member
    "Unlikely," huh?



    I'd say the fact that three of the five publishers just folded like cheap tissue paper makes a win extremely "likely." Cute attempt to put some spin on it though, AI.
  • Reply 75 of 114
    hill60hill60 Posts: 6,991member
    Quote:
    Originally Posted by iSheldon View Post


    If you don't think SJ and Apple wanted to strip eBook market share from Amazon in order to sell iPads than you're too naive for the internet. You think Apple was not active in the eBook negotiations and was just going by what the publishers wanted when SJ was flying back and forth to NY meeting with publisher after publisher?

    If you believe that then I got a bridge to sell you in Brooklyn.



    Look the general consensus all over the web is that Apple is guilty, so lets just hang them now and get a judge to stamp the paperwork later, ok?



    Better than waiting for that pesky justice system.*















    *Warning the above post may contain traces of sarcasm which may have an adverse effect on some individuals.
  • Reply 76 of 114
    hill60hill60 Posts: 6,991member
    Quote:
    Originally Posted by dav View Post


    wink wink, nod nod, know-what-i-mean?





    Say no more
  • Reply 77 of 114
    adamcadamc Posts: 573member
    Quote:
    Originally Posted by gwlaw99 View Post


    ""The government will have to show that Apple had some kind of involvement in the original arrangement,."



    I am pretty sure the Anti-trust division of justice knows what the law is and probably has some evidence of this.



    You seem to know more than some of the foremost legal brains perhaps Apple should engage you to fight their case.
  • Reply 78 of 114
    gatorguygatorguy Posts: 20,732member
    Quote:
    Originally Posted by freckledbruh View Post


    Good link and definitely makes this case a lot more gray than black-and-white. I do find it interesting that Apple suggested a ceiling for prices and not a floor as you (and others) have asserted. With that said, it still doesn't mean Apple has clean hands since it did suggest a price (which was rejected according to your link).



    In essence the ceiling is the floor in this case and reportedly by intent. That's included in the DoJ assertions. I think it's in the last couple of paragraphs in the earlier link.
  • Reply 79 of 114
    DOJ is over reaching.



    AAPL did not collude to fix pricing. What they did do is fracture Amazons near monopoly on e books. Amazon adopted a predatory pricing policy in which e book prices were set at or in some cases below Amazons cost. Pricing that was significantly below traditional book store pricing which is a critical part of a publishers business model.



    Typically, in this situation, a business would refuse to sell to a retailer who priced at a level that was destructive to the business model. However, Amazons dominate position on e books gave publishers limited options. If a Publisher wanted access to the e book distribution channel, accept Amazon's pricing model and their discounting or be barred from the e book market.



    AAPL, through the agency model, returned pricing power to the individual publishers. Keep in mind publishers each have unique products. Stephen King, Dean Koontz Tom Clancy, etc. Now each publisher can dictate the e book pricing for its unique products through the setting of list price for hardcover.



    What AAPL did was to collude with publishers to break Amazons near monopoly on the retail sale of e books. The fact that Amazon choose to set low pricing for all books, regardless of market demand, that saved consumers money is probably not relevant. Reverse the situation, say Amazon was trying to maximize profits on e books and charged e book users a huge premium. Everyone does the exact same thing to implement the agency model but the net result is AAPL entered the e book market and prices fall.



    The question is:



    Are publishers allowed to collude to create alternatives for distribution on e books?



    Are publishers allowed to collude to wrest pricing control back to each individual publisher?



    Publishers still compete on price and quality of content. As for the most favored nations pricing, this eliminated Amazons opportunity to strong arm publishers to reduce the commission rate which would have allowed Amazon to continue with a predatory pricing strategy and force new e book retailer entrants to either lose money or not enter the e book market.



    I have read the entire settlement. My question is does this DOJ agreement implicitly REQUIRE publishers who are party to the agreement to sell to Amazon? Publishers may be better off selling to AAPL under the wholesale model, count on AAPL to not discount, and deny product to Amazon.
  • Reply 80 of 114
    techboytechboy Posts: 183member
    **********



    The five publishers and Apple hatched an arrangement that lifted the price of many best-selling e-books to $12.99 or $14.99, according to the suit. The publishers then banded together to impose that model on Amazon, the government alleged.



    "As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles," said Attorney General Eric Holder.



    http://online.wsj.com/article/SB1000...054615152.html



    **********



    WTF ... that is some seriously flaw reasoning. So it is OKAY for Amazon to offer steep discounts to undermine original publishers' prices and that drove consumers to buy books from Amazon instead of other websites or bookstores??? The larger pictures here could partially explain the downfall of Borders and perhaps even B&N.



    Apple and the five publishers gathered to form an alliance to keep their prices from falling. That is wrong? DOJ might as well start suing all internet based companies because sooner or later they will see more of this type of business alliance.



    DOJ....do you effing job right...this is a waste of everyone's time. Although, I bet Amazon is enjoying this stun.
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