Senator says Apple e-book suit could destroy publishing industry

Posted:
in General Discussion edited January 2014
In a Wall Street Journal editorial on Wednesday Senator Charles Schumer (D-NY) warned the U.S. Department of Justice that its suit against Apple and two major publishers could "wipe out the publishing industry as we know it" by allowing Amazon to regain a monopoly share of the market.

Sen. Schumer asserts in his opinion piece, titled "Memo to DOJ: Drop the Apple E-Books Suit: Restoring Amazon's monopoly in digital publishing is not in the public interest," that Apple's stake in the e-book industry is vital not only for competitive consumer pricing but for young writers hoping to showcase their work.

"The e-books marketplace provides a perfect example of the challenges traditional industries face in adapting to the Internet economy," Sen. Schumer writes. "Amazon took an early lead in e-book sales, capturing 90% of the retail market. Because of its large product catalog, Amazon could afford to sell e-books below cost."

He goes on to say that publishers were faced with a Hobson's choice between going with Amazon's sales scheme or ignoring the march toward digital content.

"They could allow their books to be sold at the prices Amazon set, thus undercutting their own current hardcopy sales and the future pricing expectations for digital books—or stay out of the e-books market entirely," Sen. Schumer said of major publishing houses. "In an increasingly digital age, the latter was simply not an option."

The senator is referring to the so-called "wholesale model" Amazon adopted when the company first entered the e-book market. Power lies in the hands of resellers in this model as they buy content from publishers wholesale only to price the e-books at or below cost to drum up sales.

On the other end of spectrum is Apple's "agency model" which places the power with publishers that set content prices under a "most favored nations" clause. The DOJ has taken umbrage with the agency model and claims it may infringe on antitrust laws, thus the body took Apple and its publishing partners to court. For its part the iPad maker denies the allegations, saying it broke up a perceived Amazon monopoly.

Sen. Charles Schumer
Senator Charles Schumer speaking in Washington, D.C. | Source: Sen. Schumer's official webpage


Also noted in the WSJ article was the DOJ's apparent focus on new-release book prices which have gone up since Apple's iBookstore was launched. Sen. Schumer writes that the justice body "misses the forest for the trees" and has ignored the overall downward trend of average e-book prices. He qualified the bold statement by saying that while consumers have a short-term interest in new releases, they have "a more pressing long-term interest in the survival of the publishing industry."

Finally the senator voiced concern that the mere filing of the price-fixing suit has empowered monopolists and hurt innovators, positing that it will have a "deterrent effect" to companies in the broader U.S. economy that are trying to adapt to the oncoming digital age.

The DOJ's trial against Apple, Macmillan and Penguin Group is scheduled to begin in 2013.
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Comments

  • Reply 1 of 89
    hellacoolhellacool Posts: 759member
    Well if these companies did not break any laws then they have nothing to worry about. If they did, then it should not matter the impact, they broke the law and should pay. If Amazon has a true monopoly, the DOJ can then pursue Amazon and break it.
  • Reply 2 of 89
    darkvaderdarkvader Posts: 589member


    Schumer is an idiot.


     


    Publishers have plenty of options, the best one being to sell unencrypted PDF ebooks, which they can do from their own websites if they like.

  • Reply 3 of 89
    anantksundaramanantksundaram Posts: 20,224member

    Quote:

    Originally Posted by DarkVader View Post


    Schumer is an idiot.



    That may or may not be true, but I suggest you read the article. It doesn't take much time to do so. He makes some valid points, many that have been made by smart folks in forums like this.

  • Reply 4 of 89
    SpamSandwichSpamSandwich Posts: 33,408member

    Quote:

    Originally Posted by anantksundaram View Post


    That may or may not be true, but I suggest you read the article. It doesn't take much time to do so. He makes some valid points, many that have been made by smart folks in forums like this.



     


    Yes, they should've said, "Schumer is usually an idiot."

  • Reply 5 of 89
    starbird73starbird73 Posts: 538member
    darkvader wrote: »
    Schumer is an idiot.

    Publishers have plenty of options, the best one being to sell unencrypted PDF ebooks, which they can do from their own websites if they like.

    While I know how to do it, and most readers here would, too, the point is that when you buy an e-reader or iPad, there is one really easy way to get the books. That is his point. Buy a kindle, it is the kindle store, buy an iPad, it is iBooks.
  • Reply 6 of 89
    solipsismxsolipsismx Posts: 19,566member
    I'm agreeing with Schumer? Wow! Excellent points all around.
  • Reply 7 of 89
    tbelltbell Posts: 3,146member

    Quote:

    Originally Posted by anantksundaram View Post


    That may or may not be true, but I suggest you read the article. It doesn't take much time to do so. He makes some valid points, many that have been made by smart folks in forums like this.



     


     


    Agreed. Some people unfortunately  seem to view politics as a sporting event. Root for their team no matter what the conduct of the team. Setting the fact he is a democrat aside,  Schumer's opinion is common sense and right on the money. To engage in illegal anti-competitive behavior Apple would have had to collude with its competition. For example, the LCD manufacturers like Samsung and LG recently  paid hundreds of millions of dollars to settle a government suit for all getting together and agreeing on a price to charge to companies like Apple that bought LCDs. So to be guilty of collusion, Apple would have had to have entered into an agreement with competitor  companies like Amazon. Apple can enter into the same agreement with all the publishers because Apple isn't competing with the publishers. Further, Apple has the same model for music and apps and the government has no objection. 


     


    Moreover, in part the purpose of anti-competition law is to prevent companies from using a monopoly to gain an unfair advantage in another market thereby undermining fair competition to the determent of consumers. Here Amazon was the monopoly. Apple wasn't in the publishing business. Since, Apple got publishers to agree to the Agency model Amazon's share has dropped to about 65 percent from over  90 percent with both Barnes and Noble and Apple benefiting. This has only increased competition and  benefited consumers.


     


    Further, Amazon wasn't forced to adopt the agency model, but choose to do so so it wouldn't lose some of the books it was carrying. Interestingly enough, there is a lot of ebooks available on Amazon not available on Apple's store. It can't be because Apple's terms are onerous as the publishers set the rate. Instead, it is more likely Amazon pressured publishers for exclusives. For instance, Harry Potter and the Hunger Games. What Amazon is doing is similar to what Microsoft got in trouble for. Microsoft used its Windows' dominance to force its partners to favor Internet Explorer over entrenched Netscape Navigator. If it weren't for Windows, Microsoft would have had a hard time unseating Netscape. The same can be said of Amazon and ebooks. If it weren't for its dominance with hard cover books, it never would have got publishers to agree to selling ebooks below cost. 


     


    Amazon used its monopoly status in on-line traditional book sales to force publishers to agree to sell their works below market rates for emerging ebook market sales. Essentially Amazon would tell publishers it isn't going to carry and/or promote their traditional books without them agreeing to allow Amazon to set the price of the e-books. That is traditional anti-competitive behavior. Further, this really hurt consumers because traditional book stores are already at a disadvantage because their customers have to pay a sales tax. Amazon essentially drove sales to ebooks by making them far less expensive then traditional books at the expense of traditional retailers. Borders was a victim of such practices. 


     


    The government in an election year is getting caught up in the agency model increasing the price of some books to consumers. However, the books were being sold below cost, and since when can't the owner of a work sell it for what the owner wants. 

  • Reply 8 of 89
    anonymouseanonymouse Posts: 6,653member
    hellacool wrote: »
    Well if these companies did not break any laws then they have nothing to worry about. If they did, then it should not matter the impact, they broke the law and should pay. If Amazon has a true monopoly, the DOJ can then pursue Amazon and break it.

    That's just about the dumbest possible approach that could be suggested: Firmly establish one company in a monopoly position and by doing so destroy an industry, then break up the only player left after the irreversible damage has already been done.

    Schumer is absolutely, 100% correct on this issue. Let's hope that someone at DoJ has the sense to recognize it and that their egos aren't too big for them to alter course before it's too late. Otherwise, this will go down in history as the biggest blunder they have ever made.

    The DoJ's actions are completely, and obviously, contrary to the intent of antitrust law.
  • Reply 9 of 89
    hellacoolhellacool Posts: 759member
    anonymouse wrote: »
    That's just about the dumbest possible approach that could be suggested: Firmly establish one company in a monopoly position and by doing so destroy an industry, then break up the only player left after the irreversible damage has already been done.
    Schumer is absolutely, 100% correct on this issue. Let's hope that someone at DoJ has the sense to recognize it and that their egos aren't too big for them to alter course before it's too late. Otherwise, this will go down in history as the biggest blunder they have ever made.
    The DoJ's actions are completely, and obviously, contrary to the intent of antitrust law.

    With that crystal ball of yours can you throw out some lottery numbers? Get over it, Amazon only had a monopoly because they were first to the market with a killer product. They never used that position to hurt consumers, they used it too break up the monopoly the publishers had and forced them to abandon their antiquated business model. Apple used his fact to conspire against amazon so they can get their foot in the door and they got caught. This politician, ha, lobbying at its best. The fools that keep spouting off about this supposed monopoly that Amazon will have can only speculate and have zero evidence Amazon will harm consumers, they didn't in the past, why would they now? As for the publishers, get in the 21st century, no on wants physical books anymore. The consumer is rapidly moving to digital. I am glad Amazon dismantled the publishers monopoly and I am glad Apple got burned and it has come to light to show Apple cares about one thing, bottom line. If Amazon having a monopoly means I Payless for eBooks, good. I hope the DOJ slaps he crap out of Apple and the other publishers. Forces them back to being competitive and I can go back to $9.99 new releases. If the publishers don't like it, don't sell eBooks.
  • Reply 10 of 89


    Yeah, cause these guys have such a great track record when they get involved with industries, especially involving new technology.  New technology always disrupts older ones that address similar needs but it doesn't always eliminate them.  Word processors killed the type writer but we still have pens aplenty.  TV was supposed to kill off Radio, bit it is stronger than ever and has made a tremendous come back with the internet and podcasting.  We have seen countless dramatic changes in technology in the last few years alone and the pace in many areas in increasing.  If you want to kill innovation, competition and growth, bring in the government.


     


    Consider this - the government got involved with the corn industry and subsidized it so heavily it became a major source for sugar and now some places want to tax the very high sugar products that are only available so cheaply because of the original interference.  


     


    Brilliant.


     


    Yeah, more government involvement.  That's exactly what the industry needs.

  • Reply 11 of 89
    hellacoolhellacool Posts: 759member
    grumblegus wrote: »
    Yeah, cause these guys have such a great track record when they get involved with industries, especially involving new technology.  New technology always disrupts older ones that address similar needs but it doesn't always eliminate them.  Word processors killed the type writer but we still have pens aplenty.  TV was supposed to kill off Radio, bit it is stronger than ever and has made a tremendous come back with the internet and podcasting.  We have seen countless dramatic changes in technology in the last few years alone and the pace in many areas in increasing.  If you want to kill innovation, competition and growth, bring in the government.

    Consider this - the government got involved with the corn industry and subsidized it so heavily it became a major source for sugar and now some places want to tax the very high sugar products that are only available so cheaply because of the original interference.  

    Brilliant.

    Yeah, more government involvement.  That's exactly what the industry needs.

    Sure, every 10 year old deserves to work 18 hour days in asbestos laden factories. Sure the gov is not perfect but the have their place. If they need to step in when companies the size of Apple conspire to screw the consumer, that is a good thing.
  • Reply 12 of 89
    poochpooch Posts: 768member

    Quote:

    Originally Posted by AppleInsider View Post



    In a Wall Street Journal editorial on Wednesday Senator Charles Schumer (D-NY) warned the U.S. Department of Justice that its suit against Apple and two major publishers could "wipe out the publishing industry as we know it" [...]


    queer, because other news outlets are reporting that Senator Charles Schumer (D-NY), himself, single-handedly, could wipe out the united states as we know it. 


     


    won't someone please think of the children?

  • Reply 13 of 89
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by Hellacool View Post



    <irrelevant crap removed>


    If they need to step in when companies the size of Apple conspire to screw the consumer, that is a good thing.


     


    So, what has happened to the average price of ebooks since Apple entered the market?


     


    Have any studies been done apart from choosing from a limited number of cherry picked examples?


     


    btw the current top three books from the NYT best sellers list are still selling for the unpossible amount of $9.99 in Apple's iBooks store.

  • Reply 14 of 89

    Quote:

    Originally Posted by DarkVader View Post


     


    Publishers have plenty of options, the best one being to sell unencrypted PDF ebooks, which they can do from their own websites if they like.





    I hope somebody brings up this point in the trial. It will make all of them look bad, on both sides.


     


    When I can buy e-books for less than paperback books shipped to my home I'll start buying them. Until then they all seem like tremendous rip-offs. It is profiteering at its worst in plain sight. The convenience of having a few thousand books in a tiny device is valuable for somebody living in a submarine, but it isn't really worth it anywhere else.


     


    Amazon isn't a monopoly anymore. Barnes & Noble is online, so is Sony. There are probably other places too selling digital books. When one of these online companies finally begins pricing their e-books below the prices of paperbacks AND does some big time advertising to let people everywhere know about it, they will take over the market. It is the price fixing of the publishers that are causing these problems, not the book sellers. I'll spend fifty cents to two dollars for some electrons to be sent to my computer. If I can spend $27.50 to have ten books shipped to my door with shipping included, you can bet that companies would make much more profit selling those same ten books to me via the internet for $1.00 each.


     


    Apple's problem began not because it wanted to use the agency model. It was because they got the publishers together and told them that they all must agree with the pricing model or that Apple wouldn't move forward.

  • Reply 15 of 89
    elrothelroth Posts: 1,201member

    Quote:

    Originally Posted by DarkVader View Post


    Schumer is an idiot.


     


    Publishers have plenty of options, the best one being to sell unencrypted PDF ebooks, which they can do from their own websites if they like.



    Name-calling is for morons, and it shows you don't understand the issue, much less have a valid point to make.

  • Reply 16 of 89

    Quote:

    Originally Posted by GrumbleGus View Post


    Yeah, cause these guys have such a great track record when they get involved with industries, especially involving new technology.  New technology always disrupts older ones that address similar needs but it doesn't always eliminate them.  Word processors killed the type writer but we still have pens aplenty.  TV was supposed to kill off Radio, bit it is stronger than ever and has made a tremendous come back with the internet and podcasting.  We have seen countless dramatic changes in technology in the last few years alone and the pace in many areas in increasing.  If you want to kill innovation, competition and growth, bring in the government.


     


    Consider this - the government got involved with the corn industry and subsidized it so heavily it became a major source for sugar and now some places want to tax the very high sugar products that are only available so cheaply because of the original interference.  


     


    Brilliant.


     


    Yeah, more government involvement.  That's exactly what the industry needs.



     


    From the content of your brain fart I can't tell you are referring to as "These guys." However, just in case your reading skills suffer as badly as your writing skills, let me tell you that Schumer is telling the DOJ to butt out. 


     


    Amazon was using predatory pricing, because of their dominance to further reduce competition. The next step after elimination the competition is to increase prices back to above cost. THAT, in itself, is what the DOJ should be focusing on, hence Schumer's reference to the DOJ not seeing the forest for the tree.

  • Reply 17 of 89
    hill60hill60 Posts: 6,992member

    Quote:

    Originally Posted by Smallwheels View Post


    Apple's problem began not because it wanted to use the agency model. It was because they got the publishers together and told them that they all must agree with the pricing model or that Apple wouldn't move forward.



     


    There is a small matter of supporting evidence, which you appear to have overlooked with that claim, seeing as how there is none this farce by the DoJ will go nowhere, there hasn't even been any evidence on the overall effect on pricing of Apple's entry into the eBooks market.

  • Reply 18 of 89

    Quote:

    Originally Posted by Smallwheels View Post




    I hope somebody brings up this point in the trial. It will make all of them look bad, on both sides.


     


    When I can buy e-books for less than paperback books shipped to my home I'll start buying them. Until then they all seem like tremendous rip-offs. It is profiteering at its worst in plain sight. The convenience of having a few thousand books in a tiny device is valuable for somebody living in a submarine, but it isn't really worth it anywhere else.


     


    Amazon isn't a monopoly anymore. Barnes & Noble is online, so is Sony. There are probably other places too selling digital books. When one of these online companies finally begins pricing their e-books below the prices of paperbacks AND does some big time advertising to let people everywhere know about it, they will take over the market. It is the price fixing of the publishers that are causing these problems, not the book sellers. I'll spend fifty cents to two dollars for some electrons to be sent to my computer. If I can spend $27.50 to have ten books shipped to my door with shipping included, you can bet that companies would make much more profit selling those same ten books to me via the internet for $1.00 each.


     


    Apple's problem began not because it wanted to use the agency model. It was because they got the publishers together and told them that they all must agree with the pricing model or that Apple wouldn't move forward.



     


    Unfortunately, by rewriting history doesn't make it so. When the largest player in any market begins to sell below cost because of their large scale, it is solely to eliminate their smaller competitors. For example, Apple is the big player in the phone and tablet markets. Were Apple to sell their products below cost, they could dominate those markets. Once they have total dominance, they could raise their prices to whatever the market will bear. This is against the law. 


     


    Apple sells their products well over their costs, and dominate the market by having a worthy product for the money. This is legal. 


     


    Apple wanted to enter the e-book market. There was no economic way to do so while the dominate player was selling below cost. The power in the publishing business had swung too far toward one outlet due to predatory pricing. The "agency model" rebalances the power and makes it possible for the publishers to have multiple outlets for their wares who are in competition with each other. The old model no longer works in the new electronic media.

  • Reply 19 of 89

    Quote:

    Originally Posted by Smallwheels View Post




    I hope somebody brings up this point in the trial. It will make all of them look bad, on both sides.


     


    When I can buy e-books for less than paperback books shipped to my home I'll start buying them. Until then they all seem like tremendous rip-offs. It is profiteering at its worst in plain sight. The convenience of having a few thousand books in a tiny device is valuable for somebody living in a submarine, but it isn't really worth it anywhere else.


     



     


    If you produced books and other media, you might feel differently. When we produce physical books and DVDs we have a fairly high amount of overhead. For printed materials, it's the cost of compiling the information, a large amount to graphic artists for multiple illustrations, and then editors. For DVDs the cost of a camera crew and editors is significant. 


     


    When we go to sell the items the physical cost of the items is a very small part of the cost. For this reason we charge the same for the printed and the digital versions. For our market, the digital version can be of more benefit than the physical version, so there is no way that we'd sell them at a deep cost compared to the physical items. The value in the goods is the content contained within, and not the media. And, in our case, our products sell for many multiples of what would be considered "normal" pricing at a bookstore.

  • Reply 20 of 89


    .

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