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

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  • Reply 21 of 107
    pendergastpendergast Posts: 1,358member
    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.
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  • Reply 22 of 107
    techboytechboy Posts: 183member


    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.

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  • Reply 23 of 107
    shahhet2shahhet2 Posts: 149member

    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.

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  • Reply 24 of 107
    yousuckyousuck Posts: 1member
    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.
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  • Reply 25 of 107
    dasanman69dasanman69 Posts: 13,002member
    [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 [B]you[/B], the publisher, set the price at is what we have it at. At no point was Apple setting the price.[/quote]

    And how did Apple get the 'realistic price' for albums?
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  • Reply 26 of 107
    dasanman69dasanman69 Posts: 13,002member
    shahhet2 wrote: »
    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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  • Reply 27 of 107
    shahhet2shahhet2 Posts: 149member

    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!!!)

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  • Reply 28 of 107
    pendergastpendergast Posts: 1,358member
    yousuck wrote: »
    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.
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  • Reply 29 of 107
    techboytechboy Posts: 183member

    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??? 

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  • Reply 30 of 107
    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.
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  • Reply 31 of 107
    "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
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  • Reply 32 of 107
    yojimbo007yojimbo007 Posts: 1,165member
    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!
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  • Reply 33 of 107

    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.}

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  • Reply 34 of 107
    charlitunacharlituna Posts: 7,217member
    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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  • Reply 35 of 107
    charlitunacharlituna Posts: 7,217member

    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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  • Reply 36 of 107
    charlitunacharlituna Posts: 7,217member

    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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  • Reply 37 of 107
    jungmarkjungmark Posts: 6,928member
    shahhet2 wrote: »
    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?
    yousuck wrote: »
    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.
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  • Reply 38 of 107

    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? 

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  • Reply 39 of 107
    davidwdavidw Posts: 2,184member

    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.    

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  • Reply 40 of 107
    davidwdavidw Posts: 2,184member

    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.

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