Fully agree about the smaller traders losing out. In my local town in the uk we had an amazing bookstore where you could go in and browse, it even had a children's section where you could sit and read the books to your kids. They would order you any book that they didn't have in stock. The store even won the national book retailer of the year award two years running. The store has now disappeared because it lost most of its trade to Amazon who will continue to trade at a loss until they have a monopoly, much the same as Google is doing with android.
Yeah kind of like all the cool music stores now gone because of Apple and iTunes.
The point that keeps getting missed is in what Steve said in your quote. It was not guaranteed that the prices would go up, only that Apple would get the same sell through price as the competitors. It could have driven prices down, but the publishers pushed them up and that is why they settled. The publishers had pricing control and raised the prices.
Exactly. Apple only secured the right for Publishers not to undercut Apple's prices elsewhere. Apple didn't care what the pricepoint of ebooks was. Steve knew that if the price was the same people would opt for customer experience they could outmanoeuvre Amazon with in-app purchasing. Amazon would have to swallow the in-app purchasing fee or make customers pay outside of their app to comply with App store rules.
Once the publishers had signed with Apple they knew that they would either have to:
a) Allow Amazon to continue to loss lead and risk a breach of their agreement with Apple
b) Decline supply to Amazon and lose book sales
c) Renegotiate their agreement with Amazon to allow publishers to set prices
Since option c was the only one without significant downside for publishers and they could assume that each of them were signing into similar contract terms with Apple (and at around the same time) that all of the other publishing houses would be choosing option c.
Note that none of this requires overt collusion to achieve a synchronous outcome; only independent bodies functioning separately under the same set of assumptions.
At any point in time under the no favoured nations agreements any of the publishers can increase their market share relative to the other publishers by adjusting their retail prices across the board. Market forces will sort this out and we've already seen some movement in ebook prices. It is not surprising that the average price of an ebook has increased however, since Amazon was loss leading at the expense of the publishers other sales. Don't forget that this is an unsustainable practice that is ultimately bad for book consumers. No profit means no publishers, which means no books. Amazon had an agenda to drive sales of ebook readers (disclosure: I own one), nudge paper publishing out of the market, then allow authors to publish directly.
Collusion between publishers over an agreed price point is an entirely different matter, and one Apple neither has a mechanism to control, nor any specific benefit to derive from such activity.
Exactly. Apple only secured the right for Publishers not to undercut Apple's prices elsewhere. Apple didn't care what the pricepoint of ebooks was. Steve knew that if the price was the same people would opt for customer experience they could outmanoeuvre Amazon with in-app purchasing. Amazon would have to swallow the in-app purchasing fee or make customers pay outside of their app to comply with App store rules.
Once the publishers had signed with Apple they knew that they would either have to:
a) Allow Amazon to continue to loss lead and risk a breach of their agreement with Apple
b) Decline supply to Amazon and lose book sales
<span style="line-height:1.4em;">c) Renegotiate their agreement with Amazon to allow publishers to set prices</span>
Since option c was the only one without significant downside for publishers and they could assume that each of them were signing into similar contract terms with Apple (and at around the same time) that all of the other publishing houses would be choosing option c.
Note that none of this requires overt collusion to achieve a synchronous outcome; only independent bodies functioning separately under the same set of assumptions.
At any point in time under the no favoured nations agreements any of the publishers can increase their market share relative to the other publishers by adjusting their retail prices across the board. Market forces will sort this out and we've already seen some movement in ebook prices. It is not surprising that the average price of an ebook has increased however, since Amazon was loss leading at the expense of the publishers other sales. Don't forget that this is an unsustainable practice that is ultimately bad for book consumers. No profit means no publishers, which means no books. Amazon had an agenda to drive sales of ebook readers (disclosure: I own one), nudge paper publishing out of the market, then allow authors to publish directly.
Collusion between publishers over an agreed price point is an entirely different matter, and one Apple neither has a mechanism to control, nor any specific benefit to derive from such activity.
Did you not read the letter from Steve Jobs in which he wrote "Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”?
While I never thought Apple was guilty of collusion I do believe that the publishers were. All of the publishers are in close proximity to each other, the CEOs know each other and it is known that they sat down together in public places to discuss their strategy to get Amazon to agree to new terms.
Yeah kind of like all the cool music stores now gone because of Apple and iTunes.
Wrong again. Right now, digital downloads only account for about 50% of the music sold. Half the music sold is still in the form of CD's. Small record stores, even big ones like Tower Records, closed down because big retailers like Target, Best Buy and Walmart were selling CD's as a lost leader to get customers into their stores, hoping that they purchase other high margin products. Record only store weren't selling high margin products like toilet paper to make up any reduction of CD price, if they wanted to complete. If you actually did some research, you would find out that most of these small record stores closed down over 5 years ago, when CD's were still over 80% of the music purchased. And then there's Amazon selling CD's at a steep discount with free shipping and no tax. (At least it was no tax back when these store closed down.) These record stores didn't close down because people switched from CD's to digital downloads. These record stores closed down because people buying CD's found a cheaper and more convenient place to buy them, while they were buying toilet paper or at home online.
Did you not read the letter from Steve Jobs in which he wrote "Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”?
While I never thought Apple was guilty of collusion I do believe that the publishers were. All of the publishers are in close proximity to each other, the CEOs know each other and it is known that they sat down together in public places to discuss their strategy to get Amazon to agree to new terms.
The publishers colluding is a different matter. That Apple was charged and found guilty is a travesty.
In fact, in light of all the things that have come to light about the NSA, I wouldn't be surprised if this guy is on the NSAs payroll and doing their dirty work on site at Apple.
Sorry but I don't buy that. Apple has made a lot of money on that 'assumption', at this point they know people will pay more for a better product. I believe that in this case the 'product' isn't of a much higher quality than the competitors, and since Apple didn't set the price this time around like they did with music their next best choice was to get the competition to the price they preferred.
Not sure what there is to buy into there. If there's no difference in price, then it [price] is a non-issue and the basis of a value analysis depends on whatever else remains. That's all I was saying.
You can question the quality of the experience if you like, but that's not the thrust of my comment. If you don't perceive the iBooks solution to be more valuable then you simply fall into the category of those who don't agree with the value proposition(value-added features included, like being part of the tightly the integrated iBooks/iTunes/iOS/Mac OS ecosystem).
If someone does not have any other reason to use iBooks (like having a AppleID associated with a payment method already set up for iTunes, or have an iPhone/iPad, etc), then they likely have no necessarily compelling reason to opt for iBooks content - it might even be considered a liability. However, if they do have any investment in that ecosystem (and there are <a lot> of people in that category out there), then there's already non-trivial incentive to do so. The converse is also true, if someone can be convinced to source content from iBooks, then that may be the hook to get them to invest more heavily in the larger ecosystem.
As for Apple getting the competition to the price they wanted, I think that's why there's so much confusion with this case - Apple didn't try to directly or indirectly set competitors prices - in fact, Apple didn't care at all what the actual price was set at for any particular book (there were suggestions from the bean-counters on what would be a realistically sustainable pricing strategy, but that was it). They just wanted to be able to match the competitors price so it became that non-issue in the buying decision (as was my point). They put themselves in a position (via the MFN clause in the contracts) where they were guaranteed to be able to match the competitions price without having to sacrifice their [percentage] margins, and present what they [Apple] consider to be a better value when the dollar figure is the same. It was brilliant, Apple offered a deal to all the players (major publishers) that was beneficial to them if they all followed the same pricing strategies - something that they'd all implicitly know. In a the small circles that were relevant, Apple didn't need to "collude" with anyone, just set the stage and let it play itself out. It was a virtually unavoidable conclusion - unless a publisher suddenly decided that they weren't interested in a sustainable and profitable business strategy :P.
You know, the more I think about the whole case, the more I think it was a witch hunt that was politically motivated. Your post hits a key point. Apple ultimately didn't care what the prices were as long as they were competitive with the rest of the market. This gets missed in a lot of the coverage. Content isn't where Apple makes anywhere near the majority of their revenue so to think that they would jeopardize the company on e-books is crazy.
Comments
Yeah kind of like all the cool music stores now gone because of Apple and iTunes.
The point that keeps getting missed is in what Steve said in your quote. It was not guaranteed that the prices would go up, only that Apple would get the same sell through price as the competitors. It could have driven prices down, but the publishers pushed them up and that is why they settled. The publishers had pricing control and raised the prices.
Exactly. Apple only secured the right for Publishers not to undercut Apple's prices elsewhere. Apple didn't care what the pricepoint of ebooks was. Steve knew that if the price was the same people would opt for customer experience they could outmanoeuvre Amazon with in-app purchasing. Amazon would have to swallow the in-app purchasing fee or make customers pay outside of their app to comply with App store rules.
Once the publishers had signed with Apple they knew that they would either have to:
a) Allow Amazon to continue to loss lead and risk a breach of their agreement with Apple
b) Decline supply to Amazon and lose book sales
c) Renegotiate their agreement with Amazon to allow publishers to set prices
Since option c was the only one without significant downside for publishers and they could assume that each of them were signing into similar contract terms with Apple (and at around the same time) that all of the other publishing houses would be choosing option c.
Note that none of this requires overt collusion to achieve a synchronous outcome; only independent bodies functioning separately under the same set of assumptions.
At any point in time under the no favoured nations agreements any of the publishers can increase their market share relative to the other publishers by adjusting their retail prices across the board. Market forces will sort this out and we've already seen some movement in ebook prices. It is not surprising that the average price of an ebook has increased however, since Amazon was loss leading at the expense of the publishers other sales. Don't forget that this is an unsustainable practice that is ultimately bad for book consumers. No profit means no publishers, which means no books. Amazon had an agenda to drive sales of ebook readers (disclosure: I own one), nudge paper publishing out of the market, then allow authors to publish directly.
Collusion between publishers over an agreed price point is an entirely different matter, and one Apple neither has a mechanism to control, nor any specific benefit to derive from such activity.
Did you not read the letter from Steve Jobs in which he wrote "Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”?
While I never thought Apple was guilty of collusion I do believe that the publishers were. All of the publishers are in close proximity to each other, the CEOs know each other and it is known that they sat down together in public places to discuss their strategy to get Amazon to agree to new terms.
Yeah kind of like all the cool music stores now gone because of Apple and iTunes.
Wrong again. Right now, digital downloads only account for about 50% of the music sold. Half the music sold is still in the form of CD's. Small record stores, even big ones like Tower Records, closed down because big retailers like Target, Best Buy and Walmart were selling CD's as a lost leader to get customers into their stores, hoping that they purchase other high margin products. Record only store weren't selling high margin products like toilet paper to make up any reduction of CD price, if they wanted to complete. If you actually did some research, you would find out that most of these small record stores closed down over 5 years ago, when CD's were still over 80% of the music purchased. And then there's Amazon selling CD's at a steep discount with free shipping and no tax. (At least it was no tax back when these store closed down.) These record stores didn't close down because people switched from CD's to digital downloads. These record stores closed down because people buying CD's found a cheaper and more convenient place to buy them, while they were buying toilet paper or at home online.
The publishers colluding is a different matter. That Apple was charged and found guilty is a travesty.
In fact, in light of all the things that have come to light about the NSA, I wouldn't be surprised if this guy is on the NSAs payroll and doing their dirty work on site at Apple.
That is no longer the case, Amazon can't sell ebooks at a loss since the ruling.
Wouldn't mind seeing a link to back that up?
Sorry but I don't buy that. Apple has made a lot of money on that 'assumption', at this point they know people will pay more for a better product. I believe that in this case the 'product' isn't of a much higher quality than the competitors, and since Apple didn't set the price this time around like they did with music their next best choice was to get the competition to the price they preferred.
Not sure what there is to buy into there. If there's no difference in price, then it [price] is a non-issue and the basis of a value analysis depends on whatever else remains. That's all I was saying.
You can question the quality of the experience if you like, but that's not the thrust of my comment. If you don't perceive the iBooks solution to be more valuable then you simply fall into the category of those who don't agree with the value proposition (value-added features included, like being part of the tightly the integrated iBooks/iTunes/iOS/Mac OS ecosystem).
If someone does not have any other reason to use iBooks (like having a AppleID associated with a payment method already set up for iTunes, or have an iPhone/iPad, etc), then they likely have no necessarily compelling reason to opt for iBooks content - it might even be considered a liability. However, if they do have any investment in that ecosystem (and there are <a lot> of people in that category out there), then there's already non-trivial incentive to do so. The converse is also true, if someone can be convinced to source content from iBooks, then that may be the hook to get them to invest more heavily in the larger ecosystem.
As for Apple getting the competition to the price they wanted, I think that's why there's so much confusion with this case - Apple didn't try to directly or indirectly set competitors prices - in fact, Apple didn't care at all what the actual price was set at for any particular book (there were suggestions from the bean-counters on what would be a realistically sustainable pricing strategy, but that was it). They just wanted to be able to match the competitors price so it became that non-issue in the buying decision (as was my point). They put themselves in a position (via the MFN clause in the contracts) where they were guaranteed to be able to match the competitions price without having to sacrifice their [percentage] margins, and present what they [Apple] consider to be a better value when the dollar figure is the same. It was brilliant, Apple offered a deal to all the players (major publishers) that was beneficial to them if they all followed the same pricing strategies - something that they'd all implicitly know. In a the small circles that were relevant, Apple didn't need to "collude" with anyone, just set the stage and let it play itself out. It was a virtually unavoidable conclusion - unless a publisher suddenly decided that they weren't interested in a sustainable and profitable business strategy :P.
Maybe I'm wrong though.
Quote:
- snip