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.
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.
Your first paragraph details a position that occurred when the ebook market was less than 5% of the entire publishing landscape. Now that ebooks are 20% of the publishing landscape, do you think the publishers would take that hit and deny product to Amazon, although they appeared to fear that outcome in a smaller market?
Also, the settlement terms prevent retaliation against a retailer for said retailers pricing strategy. Do you think a publisher disallowing Amazon to sell its products would fall under retaliation?
The e book market was growing and a publisher could not afford to ignore this distribution channel. Amazon had 90% market share three years ago in a distribution channel growing triple digits. Amazon was ensuring this dominace by making it unprofitable for new entrants. Look at the price war in books between Walmart and Amazon.
The DOJ agreement stated they must cancel the existing agency contract with e book retailers and avoid any future agency model for two years. They are also forbidden to retaliate against any e book retailer for discounting. But nothing in the DOJ agreement mandated they must sell their product to anyone or spefically Amazon. Is not entering into an agreement with a retailer "retaliation"?
It is no secret publishers are pissed about Amazon's steep discounts. It completely undermines the same books sold else where, online and otherwise.
I think part of the problem is publishers need to man-up, either boycott Amazon or shut up. I work in publishing, and in twenty years of doing this, I have never seen such a lack of direction and leadership.
In addition, AAPL is now in the market and Amazon is down to 60% share. There is now a viable alternative to Amazon.
This is not about profits to the publishers. They made more money under the wholesale model than retail once you take sales tax (paid at 100% retail by the publisher) and commissions paid on gross publisher sales to the authors. The issue was whoring the price to make the paper book market decline at a faster rate due to an artificially high differential between e books and paper by Amazon operating below cost on the most popular books.
It is no secret publishers are pissed about Amazon's steep discounts. It completely undermines the same books sold else where, online and otherwise.
I think part of the problem is publishers need to man-up, either boycott Amazon or shut up. I work in publishing, and in twenty years of doing this, I have never seen such a lack of direction and leadership.
Bingo! Ebooks aren't going away, and the entry into that market is low. Hell, I could set up a website and a Paypal processing service and sell ebooks. What I can't do, for a low startup cost at least, is create a system that distributes to brick and mortar bookstores or have the warehouse space to store print books.
Eventually ebooks will dominate the publishing landscape, and the price of ebooks, no matter the pricing model, is going to experience a downward pressure due to this low market entry cost. It is the inevitable future of publishing. What are they doing to plan for this?
Why are the majority of them still in New York, paying New York rents and New York salaries?
In the last twenty years especially, we've seen a multitude of companies attempt to fight innovation. Innovation always wins.
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.
Well, I'm gonna wait to see the evidence that backs up the complaint. DoJ thinks they have a case; I'd like to see it go to trial instead of a settlement. If there are illegalities, let's get the courts to review and rule. Regardless who runs Justice, there seems to be this method to threaten suit and getting a settlement somewhere below the cost of litigation instead of having rulings that set legal precedent.
Edit: I'm pleased that Apple and some publishers have the stones to take it to trial.
No the DOJ hoped for a quick settlement in an election year.
Under the current case, it would seem as such (that ebooks fall under the definition of a typical commodity item).
I find this disturbing since each book title can easily be argued to be a different tier or a single product. 1,000 titles is not likened to 1,000 bushels of rice. I hope this topic comes up in court and publishers and authors are able to at least argue the distinction. Difference is cost can be associated with the method of distribution and packaging of said title. If not allowed to protect print, I can easily see the publishers not releasing eBooks until paperback editions are available.
btw, I agree with you and Egon - "Print is dead." Well, maybe not yet but it's visible on the horizon. It's the next DRM battle.
No way number two happens. The Justice Department will not drop the suit. It filed because it thinks it can force a settlement, but it also filed knowing that if any of the parties called its bluff it would have to go the distance.
Will Apple run into any backlash if it increasingly markets hardware that is primarily useful to access more stuff that to be bought from apple?
Unlike with Amazon's products, with Apple's products you can get content from a variety of sources including Amazon. I don't see Amazon linking to iTunes.
Why are the majority of them still in New York, paying New York rents and New York salaries?
Because it makes business sense to be in one location. If you write a novel doesn't it make more sense to be able to walk or take mass transit from publisher to publisher in the same city than fly city to city. A great many novelist live in the northeast making NYC convenient for them.
No the DOJ hoped for a quick settlement in an election year.
That is what I fear and loath - any DoJ that intimidates instead of seeking law enforcement. If it's found that this suit is about intimidation and is frivolous, the people should pay and those responsible held accountable. Justice gets to go both ways still, I hope.
Didn't DoJ just have to pay $120K out in a settlement for a frivolous suit where they were seeking a $10K fine?
But it's the non-settling publishers I really feel sorry for. They will be stuck on an agency model and competing against Amazon's discounted prices. So when those agency model publishers lower their prices to become more competitive, they must also cut their profit, which is less than what the wholesale folks are getting (wholesale prices remain static when retail prices change up or down, whereas under agency the net price goes up when the retail goes up and the net goes down when the retail goes down).
I didn't agree with any of your post, but this quoted part really makes no sense (at least that I can understand). So you are telling me if one of three hold outs is responsible for publishing the next Harry Potter or Hunger Games it is going to be hurt because those books are not offered on Amazon?
Instead, it will be the other way around. Amazon will be hurt. We already know this because one or two publishers got into a tiff with Amazon when Amazon originally resisted the agency model. The publishers withdrew their content from Amazon. Not too long afterwards, Amazon caved and switched to the agency model. Amazon can't be the biggest book seller if all the publishers aren't offered there.
Moreover, you apparently don't understand how retailers like Walmart and Amazon work. They attack the whole sale price. Walmart will tell a manufacturer to lower its price often times pressuring manufacturers to move operations overseas to places like China to satisfy these demands. Amazon does the same with books. To solidify its dominance with e-Books Amazon told publishers Amazon would not sell their traditional books if they did not substantially lower their wholesale price on e-Books allowing Amazon to aggressively lower the price on e-Books to the detriment of the more profitable traditional books. Your premise rests on the wholesale price remaining fixed and being set by publishers. The fact of the matter is large retailers have a strong influence on the wholesale price, which allows them to set low retail prices.
That is what I fear and loath - any DoJ that intimidates instead of seeking law enforcement. If it's found that this suit is about intimidation and is frivolous, the people should pay and those responsible held accountable. Justice gets to go both ways still, I hope.
Didn't DoJ just have to pay $120K out in a settlement for a frivolous suit where they were seeking a $10K fine?
The government no matter who is in power does what it wants. Moreover, $120K is nothing when you print the money.
Because it makes business sense to be in one location. If you write a novel doesn't it make more sense to be able to walk or take mass transit from publisher to publisher in the same city than fly city to city. A great many novelist live in the northeast making NYC convenient for them.
Moreover, most of the large publishers don't pay rent because they have been around forever. They own the buildings.
I have complete and absolute trust in our governmental officials -- whether elected or of the bureaucratic breed. I believe with all my aorta that they will always take the correct position and do the right thing. If they say Apple has done wrong, then it must be true.
It is perfectly a-O.K. for the government to do Amazon’s dirty work and lower the cost of ebooks in order to wipe out every mom and pop and Barnes and Noble book store from our Borders.
For full disclosure, I have lived nearly my entire life in Illinois -- land of Obama. (The fact that our last 2 governors are currently wearing orange jumpers while lounging in their 6-foot x 8-foot concrete room is an aberration by the fact that only 2 of the 5 governors preceding them experienced similar living conditions.) I am heartened that our Attorney General, Lisa Madigan, is all over this like a fly on Urbana dung. Lisa learned well from her Daddy, Michael Madigan. Michael has done a tremendous job running an extremely profitable law firm and being the Speaker of the Illinois House of Representatives for the past 3 decades while driving Illinois so far in debt that all the money Apple has couldn’t save it.
Comments
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.
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.
Your first paragraph details a position that occurred when the ebook market was less than 5% of the entire publishing landscape. Now that ebooks are 20% of the publishing landscape, do you think the publishers would take that hit and deny product to Amazon, although they appeared to fear that outcome in a smaller market?
Also, the settlement terms prevent retaliation against a retailer for said retailers pricing strategy. Do you think a publisher disallowing Amazon to sell its products would fall under retaliation?
The DOJ agreement stated they must cancel the existing agency contract with e book retailers and avoid any future agency model for two years. They are also forbidden to retaliate against any e book retailer for discounting. But nothing in the DOJ agreement mandated they must sell their product to anyone or spefically Amazon. Is not entering into an agreement with a retailer "retaliation"?
I think part of the problem is publishers need to man-up, either boycott Amazon or shut up. I work in publishing, and in twenty years of doing this, I have never seen such a lack of direction and leadership.
This is not about profits to the publishers. They made more money under the wholesale model than retail once you take sales tax (paid at 100% retail by the publisher) and commissions paid on gross publisher sales to the authors. The issue was whoring the price to make the paper book market decline at a faster rate due to an artificially high differential between e books and paper by Amazon operating below cost on the most popular books.
Is not entering into an agreement with a retailer "retaliation"?
Good question, but I'd have to respond with another question.
What is your (you being the publisher) reason for not allowing your books to be sold in the largest marketplace in the world for your product?
It is no secret publishers are pissed about Amazon's steep discounts. It completely undermines the same books sold else where, online and otherwise.
I think part of the problem is publishers need to man-up, either boycott Amazon or shut up. I work in publishing, and in twenty years of doing this, I have never seen such a lack of direction and leadership.
Bingo! Ebooks aren't going away, and the entry into that market is low. Hell, I could set up a website and a Paypal processing service and sell ebooks. What I can't do, for a low startup cost at least, is create a system that distributes to brick and mortar bookstores or have the warehouse space to store print books.
Eventually ebooks will dominate the publishing landscape, and the price of ebooks, no matter the pricing model, is going to experience a downward pressure due to this low market entry cost. It is the inevitable future of publishing. What are they doing to plan for this?
Why are the majority of them still in New York, paying New York rents and New York salaries?
In the last twenty years especially, we've seen a multitude of companies attempt to fight innovation. Innovation always wins.
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.
Books are a luxury item.
Well, I'm gonna wait to see the evidence that backs up the complaint. DoJ thinks they have a case; I'd like to see it go to trial instead of a settlement. If there are illegalities, let's get the courts to review and rule. Regardless who runs Justice, there seems to be this method to threaten suit and getting a settlement somewhere below the cost of litigation instead of having rulings that set legal precedent.
Edit: I'm pleased that Apple and some publishers have the stones to take it to trial.
No the DOJ hoped for a quick settlement in an election year.
Books are a luxury item.
Books are made of paper.
The rest are from my CD collection.
Mine are copies from friends and the library.
Under the current case, it would seem as such (that ebooks fall under the definition of a typical commodity item).
I find this disturbing since each book title can easily be argued to be a different tier or a single product. 1,000 titles is not likened to 1,000 bushels of rice. I hope this topic comes up in court and publishers and authors are able to at least argue the distinction. Difference is cost can be associated with the method of distribution and packaging of said title. If not allowed to protect print, I can easily see the publishers not releasing eBooks until paperback editions are available.
btw, I agree with you and Egon - "Print is dead." Well, maybe not yet but it's visible on the horizon. It's the next DRM battle.
It will NEVER go to trial. There are only two possibilities.
1. Apple will realize it can't win and settle.
2. The DOJ will realize it can't win and withdraw the suit, just like they did with IBM.
I predict #2
No way number two happens. The Justice Department will not drop the suit. It filed because it thinks it can force a settlement, but it also filed knowing that if any of the parties called its bluff it would have to go the distance.
Will Apple run into any backlash if it increasingly markets hardware that is primarily useful to access more stuff that to be bought from apple?
Unlike with Amazon's products, with Apple's products you can get content from a variety of sources including Amazon. I don't see Amazon linking to iTunes.
Why are the majority of them still in New York, paying New York rents and New York salaries?
Because it makes business sense to be in one location. If you write a novel doesn't it make more sense to be able to walk or take mass transit from publisher to publisher in the same city than fly city to city. A great many novelist live in the northeast making NYC convenient for them.
No the DOJ hoped for a quick settlement in an election year.
That is what I fear and loath - any DoJ that intimidates instead of seeking law enforcement. If it's found that this suit is about intimidation and is frivolous, the people should pay and those responsible held accountable. Justice gets to go both ways still, I hope.
Didn't DoJ just have to pay $120K out in a settlement for a frivolous suit where they were seeking a $10K fine?
But it's the non-settling publishers I really feel sorry for. They will be stuck on an agency model and competing against Amazon's discounted prices. So when those agency model publishers lower their prices to become more competitive, they must also cut their profit, which is less than what the wholesale folks are getting (wholesale prices remain static when retail prices change up or down, whereas under agency the net price goes up when the retail goes up and the net goes down when the retail goes down).
I didn't agree with any of your post, but this quoted part really makes no sense (at least that I can understand). So you are telling me if one of three hold outs is responsible for publishing the next Harry Potter or Hunger Games it is going to be hurt because those books are not offered on Amazon?
Instead, it will be the other way around. Amazon will be hurt. We already know this because one or two publishers got into a tiff with Amazon when Amazon originally resisted the agency model. The publishers withdrew their content from Amazon. Not too long afterwards, Amazon caved and switched to the agency model. Amazon can't be the biggest book seller if all the publishers aren't offered there.
Moreover, you apparently don't understand how retailers like Walmart and Amazon work. They attack the whole sale price. Walmart will tell a manufacturer to lower its price often times pressuring manufacturers to move operations overseas to places like China to satisfy these demands. Amazon does the same with books. To solidify its dominance with e-Books Amazon told publishers Amazon would not sell their traditional books if they did not substantially lower their wholesale price on e-Books allowing Amazon to aggressively lower the price on e-Books to the detriment of the more profitable traditional books. Your premise rests on the wholesale price remaining fixed and being set by publishers. The fact of the matter is large retailers have a strong influence on the wholesale price, which allows them to set low retail prices.
That is what I fear and loath - any DoJ that intimidates instead of seeking law enforcement. If it's found that this suit is about intimidation and is frivolous, the people should pay and those responsible held accountable. Justice gets to go both ways still, I hope.
Didn't DoJ just have to pay $120K out in a settlement for a frivolous suit where they were seeking a $10K fine?
The government no matter who is in power does what it wants. Moreover, $120K is nothing when you print the money.
The government no matter who is in power does what it wants. Moreover, $120K is nothing when you print the money.
I hear we're changing our motto from "In God We Trust" to "Fiat! It's not just a car, it's our currency".
Because it makes business sense to be in one location. If you write a novel doesn't it make more sense to be able to walk or take mass transit from publisher to publisher in the same city than fly city to city. A great many novelist live in the northeast making NYC convenient for them.
Moreover, most of the large publishers don't pay rent because they have been around forever. They own the buildings.
It is perfectly a-O.K. for the government to do Amazon’s dirty work and lower the cost of ebooks in order to wipe out every mom and pop and Barnes and Noble book store from our Borders.
For full disclosure, I have lived nearly my entire life in Illinois -- land of Obama. (The fact that our last 2 governors are currently wearing orange jumpers while lounging in their 6-foot x 8-foot concrete room is an aberration by the fact that only 2 of the 5 governors preceding them experienced similar living conditions.) I am heartened that our Attorney General, Lisa Madigan, is all over this like a fly on Urbana dung. Lisa learned well from her Daddy, Michael Madigan. Michael has done a tremendous job running an extremely profitable law firm and being the Speaker of the Illinois House of Representatives for the past 3 decades while driving Illinois so far in debt that all the money Apple has couldn’t save it.