

Apple in antitrust crosshairs over e-book pricing  - dazbradbury
http://arstechnica.com/apple/news/2012/03/apple-in-antitrust-crosshairs-over-e-book-pricing.ars

======
gamble
The underlying problem with the ebook market is the way publishers mandate the
use of DRM.

Under the old model, Amazon was free to sell ebooks under cost, with the goal
of quickly establishing a Kindle monopoly and placing itself in a negotiating
position that would eventually allow them to capture most of the profit in the
ebook market. The publishers and Apple introduced the agency model to prevent
Amazon from dominating ebooks.

Amazon's strategy wouldn't have worked if not for DRM. If the publishers
instead mandated that ebooks _couldn't_ use DRM but let Amazon sell at any
price, there would be no reason for Amazon to sell below cost because
customers would be able to migrate to another vendor's platform at any time.

~~~
yousureimnot
DRM is nasty, but it has nothing to do with Amazon's model. The Kindle exists
to sell books, not the other way around. You can read and buy Kindle books on
an iPad or a computer, and (on average) they're going to make one hell of a
lot more profit on eBooks than cheap consumer electronics.

~~~
gamble
DRM is what provides the barrier against switching between platforms. I have
around 200 Kindle books. If I wanted to switch to another platform, I'd either
have to carry two e-readers or lose access to a big chunk of my library.

It also makes me less likely to buy from smaller vendors, because the music
industry's history shows that when publishers with DRM-encrypted products go
bankrupt, they tend to shut down their DRM servers and their customers lose
access to their purchases.

~~~
mahyarm
To be honest, a large chunk of kindle books on amazon.com don't have DRM
enabled. Try converting your kindle library with calibre and be surprised that
some of your paid books don't have drm. Calibre will fail on books with drm
enabled unless you install a 3rd party plugin.

For me, I choose to keep on using amazon.com not because of DRM switching
costs, but the connivence, library breadth and syncing services on many
devices. Doing it manually with calibre and a nook is just a pain.

------
rhaphazard
Is this why ebooks in general are so expensive? I always wondered why digital
copies cost as much as the physical ones, and I always thought the publishers
were just being greedy.

~~~
cstross
How books are made:

[http://www.antipope.org/charlie/blog-
static/2010/02/cmap-2-h...](http://www.antipope.org/charlie/blog-
static/2010/02/cmap-2-how-books-are-made.html)

Note that there are 17 steps in this process for paper books ... and around 15
or 16 for ebooks. And the cost of physical goods (ink and paper) is less than
10% of the cover price.

~~~
jamesaguilar
Steps 13, 14, 15, and 16 are all unnecessary in the electronic world. Perhaps
most of step 8 too, since the ARCs will be sent out electronically.

The actual materials are only part of the cost advantage ebooks have over
print. Among the other advantages are:

    
    
        - Real estate for book stores.
        - Salaries for bookstore employees.
        - Shipping, packaging.
        - Inventory management.
        - Bookstore profit margins.
        - MUCH simpler typesetting, since pagination is mostly handled by the device.
    

So by saying it should only be ten percent of savings you are really
understating the advantage by quite a bit.

------
larrik
Seems like the DoJ is a year late on this one.

~~~
freehunter
Apple has already come under investigation, once for actively prohibiting
people from using third-party music managers [1] and once for unfair contracts
to limit publishers to use only iTunes for their music [2].

Throughout most of their history, Apple has been protected from the kind of
anti-trust onslaught that has forced Microsoft's hand in some decisions,
because Apple hasn't ever controlled significant influence over a market. This
has changed in the last decade, and at some point Apple will have to grasp the
concept of a legal monopoly or be shown what "illegal monopoly" really means.

[1] [http://www.bloomberg.com/news/2011-03-22/apple-s-jobs-
must-a...](http://www.bloomberg.com/news/2011-03-22/apple-s-jobs-must-answer-
questions-in-itunes-antitrust-dispute.html)

[2] <https://mashable.com/2010/05/27/itunes-antitrust/>

------
cstross
Great going, DoJ!

Ignore the aggressive, predatory monopoly vendor with 85% of the market (AMZN)
and go after the other guys, why don't you ...

(I wish I was making that 85% thing up; alas, that's how much of the US ebook
market Amazon have got.)

~~~
aristus
I don't even bother to look at my iTunes sales anymore. I just assume it's
1/10 of my Amazon sales.

But what is Amazon doing that is predatory? Genuinely curious. Simply having a
monopoly isn't a crime; abusing the advantage is.

------
protomyth
I think if the contract term "cannot sell for a lower price through another
vendor" was made illegal, it might make this problem a little easier to solve.

------
cletus
I've always held that the "agency model" pushed by Apple is anticompetitive.
The argument for it is that ebooks are different to physical books in that
they are infinitely copyable (which is obviously true) and that leads to books
being priced at or near cost and publishers don't want to be "commoditized" in
that way.

But that's a BS argument. A traditional bookshop will have a 100% markup for
recommended retail price to cover costs (store, employees, utilities and so
on). The publisher's half will be divvied up a number of ways including
editing, printing, distribution and let's not forget the author (10% or less).

Amazon of course reduced their overhead (no physical store) and increased
their volume cutting down that markup significantly. They may have through
volume been able to negotiate a lower cost from the publisher but I have no
evidence of that.

Ebooks change the model drastically. Printing costs disappear. Editing, the
author's cut and the publisher's profit remain. Distribution costs are
basically zero. What's more, ebooks have no resale market (unlike, say,
college textbooks). This reduced utility should lower the sticker price.

Yet publishers seem stuck in a mindset of looking at nothing more than the
retail price as some kind of metric for profit. Publishers should be embracing
ebook distribution. It lowers their costs and (in theory) increases their
profit through no printing and distribution costs.

Their needs to be structural separation between wholesale and retail market
segments and that means publishers shouldn't be able to dictate the retail
price. Period.

~~~
Steko
Your "argument for it" is a complete straw man.

The real argument for the agency model is that the publishers own the rights
to publishing and can set terms as they wish. If they want to wholesale ebooks
they can do so... and they can also decline to do so if such is their desire.
If they want to use an agency model they can and can also decline to do so.

The publishers presumably want to sell books using the model that favors them
(cf Adam Smith) and so they have chosen the agency model.

What very well may be anticompetitive about this situation is for all the
large publishers to get together and collectively move to a model that
knowingly results in higher consumer prices. IANAL but on it's face that looks
pretty bad and I'd guess based on reported emails that they've pretty clearly
crossed the line on price fixing laws.

Presumably their defense is that the initial "lower prices" were loss leaders
by monopolist Amazon not true market prices and there's probably some truth to
this and that's probably why we'll see a non-trivial but non-blockbuster
settlement in the low eight digits.

~~~
mikecane
>>>The real argument for the agency model is that the publishers own the
rights to publishing and can set terms as they wish.

You lack knowledge of publishing. This model was struck down by the courts in
the 1970s. Had it still been in effect, there would have never been a
videocassette rental market -- which some studios, notably Warners, tried to
subvert by tiered pricing for cassettes that were deemed "Rental Only."

Book publishing is trying that trick now too: Do you like the fact that Random
House has jacked up the pricing of eBooks to extortionate levels to public
libraries -- many of which are supplementary funded by tax dollars, perhaps
even yours? It's the same damn eBook you can buy for yourself, only 4x or more
in price. This while libraries pay far less for print books.

Listen, unless you've an understanding of the history of book publishing, all
you've got as an argument is some ideology, not fact.

And the fact is that the current arguments in book publishing go waaaaay back
in time, as far back as 1922:

Book Publishing: This Isn’t 1922 Any Longer
[http://mikecanex.wordpress.com/2012/02/06/book-publishing-
th...](http://mikecanex.wordpress.com/2012/02/06/book-publishing-this-
isnt-1922-any-longer/)

The most damaging thing that ever happened to book publishing is something
none of you know about. A change in the tax laws in the 1970s that classified
book inventory the same way as factory inventory, thus making it no longer
economical to keep books in print and in warehouses. This led to a sweeping
change in the availability of books, creating shorter print runs and far less
availability of books published even within a year.

None of you should be sympathetic towards the publishing industry. The
obstructionism that is dooming them is the product of their own inaction and
action.

[typo edits]

