

New e-book pricing scheme a surprising assault on the wallet - stfu
http://bottomline.msnbc.msn.com/_news/2011/12/15/9469981-new-e-book-pricing-scheme-a-surprising-assault-on-the-wallet

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raganwald
This is an article about an article in the WSJ. Is it linkjacking?

It repeats a claim about a quote from the original article while providing no
source to back it up: _The whole agreement was actually launched at the behest
of Apple’s Steve Jobs, who had wanted to create an e-bookstore for the iPad
but didn’t want to compete with Amazon.com’s cheap titles, according to the
story._

Given the recent SNAFU over misquoting Google, I’m wary of jumping down Mr.
Jobs’ long-dead throat on the basis of a quote of a quote of a source without
being able to read the original transcript.

One thing I’m interested in understanding, for instance, is the basis of
Apple’s “fear” of Amazon’s prices. I remember from the music business that
Amazon did undercut Apple’s prices, but it wasn’t because Apple was unable to
make money at a lower price point. It was because the music labels forced
Apple to maintain higher prices and then allowed Amazon to offer the same
tracks at a lower price in order to generate competition that would give them
the leverage they needed to negotiate _higher_ music prices from Apple in the
future.

Which they got, and now they can offer a sliding scale of prices, with some
tracks being $1.29, something that Jobs and Apple resisted.

So now I’m reading that Apple is trying to price fix all books at the same
price, and I am mightily interested in knowing the full story. Perhaps the
problem isn’t that Apple is trying to maintain artificially high prices, but
that it is trying to prevent publishers from shackling it and it alone with
higher prices.

~~~
nirvana
The claim in the article is false. Apple doesn't want high ebook pricing,
because Apple is a hardware manufacturer. iTunes and all the content it sells,
was created as a loss leader to generate demand for their hardware. Apple
historically has fought very hard to keep content prices down.

At the time that iBooks was announced, there were many stories on this issue,
and I read that the agreement Apple entered into with the book publishers was
that they could set their prices however they wanted, they just couldn't
charge _more_ on the iBookstore than they charged elsewhere.[1]

Apple gave them pricing flexibility, provided that they didn't do what you
point out the record companies did.

The book publishers liked this, and wanted the same terms from Amazon. They
figured they could just go with Apple if Amazon didn't comply. Amazon rolled
over, and ever since their PR agency has been floating stories like this one
to make out like Apple is behind the rise in ebook prices.

Apple isn't. Apple just wanted the iBookstore to be competitive and offer low
prices.

[1] The reason Apple lets publishers set prices is the same reason Apple lets
app developers set prices. The iBookstore is open to just about anyone, even
very small publishers. Apple isn't in the business of pricing retail products
like this, and figures if the producer of the product sets the pricing, then
the market will be more efficient. The notable exception to this, of course,
is the music industry, which was the first part of the iTunes store, and which
Apple had to work to keep prices down. Also in the TV and movies section they
work to keep prices down. Maybe they could have dictated pricing for books,
but if they had, it would have been to keep prices down, not up, like they did
for the other categories. The "price it whatever you want" model worked on the
appstore to provide a vibrant community where great apps can be had for $0.99.
Its not unreasonable to expect Apple expected something similar in the
iBookstore.

~~~
brd
I remember when this happened and I remember how pissed I was at Apple for the
move they pulled. Amazon was essentially protecting the publishers from
themselves (think music industry) and Jobs came in and threw the entire
arrangement out the window.

Apple doesn't care about selling content, they care about selling hardware.
Within that line of thinking, anything bad for Amazon's stranglehold on books
is a good thing for Apple since it reduces the friction of switching from a
kindle to an ipad. You could easily make the argument that Apple pulled this
move thinking "Whats bad for Amazon is good for us" and totally screwed
everyone else (publishers and customers) in the process. Apple's move was
certainly unscrupulous and quite possibly illegal.

~~~
roc
> _"Amazon was essentially protecting the publishers from themselves"_

Pre-iBookstore, Amazon was offering a 65-35 revenue split, with the fat end
going to Amazon. There are certainly pros and cons to each approach, but
Amazon wasn't protecting anything but their own interests and profitability.

~~~
brd
I did not mean to portray Amazon as some benevolent 3rd party in the industry.
Amazon was most certainly milking the publishers for what they were worth but
they were doing their best to ensure that the content itself stayed reasonably
priced and accessible to consumers in order to curb piracy.

I have zero problem with Apple forcing a renegotiation of terms between
publishers and Amazon. I have serious qualms about Apple totally disrupting
what was a very healthy trend towards reasonably priced ebooks.

Amazon was most certainly protecting publishers from themselves regardless of
the split behind the scenes. When you compel people to pirate content there is
nothing for anyone to split. Apple disregarded this entirely because at the
end of the day they don't really care if people pirate, they just want to make
sure the content is available on their hardware.

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tatsuke95
First let me say that I'm a "content creator" (I've had a book published). I'm
also a huge consumer of e-books (bought about 100 last year).

The instant that I start getting sticker shock when looking at the price of
ebooks, I'll do what I've been doing for years. I'll pirate the material.

This battle was lost a long time ago, but these guys just keep trying to fight
it. I thought it was proven by now, with the latest example being Louis CK,
that people will pay for media if the price is right. Meanwhile, it will
always be free for those who really want it. I'm not going to argue about the
moral implications of piracy, but it is a _fact_ that it exists and isn't
going anywhere.

When will these people learn that all their "Gotcha!" distribution and sales
mechanisms are working against them?

~~~
officemonkey
The problem with the new paradigm is it destroys the old power structure. As
the means of production are pushed to the actual artist, what does the
label/publisher do?

~~~
tatsuke95
Yep, that is the problem. And their hang-on-at-all-costs attitude is
understandable in that context. But history reveals they'll be losers in the
end. I just pray (to Mr. Hitchens, of course) that they don't destroy our
internet on the way down.

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tzs
People always think that e-books should be cheap because they don't have the
physical costs associated with paper books--but really, how high are the
actual physical costs of paper books?

Doing some back of the envelope estimates I can't see how the marginal cost of
a book could be over a couple dollars or so for the typical novel or mass
market non-fiction book, including shipping it to the bookseller. Add in some
more for the costs of storage of the physical book while it is waiting to be
sold, and the costs of handling at the seller--and I still can't see it going
over a few dollars.

Thus, I don't see why it would be surprising for publishers that sell a
hardback for $20 to expect to sell an e-book for $15 or so.

Of course, it is possible that if they sold e-books for a lot less, it would
so greatly expand the market that they would come out ahead overall. However,
I don't think that is likely--I don't think most people's amount of reading is
determined by the price of books.

~~~
smackfu
Beyond manufacturing, eBooks also don't have the rights of a paper book. Can I
buy and sell it on the used market? Can I loan it out? Can I return it?

Aren't those worth something too?

~~~
parfe
Those reasons led me to put my kindle in a drawer and forget about it. Buying
a used book from amazon is cheaper and grants me full rights to the item.

Paying 2-2.5x the price for a restricted digital version with no gift or
resale value is not worth it except in limited cases (e.g. Hitchhiker's Guide
to the Galaxy purely based on its weight).

~~~
guga31bb
I don't see how that could be the only reason for ditching your kindle.
Stripping the DRM is trivial, and for convenience of sharing, ebooks win hands
down. If you want to share a book with friends it's much easier to send an
email attachment than go to the post office.

~~~
parfe
>I don't see how that could be the only reason for ditching your kindle.

What other reasons do I need besides cost and true ownership? What an odd
response. Do you think i have some ulterior motive for ditching a device I
paid $260 for?

I literally handed a book to a friend last night. She doesn't own an ebook
reader. Now she has the book and can hand it off to someone else.

My father doesn't own an ebook reader and I give him plenty of books. Although
now that I think about it I should probably just give him my kindle so he can
increase the font size (an actual use case!) and stop leaving reading glasses
all over his house.

Your response is essentially "Just torrent the book" because stripping the DRM
off an ebook and emailing it someone is just the same as that person going to
the pirate bay for content.

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akeck
If you, as a U.S. consumer, feel that this reported agreement to set prices is
unfair, you have the right to file a complaint. D.O.J. has instructions here:
<http://www.justice.gov/atr/contact/newcase.html> As D.O.J notes, "Your
e-mails, letters, and phone calls could be our first alert to a possible
violation of antitrust laws and may provide the initial evidence needed to
begin an investigation."

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codex
I've always assumed that e-books are expensive because their buyers are known
to be affluent. Once everyone uses an e- reader they'll find some new way to
segment the market--e-hardcover vs. e-paperback, so to speak. Maybe you'll
just pay more to get a book early.

~~~
metageek
> _I've always assumed that e-books are expensive because their buyers are
> known to be affluent._

That's probably part of it, yeah. Maybe we'll see that eroding with the spread
of smartphones.

The problem there is that generating multiple versions of the ebook throws
away some of the economic appeal. The segmentation between hardcovers and
paperbacks is natural in the format: once the hardcovers sell out, and
nobody's willing to pay hardcover prices any more, you need to make a cheaper
edition, so you make paperbacks, which require you to spend effort on laying
out the book again. With ebooks, once you generate the initial edition,
there's no inherent need to invest in the book ever again. Once it stops
selling at $20, you just cut the price.

To yield segmentation like this, there'd have to be a strong economic
incentive, or else a _cheap_ way of generating the multiple editions. Maybe if
the high-end version had pictures, and the low-end version didn't; then you
could build them both from the same source file.

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posabsolute
Personally I think this is a stupid idea, boost the price of the books and and
the piracy will explode, put books at 5$ and people will actually buy the
books.

This is the kind of stuff where you need a price that does not "matter" on the
wallet. Amazon and publishers are just too much greedy, the authors does not
really make more money with that kind of pricing, it's still just the big guys
that make(want) more money.

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feralchimp
"pricing agreement among publishers effectively prevents retailers from
discounting e-books without a publisher's permission"

IANAL, but I deal with a lot of OEM and reseller agreements, and this exits
the sniff test with the "Almost Certainly Illegal" bit set.

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bennesvig
What happens as more and more people, including already successful authors,
self-publish? The pile of ebooks whose price can be artificially inflated will
get smaller and smaller.

Publishers need to figure out how they can better provide value to authors and
readers. Collaborating to keep prices up shows how screwed they are. They're
kicking and screaming against a shift in culture and technology, where if they
don't adapt they'll go extinct.

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cnorgate
This will simply lead to more piracy of content... there is no way to justify
that an e-book should cost more than a physical one, under ANY circumstance...
there are no printing, distribution or sales costs involved... I expect this
will just lead to increased piracy of content. So sad.

~~~
bilban
How about if an ebook about Jimi Hendrix contained video and audio content
too? Something that went beyond the print version?

~~~
onemoreact
That's not a book.

PS: Many programming books include a CD with same code etc, but again your not
just buying a book at that point.

~~~
bilban
Why constrain the definition of an ebook to something analogous to ink and
paper?

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JoeAltmaier
Walled gardens are ok for iPad, but Amazon tries it, and we're up in arms?
Lets be morally consistent here. If Amazon 'owns the platform', they can
charge anything they like. Arguments about the quality of the offering,
security of the store etc are irrelevant to the core issue: does the seller of
a device have the right to dictate terms about use of the device?

I'm not a fan of walled gardens. But if they are allowed to exist in our free
market, than this ebook pricing change is not novel.

~~~
metageek
You're conflating two issues. Conspiracy to fix prices is generally illegal;
robbing users of the right to use their own hardware is not.

And Amazon isn't dictating terms on ebooks. You can install .mobi books you
didn't get from them. You can even sideload apps onto the Kindle Fire.

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saturdaysaint
I wish publishers offered something like an Audible subscription for e-books.
When you buy credits in bulk (24 credits for $240), books, even new ones not
yet in paperback, are effectively around $10 each. Plus Audible has frequent
sales that allow you to get 2 books for the price of one.

Amazon (owner of Audible) gets it. If anything, the Kindle Lending Library is
a pretty effective fire under the publishers' asses - even without factoring
piracy in, they're competing with free.

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japhyr
I don't have a kindle yet, but I have seen e-book prices for a while on
amazon. I was surprised recently to see e-books advertised at 24.95 and up in
Harper's magazine.

