Some publishers already settling on e-book pricing, but Apple's not budging yet

Apple,  Penguin, and Macmillan haven't shown any signs of settling with the Department of Justice over charges of e-book pricing collusion issued yesterday, sources say. However, the other publishers in the suit, HarperCollins, Hachette, and Simon & Schuster, are likely to settle before the investigation goes any further.  Those who settle would basically be letting Amazon take back its throne as the god-king of e-books, since publishers were "forced" to raise their prices there due to the contract with Apple that forbade them to offer the books for cheaper anywhere else (known as "the most favored nation" clause). Apple obviously isn't interested in allowing Amazon to undercut them if the iBookstore is going to have any hope of success.

On the upshot, any settlement means that consumers will be able to enjoy cheaper e-books on iOS devices, no matter which store you go with. Amazon seems willing to take a loss on pricing so long as it drives rivals out of the market. That said, is it unfair that Amazon is using its existing position of leverage to lock out competition, or should Apple be doing what's best for consumers rather than what makes publishers the most money?

Source: WSJ

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Reader comments

Some publishers already settling on e-book pricing, but Apple's not budging yet

20 Comments

Monopoly? So you're saying they're the only ebook sellers in this country? Do you even know what a monopoly is?

Obviously not, but the Amazon critics (like Apple) don't seem to know the meaning of monopoly either.

Seriously your defending Apple here and willing to pay more for it? OK, OK, you earned your Fanboy patch for today.. lol!

I guess I'll have to earn my fanboy stripes to because I will defend Apple on this position. If the DOJ is going to go After Apple for "collusion" in pricing for ebooks, they're going to have to do the same for music, movies, tv shows and apps. Because in those situations as well, the content creators / publishers set the prices and Apple gets their 30% cut. So why should it be a problem for iBooks. I see no problem with that. The only problem people are having is with the part about Apple saying to the publishers they can't sell their content to Amazon at a lower price than offered to Apple. This is probably no different than the deals Apple has with music, tv, or movie production companies, so why the big deal with books?
The only winner in all of this is Amazon. They get to use their dominant position in ebooks by selling them below cost to drive out competition which, in the long-term, could mean higher prices if competition is driven out. The is teeters on predatory pricing.
I'm of the belief that content creators should set the prices for the content they create then let the consumers decide if they find value at said price. If they do, the price stays, if not then publishers have no choice but to drop prices.

The content creators DO set the price for their product...which they sell to the retailers. The retailers then set the price they wish to sell to consumers. So you're saying you are in favor of a system, where retailers are not allowed to have sales, or set their own prices?
The issue Apple is running into regarding books (if I understand correctly) is the favored nation clause.

I have no problem with retailers having sales but there's a fine line between having sales and a retailer like Amazon, who's dominant in selling ebooks, using sales to drive out competition. As I mentioned in my post above,that teeters on predatory pricing.
As far as Apple running into issues with the favored-nations clause, this is my understanding as well. But if the DOJ is going to go after Apple for ebooks they may as well go after Apple for all digital content because I don't doubt for a second they have this clause with movie, music, tv producers, etc..
I also came across a good article on Macworld regarding this issue, I suggest you read it. It's quite interesting.
http://www.macworld.com/article/1166328/thepriceisrightthedebateoverebookpricing.html

The problem is that Amazon can and does sell Songs, videos, etc for whatever price it wants.
The agency model (which apple proposed) for book pricing prohibits this from taking place. Neither Apple or Amazon actually sell you the books, so they can't set their own prices. The prices are set by the publishers and they are the actual vendors of the product.
The whole scheme is similar to the old Net Book Agreement that publishers used to run with booksellers in the UK from 1900 to the 1990s. Booksellers were unable to discount new books, and if they did then the publisher would remove them from the "approved retailer" list. This is exactly what happened originally when Amazon decided that they wouldn't accept the Agency Model for books.
The aNet Book Areement was decided to be illegal collusion and price fixing by the courts in the UK. I would expect a similar outcome here.

Does amazon always agrees to buy a poblisher's product based on the publisher's asking price to?

The problem is in colluding to tell other retailers what they can or cannot do. Apple can take their 30% cut -- nobody has a problem with that. What Apple cannot do is dictate to competitors what they can or cannot do.
If Apple did the same for music -- telling Walmart they could not sell singles for $0.79, and was caught working out that very deal with the Big 5 record labels, you can bet they would be in just as much trouble. As they should be.

If Amazon sells at a loss, that loss comes from paying publishers their price, and then selling cheaper. Publishers are not losing money, Amazon is, and we pay less on certain items and more on others to compensate. We have a choice on what to buy and in the end everybody wins.
Apple can sell books just like Amazon, IF they are willing to part with or lower their soprano-like 30% cut on everything. It is not the publishers who are profiting from this, it is Apple, who contributed with absolutely nothing on the making of the book and gets a cut greater than everybody else.

Where is a source that can confirm that Amazon is actually selling books below their own cost?? If they're just selling for, say, a 3% margin, where Apple is demanding a 30% margin for themselves, then defintely screw Apple!

I'm confused. The publishers choose the price in Apple Store. They chose to charge more than Amazon and forced Amazon to raise their prices. Instead they could have charted 9.99 on the Apple Store. Apple does not dictate prices, just that they expect prices on the Apple Store to not be more than what is charted in other places.

So, currently if I am a publisher, I can set my own price and sell to:
- Amazon who can then like Walmart buy but likely force me to lower my price - to further their goals.
- Apple and raise or lower my price based on sales performance and not their willingness to carry my work. And I can still sell to Amazon if I want (with an even playing field approach).
I view Apple as my storefront, cashier, advertisement department, HR department, printer, etc.
I view amazon as must local producers view Walmart ......
So why must there be something wrong with either approach? Can't they both exist? I believe having a choice is better than not having one.

You guys are really missing the point. The problem is that apple is forcing all prices higher. If you sell on iTunes for 13.99 amazon or whoever can't sell it for less. Evan if they are willing to take a loss. Its like Walmart forcing its suppliers to make all retailers sell for the same price or higher. I dont know about you but im glad i can search around to see what retailers have the best price. Why pay company A $15 whenbi can pay company B $10 for the same product. But I'm glad some of you people like getting ripped off, even a few bucks.

The only point that I can defend Apple on regarding the pricing of e-books is passing the cost of hosting the online store to purchase books. The baked in capabilities of having an e-book in possession - such as search options, font style/size, and cross-hardware utilization - could also be considered "extras" possibly worth additional charges but it's a far stretch.
At the end of the day, these books should at most be on par with paper copies considering the exclusion of cost for printing materials.

It is confusing to the consumer. Some e books cost as much, if not more than the hard copy. Makes nonsense. Who is to blame? Is it wrong to sell your product, and ask that you have a contract with me, and not sell your product to my competition at a lower price? Like the music business, the publishers are making the money, not the writers of the material. When Apple wanted to increase the sample to 90 seconds from 30 seconds, some publishers had a fit over that. Just how much does it really cost to produce an e book? I am not one for the government looking into things, but in this case may be a good thing to make it equal across the board, but it most likely will make things worse. Might as well buy the hard copy.