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Apple Holds Firm As Publishers Settle With DoJ Over e-Book Pricing

Soulskill posted about a year and a half ago | from the 12-angry-government-agencies dept.

Books 129

Nerval's Lobster writes "The U.S. Department of Justice has just settled with book publisher Macmillan in an ongoing case over the price of e-books, bringing its number of settlements with big-name publishers up to five. Justice claims that those five publishers, along with Apple, agreed to 'raise retail e-book prices and eliminate price competition, substantially increasing prices paid by consumers.' Apple competes fiercely in the digital-media space against Amazon, which often discounts the prices of Kindle e-books as a competitive gambit; although all five publishers earn significant revenues from sales of Kindle e-books, Amazon's massive popularity among book-buyers — coupled with the slow decline of bricks-and-mortar bookstores — gives it significant leverage when it comes to lowering those e-book prices as it sees fit. But Justice and Apple seem determined to keep their court date later this year."

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And those expensive E-books... (4, Interesting)

TWX (665546) | about a year and a half ago | (#42835469)

...along with a DRM scheme that causes problems (see the 1984 controversy) are why I keep reading dead-tree editions.

DVD and Blu-Ray have DRM that's somewhat nonsensical, but the media are cheap. I can excuse some of the stupidity because I'm not paying a lot for it.

E-books are too expensive for not having a physical copy.

Re:And those expensive E-books... (1)

h4rr4r (612664) | about a year and a half ago | (#42835607)

All three are not impossible to crack.

I just put shelves up for my books, as for the number i have book cases were too expensive. I pretty much either have to switch to ebooks or give up having any wall space not covered by books.

Re:And those expensive E-books... (2)

noh8rz9 (2716595) | about a year and a half ago | (#42836105)

this whole case is absurd. Yes, the iBooks deals raised prices on consumers. But that's only because Amazon was selling below cost to drive bookstores, and ultimately publishers, out of business. And this case was filed by a lawyer in Amazon's building. Way to go, DOJ! being a proxy pawn for a market manipulator.

Re:And those expensive E-books... (0)

h4rr4r (612664) | about a year and a half ago | (#42836295)

Below cost?

Ebooks cost $0. Was amazon giving them away with money?

The first one costs something, the rest are copies that can be done for nothing.

Re:And those expensive E-books... (0)

Anonymous Coward | about a year and a half ago | (#42836531)

The cost of ebooks is not $0. You have to maintain a server farm to store, sell and distribute those ebooks.Those servers have to have power, cooling, networking, and floorspace. And you need people to maintain it all. On top of all of that, the author usually gets a percentage of each book sold.

Re:And those expensive E-books... (0)

h4rr4r (612664) | about a year and a half ago | (#42836749)

No you don't. Post the first copy online and take your machines down.

If you want to sell DRMed books, then you need that other crap. Even then though books have a cost of a few cents. So surely they are not being sold below that.

Re:And those expensive E-books... (1)

KeithJM (1024071) | about a year and a half ago | (#42837331)

What does it even mean to post a copy online and then "take your machines down?" Where are you posting it, Reddit? Even without any DRM you still need a server to be able sell it online. For instance, Apple doesn't have any DRM on music they sell, and I assume Amazon doesn't either. But they still spend quite a bit on software development, servers, network bandwidth and vendor contracts to be ABLE to sell it. It doesn't cost them $1 per song to sell it, but it's not $0.

Re:And those expensive E-books... (1)

0123456 (636235) | about a year and a half ago | (#42837703)

The cost of ebooks is not $0. You have to maintain a server farm to store, sell and distribute those ebooks.Those servers have to have power, cooling, networking, and floorspace. And you need people to maintain it all.

Which costs... basically nothing. You could fill all the e-books on Amazon onto a 1TB hard drive, so one rack of servers could handle redundant storage on redundant servers for many times more e-books than Amazon currently sells.

Re:And those expensive E-books... (2)

bws111 (1216812) | about a year and a half ago | (#42836827)

So you're claiming Amazon got the right to sell these ebooks from the publisher for $0? Fascinating. I wonder how the publishers and authors planned to make any money like that.

Or maybe the publishers sold the books to Amazon from some non-zero price. That price would of course be a COST to Amazon, and if they sold the books to their customers for less than that amount then they sold them below cost.

Re:And those expensive E-books... (1)

Anonymous Coward | about a year and a half ago | (#42836981)

Below cost?

Ebooks cost $0. Was amazon giving them away with money?

The first one costs something, the rest are copies that can be done for nothing.

Yeah, that first one costs tens of thousands of dollars. Booksellers have to maintain an entire digital infrastructure to distribute the product, they have to buy the books from publishers who have to spend considerable money per book for editing, packaging, graphic design and layout, etc. It costs a lot of money to produce and distribute professionally created books.

But under the wholesale model, Amazon buys both books and e-books from the publishers at a bulk rate and sells them to consumers for a price below that bulk rate. That's destructive to publishers and booksellers because Amazon's dominant market share leads consumers to think that its prices are the true prices that everyone should charge for e-books for and anyone selling at higher prices is trying to gouge customers. In a bid to create a monopoly share, Amazon loses money on books while gutting everyone else's ability to charge a profitable price.

That contributed to the destruction of Border's Books and is seriously hurting other booksellers like Barnes & Noble, which has announced that it's going to close 1/3 of all its stores over the next year. If this persists, Amazon will ultimately be the only bookseller left (read: monopoly) and it will cripple publishing houses, who will find it almost impossible to make a profit on their own products. That will result in fewer publishers, fewer authors will be able to make a living at writing, and so there will be fewer professional-quality books for consumers to choose from.

Yes, publishers and booksellers need to make serious changes to adapt to the digital marketplace. But Amazon right now is a very destructive force and it's going to have serious negative consequence in the literary marketplace over the long run.

Re:And those expensive E-books... (1)

ak3ldama (554026) | about a year and a half ago | (#42836719)

Way to go, DOJ! being a proxy pawn for a market manipulator.

Isn't that the norm?

Re:And those expensive E-books... (1, Troll)

ZombieBraintrust (1685608) | about a year and a half ago | (#42838961)

Bookstores went out of buisness under Apples agency model not under Amazons. Agency model went into effect in 2010 Borders went out of buisness in 2011.

Re:And those expensive E-books... (1)

davidbrit2 (775091) | about a year and a half ago | (#42838017)

...or give up having any wall space not covered by books.

And you view this as some sort of problem?

Re:And those expensive E-books... (-1, Troll)

kuporuta (2836515) | about a year and a half ago | (#42835679)

http://www.cloud65.com/ [cloud65.com] as Dennis responded I am amazed that you able to earn $7397 in a few weeks on the computer. did you see this web site

Re:And those expensive E-books... (1)

Impy the Impiuos Imp (442658) | about a year and a half ago | (#42837769)

Wow! I could almost afford an eBook!

Re:And those expensive E-books... (4, Insightful)

GIL_Dude (850471) | about a year and a half ago | (#42835701)

Not only are they expensive, they are also not sold. They are licensed. This removes the ability to use the provisions of the first sale doctrine. So you can buy a license to a book - but you can't transfer it. With a physical book I can sell it to a used book store, hand it to my wife or kids and let them read it, send it off to a friend in another state, donate it, etc. With an e-book I can't (legally) do any of that. I can't even let my wife read it on her e-reader (separate account). Since we are very limited in what we can do (again legally) with them, they don't have the same value to me as a consumer. Yet they charge the same (or higher) price. I had put my thoughts on this into a blog entry some months back. They still pertain now. http://gildude.blogspot.com/2012/03/have-you-bought-into-e-book-model.html [blogspot.com]

One of the things I'd like to see if the ability to transfer from one cloud service to another. Amazon has theirs, Google has theirs, other folks likewise have theirs. But I have no (legal) way to transfer an e-book out of say Amazon's service and into say Google's service if, for instance, I decide I want to use a different e-reader and move "my" licensed content. Can't do it. The only value I get out of e-books that is missing from physical books is the amount of books that can be stored on a small device and the ability to add more to that device from say a hotel room on a trip. However e-books have all the previously mentioned downsides - many of which people are very slowly becoming aware of.

Google gives instructions on moving their ebooks. (1)

Andy Prough (2730467) | about a year and a half ago | (#42835905)

I bought a Google e-book recently and used their instructions to convert it and download it to my old Nook reader. I think Google's will work on nearly any device.

Not in Europe. (0)

Anonymous Coward | about a year and a half ago | (#42836203)

In Europe, THEY ARE SOLD.

Indeed, if in the USA it's only licensed, then you have rights to read it from wherever you want (TPB for example) since you have a License to the content. You can also sell that license. Lastly, you have the right to a full refund.

But in the EU it's sold, even if they call it a license, that license is STILL a sale.

Re:And those expensive E-books... (1)

Shagg (99693) | about a year and a half ago | (#42837311)

Not only are they expensive, they are also not sold. They are licensed. This removes the ability to use the provisions of the first sale doctrine.

That's what the Publishers claim... doesn't mean it's true. As far as I know it hasn't been tested in court yet.

Re:And those expensive E-books... (1)

fredprado (2569351) | about a year and a half ago | (#42837425)

And that is why licenses like this should not be permitted. It is a blatant attempt to circumvent laws of purchase that exist to protect the consumer rights.

Re:And those expensive E-books... (1)

Cinder6 (894572) | about a year and a half ago | (#42835765)

I've noticed more and more Amazon eBooks, especially sci-fi books, being released without DRM. It's still very much in the minority, but at least it's happening.

Re:And those expensive E-books... (1)

CCarrot (1562079) | about a year and a half ago | (#42836221)

I've noticed more and more Amazon eBooks, especially sci-fi books, being released without DRM. It's still very much in the minority, but at least it's happening.

I posted feedback to their help center a while back telling them that they needed to implement a DRM filter on their advanced search page, at least something like "DRM? Y/N". Yeah, right, I won't be holding my breath for it...

In the meantime, search Amazon for books from Baen or Tor, they're the only two major publishers I am aware of that have implemented a no DRM policy. Or better yet, buy direct from Baen [baenebooks.com] . Tor's supposed to have a store too [tor.com] , but something seems to have gone awry there.

Re:And those expensive E-books... (1)

rujholla (823296) | about a year and a half ago | (#42836903)

In the meantime, search Amazon for books from Baen or Tor, they're the only two major publishers I am aware of that have implemented a no DRM policy. Or better yet, buy direct from Baen [baenebooks.com]. Tor's supposed to have a store too [tor.com], but something seems to have gone awry there.

Actually I don't think baenebooks.com sells books directly anymore. Last time I was there they said that they were now using amazon.com as their ebook distributor.

Re:And those expensive E-books... (1)

CCarrot (1562079) | about a year and a half ago | (#42837233)

Actually I don't think baenebooks.com sells books directly anymore. Last time I was there they said that they were now using amazon.com as their ebook distributor.

S'weird, cause I just bought their latest monthly book bundle [baenebooks.com] ...the downloads don't seem to come through Amazon...and I can pay with PayPal...

I did notice, though, that Tor is selling on there as well, so maybe they just decided not to bother setting up their own store.

Re:And those expensive E-books... (1)

Githaron (2462596) | about a year and a half ago | (#42837077)

O'Reilly [oreilly.com] sells their books DRM free in multiple formats. You can re download your books whenever you want and they will even sync your books to your Dropbox account if you so desire. Of course, they sell technical books not story books.

Re:And those expensive E-books... (4, Insightful)

kbrannen (581293) | about a year and a half ago | (#42835875)

One can easily argue that the price of the e-books shouldn't be dirt cheap because the content is what you're really paying for. What should be true is e-books are the price of the physical book minus all the expenses that physical books have the e-books don't (e.g. paper, printing, shipping, etc) plus a few cents for the server. I don't know what percent that is of a physical book, but that does seem reasonable. I'm disgusted when I see the e-book costing the same or more than a physical book.

Re:And those expensive E-books... (1)

CastrTroy (595695) | about a year and a half ago | (#42836591)

I don't think that eBooks really should cost much less than print book. Most of the money goes to the author and publisher. Very little money goes into paying for shipping/warehousing/printing a physical book. You can go down to your local dollar store and pick up novels/bibles there for $1 a piece. And they are probably only buying them off the supplier for 30-50 cents a piece. I wouldn't be surprised if the overhead costs were pretty much the same for print and e-books. I'm actually pretty satisfied with the price of books lately. It wasn't long ago that a new hardcover could be $30-$40. Now you can usually get them for about $10-15 if you go to Amazon or other large online book stores.

Re:And those expensive E-books... (1)

Githaron (2462596) | about a year and a half ago | (#42837133)

Most places do not give you the right to sells your ebooks. Many times, you are not even supposed to loan them out. Aside from publishing and distributing cost, this is a reason that a ebooks are much sell valuable than print books and should be sold accordingly.

.

Re:And those expensive E-books... (1)

Pembers (250842) | about a year and a half ago | (#42836853)

I've heard (too lazy to dig out a source) that printing physical books and shipping them to the retailer accounts for about 20% of the retail price. Publishers invest a lot of money in each book that they publish (the author's advance, editing, cover design, marketing and so on). They still have the mindset that shelf space is scarce, meaning that if a book doesn't show a profit within six months or a year of release, it probably never will, because it will have been kicked out of the front of the bookshop to make room for the next release.

Re:And those expensive E-books... (1)

Githaron (2462596) | about a year and a half ago | (#42837201)

In a sense, "shelf space" is still scarce. If a book does not have a lot of exposure to potential buyers, the likelihood of the book being bought decreases. First/Front page space is scarce. While keeping a title on sale indefinitely is now much cheaper, I would venture a guess that most of the sales are still within the first year.

Re:And those expensive E-books... (1)

TWX (665546) | about a year and a half ago | (#42837475)

One can easily argue that the price of the e-books shouldn't be dirt cheap because the content is what you're really paying for.

A hardcover is about $25 for a novel, a paperback is about $8.

Re:And those expensive E-books... (1)

kbrannen (581293) | about a year and a half ago | (#42838737)

One can easily argue that the price of the e-books shouldn't be dirt cheap because the content is what you're really paying for.

A hardcover is about $25 for a novel, a paperback is about $8.

Paperbacks are much cheaper for a couple of reasons: 1. the materials; 2. they aren't as "new" so it's like they're on sale compared to the hardback. I don't know if it should be that way, but that's the way it seems to go. I will admit that the hardbacks do last longer, so perhaps the better materials should cost more. Personally, I prefer the paperbacks.

Re:And those expensive E-books... (0)

Anonymous Coward | about a year and a half ago | (#42835883)

just go to http://ebookoid.com and download ebooks for free

Re:And those expensive E-books... (1)

Mitreya (579078) | about a year and a half ago | (#42835971)

E-books are too expensive for not having a physical copy.

It is also not unheard of to have a higher (or very similar) price for an eBook. So sometimes they are literally too expensive.

Also, does the license automatically offer a non-DRM version if my new eReader is unable to support current format 20 years later?

Re:And those expensive E-books... (1)

0123456 (636235) | about a year and a half ago | (#42836157)

The last book I bought, the DRM-infested e-book was $20 and the paperback was $12.

Either publishers have no clue, or they're trying to keep selling paper books rather than e-books. The funny part is that by demanding DRM on the e-books Amazon sell, they're helping to tie Amazon customers to their Kindles so they can't buy from other stores.

Re:And those expensive E-books... (4, Insightful)

squiggleslash (241428) | about a year and a half ago | (#42837411)

People aren't buying eBooks because they're cheap, they're buying them because you can be pretty much anywhere, and suddenly think "Wait? Stephen King has a new book out? It's been WEEKS since the last one!", whip out your Kindle, select the book, buy it, and start reading it within a minute of having that thought.

And later that day, you can think "Hmmm, what was that fuss about involving King and Kubrick? Oh yeah, I read about that in "The Making of The Shining", let me just take a look at that. And you can witch to that book.

And then you can think "OMG, I don't remember where it was in this tome, but hold on, I have this nifty search button", and then find the relevent pages.

eBooks are 100% about convenience, and 0% about price. It's instant gratification. And while you lose one type of flexibility, you gain other types. And the ability to search or have access to your book without notice may well be more useful to you than the ability to have a copy 20 years from now, or the ability to lend the book to a friend.

It may even be worth paying more for.

Re:And those expensive E-books... (1)

0123456 (636235) | about a year and a half ago | (#42837713)

eBooks are 100% about convenience, and 0% about price. It's instant gratification.

That is obviously nonsense, or people wouldn't be selling so many $0.99 e-books and this case wouldn't exist because Amazon wouldn't have been cutting prices on e-books to sell more.

Re:And those expensive E-books... (3, Insightful)

squiggleslash (241428) | about a year and a half ago | (#42837783)

If you've ever been to a bookshop you'll have seen books on sale at ridiculously low prices too. It's not unheard of in any industry to put things on "special offer" in order to "sell more stuff".

In addition, this case is about Amazon trying to make its ebooks less expensive than Apple's, B&N's, etc. It is not about Amazon trying to undercut paper book prices, and indeed, as the GGP correctly noted, Amazon frequently charges more for eBooks than new paper books (and virtually always more for eBooks than Amazon charges for used paper copies.)

I'm not sure why you'd think people are buying Kindles to get cheaper books, but it just isn't true, and that's not the attraction.

Re:And those expensive E-books... (1)

0123456 (636235) | about a year and a half ago | (#42837883)

I'm not sure why you'd think people are buying Kindles to get cheaper books, but it just isn't true, and that's not the attraction.

Uh, let's see. Maybe it could be because I know a ton of Kindle owners and many of them bought those Kindles to get cheaper books?

compete with paper (1)

fermion (181285) | about a year and a half ago | (#42835597)

I buy ebooks when, usually from Amazon, when they are $10 or less. Mostly I don't buy from Apple 1}because I can only read on my iPad and 2) because it is usually more. Increasingly music is the same way, but because there is no lockin it is not so critical. Amazon gets my money for streaming video.

Which is to say I think that I don't think that the price is the critical factor here. Over time we are going to see more open sales and less lockin. This will happen as publishers depend less on printing paper and more on quality books.

Re:compete with paper (2)

CanHasDIY (1672858) | about a year and a half ago | (#42835733)

I rent ebooks...

FTFY.

Re:compete with paper (1)

Mitreya (579078) | about a year and a half ago | (#42836005)

I rent ebooks...

FTFY.

And, oddly enough, I still pay a full purchase price for that rental service (sometimes higher than the cost of a paper copy)

Re:compete with paper (1)

CanHasDIY (1672858) | about a year and a half ago | (#42836251)

I rent ebooks...

FTFY.

And, oddly enough, I still pay a full purchase price for that rental service (sometimes higher than the cost of a paper copy)

Precisely why I have a standing ban on ebooks. That is, until I can get my automatic book scanner built [wired.com]

Re:compete with paper (2)

MightyMartian (840721) | about a year and a half ago | (#42836099)

I dunno. I've bought books from Apple's store. They come as an unencrypted epub file which I can happily read on pretty much any modern eReader.

Re:compete with paper (0)

Anonymous Coward | about a year and a half ago | (#42836443)

I walk 500 yards across the street (advantage of living in town instead of in the boonies with a 50 mile commute) to a book store and buy dead tree books for less than $10. I think the last time I paid over $10 for a book was a nice hardcover collection of Lovecraft stories. If they don't have the book I'm looking for, I got to Barnes & Noble online and order the dead tree edition there, usually without any shipping costs.

I don't know what you mean by seeing more open sales and less lock-in as publishers depend less on printing paper. Dead-tree format seems to be, not only perplexingly enough, the CHEAPEST format, but the ONLY format that has NO lock-in.

Of course Apple are going to take it to court. (0)

BasilBrush (643681) | about a year and a half ago | (#42835601)

Apple have done nothing wrong. Their ebook deal is exactly the same as their App Store deal. The person/company that puts the book/app on the store decides the price. Apple get 30% of it.

Re:Of course Apple are going to take it to court. (1, Informative)

Anonymous Coward | about a year and a half ago | (#42835721)

apple entered into an agreement with the publishers to fix prices of ebooks and kill their competition's business model. That's the issue at hand.

Re:Of course Apple are going to take it to court. (1, Troll)

BasilBrush (643681) | about a year and a half ago | (#42835961)

No they didn't. I repeat, the ebook business model is exactly the same as the app store model. It's not something new and devious devised by a conspiracy.

Re:Of course Apple are going to take it to court. (4, Informative)

alexander_686 (957440) | about a year and a half ago | (#42836493)

You are right – but you are also missing the point.

There are 3 major players: the publishers, the distributors (Apple or Amazon), and the customers.

Amazon’s Kindle used a distributor’s model. Amazon would buy the book at a fixed price from the publisher but would set the retail price. They could, and did, sell books at a loss, to promote the Kindle.

Apple uses an agency model. The publishers set price and then negotiates the percentage the retailer (Apple) keeps. It is alleged that Apple and the publishers colluded to break Amazon’s near monopoly.

The agency model shifts power away from the distributors to the publishers. As you say this model has been around for a long time – so why care?

What makes it a Federal case is that (allegedly) this raised prices for consumers. Why? Because now all bookstores sell the same book for the same price, so bookstores are no longer competing on price. It shifts power away from customers to the publishers, resulting in higher prices.

Re:Of course Apple are going to take it to court. (2, Insightful)

Anonymous Coward | about a year and a half ago | (#42837085)

But Amazon is selling books at prices across the board that are unprofitable and accusing anyone charging higher prices of gouging. They are actively trying to destroy other distributors and bring publishers under their thumb. This is going to hurt consumers in the long run because destroying publishers and distributors ability to make a profit will result in fewer books getting published. Consumers will have fewer books to choose from and fewer venues in which to shop for them.

I'm absolutely amazed that folks here on Slashdot who claim to value freedom, etc, are actually cheering Amazon's attempt to build a monopoly. Has everyone's hatred for Apple really blinded them that much to what's going on here?

Re:Of course Apple are going to take it to court. (1)

alexander_686 (957440) | about a year and a half ago | (#42837227)

Do 2 wrongs make a right?

There are Slashdotters who value fairness, reject sloppy logic, guilt by association, and broad generalizations.

Was Amazon selling best sellers at a loss as a loss leader? They wanted to generate overall excitement and get people to visit the store and buy Kindles. Or was this to crush book stores – which were already in decline.

If true, and I think there is more than a smidge of truth in those accusations, then Amazon should be brought on a lawsuit for it’s failings. Giving Apple a free pass is not the right option.

The Fight is Over Channels (0)

Anonymous Coward | about a year and a half ago | (#42838887)

Put aside your hate of Apple or Amazon for a minute.

Amazon is using a distributor model where they would price the books and the publisher has to accept the sale price set by Amazon. This is a weird agreement that most publishers would enter only under duress (the threat of losing sales from an all powerful distributor) because it shifts even more power to Amazon.

In the short term this model benefits consumers at the cost to the publisher and other channels. Now publishers are doing pretty well because of the e-book revolution. Their revenues might be dropping, but their costs are dropping even faster, so their profits are going up. It's not the end of the world if some of those profits are squeezed out by Amazon and delivered to consumers as savings when they shop at Amazon.

However, in the long term, this is a winner-takes-all model. By that I mean distributors that have immense scale (and Amazon in scale is even bigger than Walmart) continue to grow sales while smaller, newer channels that cannot negotiate the same model can never get off the ground. In addition, publishers will make so little money they they will start squeezing authors, who will eventually start direct publishing through Amazon. I'm certain that this will put Barnes and Nobles out of business, for example, and that would not be good for consumers IMO.

Now look at Apple's agency model. If this model were prevalent across publishing, there would be competition at two levels. The first level of competition would be around the efficiency of distribution - a distributor that could charge less than 30% could gain more sales at the expense of Apple (because they can simply develop an iOS app and sell books offline for consumption on Apple products like the B&N and Kindle apps do today). The second level of competition would be where it has always been - between publishers centered around the caliber of their authors and the quality of their books. Barnes and Noble will likely stay in business if this model is prevalent.

The agency model has no active participant like Amazon busting up the unfair pricing of e-books compared to dead-tree books. But I think that that price collusion needs to be broken up through existing anti-trust laws or by new publishers who see an electronic-only publishing model as a tremendous opportunity to compete with legacy publishers burdened with the cost structure of publishing paper books.

Re:The Fight is Over Channels (1)

ZombieBraintrust (1685608) | about a year and a half ago | (#42839039)

Nope. Publishers were still setting wholesalse prices in the distributor model. When Amazon set price at $9.99 for a book with a $20 suggested retail price the publisher was making $9.99 on the book. Under agency model they set the prices at $15 and got to keep 2/3s. So they made $9.99 per book. Publishers made more money per book in the distributtor model because with lower prices there were more sales. But driving sales to digital would kill the whole point of having a publisher. Publishers only provide benifit to authors in the print world. They are dinosours and they know it. So they intentionally raised prices to slow digital down. And they used an agreement that made sure other publishers did the same.

Re:Of course Apple are going to take it to court. (1)

Anonymous Coward | about a year and a half ago | (#42837343)

Almost. It shifts power away from distributors to the publishers.

In neither the Amazon nor the Apple model is the customer the one with power. Amazon is using its weight to crush competing bookstores. Apple tried to use its weight to stop Amazon, which actually would have eliminated the Amazon price advantage and made it possible for multiple bookstores to run digital versions, because they'd have to compete on things other than trying to match Amazon's negative margin.

Amazon's unfairly low prices hurt competing bookstores and also concern publishers, who see eroding prices as a threat to their long-term profitability when coupled with falling sales. Customers with a long view should also see a threat from Amazon essentially dictating prices.

It's not the agency model itself that is problematic. It's not even the MFN provisions. It's the combination of those two with a pricing structure that ensures the same end pricing for all. Had the publishers simply required that distributors recoup all costs and not sell at a loss, the DOJ investigation would be a lot less interesting, because that is a nondiscriminatory corrective action to predatory pricing. But requiring everyone to have the same markup is a step too far and becomes price fixing.

Re:Of course Apple are going to take it to court. (2)

Pembers (250842) | about a year and a half ago | (#42836571)

The problem was not Apple's app store model. The problem was that Apple allegedly colluded with the publishers to raise the prices of ebooks in other stores. With iPhone and iPad apps, it didn't matter so much, because the Apple store is the only officially-sanctioned source of those. I guess Apple didn't like the thought of having to compete on price with other ebook retailers...

Re:Of course Apple are going to take it to court. (1)

BasilBrush (643681) | about a year and a half ago | (#42836705)

The problem was that Apple allegedly colluded with the publishers to raise the prices of ebooks in other stores.

And it's nonsense. Apple has no ability to set prices for other stores. That is between the publisher and those other stores. Apple doesn't even set prices for their own store.

All Apple did was use exactly the same model they used for it's App Store. It'd be surprising if they didn't. It's not some fiendish plot.

Apple will let it go all the way to court because they have done nothing wrong.

Re:Of course Apple are going to take it to court. (0)

Anonymous Coward | about a year and a half ago | (#42837091)

Apple DID set the prices for other stores, you idiot. That's exactly what the agreement between Apple and the publishers was about. It is illegal to enter into anticompetitive agreements. It has been illegal since 1890. It's still illegal when Apple does it.

Re:Of course Apple are going to take it to court. (3, Informative)

SDrag0n (532175) | about a year and a half ago | (#42837451)

You don't seem to understand. You're right, Apple shouldn't have the ability to set prices for other stores, but what they did was get the publishers to agree that they wouldn't allow other stores (aka: Amazon) to sell for prices less than Apple.

That's why there is such a "to do" about this. It's not the way things normally work and that's why the DOJ has brought the lawsuit about.

Re:Of course Apple are going to take it to court. (0)

Anonymous Coward | about a year and a half ago | (#42837513)

And it's nonsense. Apple has no ability to set prices for other store.

The government's case boils down to the argument that the net outcome of the contracts and other agreements between Apple and the publisher amounted to precisely what you're saying Apple had no ability to do.

Essentially, Apple's agreement boiled down to two relevant requirements:

  1. The publisher sets the sale price. Apple receives 30% of the sales price as the distributor
  2. Apple receives preferential pricing such that the publisher cannot offer a lower sale price through a different distributor

This is called agency pricing. It is allowed because in some markets the primary competitve force is between potential distributors for access to content. In this model distributors compete with each other for access to the producer's content in theory by offering better distribution channels and/or taking a lower percentage of the sale price as payment (or a combination of the two), driving market efficiency. By its nature this model eliminates competition between distributors on sale price.

The heart of the government's case boils down to the argument that in the e-book market competition between distributors for access to content is negligible compared to competition between distributors for consumer sales. There is also insufficient competition possible in terms of other non-price-related attributes of the distribution channel. By leveraging its market share to enforce an agency pricing model Apple is thus effectively colluding with publishers to fix prices.

A common sense litmus test for whether agency pricing works in a given market is this: If, all other things (quality/reach of channel, etc.) being equal, distributor X offers to take a substantially smaller cut of the sale price than distributor Y and this results in distributor Y losing access to the content in question, then agency pricing is an effective competitive force in the market. If that does not happen then neither X nor Y has any incentive to compete with each other for access, so there is effectively no competition in the market (because the agency pricing model forbids them from competing on price to end consumers).

Re:Of course Apple are going to take it to court. (0)

Anonymous Coward | about a year and a half ago | (#42837049)

apple entered into an agreement with the publishers to fix prices of ebooks and kill their competition's business model. That's the issue at hand.

Their competition's business model is to sell the product at a loss to gut other booksellers' market share and create a monopoly. That is not A Good Thing for consumers. It will result in fewer booksellers, fewer publishers, and, ultimately, fewer professional-quality books for consumers to choose from. Amazon's strategy is a textbook case of attempt monopoly building and we should be cheering Apple and the publishers for trying to break it. I realize its in vogue here on Slashdot to hate Apple these days, but this is a case where they really are the good guys.

Re:Of course Apple are going to take it to court. (2)

SpiralSpirit (874918) | about a year and a half ago | (#42837879)

Apple's business model was to raise everyone's price and contract so that no one could sell cheaper than them. It was good for apple and good for the publishers, and you want to tell me its "A Good Thing" for consumers? It is outright price fixing. Amazon's behavior has legal tests you can apply to see if its monopolistic behaviour that's illegal, but you'll find that it involves other distributors (like apple) not being able to get content, which certainly wasn't the case. It isn't illegal to just sell something for less than your competition. It doesn't take a set of binoculars to see that you're missing the point entirely, and defending Apple's actions that were truly bad for the consumer. It was anticompetitive (to put Amazon and their thin margins out of business) and also illegal by fixing prices.

Re:Of course Apple are going to take it to court. (1)

Anonymous Coward | about a year and a half ago | (#42835787)

But that isn't the issue:

http://www.pcpro.co.uk/news/378679/apple-settles-with-eu-on-ebook-probe

European Union regulators ended an antitrust probe into ebook prices, accepting an offer by Apple and four publishers to ease pricing restrictions on Amazon and other retailers. The decision hands online retailer Amazon a victory in its attempt to sell ebooks cheaper than rivals in a fast-growing market publishers hope will boost revenue and customer numbers. The European Commission said the concessions from Apple and the publishers soothed concerns that their pricing deals curbed competition. "The commitments proposed by Apple and the four publishers will restore normal competitive conditions in this new and fast-moving market, to the benefit of the buyers and readers of ebooks," EU Competition Commissioner Joaquin Almunia said.

Apple and the publishers offered to let retailers set prices or discounts for a period of two years, and also to suspend "most-favored nation" contracts for five years.

Such clauses bar publishers Simon & Schuster, HarperCollins, Hachette Livre and Verlagsgruppe Georg von Holtzbrinck, the owner of German company Macmillan, from making deals with rival retailers to sell ebooks more cheaply than Apple. ...

That is a cartel. If Apple did nothing wrong why did they settle in the EU?
Read more: Apple settles with EU on ebook probe | News | PC Pro http://www.pcpro.co.uk/news/378679/apple-settles-with-eu-on-ebook-probe#ixzz2KKxWeAFP

Re:Of course Apple are going to take it to court. (1)

Nerdfest (867930) | about a year and a half ago | (#42838707)

Look at the Apple vs. Samsung trial. Apple *owns* the US 'justice' system.

Re:Of course Apple are going to take it to court. (0)

Anonymous Coward | about a year and a half ago | (#42835943)

Uh, no. What Apple did is collude with publishers to prevent Amazon from competing with iTunes. It's called price fixing, and it's illegal.

Trial (0)

Anonymous Coward | about a year and a half ago | (#42835605)

Did the publishers agree to turn over evidence against Apple as part of their settlements?
Apple really should settle. They can afford to pay whatever, and they don't need the bad PR.

Re:Trial (0)

Anonymous Coward | about a year and a half ago | (#42835677)

...they don't need the bad PR.

Like it matters. The RDF warps space-time so heavily it'd make a triple-homicide look like unicorns and innovation. Bad PR would just look like more Apple Magic and get the loons to line up overnight to buy two.

Publishers should be able to price their product.. (2)

dehole (1577363) | about a year and a half ago | (#42835691)

Publishers should be able to price their product at whatever levels they want. They got into trouble when they got together to agree on set prices.

Ebooks are an interesting thing. The Apple and Kindle Ebooks seem to be licenses to view the content, unless you illegally break the DRM of the content and load it into callibre or a similar software. You can't buy an ebook and then sell it when you are done. You can't buy a used ebook :)

Physical textbooks are getting that way too, coming with 1 time licenses to study problems that your teacher may require, which eliminates the used text book market. Ultimately, they are adapting their profit model to extract the most they can out of the existing market, similar to how Dice hosts advertisements on slashdot and calls them news articles.

I would hope that these trends push people to abandon these platforms, but history tells me that most people will stick with it because its good enough (some people gradually edging out of the market, but they don't matter). Will the people sick of these moves make their own platform? Hopefully.

Re:Publishers should be able to price their produc (1)

Cinder6 (894572) | about a year and a half ago | (#42835925)

Actually, some Amazon eBooks don't have DRM. I still don't think you're allowed to sell them when you're done, though.

It was worse than that (1, Informative)

Sycraft-fu (314770) | about a year and a half ago | (#42836261)

They were agreeing on a set agency pricing.

See normal pricing is wholesale, meaning that I decide what I need to charge for a product, and I sell it to stores for that much (usually with quantity discounts). Then the retailer is free to price it as they wish. They can mark it up a ton and try to make big unit profits, they can sell it at a loss as a loss leader. I am happy either way because I am getting what I want per copy.

Agency pricing is different. Here the manufacturer tells the retailer what price they must sell the final unit for. They not only set the price the retailer must pay them, but the price the retailer must charge customers.

Agency pricing is pretty scummy period in my opinion, and is fairly rare. Here not only was it being done, but as a collusion.

Then, to make matters worse, it was done due to the request of a retailer. Apple wanted agency pricing so they didn't have to compete with Amazon on price. They were having their high margins enforced on all retailers, at the expense of the consumers.

Re:It was worse than that (0)

Anonymous Coward | about a year and a half ago | (#42837209)

Agency pricing is different. Here the manufacturer tells the retailer what price they must sell the final unit for. They not only set the price the retailer must pay them, but the price the retailer must charge customers.

Agency pricing is pretty scummy period in my opinion, and is fairly rare. Here not only was it being done, but as a collusion.

But that's not what the publishers were doing. Publishers weren't colluding on price, What the publishers colluding on was working with Apple to build an alternate outlet so they wouldn't be at the mercy of Amazon and it's below-cost wholesale strategy that was gutting everyone ability to charge a profitable price for books. Then, with that outlet in place, they told Amazon, "you can charge whatever you want above unit cost, but if you keep selling at a loss, we'll stop selling our products to you."

It's ironic that Amazon is complaining that publishers want to make Jeff Bezos sell books at a price where he won't lose money. The fact that he wants to lose money on book sales ought to tell you something about what he's really trying to accomplish. Corporations aren't in the business of losing money, so when a big corporation adopts a model that requires it to lose money on an entire product line across the board for a long period, you should ask yourself, "so how are they planning on eventually making money off this strategy?" The answer usually isn't one that's in the consumer's interest.

Re:It was worse than that (1)

ZombieBraintrust (1685608) | about a year and a half ago | (#42839109)

No they colluded on price as well. They came up with "suggested" tiers for new releases. For best sellers the price would be X on release day, Y after a few months, and then settle at Z.

Re:It was worse than that (1)

rochrist (844809) | about a year and a half ago | (#42837493)

Agency pricing isn't rare at all. Try buying a Vox AC-15C1 amp for less than $599.

It's pretty rare overall (1)

Sycraft-fu (314770) | about a year and a half ago | (#42837579)

I'm not saying you never see it, the audio world likes it to an extent, Denon does it, but it is not very common. Most manufacturers decide what they want to make per unit and price accordingly. What the retailer does is of no concern to them.

Agency pricing is legal, but not to collude on it.

Re:It was worse than that (0)

Anonymous Coward | about a year and a half ago | (#42837659)

Vendors generally get around it by bundling other things with the amp so their customers end up getting a better deal anyway. I personally got a set of $500 demagnetized audio cables and a $150 low feedback composite volume control knob (not as good as wood, but pretty good to my ears) for an extra $50 when I bought my amp.

Re:It was worse than that (3, Insightful)

gnasher719 (869701) | about a year and a half ago | (#42838069)

Agency pricing is pretty scummy period in my opinion, and is fairly rare. Here not only was it being done, but as a collusion.

Apple has so far sold 25 billion songs, all with agency pricing. Record companies set the price, and Apple sells it. The same things with books. Apple sells tens of thousands of different ebooks. They don't want to worry about what price to set for each book. So they let the publisher set the price; the publisher has more experience anyway.

Now apparently Apple told the publisher: If you sell the same book to other distributors for less, then we are not interested. Can't see anything wrong with that.

Re:Publishers should be able to price their produc (1)

Shagg (99693) | about a year and a half ago | (#42837415)

Publishers should be able to price their product at whatever levels they want.

Distributors should be able to price their product at whatever levels they want.

It's one thing for a publisher to set the price when they sell to a distributor. It's quite another thing for publishers to dictate the price when a distributor sells to a consumer.

Re:Publishers should be able to price their produc (0)

Anonymous Coward | about a year and a half ago | (#42838669)

Exactly. Once you sell me something, it's mine. I can sell it at a price of my choice.

Mess! (1)

DogDude (805747) | about a year and a half ago | (#42835737)

What a fucking mess. I'm glad I still read actual books.

Re:Mess! (1)

hedwards (940851) | about a year and a half ago | (#42836249)

Which works great if you don't spend a lot of time traveling. Or have a huge house.

Personally, I use the library and only buy books that I'm going to want for years to come.

Re:Mess! (1)

spire3661 (1038968) | about a year and a half ago | (#42837215)

Maybe you should read something to help cure that smugness.

Buy? Pffff. (1)

Anonymous Coward | about a year and a half ago | (#42835747)

There's a much better way to avoid being gouged for books. Pirate.
Ebooks are tiny and there is apparently a quite active ebook piracy scene. You can find torrents that are VAST archives of thousands of books (of just one genre!) and they're smaller than your average HD movie rip.

The ebook prices publishers put forward are an absurd, laughable fantasy designed to protect their old business models as long as possible. (And to foster the idea that their high prices are somehow normal)

I can get 10-12 dollars for a hot new release from a well known author, but 10 for the 3rd book in a serries of 12 in a not particularly critically acclaimed written in the 70s? Yeah fucking right. And that's even if it's for sale. The biggest complaint by far I have about ebook sellers is lack of selection and worse, inconsistent selection. The pirates have everyone beat here. Ancient copyright rules make this industry a farce.

Downside (2)

SuperKendall (25149) | about a year and a half ago | (#42835855)

On the other hand, given the egregious awards for downloading just a few movies or songs - imagine the financial penalty for a collection of a thousand books.

Everyone is just lucky the book industry is not going after pirates the same way the music industry has.

Re:Downside (1)

vivek7006 (585218) | about a year and a half ago | (#42839273)

On the other hand, given the egregious awards for downloading just a few movies or songs - imagine the financial penalty for a collection of a thousand books.

Everyone is just lucky the book industry is not going after pirates the same way the music industry has.

Yeah, that worked out so well for the music industry

Re:Buy? Pffff. (2)

MightyMartian (840721) | about a year and a half ago | (#42836133)

Well, that's a solution... if you have no scruples whatsoever.

Apple trying to protect the market from Amazon (1)

SuperKendall (25149) | about a year and a half ago | (#42835789)

Really this case has a lot more depth to it than just the old Apple/Aamazon angle. Everyone shoudl read more details as to what this is all about. [time.com]

It was about the publishers (and Apple) trying to keep the market more open to competition - an excerpt:

"While the deal caused prices to go up for some new releases and bestsellers, according to Schumer, the average ebook price actually went down from $9 to $7....It was actually Amazon - not Apple or the publishers - that held too much market power and was using a predatory pricing to drive the publishers out of business. In a comment on the settlement filed by Barnes & Noble, the company argues that without the shift in pricing strategy from the publishers, it would have been unable to develop its own competing e-reader. "

Re:Apple trying to protect the market from Amazon (2)

Chris453 (1092253) | about a year and a half ago | (#42835915)

It was about the publishers (and Apple) trying to keep the market more open to competition

Do you really believe that? If so, I have some ocean side property to sell you in Arizona...

Apple and the publishers did this to make money (as much of it as possible) and didn't think anyone would notice their backroom dealing.

Re:Apple trying to protect the market from Amazon (1)

Anonymous Coward | about a year and a half ago | (#42836395)

Yep. They're out to make as much money as possible by *DROPPING* the average price by $2.

Reading comprehension for the win!

Re:Apple trying to protect the market from Amazon (1)

Chris453 (1092253) | about a year and a half ago | (#42836525)

Yep. They're out to make as much money as possible by *DROPPING* the average price by $2.

Reading comprehension for the win!

Maybe you should take a look at who made that $2 claim that you are spouting off as fact. Who made it again? Senator Charles Schumer made that claim in an op-ed to the Wall Street Journal. The SAME Charles Schumer that has taken at LEAST $100k in legal bribes (campaign contributions) from the book industry according to latest figured released [opencongress.org] .

Maybe you have a reliable source for that $2 claim that isn't getting kickbacks from the same industry?

Re:Apple trying to protect the market from Amazon (1)

alexander_686 (957440) | about a year and a half ago | (#42836805)

Reading comprehension for the win!

Ummm you might want to take a reading compression course – or maybe some high school math. You have been misled or tricked. The article never mentions revenues or profits.

Bestsellers increase in price while other books now sell for less. If Amazon sold the same number of “Bestsellers” as all other books then yes, revenue would decline. However, if “Bestsellers” are their best sellers – which is a reasonable assumption – you can no longer say that. Now, pulling Amazon’s annual statement we can see the revenue increased. Can’t say if because of higher prices, higher volume, or what not – but it is suggestive.

Re:Apple trying to protect the market from Amazon (1)

alexander_686 (957440) | about a year and a half ago | (#42836585)

Why not? They
        Wanted to keep the market open
        They wanted to shift power away from distributions (dominated by Amazon)
        They wanted to gain control of retail price of their books. (End discounting of their books, have 1 day specials to promote their books, etc)

Multiple motivations can drive the same actions.

Re:Apple trying to protect the market from Amazon (0)

Anonymous Coward | about a year and a half ago | (#42837061)

Motivation's irrelevant. It's their actions of colluding to fix prices that are illegal.

Same motivation (2)

SuperKendall (25149) | about a year and a half ago | (#42836859)

Apple and the publishers did this to make money

Of course they did.

Because Amazon destroying all other publishers means they make very little money. But do you think that's better, or worse for readers?

Amazon charging less so they can lock the whole market into the Kindle platform for eBooks is not exactly an altruistic move either you know.

Apple the open platform. (1)

tuppe666 (904118) | about a year and a half ago | (#42838195)

Apple and the publishers did this to make money

Of course they did.

Because Amazon destroying all other publishers means they make very little money. But do you think that's better, or worse for readers?

Amazon charging less so they can lock the whole market into the Kindle platform for eBooks is not exactly an altruistic move either you know.

You mean instead of *middle men* bleeding artists dry, and electronic store fronts taking massive mark-ups on Authors Books. That sounds wonderful.

As for the whole kindle thing. I'm pro a move to open devices and formats, and look forward to Apple relinquishing its patents on its closed formats [and it embracing open ones flac and webm being good starts] , and opening its devices to Alternative store-fronts *including* kindles who currently use a web-app :)

I Agree with you I think boycott Apple until they open their [not your] platform.

Re:Apple trying to protect the market from Amazon (0)

Anonymous Coward | about a year and a half ago | (#42837131)

There is no such thing as predatory pricing for eBooks. In antitrust law, predatory pricing can only exist when the price is below marginal cost. But the marginal cost for an eBook is practically zero. And even if Amazon WERE predatory pricing, that would NOT give Apple the right to enter into an illegal price-fixing agreement to make up for it or get back at them. Apple's solution would be to sue Amazon in court for predatory pricing, or to report them to the Department of Justice or Federal Trade Commission. They are NOT allowed to do vigilante justice on their own terms.

What is a Cartel? (1)

tuppe666 (904118) | about a year and a half ago | (#42837897)

It was about the publishers (and Apple) trying to keep the market more open to competition - an excerpt:

Bless you sweetness, you do know that this is nothing to do with *competition*...its the opposite of competition its a cartel. As for Apple...because you don't really care about the publishers is in it for "most favored nation", that means *nobody* can compete on price with Apple.

In fact this is anticompetitive....its why the DoJ is breathing down Apples Neck

Re:Apple trying to protect the market from Amazon (1)

SEE (7681) | about a year and a half ago | (#42838417)

Blatant collusion in price-fixing is illegal, and screaming "But Amazon!" doesn't change that.

And, oh, my, Senator Schumer of New York says things that support New York-based publishers in a dispute with Washington-based Amazon? Next up, we'll ask congressmen from West Virginia what they think about nuclear power as an alternative to coal; it'll be just as reliable.

Or buy Indie... (1)

seven of five (578993) | about a year and a half ago | (#42835879)

Not all ebooks are overpriced or have DRM.

Forget EBooks (0)

Anonymous Coward | about a year and a half ago | (#42836263)

What about Tech books? Exchange, PowerShell, many others. All of the different sellers keep the prices within a couple dollars of each other, which is fine for new books, but even the used books are within 5-10% usually. Hard to find one under $40 and they are usually much higher than that.

Something like Spotify for books would be nice... (1)

nclemenson (303429) | about a year and a half ago | (#42837023)

The library has always been my first choice for books, but something like Spotify for books would move the library to 2nd...

Re:Something like Spotify for books would be nice. (1)

alexander_686 (957440) | about a year and a half ago | (#42837565)

My libary lends e-books.

Also, doesn’t Amazon Prime kind of do this – letting you lend 1 book a month?

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