# DOJ Sues Apple and Publishers for Collusion



## bobukcat

Shortly after the iPad released and prices of books in the Kindle store went up I blamed Apple of ruining a good thing for consumers, it looks like the DOJ feels the same way.



> The five publishers facing a potential suit are CBS Corp.'s Simon & Schuster Inc.; Lagardere SCA's Hachette Book Group; Pearson PLC's Penguin Group (USA); Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH; and HarperCollins Publishers Inc., a unit of News Corp. , which also owns The Wall Street Journal.





> As Apple prepared to introduce its first iPad, the late Steve Jobs, then its chief executive, suggested moving to an "agency model," under which the publishers would set the price of the book and Apple would take a 30% cut. Apple also stipulated that publishers couldn't let rival retailers sell the same book at a lower price.
> 
> "We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway,'" Mr. Jobs was quoted as saying by his biographer, Walter Isaacson.
> 
> The publishers were then able to impose the same model across the industry, Mr. Jobs told Mr. Isaacson. "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books,' " Mr. Jobs said.


http://online.wsj.com/article/SB100...7489216.html?mod=WSJEurope_hpp_LEFTTopStories


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## Herdfan

While the publishers may be guilty of collusion, I am not sure how I see Apple's guilt in this. All Apple did was say it wanted a 30% cut, you set the price. This is the same deal they have with their App Store and quite possibly iTunes. 

What I see as happening is the publishers saw that people were willing to pay a higher price to Apple, so they decided that they would attempt to force the same deal on Amazon. Result is higher prices. 

But as I see it, no one forced them into the deal with Apple in the first place.


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## bobukcat

Herdfan said:


> While the publishers may be guilty of collusion, I am not sure how I see Apple's guilt in this. All Apple did was say it wanted a 30% cut, you set the price. This is the same deal they have with their App Store and quite possibly iTunes.
> 
> What I see as happening is the publishers saw that people were willing to pay a higher price to Apple, so they decided that they would attempt to force the same deal on Amazon. Result is higher prices.
> 
> But as I see it, no one forced them into the deal with Apple in the first place.


Apple's culpability _may_ revolve around their rule that the same book couldn't be sold to another party for less. Amazon was in a wholesale model, just like they were for physical books, where they bought for a set price and then sold it for whatever price they wanted. Some Kindle books were reportedly sold below costs, with the Agency model the other re-sellers could no longer discount because the price is set by the publisher.

There are talks that a settlement may be reached with some of the publishers, no mention of the same talks occurring with Apple.

Barnes & Noble and Apple argue that eBooks are available to more people (because of iPad adoption rates primarily) and that benefits consumers but almost all the new releases went up from $9.99 to at least $12.99 after the publishers forced the new model on Amazon, so it wasn't good for the millions of Kindle (or Kindle application) users.


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## Herdfan

bobukcat said:


> Apple's culpability _may_ revolve around their rule that the same book couldn't be sold to another party for less.


Yes, but Apple didn't set the price. The publishers did. They could have set the price at $9.99 to match the Kindle pricing. But they didn't.

I think Apple is in the clear here simply because they only offered a way for publishers to sell books on their platform and they are free to set the terms for these sales. No one forced the publishers to go along with it. The Kindle was well established by this time so they really didn't need to go with Apple.

They instead saw it as a way to get increased revenue so they went along with it.


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## bobukcat

Herdfan said:


> Yes, but Apple didn't set the price. The publishers did. They could have set the price at $9.99 to match the Kindle pricing. But they didn't.
> 
> I think Apple is in the clear here simply because they only offered a way for publishers to sell books on their platform and they are free to set the terms for these sales. No one forced the publishers to go along with it. The Kindle was well established by this time so they really didn't need to go with Apple.
> 
> They instead saw it as a way to get increased revenue so they went along with it.


I see your point but I doubt (hope) the US DOJ isn't filling a lawsuit against anyone, much less a behemoth like Apple, without some pretty compelling evidence. There's always the possibility it gets dismissed, etc. but I don't believe that happens too much when it's the DOJ filling it.

Personally I was unhappy with Apple for giving the publishers pricing control because it raised my prices when they forced the same deal on Amazon shortly after.

It was also interesting to me that they were wiling to relinquish price control on ebooks when they were so successful in controlling the price of music.


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## hilmar2k

I root against Apple in every lawsuit, just out of principle. They are way too litigeous, and maybe a few courtroom smackdowns will do them some good.

If given the opportunity to give Apple money, or someone else, I'll always choose someone esle.


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## phrelin

It's complicated, but I regularly buy books via Kindle at $3.99 or less (more than a few at 99¢), which to me reflects the fact that we're not part of creating or shipping piles of paper with printing on it around the country.

I'll be interested in seeing how publishers justify those prices - how much is paid to the author, an editor, etc., and how much goes into printing, distribution, and the costs associated with books printed that don't sell - the latter being totally waste.

This take on the story Why E-Books Still Roil the Publishing World offers some observations:


> For example, at the time of writing, Amazon sells Stephen King's bestseller "11/22/63″ in hardcover for $17.49, with the Kindle e-book version going for $26.91....
> 
> ...TechCrunch reports that Random House has revised its pricing policy for libraries, raising the price for e-book titles by as much as 300%. Library journal The Digital Shift pointed to the example of a Random House e-book being offered to libraries for $40 being raised to $120. The library is able to buy the print version of that same book for $20. Even some children's titles - which often cost $10 or under in print - are going for as much as $85 as e-books for libraries.
> 
> This isn't the first case of a publisher lashing out at libraries over e-books, either. Last year, HarperCollins set a limitation of 26 check-outs for its e-books, after which a library would be forced to buy a new copy. Other major publishers either refuse to sell some popular titles to libraries or don't allow them to lend out their e-books at all.


Keep in mind who the defendants are:


> In addition to Apple, the defendants in the DOJ suit are expected to include CBS's Simon & Schuster (NYSE:CBS), Hachette Book Group, Pearson (NYSESO), Macmillan, and News Corp's HarperCollins (NASDAQ:NWS)


(Pearson owns the _Financial Times_ and it's Penguin Group segment engages in book publishing business, under the Hamish Hamilton, Putnam, Berkley, Viking, Dorling Kindersley, Puffin, and Ladybird imprints. Hachette Book Group similarly has many "brands" such as Little, Brown and Company, but controls no news outlets.)

This means to me that every story by News Corp's and CBS subsidiaries is suspect, including the one noted in the original post from News Corp's _Wall Street Journal_.

Lastly, I'm an iPad Kindle App user. I have no delusions about Steve Jobs attitude regarding these matters. On the one hand, he thought of himself as a great benefactor just making books available to people. On the other hand, if he could force the price up 50% with most of it going to Apple, he wouldn't hesitate. So Apple's stuck with collusion charges.


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## bobnielsen

Not necessarily related, but I noticed recently that Kindle library books are now being restricted to Kindle devices, keeping them from the Kindle app on other e-readers or tablets. HarperCollins (and possibly other publishers) limits the number of library checkouts to something like 24 times before the library needs to purchase another copy.


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## Steve

phrelin said:


> I have no delusions about Steve Jobs attitude regarding these matters. On the one hand, he thought of himself as a great benefactor just making books available to people. On the other hand, if he could force the price up 50% with most of it going to Apple, he wouldn't hesitate. So Apple's stuck with collusion charges.


I think it was more the former than the latter. Jobs was rarely motivated by profits over product, at least based on everything I've read about him. He was sometimes criticized by others at Apple because he didn't want to charge _enough _for things.

He was a competitor, though, and I think he simply wanted to ensure if Apple was going to feature and/or promote a publisher's titles on iTunes, those books wouldn't be available on Amazon (or elsewhere) for less money. IMHO, he would have been an idiot if he didn't ask for that kind of insurance.


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## phrelin

Steve said:


> I think it was more the former than the latter. Jobs was rarely motivated by profits over product, at least based on everything I've read about him. He was sometimes criticized by others at Apple because he didn't want to charge _enough _for things.
> 
> He was a competitor, though, and I think he simply wanted to ensure if Apple was going to feature and/or promote a publisher's titles on iTunes, those books wouldn't be available on Amazon (or elsewhere) for less money. IMHO, he would have been an idiot if he didn't ask for that kind of insurance.


Maybe I'm a little jaded about Jobs, but even the concept that "those books wouldn't be available on Amazon (or elsewhere) for less money" puts Apple into the arena of legally questionable price collusion practices.

If Amazon wanted to sell a book that costs them $299.99 for the sale price of $2.99, there should be no restrictions


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## phrelin

After I thought about this more, I realize that I'm an old guy who remembers when there were so-called "Fair Trade Laws." Under state imposed Fair Trade statutes, the manufacturer was able to impose a fixed price for items. These fixed prices could offer some price protection to small merchants in competition against larger retail organizations. This began in 1931 during the Great Depression my state, California.

They are all gone now. What you see is the MSRP which large discount stores ignore completely.

The idea that in the 21st Century U.S. a manufacturer and a retailer would agree that no one could undersell a price because the manufacturer sets the retail price disturbs me. Manufacturers and wholesalers can decide the price they'll sell an item to a retailer. But what the retailer charges is none of their business.


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## Steve

phrelin said:


> Maybe I'm a little jaded about Jobs, but even the concept that "those books wouldn't be available on Amazon (or elsewhere) for less money" puts Apple into the arena of legally questionable price collusion practices.
> 
> *If Amazon wanted to sell a book that costs them $299.99 for the sale price of $2.99, there should be no restrictions*


I respectfully disagree. I think Jobs could have cared less if the books sold for $299 or $2.99. What he did care about was a level playing field, and wanted to make sure if publishers were going to dictate Apple's book prices, they weren't going to be higher than what Amazon, B&N et al. could sell those same books for.

Don't get me wrong. I think the "agency model" (where publishers arbitrarily set prices) is pure greed on the part of the big houses. But apparently agreeing to it was the only way Apple was going to be able to get into the e-book business, and they did the best they could to cover their corporate butt by insisting on "most favored nation" pricing. Just my .02.


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## bobukcat

Steve said:


> I respectfully disagree. I think Jobs could have cared less if the books sold for $299 or $2.99. What he did care about was a level playing field, and wanted to make sure if publishers were going to dictate Apple's book prices, they weren't going to be higher than what Amazon, B&N et al. could sell those same books for.
> 
> Don't get me wrong. I think the "agency model" (where publishers arbitrarily set prices) is pure greed on the part of the big houses. But apparently agreeing to it was the only way Apple was going to be able to get into the e-book business, and they did the best they could to cover their corporate butt by insisting on "most favored nation" pricing. Just my .02.


And that right there - making sure others couldn't sell the same product for less - is probably what has them in the DOJ's cross-hairs for price-fixing. Essentially the publishers and Apple (I don't think "Apple didn't have any choice if they wanted to sell the books" is a legal defense) colluded to raise the price of ebooks at other resellers, one of which had been quite successful (does anyone believe that ebooks would have been nearly as popular when the iPad launched if not for the Kindle??) selling them at lower prices in the wholesale model.

I expect this will all lead to some kind of a settlement where the kids all agree not to do it again and possibly pay some kind of trivial fine. I seriously doubt they will be able to force a change in the pricing model, but I would like to see it go back to the way it was with hardcover books. Sell them at a fixed price to retailers and let the market decide what they will sell for. If Apple thinks they can charge more than Amazon for an ebook (or vice versa) the market would decide how many they sell at those prices.


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## Steve

bobukcat said:


> And that right there - making sure others couldn't sell the same product for less - is probably what has *[Apple]* in the DOJ's cross-hairs for price-fixing.


You can portray it as Apple making sure competitors couldn't sell for less. But from Apple's standpoint, I think it was making sure they weren't forced to sell for more. Big difference there, IMHO. 



> I expect this will all lead to some kind of a settlement where the kids all agree not to do it again and possibly pay some kind of trivial fine. I seriously doubt they will be able to force a change in the pricing model, but I would like to see it go back to the way it was with hardcover books. *Sell them at a fixed price to retailers and let the market decide what they will sell for.*


Agree 100%.


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## bobukcat

Steve said:


> You can portray it as Apple making sure competitors couldn't sell for less. But from Apple's standpoint, I think it was making sure they weren't forced to sell for more. Big difference there, IMHO.
> 
> Agree 100%.


Sure, and the whole section of laws regarding fair market and price fixing is (expectedly) very complex. I work for a manufacturer of enterprise focused products and we sell almost entirely through resellers. These resellers often negotiate discounts on products based on the size of the deal, etc. and the one thing that the legal team drills into our heads is - "You cannot dictate the final price to the customer!!!" We can suggest to a reseller that a lower margin on a deal might be in their favor, warranted, whatever but you cannot get into discussions about what the final price to the customer will be. Obviously things aren't that cut and dried in all circumstances (there are plenty of consumer electronics companies that prohibit discounting of certain products) but as I said before, I have to think the DOJ has some pretty significant evidence to go after giants like Apple and these publishers.


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## klang

I'd love to see ebook prices at Amazon go back to the old prices. I refuse, mostly, to pay hard cover prices for an ebook.

I don't see how Apple is any more responsible legally than Amazon or B&N. Didn't they all sign the same contracts with the publishers?


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## Steve

klang said:


> I don't see how Apple is any more responsible legally than Amazon or B&N. Didn't they all sign the same contracts with the publishers?


I guess because it was Apple that set the precedent allowing publishers to set an "e-seller's" price. My guess is B&N went along with it because it was also in their interest not to let Amazon undercut them to gain market share, but they'll fly under the radar on this and Apple will take the heat.

I have a feeling when book prices inevitably drop as a result of this DOJ investigation (a good thing :up, poor B&N is going to suffer the most, because unlike Amazon and Apple, I don't think they can afford "price wars".


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## Herdfan

What actually is Apple selling? Does Apple ever take title to the e-book? 

I don't know, but it seems Apple is just collecting a commission similar to a real estate transaction vs. a car purchase (the dealer actually takes title to the car). Yes, it does come from Apple's servers so that be relevant. And Apple gets all the money initially.

I think it is much more complicated than just retailers buy at one price and sell at another.


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## bobukcat

Steve said:


> I have a feeling when book prices inevitably drop as a result of this DOJ investigation (a good thing :up, poor B&N is going to suffer the most, because unlike Amazon and Apple, I don't think they can afford "price wars".


Possibly to some extent but they have sold a lot of Nooks and those are not going to be able to go buy the book from the Kindle store (unless it's a rooted Nook Color running the Kindle application of course) or Apple. They are pretty much locked into buying from B&N. My wife and I have Kindles and I know there have been times when B&N had a book cheaper but we wanted to read it so we paid more to get it on our Kindles. I think the publishers missed out on an opportunity to see what could be done with the ebook business and instead are just trying to resist change at all costs, even though it (ebooks) are definitely where the future or publishing lies.


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## hdtvfan0001

> The Justice Department sued Apple Wednesday, alleging the technology giant and five major publishers conspired to push up the prices of e-books and limit retail price competition.
> 
> The lawsuit, filed in Manhattan federal court by the Justice Department's Antitrust Division, alleges Apple and the publishers had a common interest in fighting Amazon.com's practice of selling e-books for as little as $9.99, and decided to work together to raise prices.
> 
> The government alleges that Apple and the publishers reached an agreement to stop competing on price, allowing e-book prices to rise significantly. Apple would be guaranteed a 30 percent "commission" on each e-book sold...


Full News Article Here:

http://marketday.msnbc.msn.com/_news/2012/04/11/11140844-us-says-apple-publishers-conspired-to-fix-prices?lite


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## davejacobson

How can this be true. Isn't Apple the beloved company of the masses.
I know they wouldn't do anything wrong.


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## trh

About time. I bought my eBook reader years ago with the promise that eBooks would be significantly cheaper than paper copies. And they were. Until Steve Jobs visited a couple of publishers just before the iPad came out. Then they all went up $3-$5 in price. 

Of course Apple will end up paying less than what they've made. Not much of an incentive to stop them from doing it again.


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## Stewart Vernon

I don't know how to feel about this... On the one hand, price-fixing is illegal and should probably be dealt with. On the other hand, Amazon isn't noble either and has been dumping books as loss-leaders to capture the market. You can be sure IF Amazon dominated the e-book market, the prices would go up there again.

I don't know all the details... but I don't know why in the case of e-books the publisher can't set the price and disallow sales as part of their contract. It isn't like physical inventory where it costs a lot to stock product OR process returns or damages... and I expect the model is such that neither Amazon nor Apple pays anything to a publisher until after the sale of an e-book... so it's not the same as needing to clear the aisle with a clearance sale to make room for new product and move old product that isn't selling.

An e-book should hold its price essentially forever unless it was overpriced to begin with.


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## Garyunc

I do love my my ipad but I think if that any parties guilty of this should be heavily fined and refunds would be nice!! I do think the e-book prices are ridiculous. Why should the e-book price be almost as much as the hard cover book price?


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## hdtvfan0001

Garyunc said:


> I do love my my ipad but I think if that any parties guilty of this should be heavily fined and refunds would be nice!! I do think the e-book prices are ridiculous. Why should the e-book price be almost as much as the hard cover book price?


I commend you on your post.


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## trh

This is a very good article (IMO) in the New Yorker on Steve Jobs and eBooks and the iPad. *New Yorker Jan 2010*


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## Stewart Vernon

As a consumer, I welcome lower prices...

but...

Why do people assume e-books should be priced lower than "real" books?

I grant you that the production costs for an e-book are negligible compared to actually chopping down trees and making real books... but given the author does the creative work to create the content... and what we want to buy/read is that content... why should anyone assume that e-books automatically should or would cost less?

IF digital replaces actual... and one day there are no more real books made... only e-books... why wouldn't the price for those e-books be whatever the market would bear?

If you want a real book (I sometimes do) then you should love that the real book costs the same or less (if in a bargain bin) than an e-book! Not chastising that the e-book costs more.

A CD contains digital music... you can buy digital music online... the same digital music, essentially... so why shouldn't both cost the same?

I love me some low prices... but entitlement to low prices never makes sense to me.


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## hdtvfan0001

Stewart Vernon said:


> As a consumer, I welcome lower prices...
> 
> but...
> 
> Why do people assume e-books should be priced lower than "real" books?
> 
> I grant you that the production costs for an e-book are negligible compared to actually chopping down trees and making real books... but given the author does the creative work to create the content... and what we want to buy/read is that content... why should anyone assume that e-books automatically should or would cost less?
> 
> IF digital replaces actual... and one day there are no more real books made... only e-books... why wouldn't the price for those e-books be whatever the market would bear?
> 
> If you want a real book (I sometimes do) then you should love that the real book costs the same or less (if in a bargain bin) than an e-book! Not chastising that the e-book costs more.
> 
> A CD contains digital music... you can buy digital music online... the same digital music, essentially... so why shouldn't both cost the same?
> 
> I love me some low prices... but entitlement to low prices never makes sense to me.


The cost to "manufacture" an eBook is <$1.00 on average, according to 6 different NY Time Best Selling Authors who spoke on this subject at book signings I attended with my wife. This topic comes up more and more, and while the authors have some enthusiasm for the eBook format...they also have commented that the pricing is often "beyond what it should be".

The two top costs are the author contractual pmt. and promotional marketing expenses, which vary per title.

The underlying key cost on that front is the author payment for what is typically a substantial amount of work. Some authors work on 2-3 books overlapping, others 1 at a time. If that gets reduced significantly, we'll likely all see less books...in any format.

What then muddies the water are the outside players (like a large payment to iTunes) to simply deliver the content - especially when this can be done far more economically, and is done cheaper through other channels.

In the case for the topic on hand in this thread, it appears that Apple made an intentional choice to try to manipulate and control the market pricing in their favor to assure *their* target for profit.

Doing so with key publishers/distributors is clear collusion and price fixing, which is likely why 3 of the players already came clean to bail out from the heartburn - at least from their participation.

As a few others have said...this is not the first time (and likely not the last) that this has happened/will happen. Still...it's illegal, unethical, and plain wrong.

The fact that Apple would not immediately fess up and take their medicine (like the 3 other players so far) demonstrates the degree of their corporate arrogance - which has surfaced on other fronts in the past. This is not to bash Apple, rather, to expose that there is a pattern of this kind of culture at that company which is indefensible.


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## Sixto

Stewart Vernon said:


> As a consumer, I welcome lower prices...
> 
> but...
> 
> Why do people assume e-books should be priced lower than "real" books?
> 
> I grant you that the production costs for an e-book are negligible compared to actually chopping down trees and making real books... but given the author does the creative work to create the content... and what we want to buy/read is that content... why should anyone assume that e-books automatically should or would cost less?
> 
> IF digital replaces actual... and one day there are no more real books made... only e-books... why wouldn't the price for those e-books be whatever the market would bear?
> 
> If you want a real book (I sometimes do) then you should love that the real book costs the same or less (if in a bargain bin) than an e-book! Not chastising that the e-book costs more.
> 
> A CD contains digital music... you can buy digital music online... the same digital music, essentially... so why shouldn't both cost the same?
> 
> I love me some low prices... but entitlement to low prices never makes sense to me.


Yep, I tend to agree, not really sure where I side with this situation, but hopefully it doesn't affect Apple too much. Ever since the switch to the iOS ecosystem the family loves all the integration. Some really cool stuff compared to what we came from. Kids were home for Easter and loved the new addition to the entertainment center (Apple TV) with the integration with iCloud/iPhone/iPad. It just gets better and better.

We actually use the Kindle App for books, which easily allows the iPad and Kindle Touch to share books. Works great.

And Macmillan's CEO sure thinks he didn't do anything wrong: http://www.tor.com/blogs/2012/04/a-message-from-john-sargent

As with most things, two sides to every story, but if they did do something that's not accepted, then they'll change it and we'll move on with hopefully not much impact.

Interesting that it's not criminal, rather civil.


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## Stewart Vernon

Yeah... that's why I am torn. The collusion and price-fixing allegations are bad news and need to be addressed.

What I wouldn't want to see, however, is Amazon killing e-book sales with prices so low that authors no longer want to write books.... so it's a case where I kind of have to hope both sides lose!


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## trh

According to the New Yorker article, author's royalties went up 10% with eBooks. 
There was a recent survey that showed people with eBook readers increased their reading (therefore more books being sold). 
And didn't Google just announce they are coming up with a program where authors can self-publish on Google and get most of the sales?

So I don't think authors are going to lose out with eBooks. The publishing industry needs to adapt to the new technologies and get away from an antiquated pricing model.


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## phrelin

hdtvfan0001 said:


> No need.
> 
> This new thread is about the new (current) information and *the actual US Justice Department lawsuit*. The previous one was about speculation in advance. A number of things have changed in the interim.


OK then I'll more or less repeat myself.

As an old guy, I remember when under state imposed "Fair Trade" statutes, the manufacturer was able to impose a fixed price for items. These fixed prices could offer some price protection to small merchants in competition against larger retail organizations. This began in 1931 during the Great Depression in my state, California.

It took a long time, but those laws are gone now. What you see is the MSRP which large discount stores ignore completely.

The idea that in the 21st Century U.S. a manufacturer and a retailer could agree that no one could undersell a price because the manufacturer sets the retail price disturbs me.

Manufacturers and wholesalers can decide the price they'll sell an item to a retailer. But what the retailer charges is none of their business.

Any time the Justice Department goes after price fixing done by manufacturers and retailers together, IMHO they should get all the positive accolades possible.


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## hdtvfan0001

phrelin said:


> The idea that in the 21st Century U.S. a manufacturer and a retailer could agree that no one could undersell a price because the manufacturer sets the retail price disturbs me.
> 
> Manufacturers and wholesalers can decide the price they'll sell an item to a retailer. But what the retailer charges is none of their business.
> 
> Any time the Justice Department goes after price fixing done by manufacturers and retailers together, IMHO they should get all the positive accolades possible.


Kudos -agree.


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## Sixto

Seems like if the DOJ wins then it might end with the book industry being worse for publishers, retail chains, and eventually consumers. I guess it all depends on one's perspective. If the goal is for Amazon to have a monopoly, lower prices even at a loss to Amazon, then if they win that may happen. I would think that this could hurt the content creators as well.

http://news.cnet.com/8301-13578_3-5...o-lose-e-book-antitrust-suit-targeting-apple/

http://www.nytimes.com/2012/04/12/b...cut-e-book-prices-shaking-rivals.html?_r=1&hp

The more I read the less it sounds like a good idea for this suit, but we'll see how it plays out.


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## hdtvfan0001

The "goal" has always been to have a free market - not one that is manipulated by Apple, publishers, Amazon, or anyone else through illegal collusion and/or price-fixing. 

To be clear....Apple is part of this lawsuit...not Amazon. It's not if people compete, but how.

As long as authors write books...people will read them. Where they get them, however, will be a market-driven choice.


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## Sixto

The previous thread's title was certainly more accurate: "DOJ to Sue Apple and Five Publishers for Collusion":http://www.dbstalk.com/showthread.php?t=202810​
The actual title of the article that this thread is based on is: "US says Apple, publishers conspired to fix prices".

It sure is weird to not see the publishers mentioned in the title.


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## hdtvfan0001

Actually...the previous thread and title are obsolete...since 3 of the parties chose to admit their guilt, cease their participation from the illegal practices, and are no longer part of the current lawsuit by the Justice Department.

The title heading with Apple as the significant named lawsuit target came right from headlines by much of the mainstream media...example...CNN's title below. The two remaining publishing houses appear to be secondary participants.


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## lparsons21

Being an avid reader, I wasn't thrilled with Apple and the publishers getting together to push the price of ebooks up. So on one hand I'm hoping that this benefits us that read a lot.

One good thing that came out of the push for higher prices was that I started looking for other legal methods to get books. And lo and behold, there are tons of free ebooks out there, and not just the classics. Bunches by new or never before published authors, as well as some early efforts by more established names are available. Many are very good, most are just OK, and some are really bad. But they are free and I've found new authors to watch for.


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## klang

Sixto said:


> The previous thread's title was certainly more accurate: "DOJ to Sue Apple and Five Publishers for Collusion":http://www.dbstalk.com/showthread.php?t=202810​
> The actual title of the article that this thread is based on is: "US says Apple, publishers conspired to fix prices".
> 
> It sure is weird to not see the publishers mentioned in the title.


It is not as good an Apple bash with the publishers included.

I agree this should have been combined with the original thread.

If this results in lower e-book prices from Amazon I'm all for it.


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## hdtvfan0001

lparsons21 said:


> Being an avid reader, I wasn't thrilled with Apple and the publishers getting together to push the price of ebooks up. So on one hand I'm hoping that this benefits us that read a lot.


Excellent point.

There's that delicate balance between market pricing and enough financial incentive to the content providers (authors/publishers) to supply their products.



> One good thing that came out of the push for higher prices was that I started looking for other legal methods to get books. And lo and behold, there are tons of free ebooks out there, and not just the classics. Bunches by new or never before published authors, as well as some early efforts by more established names are available. Many are very good, most are just OK, and some are really bad. But they are free and I've found new authors to watch for.


You're right again...there are numerous thousands of free eBooks out there.

I suspect that the end result of this lawsuit, as well as adjustments that might happen with the Amazon lower pricing that spawned this activity by Apple and the publishers...is to establish some kind of tiered pricing based on the age of the eBook.

This has already happened where a new Blu Ray disk release is offered for a limited time (usually a week) at an introductory discounted price by retailers, then it changes to a higher price for a period of time...and later it gets reduced in price based on age.

I would not be surprised to see the publishing world adopt something similar.


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## lparsons21

I would hope that would end up being the price model going forward.

For me, it isn't important that I read that latest best seller when it comes out. If it is a good read, it will be around for a long time and I'll read it later. Same for DVDs and video of all sorts.


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## klang

Some e-book prices are already changing with the same cycle of hardback and paperback releases. I held off buying Clive Cussler's The Jungle until it came out in paperback. The e-book price went down about $5.


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## TBoneit

Stewart Vernon said:


> As a consumer, I welcome lower prices...
> 
> but...
> 
> Why do people assume e-books should be priced lower than "real" books?
> 
> I grant you that the production costs for an e-book are negligible compared to actually chopping down trees and making real books... but given the author does the creative work to create the content... and what we want to buy/read is that content... why should anyone assume that e-books automatically should or would cost less?
> 
> Snip


Ebooks should be lower cost for several reasons.

1. No physical media. This means no paying for paper, printing, typesetting, Warehousing, Trucks running around delivering, labor costs.

2. Same payment to the author and less distribution fees and Ebook should allow a lower price with a higher profit.

3. I'm sure it costs Amazon a lot less to warehouse a Ebook (1 server?) than to have warehouses all over for the same print title, pay for packing materials, packing labor, shipping costs (cost to pack, then take to loading dock and ship. Include paying to have the books delivered, unloaded and stocked in the warehouse Vs having them delivered over the Internet.

4. The customer paid the expense for the Ebook hardware (the reader) not the publisher.

If the book sells for $20 hardcover, Vs Ebook. Pay the author the same fee. I'd bet the publisher could make the same $$, the Author the same $$, the seller the same $$, possibly a distributor's $$ and still sell for a lot less.

IMO there is price gouging going on if the price is equal or higher.

Just one persons opinion of course.


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## Christopher Gould

Game of thrones at Walmart paperback 6.59 lists for 8.88. Kindle 4 book set 29.99 average out to 7.50 a book. So paperback cheaper than e-book.


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## Stewart Vernon

TBoneit said:


> Ebooks should be lower cost for several reasons.


To be clear... lower "cost" or lower "price"?

Clearly an ebook is cheaper to produce than a real book (i.e. lower cost)... but that doesn't necessarily translate to a lower price for the consumer.

Think about you and your job... You get hired today for $10/hr and 2 years from now you are much better at your job. You can do the work more efficiently, higher in quality, and are just all-around better at your job. So... should you get paid more for your skills OR should you be paid less because you shouldn't get paid more to do the same work?

Why should an author be expected to charge less for an ebook than a printed book? Why shouldn't the author be able to get more money for his work? IF you were an author wouldn't you want more money for your work?

Also, once printed books become a thing of the past... and ebooks are the only way for authors to sell... why then wouldn't they cost whatever the author wants to sell them for?



TBoneit said:


> 1. No physical media. This means no paying for paper, printing, typesetting, Warehousing, Trucks running around delivering, labor costs.


Agreed. The cost to produce an ebook is lower. But that doesn't automatically mean the price will or even should go down.



TBoneit said:


> 2. Same payment to the author and less distribution fees and Ebook should allow a lower price with a higher profit.


True... but the author could keep the price the same and make even more profit. Why isn't that possible?



TBoneit said:


> 4. The customer paid the expense for the Ebook hardware (the reader) not the publisher.


I bought my bookshelf too... not the publisher. Not sure what that has to do with anything.



TBoneit said:


> If the book sells for $20 hardcover, Vs Ebook. Pay the author the same fee. I'd bet the publisher could make the same $$, the Author the same $$, the seller the same $$, possibly a distributor's $$ and still sell for a lot less.


Yes... very true... but they can make more profit if they keep the price the same.

Think... Why should they charge different prices? IF they charge the same price for ebooks and printed books... then you decide if the book is worth $20. If the book is worth $20 to read, then you pay that price and choose your format (printed vs ebook).

There's just no automatic reason to expect an ebook to *have* to be priced lower than a printed book whether it can be or not.

They could also lower the price of real books too... sometimes they do this... Amazon sells books nearly half their listed price anyway... so clearly there is profit built into the model, right?



TBoneit said:


> IMO there is price gouging going on if the price is equal or higher.
> 
> Just one persons opinion of course.


You are of course entitled to your opinion. I've already said too that I would like lower prices... That would be nice and I would buy more books... but I don't expect lower prices just because they are ebooks. I don't know why anyone should expect lower prices, no matter how much we might want them.

Lower prices means less perceived value. Consumers will still wait for sales and want further discounts... People always want things to be cheaper... and I don't want authors to stop writing books.


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## trh

I don't think anyone believes author's fees should go down with eBooks. The New Yorker article stated that Author's royalties went from 15% to 25% with eBooks. And they (the publishers) could afford to give more royalties to the writers because a good portion of their overall costs went down -- but they wanted to keep the same selling price.

Another item not mentioned previously as a cost for publishers is 'returns'. The New Yorker stated the industry normal is 35% of all printed books are returned by vendors to publishers. The publishers have to write that amount off; and they do that by charging us all more for our books. This cost doesn't apply to eBooks.

And the comparison using someone working for an hourly rate isn't appropriate. Writers are more like commissioned salesman -- they more they sell, the more they make. So as an author becomes more popular/successful, they will make more money (and that hasn't changed whether the book is printed or digital).

But the lawsuit is because Steve Jobs wanted 30% of $15, not $10 and he told the publishers that he could make that happen.


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## trh

lparsons21 said:


> One good thing that came out of the push for higher prices was that I started looking for other legal methods to get books. And lo and behold, there are tons of free ebooks out there, and not just the classics.


Don't forget to check with your library also. Many have eBooks you can 'check out'. And if yours doesn't ask them if they have any agreements with other libraries. My county hasn't implemented eBooks, but the county next door does. I had to drive 35 miles to their library to get a card, but since then, I've read 20 books from their system.

Of course publishers are trying to charge libraries additional fees for eBooks, but that is another topic.


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## bobukcat

The main reason I expect e-books to be less than print = Amazon sold MILLIONS of copies of new releases for $9.99 on Kindle when Hardbacks were $20+. Of course that was before Apple and the Publishers got together and decided they could force us to pay more. If Apple had used the same purchasing (from the publisher) model that Amazon was, the same model Amazon (and other retailers) had been using for physical media books for years and years we wouldn't all be paying more for e-books today. 

Everyone loves Apple but does anyone really believe that e-book adoption rates would be anything like they are today without the Kindle and Kindle applications Amazon brought to market? Sure others were making e-book readers before them but none of them compared in adoption rate. When B&N released the Nook line popularity increased dramatically again. Then the iPad was released....


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## bobukcat

Stewart Vernon said:


> Why should an author be expected to charge less for an ebook than a printed book? Why shouldn't the author be able to get more money for his work? IF you were an author wouldn't you want more money for your work?
> 
> Lower prices means less perceived value. Consumers will still wait for sales and want further discounts... People always want things to be cheaper... and I don't want authors to stop writing books.


I'm not sure anyone has said they want the author to get paid less, if they did I missed it. The fact that lower price of finished product may equal a higher volume (others have linked statistics that e-book consumers buy more books than non-e-book consumers) is further incentive for writers.

Amazon and others (Google most recently) provide ways for authors to publish directly, enabling a whole new generation of writers to go to market without the publishers. JK Rowling completely cut the publisher out of her e-book delivery. The times are changing and the publishers are trying to do anything they can to keep themselves relevant as long as possible, that's understandable until they conspire to fix prices - then it's time for a lawsuit.


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## jdskycaster

trh hit it on the head. The issue is with apple taking a rediculous comission for doing nothing other than hosting a file for download. This is becoming an issue not just for books but for everything that is sold on itunes.

Many companies that want to develop commercial applications for their customers are forced to pay these royalties to apple when the companies creating the apps are already supporting apple by making the hardware more attractive to apples customers. This is not a two way street and there are already signs that many commercial apps will not be ported or developed for ios because of the itunes royalty ripoff.

Who deserves to be paid more? The writer, the publisher or apple?


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## Stewart Vernon

The iTunes 30% "take"/royalty for Apple is literally apples vs oranges.

iTunes (Apple) hosts the worldwide Web site, handles accepting credit cards, taking payments, delivering the product when ordered, marketing to the whole world via iTunes and Apple TV commercials, etc.

Above are all things YOU would have to pay for yourself if you sold the App (or book) yourself. Heck, Agents often take 10-20% for an author's published manuscript... and arguably the Agent does far less than Apple!

The point is... you can do everything yourself, or you can sell on "consignment" and let someone else take the risks...

Meanwhile, regarding ebooks and prices.

People still seem to have this assumption that an ebook should sell for less than printed... and I don't know where this comes from.

Should you pay less for a movie ticket at a digital theater than one who projects film? It saves money not to make those film copies, so I guess you expect them to "pass the savings" on to the consumer. That almost never happens.

An eBook should sell for what the market will bear. If people want to pay, it will sell... if they don't, it won't.

That is why I'm against the artificially high prices like Apple setting a minimum price or colluding to get publishers to agree across the board on pricing... but I don't like Amazon's undercutting-to-get-marketshare model either... because that is a race to the bottom where people only want to pay a few bucks for all eBooks and the result would be driving the higher caliber authors out of the business.


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## trh

Stewart Vernon said:


> Meanwhile, regarding ebooks and prices.
> People still seem to have this assumption that an ebook should sell for less than printed... and I don't know where this comes from.


My expectation of this came from the original marketing by Sony (I have one of the first Sony eBook Readers -- still works just fine). Their marketing was $9.99 (or less) for new releases/NY Times Best Sellers.

I just want a free market determining the pricing.


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## Stewart Vernon

trh said:


> I just want a free market determining the pricing.


The problem is... in some ways, the market is more free now than it was before. IF Amazon dumps prices to the point they control the market and drive other publishers out of the market... prices could go up again AND not be going to the author's pockets, but Amazons... if they are allowed to have a monopoly, which is where things were headed just a couple of years ago.

Here's a good article explaining the irony here and one point I was trying to make...

On the one hand:

"_After the Department of Justice announced an antitrust lawsuit against Apple and five major publishers, three of whom settled immediately (see "DOJ Files Antitrust Suit in E-Book Pricing Case"), Amazon, the nation's leading retailer of e-books, responded by announcing that it was planning to lower e-book prices._"

But on the other hand:

"_Before the major publishers adopted the agency model in 2010, which let the publishers set the retail price of their ebooks (and kept e-book retailers like Amazon from selling below the publishers' retail price), Amazon controlled 90% of the e-book market. The agency model helped other retailers such as Barnes & Noble and Apple gain share to the point that Amazon now controls just 60% of the e-book market._"

Full article *here*.


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## phrelin

Stewart Vernon said:


> Meanwhile, regarding ebooks and prices.
> 
> People still seem to have this assumption that an ebook should sell for less than printed... and I don't know where this comes from.
> 
> Should you pay less for a movie ticket at a digital theater than one who projects film? It saves money not to make those film copies, so I guess you expect them to "pass the savings" on to the consumer. That almost never happens.
> 
> An eBook should sell for what the market will bear. If people want to pay, it will sell... if they don't, it won't.
> 
> That is why I'm against the artificially high prices like Apple setting a minimum price or colluding to get publishers to agree across the board on pricing... but I don't like Amazon's undercutting-to-get-marketshare model either... because that is a race to the bottom where people only want to pay a few bucks for all eBooks and the result would be driving the higher caliber authors out of the business.


All forms of the written word, including novels and non-fiction narratives and self-help manuals, should be sold for what the market will bear. But if you're a author is your goal is to sell one copy of your writing for $4 million? Or is it to sell 4 million copies of your writing for $1? Whatever, I look at it from the author's point of view.

Let's look at the economic flow for printed versions of your writing ignoring the printed self-publishing option which usually doesn't work out:

The author should sell rights to his/her work for the highest return he/she can get. But if the price is too costly, unrealistic, the printed version might not sell even if there is some publisher interest. And getting serious publisher interest if you are a new author is all a matter of luck. That's at the beginning of the economic flow.
The publisher should resell those rights in the form of printed hard bound books and printed paperback books to retailers for the highest overall return they can get which is a function of price less cost times volume. But there are significant costs well beyond paying the author, labor for editing, marketing which flows money into magazines and newspapers, labor and materials costs for printing, shipping which involves money flow through trucking firms to drivers, etc.
Retailers in hundreds of locations should sell hard bound books and printed paperbacks for the highest overall return they can get which again is a function of price less cost times volume. They have rent and insurance. They have to pay the help just to keep the store open, clean, and interesting. They have competition. The big emotional argument used to be over the neighborhood bookstore or the large chain. But retailers have a problem related to space for inventory, particularly unsold inventory. They have to drastically mark down - clearance prices.
At the other end of the economic flow is the reader, the final buyer. He/she buys the right to to read the author's words. Once they have been read, the book, whether a $8 paperback or a $28 hard bound, is a used commodity that can be resold, shared with a friend, or a dust collector on a shelf or trash. Nothing about that used commodity will generate more money for the author, but it might result in lower sales volume for the author, publisher and new book store retailer.
Now let's look at ebooks which are a different story:

Again, the author should sell rights to his/her work for the highest return he/she can get. No interest from a publisher? Self-publish on the internet. Maybe through Amazon's Kindle Direct Publishing. You set the price of your writing and have two royalty options. But let's say you get a publisher's offer. It's nice to get a publisher who generates printed hard bound books. The typical hard bound sells a few hundred copies and never gets printed in paperback. But you're looking for a serious ebook publisher.
You land a publisher that has a serious ebook approach - it's all about marketing on the internet. Your publisher should resell those rights in the form of an ebook through online retailers for the highest overall return they can get which is a function of mostly volume times price less online marketing and formatting costs. There are _relatively_ minimal costs beyond paying the author and on line marketing - no money flowing into magazines and newspapers, no labor and materials costs for printing, no shipping which involves money flow through trucking firms to drivers, etc. I guess they pay editors, though you could fool me.
Ebook retailers should sell ebooks for the highest overall return they can get which again is a function of volume times price less costs. They have to pay the help to program the site, operate and maintain the servers, etc. They have competition. But they don't have a problem related to space for inventory, even unsold inventory. And if your book isn't selling, they can do what Amazon does - offer your writing as the Kindle Daily Deal for 99¢. They get some return and you might actually get to be known. And if you get to be known, people can buy your book because its still there on line. The retailer still has it in the store, not having replaced it with this week's new book.
At the other end of the economic flow is the reader, the final buyer. He/she buys the right to to read the author's words. Once they have been read, the book is simply available through the reading device, not taking up physical space and collecting dust, it can't be resold nor is it easy to lend.
IMHO the ebook model will be most successful for the most authors based on low pricing and volume.

IMHO printed books have a rather strange "economic model." It is an "economic model" that I find hard to defend.

If the printed book publishing business is suffering, it is because of high overhead and marketing costs related to snob appeal (always have a few overpaid executives lunching with the "right" people to get you a review in the New York journals). And it is just silly to use up all that paper and ink and energy to print a book. And it is downright wasteful to truck the book all over the country. And retail stores use energy for lighting, heating, etc.

But if you are an author, and you are lucky enough to get the right publisher, and that publisher assigns you to the "right person" and your book gets circulated to the right reviewers and one or more decides your book looks interesting enough to read and finds it interesting enough to opine about on the pages of the New York Times, you may get to be on the NYT Best Seller List and your book will sell for $34.95. And that will make your publisher richer, may make you rich and your writing ultimately will be broadly read when the book comes out in paperback and ebooks at a cheap price.


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## Stewart Vernon

The problem on the other end of pricing is that consumers tend to see "low prices" as synonymous for "cheap"...

Yes, people want to spend less... but if eBooks routinely become <$9.99 then people will expect them to sell for even lower... and the lower the price is, the lower overall value people will assign to the product.

There is very little difference between a $10 burger at a sit-down restaurant and a $5 burger at Burger King these days... but the sit-down restaurant can't drop their prices because people will see it as if their food isn't somehow as good. Similarly, people won't pay more at Burger King because they perceive fast-food as lower quality.

Blu-ray movies that are new releases of a movie in theaters earlier this year are sold at higher prices than Blu-ray releases of a movie from 20 years ago just now released in high-def... even IF that older movie is actually a superior movie.

Similarly... a movie found in the bargain bin at Wal-Mart is assumed to be a lesser movie... while simultaneously setting expectations for more movies to show up in that bargain bin soon.

It's part of the race for the bottom I was talking about.

Paperbacks of a novel might be say $6.95 while a hardcover of that same novel might be $19.95... It's the exact same story, so the only reason for the difference in price is the packaging. Hardcover books are seen as more "collectible" or something to display on your shelf.

A digital copy might cost less to make, but it provides things you can't do as easily with your printed book. For instance... you can search within the digital book very easily on a computer or mobile device. You can also copy/paste from the book to an email or something else to share with someone else for say a book review or just to tell someone something funny you read... instead of having to hold the book open and type all that OR scan the page.

The point is... a digital copy provides some things a printed copy doesn't, and vice-versa. What is it worth? It depends on the consumer and it depends on the book. Each book will be different and each consumer will be different.

It's easy to say printed books cost more, because they certainly do... but the value of a book is more than just what it costs to package it up... and I think some people are forgetting that value.

If you like a book, it is worth more... if you don't like it, you probably couldn't be paid to read it.

Look at all the great classic literature that is available in eBook format for FREE... stuff that costs you $5+ at a book store... Don't forget about that when talking about eBook pricing.


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## hdtvfan0001

At the end of the day:

- This lawsuit is based on 3 remaining parties (including Apple) violating current price fixing laws. One would like to give all 3 parties credit that they knew about this law as they chose to try to circumvent it.

- The publishers who went along for the ride are no less guilty, but likely felt somewhat intimidated to go along based on Apple's market position, and also for their own self interest to make more money.

- The participants were wrong, should be punished, and likely will receive still penalties for their actions. Still, as others have pointed out, Apple in particular has already set aside money for any fines and will simply move on.

- Since the cost of "manufacturing" eBooks is measurably less than paper-based Books, their pricing should be able to sustain sufficient profit margins at market costs below their paper counterparts.

We'll have to see how this unfolds. I suspect we'll see some kind of "settlement" and this never goes to trial.


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## jdskycaster

Stewart Vernon said:


> The problem on the other end of pricing is that consumers tend to see "low prices" as synonymous for "cheap"...
> 
> Yes, people want to spend less... but if eBooks routinely become <$9.99 then people will expect them to sell for even lower... and the lower the price is, the lower overall value people will assign to the product.
> 
> There is very little difference between a $10 burger at a sit-down restaurant and a $5 burger at Burger King these days... but the sit-down restaurant can't drop their prices because people will see it as if their food isn't somehow as good. Similarly, people won't pay more at Burger King because they perceive fast-food as lower quality.


This does not hold up in the digital world. You cannot feel, see or taste the digital bits of information. You can see some cover art and read a sample of the written book just you can sample a song but it really does not matter if it is .99 or $10.99. In today's digital world most purchased are based on word of mouth or written reviews rather than price shopping.

Why your food analogy does not work at all is that there can be a huge difference in quality that you can see and taste in the final product and that is service aside. If you think Burger King and Mcd's use the same ingredients in their dollar menu burgers as a sit-down restaurant serving a $10 burger you are going to the wrong sit down burger joint.


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## Stewart Vernon

jdskycaster said:


> This does not hold up in the digital world. You cannot feel, see or taste the digital bits of information. You can see some cover art and read a sample of the written book just you can sample a song but it really does not matter if it is .99 or $10.99. In today's digital world most purchased are based on word of mouth or written reviews rather than price shopping.


Tell that to the people on iTunes who are routinely having sales of half price or so on their Apps in order to boost sales. This seems to indicate that some (like me actually) wait for sales to buy some apps. I also shop for the free TV shows they have on iTunes from time to time.



jdskycaster said:


> Why your food analogy does not work at all is that there can be a huge difference in quality that you can see and taste in the final product and that is service aside.


Unless you are reading books differently than I am... you can't taste the difference in eBooks either 



jdskycaster said:


> If you think Burger King and Mcd's use the same ingredients in their dollar menu burgers as a sit-down restaurant serving a $10 burger you are going to the wrong sit down burger joint.


Where in my message did I say anything about the dollar menu? I specifically said the $5 burgers at fast food places are not much different than the $10 burgers at a sit-down place. Obviously the dollar menu is different, and sit-down places don't have a dollar menu equivalent.

Although, that said, I'd be surprised if the source of the beef at most restaurants isn't often the same... they all shop around for bargains I'm sure... so while I wouldn't make the comparison, there might not be that much difference (except for size and toppings) in dollar menu burgers after all.

Whereas a digital eBook contains the exact same content as a printed book.

Which reminds me... how come the debate is only about price of eBook vs printed book? Why no debate on the price of audio books which are routinely more than eBooks? An audio book is someone else reading the book to you, often paraphrasing or abridged from the eBook/printed book counterpart too... but I'm not seeing any outrage over prices of audio books.


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## TBoneit

Where I said cost I was referring to what It would cost me to buy.

I believe the author should get the same Dollar return per copy sold whether it is eBook, Paperback or Hard cover. Unless they agree to a sliding scale dependent on time.

I still believe that the author and the publisher can both come out ahead on a lower price based on the real costs for eBooks.

If a eBook would sell 20,000 copies at a $20 price point would not a $10 price point sell more for popular fiction? Thus making more money for the author due to higher sales? Would this also not make it likelier that a book buyer might take a chance on a book at a lower price and become hooked on the author?

Certain books that will always be low volume or have a fixed volume such as reference works or technical matter or books used in schools will in general have approximately the same sales independent of price within reason.

I don't have to have an expensive bookshelf for paperbacks or hardcovers.
For eBooks I have to invest in hardware.

Therefor I buy real books and do not even have a eBook reader.
In the last 6 months I have bought approximately 40+ books.

I wouldn't even think of giving someone a eBook for a Christmas gift for example.

Many of the books I bought in the last year were used. Not available new and for sure not as eBooks. One came from England.

One book for example was 
http://www.amazon.com/Sleeping-planet-William-R-Burkett/dp/B0007E1H7Y
Sleeping planet
William R Burkett

Worth reading BTW.


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## trh

Stewart Vernon said:


> Which reminds me... how come the debate is only about price of eBook vs printed book? Why no debate on the price of audio books which are routinely more than eBooks? An audio book is someone else reading the book to you, often paraphrasing or abridged from the eBook/printed book counterpart too... but I'm not seeing any outrage over prices of audio books.


Probably hasn't come up because this thread is about the DOJ lawsuit regarding eBooks. Also knowing what goes into making an audio book (everything that goes into a printed copy plus having someone spend weeks in a recording studio with a recording engineer and a producer), adds more cost than an eBook or printed book. So no outrage from me.


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## Stewart Vernon

TBoneit said:


> I believe the author should get the same Dollar return per copy sold whether it is eBook, Paperback or Hard cover. Unless they agree to a sliding scale dependent on time.


Why couldn't the author decide to get more by charging the same price for an eBook as for printed, and instead of passing the "savings" to the consumer, pass the savings to the author?

That should be a choice too... and if the market will bear it, that should be ok.



TBoneit said:


> I still believe that the author and the publisher can both come out ahead on a lower price based on the real costs for eBooks.
> 
> If a eBook would sell 20,000 copies at a $20 price point would not a $10 price point sell more for popular fiction?


Not necessarily. As I was saying earlier... People have this innate desire to associate "worth" and price... so a book that debuts at $10 is perceived by many to not be as good of a book as one that debuts at $20.

I'm not saying *I* think that way... but many consumers do. Many consumers think that if a book (or any product) is better, it will cost more. Think about your brand name clothing vs non-brand name clothing where much of the quality is the same, but people will pay more for a name brand like Nike than they will for a generic shoe.



TBoneit said:


> Thus making more money for the author due to higher sales? Would this also not make it likelier that a book buyer might take a chance on a book at a lower price and become hooked on the author?


When you go to a bookstore (if you still do)... do you look first at the Best Seller List? or the bargain bin?

The books in the bargain bin are there because they aren't selling and are lower in price... thus the assumption by many consumers that books marked at a higher price "must" be "better"... again, not my thinking, but something many consumers use to make decisions.



TBoneit said:


> I don't have to have an expensive bookshelf for paperbacks or hardcovers.
> For eBooks I have to invest in hardware.


Not necessarily. Many eBooks (at least the ones in the ePub format) can be read on your computer with free software... and you already have a computer apparently 

On the flip side... if you buy books, it is true you don't have to buy an expensive shelf... but you have to put them somewhere... unlike eBooks that reside on whatever device you use to read them (like your PC) that is already taking space for other uses.



TBoneit said:


> Many of the books I bought in the last year were used. Not available new and for sure not as eBooks.


And this is one place where eBooks lose, just like digital downloads... If you read a book and want to share it, give it away, or sell it... you can... but you can't with an eBook unless it was a free one with no DRM that is public domain intended to be shared.

eBooks are growing on me... but there are still some things I like having on my bookshelf as a real book.


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## Alan Gordon

I want to say two things, and I apologize if this has been brought up already, because I haven't been following this thread intently.


It is true that eBooks cost the publisher less to manufacture, but it's also important to note (and it may already have been) that unlike B&M stores or e-tailers who have to store the inventory, there is no need to either use the item as a loss leader to get people to visit their store, nor the need to use sales to clear out excess inventory.

Comic books. I grew up buying comics... I don't buy them anymore, but I still keep up with that world via a couple of sites, and DC Comics started selling all their new releases late August of last year, and I think Marvel is starting this month... or soon anyway. Other publishers are selling books as well. Recently, Apple started selling Marvel trade paperbacks (collected reprints) for iBooks via iTunes... not a big surprise given the fact that Marvel is owned by Disney. However, they do not sell new release issues.

As is, I believe customary, Apple would get a percentage of the costs associated with in app purchases via Comixology, DC Comics, or Marvel Comics app, but the *digital versions cost the exact same as the printed versions.* Granted, DC Comics, and I believe Marvel is about to start offering certain titles from them in printed form with a free digital copy code for an additional $1.

I'm not against a company using their clout to bring down costs, but I'm against a company using it to raise prices across the board. If there was negative price fixing involved, hopefully something will be done about it. If not, hopefully the truth will come out.

~Alan


----------



## TBoneit

Stewart Vernon said:


> Not necessarily. As I was saying earlier... People have this innate desire to associate "worth" and price... so a book that debuts at $10 is perceived by many to not be as good of a book as one that debuts at $20.
> 
> I'm not saying *I* think that way... but many consumers do. Many consumers think that if a book (or any product) is better, it will cost more. Think about your brand name clothing vs non-brand name clothing where much of the quality is the same, but people will pay more for a name brand like Nike than they will for a generic shoe.


I guess I don't think that way. With food I buy the brands I buy for the taste. I prefer Best's Hot Dogs for their taste vs Nathan's or ball park etc. I tried em all.

For shoes my brother and I wear the brand we do as it is the only brand easy to find locally that is comfortable.



> When you go to a bookstore (if you still do)... do you look first at the Best Seller List? or the bargain bin?
> 
> The books in the bargain bin are there because they aren't selling and are lower in price... thus the assumption by many consumers that books marked at a higher price "must" be "better"... again, not my thinking, but something many consumers use to make decisions.


Strangely enough I look in the bargain bin and buy from there frequently as well as the best selling top xx section and by author. It is getting harder and harder to do as the Bookstores vanish. Until it disappeared I also bought from the local used book store.



> Not necessarily. Many eBooks (at least the ones in the ePub format) can be read on your computer with free software... and you already have a computer apparently
> 
> On the flip side... if you buy books, it is true you don't have to buy an expensive shelf... but you have to put them somewhere... unlike eBooks that reside on whatever device you use to read them (like your PC) that is already taking space for other uses.


Except I don't want to read them on the PC , they aren't portable like a real book is. My books move around the house with me as I read them here and there.



> And this is one place where eBooks lose, just like digital downloads... If you read a book and want to share it, give it away, or sell it... you can... but you can't with an eBook unless it was a free one with no DRM that is public domain intended to be shared.
> 
> eBooks are growing on me... but there are still some things I like having on my bookshelf as a real book.


Right now I've been going through the boxes of books in the basement and attic and am reading books I originally bought in the 60's, 70's and 80's. Magazines too. Astounding and Analog Sci-Fi for example.

I just can't see a eBook reader still being able to display the eBooks you bought after a span of years.

Not only that but if I spend $20 for something I want something I can hold in my hand if possible.

Interesting messages here.

Best Regards


----------



## Steve

bobukcat said:


> Shortly after the iPad released and prices of books in the Kindle store went up *I blamed Apple of ruining a good thing for consumers*, it looks like the DOJ feels the same way.


Well a month later, after reading about this topic ad nauseum for the past few days (and based on the facts that have come to light _thus far_), I'm tending to agree with this scholar's view that it's the publishers, not Apple, ruining a good thing (my emphasis below):



> "Apple trying to compete against Amazon is a good thing," said Gus Hurwitz, a fellow at the Center for Technology Innovation and Competition at The University of Pennsylvania Law School. "It's the sort of thing we want to encourage so long as it's in ways that are complying with the law."
> 
> Fair competition is at the very heart of the Justice Department's case against Apple and the publishers. The government accused the publishers of illegally holding private meetings to fix e-book prices, and later teaming up with Apple to crack Amazon's dominance of the market. Bundling all the companies together in one complaint has its own problems, though. Indeed, Hurwitz noted that *Apple is not a competitor with e-book providers.*
> 
> *"If e-book publishers decided to collude and break the law, that's not Apple's problem. They were free to break the law and come to Apple as a cartel," he said. "That's not illegal on Apple's part."*_ [*more*_http://news.cnet.com/8301-13579_3-57413983-37/will-apples-game-plan-beat-the-trustbusters/]


While I agree with the publishers that the playing field needed to be leveled to break Amazon's "monopoly" on e-book sales, the "agency pricing" approach does seem like blatant price-fixing to me. Instead, why not a "wholesale" price approach that would allow the resellers to sell to consumers for whatever the market will bear? Apple, Google and B&N.com would then have been free to discount selected e-books as much as they wanted, to draw market share away from Amazon. Just my .02.


----------



## bobukcat

Stewart Vernon said:


> But on the other hand:
> 
> "_Before the major publishers adopted the agency model in 2010, which let the publishers set the retail price of their ebooks (and kept e-book retailers like Amazon from selling below the publishers' retail price), Amazon controlled 90% of the e-book market. The agency model helped other retailers such as Barnes & Noble and Apple gain share to the point that Amazon now controls just 60% of the e-book market._"
> 
> Full article *here*.


Yes, but is that really a good thing and how much of the market shift is really due to the agency model versus B&N and Apple having actually released competing readers in the same time span? Amazon chose to develop and aggressively market the Kindles with lower priced books to drive adoption rate. But just because they sold the book for $9.99 does not mean they paid the publisher or author less for it - in fact that's definitely not the case but I sense some people believe that's what happened. It is not unusual in the consumer electronics industry to subsidize the price of a relatively expensive new player / reader for a new format with cheap or free titles in that new format. When I bought my first DVD player it came with 10 free DVDs (from a list), the same with my first BD player which came with 5 free BDs from a list. Amazon grew the e-book market exponentially but instead of competing on similar terms Apple allegedly colluded with the publishers to raise prices and make more money - partly because they knew they could - when they decided to enter the market that Amazon developed from niche to mainstream.


----------



## trh

Stewart Vernon said:


> But on the other hand:
> "_Before the major publishers adopted the agency model in 2010, which let the publishers set the retail price of their ebooks (and kept e-book retailers like Amazon from selling below the publishers' retail price), Amazon controlled 90% of the e-book market. The agency model helped other retailers such as Barnes & Noble and Apple gain share to the point that Amazon now controls just 60% of the e-book market._"
> 
> Full article *here*.


How did the Agency model help Barnes & Noble & Apple gain market share? I see no correlation between the agency model and the gain by B&N or Apple.

bobukcat is right. Amazon was still paying the publishers the price they set; so their costs (and the writer's royalties) were being met. So what if Amazon decided to sell below the cost of what the books cost them? Nothing illegal about that. Sort of like when someone calls DirecTV to cancel and they offer them all kinds of incentives to stay. Businesses do this all the kind to get or keep customers.


----------



## Steve

trh said:


> How did the Agency model help Barnes & Noble & Apple gain market share? I see no correlation between the agency model and the gain by B&N or Apple.


I struggled to understand this as well, but apparently, by preventing Amazon from undercutting Apple and B&N, there was less reason for an e-book buyer to buy a Kindle and shop at Amazon if s/he was already an iTunes or B&N.com user. Unfortunately, the playing field got leveled by forcing Amazon to raise their prices, because the publishers would not agree to a wholesale model with Apple, like Apple has with the music industry.


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## Stewart Vernon

Steve said:


> I struggled to understand this as well, but apparently, by preventing Amazon from undercutting Apple and B&N, there was less reason for an e-book buyer to buy a Kindle and shop at Amazon if s/he was already an iTunes or B&N.com user. Unfortunately, the playing field got leveled by forcing Amazon to raise their prices, because the publishers would not agree to a wholesale model with Apple, like Apple has with the music industry.


Exactly... Barnes & Noble was an indirect beneficiary of things. With publishers agreeing not to sell eBooks lower at one store than another, it leveled the playing field and meant if you were a Barnes & Noble customer there was no immediate reason to bolt to a competitor.

The problem with underselling (selling at lower prices than intended or even lower than cost) by Amazon is that it undercuts the perceived value of the books.

Retail stores like Wal-Mart have loss-leaders, stuff they practically give away to get you in the store week after week so you hopefully buy other profitable things. This was why Amazon would do the same with eBooks... to get more customers browsing on Amazon and buying other things too.

But in the process... items you see at Wal-Mart as loss-leaders become things consumers see no value in... and come to expect them to be given away... and won't touch them if they aren't... so eBooks could have been on a dangerous path.

We see people all the time complaining "why can't I have music for free" because people see online downloads and they think making copies and downloading them isn't "stealing"... and eBooks were heading in that direction too. The lower value something has the less people pay for it AND the more they justify being able to take it because it is so cheap anyway.

Remember the "browser wars" too... the DOJ went after Microsoft for giving away their browser to gain marketshare and preventing fair competition from others like Netscape. Now I had a whole slew of problems with that lawsuit too...

but..

the point is... That is what Amazon was doing by cutting prices on eBooks... trying to gut their competitors before they got off the ground, so Amazon could monopolize the eBook market.

So... on the one hand, the DOJ went after Microsoft for unfairly underpricing a product... now they are going after publishers for overpricing.

In my opinion, the DOJ should really have stayed out of both cases... and given the free market a chance to decide.


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## TechnoBarbie

I'm glad I don't feel compelled to read anything that costs me money. I read alot of secondhand with anything that originally had a cost. This discussion has been interesting though.


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## trh

eBooks were being sold @ $9.99 by Sony and other companies for years before Amazon and the Kindle. It wasn't an issue until Steve Jobs told the publishers he could get them more money (because Apple Fans are used to paying a premium price??).

As the article that Stewart linked to yesterday said _"... it doesn't appear that the DOJ could have acted in any other way given the collusion among publishers, who according to the New York Times, admitted that they held regular meetings where they discussed how they "could solve the $9.99 problem," a reference to the price point that Amazon had set for e-books." _

Who knows, maybe before this is all over, DOJ will be suing Amazon because of what they define as "monopolistic practices".


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## bobukcat

Steve said:


> I struggled to understand this as well, but apparently, by preventing Amazon from undercutting Apple and B&N, there was less reason for an e-book buyer to buy a Kindle and shop at Amazon if s/he was already an iTunes or B&N.com user. Unfortunately, the playing field got leveled by forcing Amazon to raise their prices, because the publishers would not agree to a wholesale model with Apple, like Apple has with the music industry.


Exactly, when B&N launched the Nook they would have had to compete on e-book pricing with Amazon to gain market share (or deliver on some other value that Amazon was not providing that was worth that price difference to consumers). The deal the publishers signed with Apple and then forced on Amazon negated that price difference and was a direct advantage to B&N.


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## bobukcat

trh said:


> eBooks were being sold @ $9.99 by Sony and other companies for years before Amazon and the Kindle. It wasn't an issue until Steve Jobs told the publishers he could get them more money (because Apple Fans are used to paying a premium price??).
> 
> As the article that Stewart linked to yesterday said _"... it doesn't appear that the DOJ could have acted in any other way given the collusion among publishers, who according to the New York Times, admitted that they held regular meetings where they discussed how they "could solve the $9.99 problem," a reference to the price point that Amazon had set for e-books." _
> 
> Who knows, maybe before this is all over, DOJ will be suing Amazon because of what they define as "monopolistic practices".


Yes, but they never came close to achieving the success that Amazon has with the Kindle line. Probably because of the marketing power Amazon had amassed as a seller of physical books, their reputation for customer service, free delivery over WAN, and other factors.


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## bobukcat

Stewart Vernon said:


> The problem with underselling (selling at lower prices than intended or even lower than cost) by Amazon is that it undercuts the perceived value of the books.
> 
> Retail stores like Wal-Mart have loss-leaders, stuff they practically give away to get you in the store week after week so you hopefully buy other profitable things. This was why Amazon would do the same with eBooks... to get more customers browsing on Amazon and buying other things too.
> 
> But in the process... items you see at Wal-Mart as loss-leaders become things consumers see no value in... and come to expect them to be given away... and won't touch them if they aren't... so eBooks could have been on a dangerous path.
> 
> SNIP
> 
> the point is... That is what Amazon was doing by cutting prices on eBooks... trying to gut their competitors before they got off the ground, so Amazon could monopolize the eBook market.


I see it more as Amazon investing in ways to get buyers invested in their eco-system with the Kindle, much like Apple wants you hooked into their eco-system. You buy a Kindle and then you easy and quickly buy more books from Amazon on that Kindle. It's not restricted to only Kindle books but it sure is easier to buy from them than anyone else!



> Remember the "browser wars" too... the DOJ went after Microsoft for giving away their browser to gain marketshare and preventing fair competition from others like Netscape. Now I had a whole slew of problems with that lawsuit too...
> 
> So... on the one hand, the DOJ went after Microsoft for unfairly underpricing a product... now they are going after publishers for overpricing.


Completely different situation, although I did have a hard time seeing the problem with what Microsoft was doing back then until I heard more details. Microsoft was strong-arming their integrators to not include Netscape or any other browser or to build machines with Windows without including IE. I'm not sure how that compares to what Amazon, Apple or anyone else in this story had allegedly done.

I'm usually a big fan of the government staying out of things as much as possible but in this case I think they can right a wrong that has resulted in customers paying more for a product than they were before the price fixing collusion. Of course that is probably asking too much.


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## Stewart Vernon

That's why it is hard to pick a side here...

I like the free market, and wish the government would stay out of things... but there also is apparently evidence of price-fixing and collusion... and those are bad things... then it looks like it is possible the collusion actually helped avert a monopoly by Amazon, which would have possibly led to a different lawsuit by the DOJ.

It's all a mess, basically.


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## trh

Who knows, maybe in a few years the DOJ will be suing Amazon for "monopolistic practices."


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## trh

Just reading a few BBC articles on this to see their take. Turns out the agency model actually makes the publishers and writers less money (because of the 30% share to Apple).

One of the publishing CEO's said he made his decision for the future of publishing and to prevent Amazon from owning the eBook distribution. That CEO should probably have taken a look at what Apple and iTunes did to the CD industry before he got in bed with Steve Jobs.

----
Scott Turow (mega-author and President of the Authors Guild) posted a blog on this topic - *"Letter from Scott Turow: Grim News"*. Which was then followed by a point-counter-point type blog by authors Joe Konrath and Barry Eisler. Called *"Barry, Joe, & Scott Turow"*. A bit long, but interesting.


----------



## phrelin

Stewart Vernon said:


> That's why it is hard to pick a side here...
> 
> I like the free market, and wish the government would stay out of things... but there also is apparently evidence of price-fixing and collusion... and those are bad things... then it looks like it is possible the collusion actually helped avert a monopoly by Amazon, which would have possibly led to a different lawsuit by the DOJ.
> 
> It's all a mess, basically.


How could Amazon get a monopoly on ebooks? As far as I know, they have never asked a book publisher to market ebooks exclusively through the Amazon Kindle Store?

The only thing the DOJ should be looking at is making sure that Amazon will permit people with Kindles to buy ebooks through other sources if the source is willing to sell via the Kindle. You know, like on our iPads we buy books through the Kindle Store and read them with the Kindle App. Amazon should be required to offer the same courtesy to Apple, B&N, etc.

For me the picture is very clear. Manufacturers and retailers should not be allowed to conspire to fix prices. Manufacturers should sell their product to retailers at prices that is based on a marketing plan that will give them a profit. Retailers should sell that product based on a marketing plan will give them a profit.

And I don't really see why people worry so much about Amazon. Amazon is not the wealthiest entity in the world, not even close. Apple is. Neither Amazon's entire market cap nor enterprise value are as large as Apple's recently disclosed $98 billion in _cash holdings_.

Amazon's profit margin is typical for a large retailer - 1.31% (Safeway's is 1.18%), and that is on $48 billion in revenue. Apple's profit margin is 25.80% on $128 billion in revenue.

People shouldn't even be discussing the two companies in the same conversation they are so unalike. I don't get it.


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## Steve

phrelin said:


> *And I don't really see why people worry so much about Amazon.*


The worry was that if Amazon's e-book market share continued to grow unchallenged, all competition would be eradicated and at that point Amazon would be able to call all the shots in terms of e-book pricing. Let's face it, when this all started 2 years ago, at 90% market share and growing, Amazon _was_ an e-book monopolist. It's just at that time, e-books represented such a small fraction of the book business, being a huge fish in a small pond wasn't cause for any scrutiny, except by the industry itself.



> [...] Amazon is not the wealthiest entity in the world, not even close. Apple is. Neither Amazon's entire market cap nor enterprise value are as large as Apple's recently disclosed $98 billion in _cash holdings_.
> 
> [...]
> 
> People shouldn't even be discussing the two companies in the same conversation they are so unalike. I don't get it.


Just my .02, but I think introducing Apple's wealth into this argument is a straw horse that steers the conversation away from the topic at hand, e-book market share.


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## bobukcat

"phrelin" said:


> The only thing the DOJ should be looking at is making sure that Amazon will permit people with Kindles to buy ebooks through other sources if the source is willing to sell via the Kindle. You know, like on our iPads we buy books through the Kindle Store and read them with the Kindle App. Amazon should be required to offer the same courtesy to Apple, B&N, etc.


Didn't Apple recently kill the ability to buy through the Kindle app on their devices because it cuts them out of the money? I don't use my iPod for anything but music so I don't really know first hand but I thought that was what I read, you have to use the browser to make purchases from the Kindle store. I don't really think the DOJ should force Amazon to allow purchases from other stores on the Kindle hardware, especially the 3G Kindle because Amazon is paying for the wireless data plan when you use it and that is part of the value proposition of their ecosystem. If they were to somehow achieve a true monopoly on ebooks that discussion may have been necessary but that ship has sailed and there is plenty of competition in the market to allow closed ecosystems.


----------



## Steve

trh said:


> Just reading a few BBC articles on this to see their take. Turns out the agency model actually makes the publishers and writers less money (because of the 30% share to Apple).
> 
> One of the publishing CEO's said he made his decision for the future of publishing and to prevent Amazon from owning the eBook distribution. *That CEO should probably have taken a look at what Apple and iTunes did to the CD industry before he got in bed with Steve Jobs.*


The publishers *did not* enter into a "wholesale" agreement with Apple like the music industry. In that model, Apple pays a negotiated wholesale price for the music, and then charges whatever it wants.

The publishers refused to go for it, but would agree to go for the "app store" model, where the content creator sets the price, and Apple takes a 30% cut. I don't know if the term "agency model" existed before, but that's the term the publishers decided use for it.

Re: _"what Apple did to the CD industry"_, many people feel the iTunes model *saved *the CD industry, as the most effective way to thwart piracy. Personally speaking, I believe the agency model for e-book selling encourages e-book piracy as well by not making content more affordable.


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## Steve

bobukcat said:


> Didn't Apple recently kill the ability to buy through the Kindle app on their devices because it cuts them out of the money? I don't use my iPod for anything but music so I don't really know first hand but I thought that was what I read, you have to use the browser to make purchases from the Kindle store. I don't really think the DOJ should force Amazon to allow purchases from other stores on the Kindle hardware, especially the 3G Kindle because Amazon is paying for the wireless data plan when you use it and that is part of the value proposition of their ecosystem. If they were to somehow achieve a true monopoly on ebooks that discussion may have been necessary but that ship has sailed and there is plenty of competition in the market to allow closed ecosystems.


I don't use either app, but I believe both the Nook and Kindle apps now redirect you to a web page when you try to do an in-app purchase. I think Apple actually relented to allow this, because at one time, I don't think they approved _any _method to bypass the App Store.


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## RasputinAXP

I've been reading books from Kameron Hurley lately. Very good sci fi.

Kindle, 7-8 bucks. 

Nook, $8-8.50

Direct from Baen, the publisher, in unencumbered, download as often as you want multiple formats for one price? $6.

I'm willing to bet Baen makes more money at $6.


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## hdtvfan0001

As expected...by combining the old thread on this and the newer one with the news facts reported by MSNBC and others...the thread is now a hodgepodge of discussion. The title was also altered away from what the MSNBC story named it. Figured that would happen.

Several reports online indicate there are continued talks behind the scenes regarding a settlement between the DOJ and the remaining 3 parties in the lawsuit.


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## afulkerson

Steve said:


> I don't use either app, but I believe both the Nook and Kindle apps now redirect you to a web page when you try to do an in-app purchase. I think Apple actually relented to allow this, because at one time, I don't think they approved _any _method to bypass the App Store.


I have both the Kindle and an IPad. The Kindle app on the IPad does not allow you to order anything. There is no way to go to the store. You can only see what you have already ordered from Amazon for your Kindle.


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## hdtvfan0001

Apparently, there are state lawsuit implications for this situation as well:

http://www.ibtimes.co.uk/articles/328153/20120414/apple-collusion-lawsuit-e-books-prices-ibookstore.htm



> Negotiations over e-book pricing were ongoing for much of this year but eventually broke down, resulting in Wednesday's suit.
> 
> "Executives worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers," said US Attorney General Eric Holder, at a press briefing.
> 
> Simon & Schuster, Hachette and HarperCollins announced an immediate settlement. Apple and Penguin have explicitly denied any collusion on the pricing of e-books. They will battle out the case.
> 
> New York-based MacMillan have also confirmed they will not settle.
> 
> "The terms the DOJ demanded were too onerous," the company's Chief Executive, John Sargent, said in a statement cited by The New York Times, while the publisher engaged in settlement talks.
> 
> *Meanwhile, a separate suit, lodged by US states against the publishers, also resulted in partial resolution.* While Hachette and HarperCollins settled with an agreement to pay a combined $52 million, the other publishers simply refused to budge.
> 
> "This scheme would have cost consumers millions in excessive prices and stifled the development of an important form of e-commerce," said David Balto, a lawyer who was head of policy for the US Federal Trade Commission during the administration of President Bill Clinton, according to Businessweek.


----------



## bobukcat

"trh" said:


> Just reading a few BBC articles on this to see their take. Turns out the agency model actually makes the publishers and writers less money (because of the 30% share to Apple).
> 
> One of the publishing CEO's said he made his decision for the future of publishing and to prevent Amazon from owning the eBook distribution. That CEO should probably have taken a look at what Apple and iTunes did to the CD industry before he got in bed with Steve Jobs.
> 
> ----
> Scott Turow (mega-author and President of the Authors Guild) posted a blog on this topic - "Letter from Scott Turow: Grim News". Which was then followed by a point-counter-point type blog by authors Joe Konrath and Barry Eisler. Called "Barry, Joe, & Scott Turow". A bit long, but interesting.


Thanks for the links. For anyone who believes that Apple's and the publisher's agency model is better for authors I recommended you read Joe Konrath and Barry Eisler's article (some foul language included) and / or this one from David Gaughran http://davidgaughran.wordpress.com/2012/03/10/scott-turow-wrong-about-everything/

He also makes an interesting point that the publishers desire / demand for DRM was as responsible for Amazon's walled garden approach to the Kindle as anything Amazon may have chosen to do.


----------



## klang

RasputinAXP said:


> I've been reading books from Kameron Hurley lately. Very good sci fi.
> 
> Kindle, 7-8 bucks.
> 
> Nook, $8-8.50
> 
> Direct from Baen, the publisher, in unencumbered, download as often as you want multiple formats for one price? $6.
> 
> I'm willing to bet Baen makes more money at $6.


Yup, I always buy direct from Baen when possible. Got the latest Honor Harrington book by David Weber for $6. I used to buy these in hardcover but long ago ran out of space to store physical books. Have Baen email the file to Amazon and it shows up on my Kindle just like I had bought it from Amazon.

I think the days of the big publishing houses are numbered.


----------



## hdtvfan0001

As some of the details emerge, one of the bigger surprises is just how long these discussions were going on:

http://www.computerworld.com/s/article/9226099/Update_DOJ_sues_Apple_publishers_over_e_book_price_fixing?taxonomyId=17



> The DOJ's lawsuit alleges that the late Steve Jobs, then Apple's CEO, approved of a new pricing model that would raise the price of e-books. "Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99," Jobs wrote to one publishing executive during pricing discussions, according to the DOJ lawsuit.
> 
> *Beginning in late 2008, the publishers began meeting to discuss Amazon's pricing model, the lawsuit alleged. The publishers' CEOs met quarterly "in private dining rooms of upscale Manhattan restaurants" to discuss e-book pricing, the DOJ alleged.*
> 
> *In early 2010, publishers agreed to shift to a new pricing model *where they set the prices for e-books, instead of retailers, the DOJ alleged. In an agreement with Apple, all new books would be priced at $12.99 to $16.99, the DOJ alleged.


----------



## bobukcat

"Steve" said:


> The worry was that if Amazon's e-book market share continued to grow unchallenged, all competition would be eradicated and at that point Amazon would be able to call all the shots in terms of e-book pricing. Let's face it, when this all started 2 years ago, at 90% market share and growing, Amazon was an e-book monopolist. It's just at that time, e-books represented such a small fraction of the book business, being a huge fish in a small pond wasn't cause for any scrutiny, except by the industry itself.
> 
> Just my .02, but I think introducing Apple's wealth into this argument is a straw horse that steers the conversation away from the topic at hand, e-book market share.


The fact of the matter is that Amazon practically INVENTED the market. Sony had e-readers but it wasn't their core business and they didn't put much marketing into it. It wasn't until Amazon (the worlds largest seller or physical books) released a device and convinced publishers to release e-books the same date as hardcovers (there was a delay window before, if they were e-published at all) that any kind of market even worth talking about existed. Then they bet on it big time with marketing dollars, loss-leader titles, higher royalties, etc. With this in mind why would it be surprising or evil in any way that the one company who innovated and spent real money on the market would be the over-whelming leader in that market? Its similarly unsurprising that since real competition has entered that market in the form of the largest B&M bookseller (B&N) and the world's most valuable company (Apple) that their market share has declined.


----------



## hdtvfan0001

bobukcat said:


> The fact of the matter is that Amazon practically INVENTED the market. Sony had e-readers but it wasn't their core business and they didn't put much marketing into it. It wasn't until Amazon (the worlds largest seller or physical books) released a device and convinced publishers to release e-books the same date as hardcovers (there was a delay window before, if they were e-published at all) that any kind of market even worth talking about existed. Then they bet on it big time with marketing dollars, loss-leader titles, higher royalties, etc. With this in mind why would it be surprising or evil in any way that the one company who innovated and spent real money on the market would be the over-whelming leader in that market? Its similarly unsurprising that since real competition has entered that market in the form of the largest B&M bookseller (B&N) and the world's most valuable company (Apple) that their market share has declined.


Quite true.

...and competition is a good thing. In this case, the issue centers on just how "competition" was executed.

Allegedly in this case - it was done by a group of industry players with alot of clout trying to drive prices upward for their own financial reward at the expense of consumers paying more. At least that is what the Atty General stated publically.

While I suspect that since all this was going on for years, and the DOJ would not file suit against these big companies without some significant evidence to support the claims...Apple continues to deying any wrongdoing...and any guilt has yet to be "proven" for the 3 remaining players in the lawsuit.

Whatever the outcome...I suspect this will impact the eBook business in a major way going forward. There is alot of $$$ at stake (invested to date and future revenue) for multiple players.


----------



## bobukcat

"hdtvfan0001" said:


> Quite true.
> 
> ...and competition is a good thing. In this case, the issue centers on just how "competition" was executed.
> 
> Allegedly in this case - it was done by a group of industry players with alot of clout trying to drive prices upward for their own financial reward at the expense of consumers paying more. At least that is what the Atty General stated publically.
> 
> While I suspect that since all this was going on for years, and the DOJ would not file suit against these big companies without some significant evidence to support the claims...Apple continues to deying any wrongdoing...and any guilt has yet to be "proven" for the 3 remaining players in the lawsuit.
> 
> Whatever the outcome...I suspect this will impact the eBook business in a major way going forward. There is alot of $$$ at stake (invested to date and future revenue) for multiple players.


What I would like to know is what exactly the outcome of the suit would be if DOJ wins and what the publishers that settled agreed to. If its not a return to the old pricing model or some other step designed to bring back the lower prices we once enjoyed I'm not sure there's anything positive in it for consumers or the authors.


----------



## Herdfan

trh said:


> As the article that Stewart linked to yesterday said
> 
> _"... it doesn't appear that the DOJ could have acted in any other way given the collusion among publishers, who according to the New York Times, admitted that they held regular meetings where they discussed how they *"could solve the $9.99 problem," a reference to the price point that Amazon had set for e-books.*"_


That is a very easy problem to solve. Raise your price to Amazon. By this time the installed base of Kindles was very large. Simply raise the price and Amazon would have been forced to their prices. If they didn't, they would run the risk of losing titles and pi**ing off their Kindle base.

Price fixing goes on every day right under our noses. Some illegal, some not. Take gas prices. Let's say there are two gas stations across the intersection from each other. The Shell station gets a load of higher priced gas and raises their prices 5 cents. The Citgo station looks across and sees the price over their went up, so they also raise their price. This is not illegal as the station owners did not conspire to set prices equally.


----------



## Steve

klang said:


> Yup, I always buy direct from Baen when possible. Got the latest Honor Harrington book by David Weber for $6. I used to buy these in hardcover but long ago ran out of space to store physical books. Have Baen email the file to Amazon and it shows up on my Kindle just like I had bought it from Amazon.


pottermore.com is another example. Here the author is selling e-books directly to the consumer.


> I think the days of the big publishing houses are numbered.


Ya. I believe all this current pricing strategy maneuvering by the publishers is akin to rearranging deck chairs on the Titanic. Even if it means they will be less profitable, book publishers need to radically alter their fundamental business model to one that is sustainable in a completely digital economy, much like newspapers and magazines are struggling to do. They either need to accept the fact they're going to make less money, or go out of business entirely, IMHO.


----------



## hdtvfan0001

bobukcat said:


> What I would like to know is what exactly the outcome of the suit would be if DOJ wins and what the publishers that settled agreed to. If its not a return to the old pricing model or some other step designed to bring back the lower prices we once enjoyed I'm not sure there's anything positive in it for consumers or the authors.


Good question, likely without a good answer at this time.

Please note that I have repeatedly used the word "allegedly" in my posts regarding this lawsuit, as no guilt by Apple or anyone else has gone through a legal process in any way.

In the end, I suspect everyone, Apple fans, eBook fans, Kindle fans, Nook Fans, and Android fans all share 1 thing in common for the future - fair and competitive pricing to offer eBooks to consumers as one alternative way to read books.

I'm still optimistic that this all turns out making *all* eBook readers happy as an end result.


----------



## trh

bobukcat said:


> Didn't Apple recently kill the ability to buy through the Kindle app on their devices because it cuts them out of the money?





Steve said:


> I don't use either app, but I believe both the Nook and Kindle apps now redirect you to a web page when you try to do an in-app purchase. I think Apple actually relented to allow this, because at one time, I don't think they approved _any _method to bypass the App Store.





afulkerson said:


> I have both the Kindle and an IPad. The Kindle app on the IPad does not allow you to order anything. There is no way to go to the store. You can only see what you have already ordered from Amazon for your Kindle.


The original Kindle app had a link directly to Amazon to buy books. In Feb 2011, Apple changed their TOS so that any products bought through an app, Apple would get their 30%. The eventual solution was the removal of the "buy" button in the Kindle app, but you can go to Amazon via Safari and buy your books and then send them to your iPad.


----------



## Steve

trh said:


> The original Kindle app had a link directly to Amazon to buy books. In Feb 2011, Apple changed their TOS so that any products bought through an app, Apple would get their 30%. The eventual solution was the removal of the "buy" button in the Kindle app, but you can go to Amazon via Safari and buy your books and then send them to your iPad.


My bad. I was mis-remembering that Apple changed the rules last summer to allow re-directs for newspaper and magazine subscriptions, not e-book purchases.

http://www.usatoday.com/tech/news/2011-06-09-apple-subscriptions_n.htm


----------



## Author

Stewart Vernon said:


> To be clear... lower "cost" or lower "price"?
> 
> Why should an author be expected to charge less for an ebook than a printed book? Why shouldn't the author be able to get more money for his work? IF you were an author wouldn't you want more money for your work?
> 
> Also, once printed books become a thing of the past... and ebooks are the only way for authors to sell... why then wouldn't they cost whatever the author wants to sell them for?


The author isn't the one who decides what a book will cost. That's between the publisher and the retailer. Unless he or she is self-published, the author has very little say in anything other than the actual content of the book.

For dreaming up a story, creating characters, spending months or even a year doing this, the author is given a small advance and approximately 6 to 10% royalties on print books and about 17% on ebooks.

The lion's share of the money goes to the publisher. He takes that cut for editing, designing the cover and distributing the book. These are fixed costs that are usually recouped fairly quickly. And the author doesn't see another cent until his advance has "earned out."

Most authors have day jobs because they simply can't make a living based on what their publishers pay them.

Amazon came along and changed all that. By allowing authors to go straight to ebook and paying them a 70% (that's SEVENTY) royalty on gross sales, they've given many authors a chance to bypass the publishers, hire their own cover artists and editors and actually make an excellent living on their work.

So if you ever hear publishers screaming that the ebook prices have to be higher because they're trying to protect authors and get them more money, that's complete nonsense. What they're trying to protect are their office suites and staffs that they maintain with their 90% of net profits.

Anyone who thinks Amazon is the bad guy in this has it wrong. From the content creator's point of view-the author-Amazon is the hero.

What's really happening here is that publishers are scrambling to hang onto a business model that is falling apart-and who can really blame them? But the people who wind up suffering are the authors and the readers.

Now that traditionally published authors can bypass the publishers and go straight to Amazon, they can offer their ebooks at a substantially lower price ($2.99 to $5.99) and still make enough money to survive and continue to write.

There is no reason for ebooks to be priced as high as $12.99 and $14.99, except to pay for the outrageous overhead caused by the publisher's way of doing business.

I'm glad the justice department caught them at their game.


----------



## phrelin

Steve said:


> Just my .02, but I think introducing Apple's wealth into this argument is a straw horse that steers the conversation away from the topic at hand, e-book market share.


The point is that Apple had the resources to be serious competition through discounting at the retail level to attract customers away from Amazon - loss leaders are one way to do that if you are a capitalist with a lot of assets. But we all know Apple is a company used to making a fantastic 25% profit. So they hoarded cash and cut price-fixing deals with major publishers.

Steve Jobs was no capitalist saint.


klang said:


> RasputinAXP said:
> 
> 
> 
> I've been reading books from Kameron Hurley lately. Very good sci fi.
> 
> Kindle, 7-8 bucks.
> 
> Nook, $8-8.50
> 
> Direct from Baen, the publisher, in unencumbered, download as often as you want multiple formats for one price? $6.
> 
> I'm willing to bet Baen makes more money at $6.
> 
> 
> 
> Yup, I always buy direct from Baen when possible. Got the latest Honor Harrington book by David Weber for $6. I used to buy these in hardcover but long ago ran out of space to store physical books. Have Baen email the file to Amazon and it shows up on my Kindle just like I had bought it from Amazon.
> 
> I think the days of the big publishing houses are numbered.
Click to expand...

The big publishing houses are like everything "big" in this country. In this business, management gets used to being overpaid for holding authors hostage, all the while sleeping during the invasion. All of a sudden their territory has been taken over by some e-commodity upstart from Etherland known as Amazon so they try to find a way to leverage their hostages.

In this case, they turned to the one big guy in the Etherland who missed out on this e-commodity and cut a deal to slit the throat of the upstart. Only the Sheriff steps in and says that's not legal.

In the process, hopefully the hostages will be getting away. Sites like baen.com offer alternatives. Simply for a book store ebooks.com is out there.



Author said:


> Anyone who thinks Amazon is the bad guy in this has it wrong. From the content creator's point of view-the author-Amazon is the hero.


Yes, the big news is self-publishing.

While Amazon has given freedom from they stodgy old publishing houses, they aren't the only ones. For instance lulu.com offers serious competition. Check out the company's about page.

As of the dates indicated, these folks are known successful ebook self-publishers:

Amanda Hocking - 1,500,000 ebooks sold (December 2011)
Barbara Freethy - 1.3 million self-published ebooks sold (Dec 2011)
John Locke- more than 1,100,000 eBooks sold in five months
Gemma Halliday - over 1 million self-published ebooks sold (March 2012)
Michael Prescott - more than 800,000 self-published ebooks sold (Dec 2011)
Chris Culver - over 550,000 (Dec 2011)
Heather Killough-Walden - over 500,000 books sold (Dec 2011)
Selena Kitt - "With half a million ebooks sold in 2011 alone"
J.A. Konrath - more than 500,000 ebooks sold (November 2011)
Stephen Leather - close to 500,000 books sold (Nov 2011)
CJ Lyons - almost 500,000 ebooks sold (Dec 2011)
J.R. Rain - more than 400,000 books sold (Sept 2011)
Darcie Chan - more than 400,000 ebooks sold (Nov 2011)
Bob Mayer - 347 sold in Jan to over 400,000 total sold by year's end (Dec 2011)
Bella Andre - more than 400,000 books sold (Feb 2012)
Tina Folsom - over 300,000 books sold (October 2011)
J Carson Black - more than 300,000 books sold (November 2011)
B.V. Larson - over 250,000 books sold (Dec 2011)
Kerry Wilkinson - more than 250,000 books sold (Feb 2012)
T.R. Ragan - 239,592 books sold (March 2012)
H.P. Mallory - more than 200,000 ebooks sold (July 2011)
Marie Force - more than 200,000 sold in the last year (March 2012)

Read this Guardian story Amanda Hocking, the writer who made millions by self-publishing online. Also read Self-published ebook author becomes Amazon's top seller. Google "ebook self publishing success stories"


----------



## James Long

I would like to see eBooks priced the same way as physical books.

Publishers put a price on the cover of their books and sell the books to retailers at less than than price. The gap between what the retailer pays and what they charge is their margin. Out of the margin the retailer pays the costs associated with selling that book. (Warehousing and buildings, staffing, profits if possible.)

If retailers choose they can charge less than the sticker price of the book. Retailers with lower overhead may be able to charge less for the book than the label. And consumers might choose to go to a large bookseller with a discount than a smaller seller that has to charge full price to break even.

The "agency" pricing model seems to break that ... instead of the sticker being a "suggested retail price" it is a required retail price, and all sellers get the same cut (at least the way I read it).

Amazon was selling eBooks at a loss to sell their Kindles and promote the concept of reading eBooks to their customers. If the publisher wanted a $14.99 sticker price with 30% payment to the seller ($4.49) and Amazon wanted a $9.99 sale price that works out to a loss of 51c per book. What is wrong with that?

If Apple doesn't want to play the discount game they are not forced to. Conspiring to stop Amazon from offering discounts is a problem.


----------



## Laxguy

James Long said:


> If Apple doesn't want to play the discount game they are not forced to. Conspiring to stop Amazon from offering discounts is a problem.


Indeed it is, though we don't know that that's the case.

The other problem: predatory pricing is also illegal. We have a lot more sympathy for our friends running a local store when Cost-Mart comes in and undercuts them than we do for a big publishing house.

(Though these Big Box chains have learned to do so without obvious 'intent' to drive them under, and without lowering prices in one store in order to kill competitors in a specific market.)


----------



## Steve

phrelin said:


> The point is that Apple had the resources to be serious competition through discounting at the retail level to attract customers away from Amazon


We're in violent agreement on this point, as I've posted before, most recently here:


Steve said:


> While I agree with the publishers that the playing field needed to be leveled to break Amazon's "monopoly" on e-book sales, the "agency pricing" approach does seem like blatant price-fixing to me. Instead, why not a "wholesale" price approach that would allow the resellers to sell to consumers for whatever the market will bear? Apple, Google and B&N.com would then have been free to discount selected e-books as much as they wanted, to draw market share away from Amazon.


I just don't know that Apple was ever offered an option by the publishers to sell books using the wholesale model. According to this article in today's New York Times:


> "The publishers wanted to stop Amazon from using what one of them called "the wretched $9.99 price point," according to court papers. Selling e-books so cheaply, they feared, would solidify Amazon's robust grip on the business *while simultaneously building a low-price mind-set among consumers that could prove ruinous to other bookstores and the publishers themselves.*


I believe them allowing Apple to undercut Amazon to gain market share would have just exacerbated the problem, in their minds.


----------



## Steve

Interesting read from today's New York Times that explains in more detail why some publishers are trying to keep Amazon from deciding how much a title should sell for.



> The Educational Development Corporation, saying it was fed up with Amazon's scorched-earth tactics, announced at the end of February that it would remove all its titles from the retailer's virtual shelves. That eliminated at a stroke $1.5 million in annual sales, a move that could be a significant hit to the 46-year-old EDC's bottom line.
> 
> "Amazon is squeezing everyone out of business," said Randall White, EDC's chief executive. "I don't like that. They're a predator. We're better off without them."
> 
> [...]
> 
> During the holiday season, Amazon encouraged customers to use physical stores as showrooms before ordering more cheaply online, a move that infuriated bookstores in particular. Publishers and distributors say that Amazon, never exactly shy in negotiating terms, has been more assertive in its quest for ever-better deals.
> 
> In February, Amazon demanded better margins from the Independent Publishers Group, a Chicago distributor of dozens of small imprints. IPG balked, so Amazon removed nearly 5,000 of the company's e-books from its site.
> 
> "Amazon wants the price of books to be very, very low - lower than the publishing community can support," said Curt Matthews, IPG's chief executive. "Making a book is still a craft industry. Books need to be edited, to be publicized. Someone needs to say this is good and this is not. If there is not enough money to support that whole chain, the system will break down."
> 
> [*more*]


----------



## trh

Steve said:


> I just don't know that Apple was ever offered an option by the publishers to sell books using the wholesale model.


It seems they were the ones to negotiate the agency model so they wouldn't enter into eBooks losing money.


> In the complaint against Apple, lawyers for the plaintiffs detail meetings between the publishers and Apple ahead of the iPad launch. Apple agreed to adopt a model where the publisher sets a price and Apple receives a 30 percent cut, called "agency pricing". The plaintiff's attorneys argue that previous to Apple's entrance, ebooks were sold at wholesaler and the retailer itself set the price.
> 
> "Apple knew that if Amazon were allowed to continue to solidify its position in the ebook market, these network effects would make it nearly impossible for Apple to dislodge Amazon in the near term", the filing reads.
> 
> Apple responds to these allegations by admitting that meetings did occur between the two parties, however, the company entered the market with zero market share and sales. It made a conscious business decision not to lose money on the sale of ebooks and agreed to agency pricing as a result.
> 
> "It would make perfect sense as a rational and competitive business strategy for Apple not to enter as a retailer incurring losses, but instead as an agent on commission with a competitive offering - which is exactly what the agency agreements negotiated by Apple accomplished", Apple responds.


*Apple admits to two key allegations in eBook Price Fixing Case.*


----------



## phrelin

Steve said:


> We're in violent agreement on this point, as I've posted before, most recently here:
> 
> I just don't know that Apple was ever offered an option by the publishers to sell books using the wholesale model. According to this article in today's New York Times:


We are basically in agreement. If Apple was not offered an option by publishers to sell books using the wholesale model, Apple should have refused to be an outlet. But this is an evolving marketplace and in the end a "settlement" will simply acknowledge that. I don't see any evil here.

The problem in the end may be how publishers view their role. Are they wholesalers or manufacturers? In the context of the printed book, they are both because the product being sold is a "book," a physical commodity. Historically, these were valuable, carefully and attractively bound - owning books a source of pride, I guess because it meant that the owners could read which conferred status. Oh, and as an aside, that commodity contains the author's words.

What I see evolving is a generation of writers who share their words, their ideas, on the internet and we throw money into their baskets in order to be part of the sharing community.

As Dictionary.com defines it, a book is "a written or printed work of fiction or nonfiction, usually on sheets of paper fastened or bound together within covers."

IMHO we've used the term "ebook" to help us transition.

But what we're really adjusting to is the concept that Western European civilization has seen a format evolution from special community story-tellers passing stories and advice orally to the laboriously hand-copied manuscript to the printed and bound book manufactured by a process that, at some point, became mechanized enough to allow the development of the cheap "paperback" to a new format that really seems to most people more abstract than the underlying stories and advice.

It is highly likely that generations born after 2020 will come to see the "book" as funky, musty, and akin to antiques like the fireplace bellows:








=


----------



## Stewart Vernon

I think I just read something confusing in a few recent posts...

Amazon is a hero for jump-starting self-publishing and only taking 30% of the cut...

BUT

Apple is greedy for wanting 30% of the cut?

How does that equate?

Meanwhile... As I've said, I'm torn. Amazon (or anyone) should be allowed to lose money if they want.. so if an author or publisher wants their money based on $14.99 "cover" price, and Amazon pays that but chooses to sell at $9.99... ok.

The downside, though, is that it does undercut the perceived value of the book. When people routinely see a book under the suggested retail price, they begin to feel that is the maximum it is worth... which tends to force sales of those items to the store who is setting those lower prices.

Once Amazon (or anyone) has a monopoly, they will no doubt stop that practice of loss-leading with those items and the prices would go up again... and then we'd have a different problem on our hands.

Meanwhile... not all price-fixing is illegal. The government even sets price floors for some products (like dairy farm products for example) bu subsidizing... and James noted an example of non-collusion with gas stations that tend to price for their area.


----------



## Steve

trh said:


> *It seems they were the ones to negotiate the agency model so they wouldn't enter into eBooks losing money.*
> 
> 
> 
> 
> [...] "It would make perfect sense as a rational and competitive business strategy for Apple not to enter as a retailer incurring losses, but instead as an agent on commission with a competitive offering - which is exactly what the agency agreements negotiated by Apple accomplished", Apple responds.
Click to expand...

That may very well be the case. It's also possible, however that is Apple's public response to the DOJ's allegations, framed in a way that doesn't burn any bridges. If, e.g., they said "we wanted a wholesale model but the publishers wouldn't agree to it," they'd effectively be throwing the publishers under the bus (and arguably siding with Amazon).


----------



## trh

Stewart Vernon said:


> I think I just read something confusing in a few recent posts...
> Amazon is a hero for jump-starting self-publishing and only taking 30% of the cut...
> BUT
> Apple is greedy for wanting 30% of the cut?


I guess the big difference is that with Amazon, 70% is going to the author. And since the author is self-publishing and there isn't a publisher, the books are significantly cheaper (like $5).

On an unrelated note: I've enjoyed this discussion. Not only for the topic and the diversified views, but that it hasn't turned into personal attacks like so many other threads around here. Thanks everyone.


----------



## Steve

trh said:


> I guess the big difference is that with Amazon, 70% is going to the author. And since the author is self-publishing and there isn't a publisher, the books are significantly cheaper (like $5).


And when you look at the "traditional" publishing market, I wonder what value the publishing houses provide authors besides editing, design, promotion, printing and distribution? When the world become 99% e-books, and that's likely going to happen at some point, wouldn't authors just need an editor and a designer? Amazon, Apple, Google and B&N all offer ways to self-publish, and if a book is good, it should generate buzz on the internet, prompting reviewers to review and write about it. If it's not that simple, what am I missing? Maybe a publicist, just in case? :scratchin


----------



## Drew2k

Stewart Vernon said:


> I think I just read something confusing in a few recent posts...
> 
> Amazon is a hero for jump-starting self-publishing and only taking 30% of the cut...
> 
> BUT
> 
> Apple is greedy for wanting 30% of the cut?
> 
> How does that equate?


I guess it's because self-publishing with Amazon gives the 70% to the author, while with Apple that 70% is split between the Publisher and author, with the author only getting 10% of the publisher's take?

---

On a different note, I did just think of one drawback of self-publishing: the author loses the marketing power of the Publisher, and potentially loses notice from mainstream book critics. Publishers have giant PR machines to promote books from their authors, something the self-published author is not going to easily duplicate. Also, how are book critics going to find out about new books from self-publishing authors without the PR machines and book parties and the like? (yes, I know not every book has a party)

Anyway, that's a sidebar. Now back to your regularly scheduled discussion ...


----------



## Steve

Drew2k said:


> I guess it's because self-publishing with Amazon gives the 70% to the author, while with Apple that 70% is split between the Publisher and author, with the author only getting 10% of the publisher's take?


That's not exactly an apples to Apple comparison.  When it comes to _self-publishing_, Apple's split is also 70/30, same as Amazon's (and probably B&N's and Google's).

http://www.johnchow.com/how-to-sell-your-ebook-in-the-apple-ibook-store/


----------



## Stewart Vernon

Steve said:


> That's not exactly an apples to Apple comparison.  When it comes to _self-publishing_, Apple's split is also 70/30, same as Amazon's (and probably B&N's and Google's).http://www.johnchow.com/how-to-sell-your-ebook-in-the-apple-ibook-store/


You beat me to it... I was just about to say that you can self-publish with Apple too.


----------



## bobukcat

"Stewart Vernon" said:


> I think I just read something confusing in a few recent posts...
> 
> Amazon is a hero for jump-starting self-publishing and only taking 30% of the cut...
> 
> BUT
> 
> Apple is greedy for wanting 30% of the cut?
> 
> How does that equate?
> 
> Meanwhile... As I've said, I'm torn. Amazon (or anyone) should be allowed to lose money if they want.. so if an author or publisher wants their money based on $14.99 "cover" price, and Amazon pays that but chooses to sell at $9.99... ok.
> 
> The downside, though, is that it does undercut the perceived value of the book. When people routinely see a book under the suggested retail price, they begin to feel that is the maximum it is worth... which tends to force sales of those items to the store who is setting those lower prices.
> 
> Once Amazon (or anyone) has a monopoly, they will no doubt stop that practice of loss-leading with those items and the prices would go up again... and then we'd have a different problem on our hands.
> 
> Meanwhile... not all price-fixing is illegal. The government even sets price floors for some products (like dairy farm products for example) bu subsidizing... and James noted an example of non-collusion with gas stations that tend to price for their area.


I would suggest you read the details again, everyone agrees that both the publishers and authors were making more money per book under the wholesale model with Amazon, the difference in the agency model is that the consumer pays more. I will also remind you that Amazon is the top reseller of paper books (under the same reseller model they used to have for ebooks), controlling approximately 70% of that market.

Using the spectre of possible future wrong doing is not exactly a great defense. As the authors that wrote the Turro rebuttal stated - the argument that an entity that has increased book sales dramatically is the biggest danger to book sales is a strange one at best. The publishers are in the same position the record companies were and they are making all the same mistakes in my opinion.


----------



## trh

Stewart Vernon said:


> You beat me to it... I was just about to say that you can self-publish with Apple too.





Steve said:


> That's not exactly an apples to Apple comparison.  When it comes to _self-publishing_, Apple's split is also 70/30, same as Amazon's (and probably B&N's and Google's).





Stewart Vernon said:


> I think I just read something confusing in a few recent posts...
> 
> Amazon is a hero for jump-starting self-publishing and only taking 30% of the cut...
> 
> BUT
> 
> Apple is greedy for wanting 30% of the cut?
> 
> How does that equate?


I don't see where anyone has called Apple "greedy" for their self-publishing business model. The business model that people have taken exception to is the agency model that Apple created to carve out their 30%. I am torn as to whether that number is to high; Apple does provide an excellent service to distribute eBooks and the 30% is what they charge everyone. But when the creator of that book is getting roughly half that amount, Apple's share is to high OR the publishers are taking to much. The Authors are the talent and should be compensated as such.


----------



## trh

Stewart Vernon said:


> The downside, though, is that it does undercut the perceived value of the book. When people routinely see a book under the suggested retail price, they begin to feel that is the maximum it is worth... which tends to force sales of those items to the store who is setting those lower prices.


"perceived value" of a book? A new Tom Clancy book came out within the last two months. $14.99 eBook price on Amazon and Sony. I went to the mall and was in a book store there. $15.99. My perceived value is that I am getting screwed if I buy the eBook. Then I went to the local Navy base. They typically sell books for 20% lower and no tax. Same hard cover brand new Tom Clancy book. $13.99. Again, I'm getting screwed if i buy the eBook.

That's my perception.


----------



## Herdfan

trh said:


> "perceived value" of a book? ..... Same hard cover brand new Tom Clancy book. $13.99. Again, I'm getting screwed if i buy the eBook.
> 
> That's my perception.


But you are not placing any value on convenience. I, and many others, do. We were on a trip and my daughter had gotten a book from a new series to read. She likes to read, so we encourage it. So she blows through this new book in a day and wants to find a bookstore so she can get book number 2 in the series. Five minutes later she is reading it on my wife's Kindle.

She got her own Kindle for Christmas and I think she reads now more than she did before. She has a book "allowance" from her grandmother and she gets one new book per weeks. Of course some books she wants hard copies of (Hunger Games etc.), but most she is perfectly happy to read on the Kindle. When she hears about a new book, she can download and try it immediately, not go running off to the mall to see if they have it.

Convenience is worth something. In the case of the Clancy novel you mention, probably not as people wait for his new releases and they can be found everywhere. But for other books you might want to try, it is worth it.


----------



## RasputinAXP

Herdfan said:


> But you are not placing any value on convenience. I, and many others, do.


Indeed. My tolerance is if it's easier to purchase than to pirate, I purchase. So far it's been mostly purchasing. Try to delve into the back catalog of some early sci fi authors and it flings into the other direction. Some of their stuff is PD now but others are encumbered and not easily available unless you go spelunking into the dark corners of the Internet.


----------



## trh

Herdfan said:


> But you are not placing any value on convenience. I, and many others, do.


I am placing value on convenience. But I think the convenice is derived through the hardware, not the eBook. If you want a Kindle 6" E ink with WiFi, it costs $79. Kindle with WiFi and 3G is $139. If you want a 10" color screen eBook reader with WiFi, spend $499 for an iPad.

But if you insist the convenience cost is associated with the book, then my eBooks should be cheaper than your daughter's. I have an old Sony that doesnt' have wireless -- I have to be at my home PC connected to the internet to download to my authorized library. Then I have to sync that library via USB cable to my Sony. No adding books for me while on a trip.


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## dennisj00

There are some books that I want in both hardcover and kindle. I got the 'Autobiography of Mark Twain - v1' in both formats. But I'm reading it on the Kindle iPad app.

Another factor of convenience - can you imagine being able to carry ALL of your textbooks on an ereader or iPad! And do instant searches! I can remember scheduling my classes so I didn't have to carry all the books all day.

And that brings up another issue. I don't understand the 'expiration' of text books.


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## bobukcat

Herdfan said:


> But you are not placing any value on convenience. I, and many others, do. We were on a trip and my daughter had gotten a book from a new series to read. She likes to read, so we encourage it. So she blows through this new book in a day and wants to find a bookstore so she can get book number 2 in the series. Five minutes later she is reading it on my wife's Kindle.
> 
> She got her own Kindle for Christmas and I think she reads now more than she did before. She has a book "allowance" from her grandmother and she gets one new book per weeks. Of course some books she wants hard copies of (Hunger Games etc.), but most she is perfectly happy to read on the Kindle. When she hears about a new book, she can download and try it immediately, not go running off to the mall to see if they have it.
> 
> Convenience is worth something. In the case of the Clancy novel you mention, probably not as people wait for his new releases and they can be found everywhere. But for other books you might want to try, it is worth it.


Convenience is definitely worth something - the $149 I paid for my Kindle. Add in fact that if I buy the physical book I can go sell it when I'm done if I choose and make a few bucks back or donate it and get a tax write off and the ebook is even more of a rip-off at that price.

It is obvious to everyone that ebooks are cheaper to "manufacture" and distribute than the physical book so we expect to pay less for it. You can argue this all you want but it is basic consumer nature to expect to pay less for something you know costs less to make. I'm not saying that always happens but for the most part it does. Then you consider that the same book would have sold for $5 less on Amazon a couple years ago and it is even more bothersome. I still buy books on Kindle but I am not happy about the pricing changes and I find myself waiting for a title to be on sale or choosing lower priced titles if I'm just looking for something new. This isn't because of perceived value, it's because I know (or at least strongly believe) that the publishers have conspired (possibly with Apple or just with Apple's help) to raise my prices and the author isn't getting paid more, they are making less.

I also read that the EU is investigating the big publishers for collusion on royalty rates - apparently they all pay exactly the same rate to authors (17.5% I believe on physical books), what a coincidence! :sure:


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## Stewart Vernon

trh said:


> "perceived value" of a book? A new Tom Clancy book came out within the last two months. $14.99 eBook price on Amazon and Sony. I went to the mall and was in a book store there. $15.99. My perceived value is that I am getting screwed if I buy the eBook. Then I went to the local Navy base. They typically sell books for 20% lower and no tax. Same hard cover brand new Tom Clancy book. $13.99. Again, I'm getting screwed if i buy the eBook.
> 
> That's my perception.


You are actually proving my point... You already have a lower perceived value of the content of the book, thus your feeling that it should be priced lower before you will buy. The undervaluing of books is already working on you.


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## Stewart Vernon

trh said:


> I don't see where anyone has called Apple "greedy" for their self-publishing business model. The business model that people have taken exception to is the agency model that Apple created to carve out their 30%. I am torn as to whether that number is to high; Apple does provide an excellent service to distribute eBooks and the 30% is what they charge everyone. But when the creator of that book is getting roughly half that amount, Apple's share is to high OR the publishers are taking to much. The Authors are the talent and should be compensated as such.


You kind of contradicted yourself there... but anyway, the author can self-publish and set his own price and get more money that way now. He doesn't have to go through an agent or a publisher to publish an eBook at Amazon or Apple.

If you agree to use an agent or a publisher, then you have to pay them something. If they take too big of a chunk, that's up to you to decide.

Same thing with Apple's chunk... if you think Apple charges too much, then you can setup your own Web site to advertise and take orders and sell the eBook yourself and keep all the money BUT also have all the expense too.


----------



## trh

Stewart Vernon said:


> You are actually proving my point... You already have a lower perceived value of the content of the book, thus your feeling that it should be priced lower before you will buy. The undervaluing of books is already working on you.


The content of an eBook and print book is the same. So no lower perception there. The reality is that the cost to get an eBook delivered to me is cheaper than a printed copy. So because that cost is cheaper, I want to pay a lower price. The actual value I place on the book is after I've read it.


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## bobukcat

Stewart Vernon said:


> You are actually proving my point... You already have a lower perceived value of the content of the book, thus your feeling that it should be priced lower before you will buy. The undervaluing of books is already working on you.


I perceive that because a book suddenly cost me 50% more than it did before while being completely unchanged in content I am being screwed over - the DOJ agrees with me. 

Your argument is that undervaluing the book (a subjective measurement to be certain) will lead to a steady decline in book prices and eventually ruin the book industry. The results in the wholesale model point to exactly the opposite happening - more books were sold and the authors made more money while the consumers got a better deal. Even the authors know they will sell more books at $9.99 than at $14.99 (blockbuster releases somewhat excluded). You seem to support higher book prices even though the author and publisher are both making less money while consumers pay more, I cannot understand that position but we can agree to disagree.


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## Laxguy

bobukcat said:


> Even the authors know they will sell more books at $9.99 than at $14.99 (blockbuster releases somewhat excluded). You seem to support higher book prices even though the author and publisher are both making less money while consumers pay more, I cannot understand that position but we can agree to disagree.


You seem to assume that the price elasticity for all books is the same. Sure, some books my sell double what they would have when priced 50% higher, but under a lot of circumstances, there would be only a marginal increase in sales due to a lower price. E.g., I'd rather sell 5,000 books @ $15.00 than 6,000 @ $10.00, as would all but the most altruistic of authors.


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## bobukcat

Laxguy said:


> You seem to assume that the price elasticity for all books is the same. Sure, some books my sell double what they would have when priced 50% higher, but under a lot of circumstances, there would be only a marginal increase in sales due to a lower price. E.g., I'd rather sell 5,000 books @ $15.00 than 6,000 @ $10.00, as would all but the most altruistic of authors.


Not if you made more selling the 6000 at $10.


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## Laxguy

bobukcat said:


> I perceive that because a book suddenly cost me 50% more than it did before while being completely unchanged in content I am being screwed over - the DOJ agrees with me.


Not sure how to interpret your emoticon, but most certainly the DoJ isn't saying you've been screwed over, or that any one has been. Merely that there's enough smoke to see if there's a fire.


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## Laxguy

bobukcat said:


> Not if you made more selling the 6000 at $10.


And just how would that work? And you can't change the percentages the author gets.....


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## Steve

Laxguy said:


> E.g., I'd rather sell 5,000 books @ $15.00 than 6,000 @ $10.00, as would all but the most altruistic of authors.


Doesn't that depend on what the royalty is based on?

E.g., my daughter-in-law wrote a fashion self-help book 2 years ago, and she received a negotiated $$$ amount up front from the publisher for the first 20k copies, and now gets a fixed $$$ amount for each copy sold over that, no matter what the sales price of the book. That goes for both the print and e-editions.


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## trh

Laxguy said:


> Not sure how to interpret your emoticon, but most certainly the DoJ isn't saying you've been screwed over, or that any one has been. Merely that there's enough smoke to see if there's a fire.


Actually, they have said 'the consumer' has been screwed over. AG Holder during his press conference:


> As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles.


The three publishers that have settled have agreed to pay back $52 million; DOJ has stated they believe the total 'screw job' is at $100 million.

The actual filing is interesting reading. Including emails excerpts between the publishers. Also, DOJ doesn't refer to it as the 'agency model', but as the 'Apple agency model' as Apple drafted it and sent it to each of the publishers.


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## Laxguy

Steve said:


> Doesn't that depend on what the royalty is based on?
> 
> E.g., my daughter-in-law wrote a fashion self-help book 2 years ago, and she received a negotiated $$$ amount up front from the publisher for the first 20k copies, and now gets a fixed $$$ amount for each copy sold over that, no matter what the sales price of the book. That goes for both the print and e-editions.


Of course, but for sake of arguing that authors are always better off selling at a lower price, you have to use same percentages, and not a fixed amount or floating percentages.


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## Steve

Laxguy said:


> Of course, but for sake of arguing that authors are always better off selling at a lower price, you have to use same percentages, and not a fixed amount or floating percentages.


I know you were responding to a different argument, so this question isn't directed at you, but is a non self-publishing author getting a % a common occurrence? I thought publishers usually gave authors fixed, negotiated per-copy royalties, based on # copies sold, with the royalty changing when they reached certain sales milestones.


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## trh

Steve said:


> I know you were responding to a different argument, so this question isn't directed at you, but is a non self-publishing author getting a % a common occurrence? I thought publishers usually gave authors fixed, negotiated per-copy royalties, based on # copies sold, with the royalty changing when they reached certain sales milestones.


Here's a link to a literary agent that discusses your question. *Barbara Doyen*


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## Steve

trh said:


> Here's a link to a literary agent that discusses your question. *Barbara Doyen*


Thanks. Per that article, my DIL gets a % of the cover price, so a fixed amount per copy sold (over 20k copies).


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## bobukcat

"Laxguy" said:


> And just how would that work? And you can't change the percentages the author gets.....


No, but what did change is what they are getting a percentage of. Amazon used to buy the books at a fixed 50% of the cover price (just like they did for paper books) and that is what the author was paid on. That meant they were getting paid their percentage (17.5 seems to be the most widely quoted number) of $11 (assuming a $22 hardcover list) per copy while Amazon was selling it for $9.99. Under the new model if the book sells for $13.99 they get paid their percentage of $9.80 after the reseller takes their 30% cut. That example equates to about 12% lower royalty rate.


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## bobukcat

"Laxguy" said:


> Not sure how to interpret your emoticon, but most certainly the DoJ isn't saying you've been screwed over, or that any one has been. Merely that there's enough smoke to see if there's a fire.


They filed a civil lawsuit, they aren't saying there might be fire, they are saying there's a big one burning and we know who lit it! It has to be proven in a court of law (or settled) but its not just an investigation anymore.


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## Stewart Vernon

bobukcat said:


> No, but what did change is what they are getting a percentage of. Amazon used to buy the books at a fixed 50% of the cover price (just like they did for paper books) and that is what the author was paid on. That meant they were getting paid their percentage (17.5 seems to be the most widely quoted number) of $11 (assuming a $22 hardcover list) per copy while Amazon was selling it for $9.99. Under the new model if the book sells for $13.99 they get paid their percentage of $9.80 after the reseller takes their 30% cut. That example equates to about 12% lower royalty rate.


Think about what you just described there for a minute.

Now... let some time elapse and let Amazon continue to sell eBooks for less than they are actually paying for them... and let that drive all of Amazon's competitors out of business.

Ok... now in that future, where Amazon is the only place left to sell your eBook. You don't think Amazon will continue to pay $11 for a book that they sell for $9.99 do you? No... instead, Amazon will then begin to say "Your book is only worth $9.99, we will pay you half of that" and you will not have much choice in shopping your book elsewhere by then.


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## trh

Amazon drive all of their competitors out of business? Including Apple? 

You seem to be arguing that it was ok for the publishers and Apple to fix prices to stop one company from taking over the market.


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## bobukcat

"Stewart Vernon" said:


> Think about what you just described there for a minute.
> 
> Now... let some time elapse and let Amazon continue to sell eBooks for less than they are actually paying for them... and let that drive all of Amazon's competitors out of business.
> 
> Ok... now in that future, where Amazon is the only place left to sell your eBook. You don't think Amazon will continue to pay $11 for a book that they sell for $9.99 do you? No... instead, Amazon will then begin to say "Your book is only worth $9.99, we will pay you half of that" and you will not have much choice in shopping your book elsewhere by then.


As I've said before, using the spectre of possible wrong doing in the future is hardly justification for illegal behavior. Do you really believe that Apple could not have been competitive with Amazon if purchasing the ebooks in the wholesale model? I might accept that B&N would have had a challenge there but then it is up to them to deliver some type of additional value to the consumers, and they've proven they can with the Nook line. I know several people who chose Nook over Kindle because they could go to the B&N store to buy it and they allowed lending when Amazon did not. That is how a free market is supposed to work.


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## Stewart Vernon

trh said:


> Amazon drive all of their competitors out of business? Including Apple?
> 
> You seem to be arguing that it was ok for the publishers and Apple to fix prices to stop one company from taking over the market.


To be fair... Even the DOJ isn't sure they can prove Apple was involved in the price-fixing... the documents I read indicated that while Apple was in favor of and encouraged the model, that it was the publishers themselves who met to discuss setting the actual prices.



bobukcat said:


> As I've said before, using the spectre of possible wrong doing in the future is hardly justification for illegal behavior. Do you really believe that Apple could not have been competitive with Amazon if purchasing the ebooks in the wholesale model? I might accept that B&N would have had a challenge there but then it is up to them to deliver some type of additional value to the consumers, and they've proven they can with the Nook line. I know several people who chose Nook over Kindle because they could go to the B&N store to buy it and they allowed lending when Amazon did not. That is how a free market is supposed to work.


That's a tricky question to answer...

Amazon had 90% of the market a couple of years ago and only has 60% now as a result of the pricing changes. Arguably, without those pricing changes Amazon had a head start on cornering the market and was using eBooks as a loss-leader to keep that marketshare.

As for advocating illegal activities to prevent other possible wrongdoing... I don't want to go political here... but our country was kind of founded on doing just that... if you believe there is a wrong about to happen, risk breaking that wrong law to create justice. It is arguably not just a right but a responsibility.

Now, if you get caught and lose (like the DOJ pursuing Apple and the book publishers) then those are the breaks... but if you are trying to prevent something else you believe in, then it's hard to argue completely against taking action.

Look at what happened to Web browsers basically. For those who forget...

Web browsers were free at first... then some companies started charging nominal fees for boxed packages... then Netscape came along and changed the game.

Netscape gave their browser away, but built features into their server-side software that could only be viewed by their browser and then pushed to make those standard HTML. This helped sell their server software and made it impossible (practically) for their competitors to sell competing browser software.

Thus Netscape captured the browser market... which also meant they had a huge leg up on the server side. Then, guess what? Netscape started charging for their browser once the competition had been pretty much eliminated!

Then comes Microsoft... Microsoft bought the company who created Internet Explorer... Microsoft began bundling IE with their operating system, began integrating special features on it that only worked with Windows Web servers (sound familiar??) and worked to get those included in standard HTML.

Microsoft had one-upped the Netscape model by not only having a free browser but making sure each Windows-installed machine came with that as part of the pre-load.

So... Netscape complained... about essentially the same process that had gained them marketshare in the first place!

Microsoft had their hand slapped... but the real damage was finally done. The value of Web browser software had been forever ruined. Now it is unthinkable to pay for Web browser software... so companies either develop them as a loss-leader to sell something else OR hobbyists develop them for fun and programming experience.

It's not too much of a leap to see things like eBooks devalued over a long process until people begin to expect them to be near-free. It is already happening to the music industry if you think about it. People balk at prices of music to the point of sometimes trying to justify why it is "ok" to steal electronic copies since it "doesn't hurt" anyone... It's about a 1 second hop to justifying the same thing for digital copies of anything and everything.


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## bobukcat

Stewart Vernon said:


> Amazon had 90% of the market a couple of years ago and only has 60% now as a result of the pricing changes. Arguably, without those pricing changes Amazon had a head start on cornering the market and was using eBooks as a loss-leader to keep that marketshare.


As I and others have stated, there were many other things that happened in the same time frame as the pricing model changes. The largest one was definitely the introduction of the iPad and iBooks by Apple. The 2nd largest was B&N releasing the Nook reader (as a lower price than the Kindle BTW). Considering there was no market to speak of at all before the Kindle and a still very small market (relatively) when the iPad was released I don't think it's accurate to credit the pricing changes for the market share shift. It may have had played a part but it was a small piece of the puzzle comparatively.



Stewart Vernon said:


> It's not too much of a leap to see things like eBooks devalued over a long process until people begin to expect them to be near-free. It is already happening to the music industry if you think about it. People balk at prices of music to the point of sometimes trying to justify why it is "ok" to steal electronic copies since it "doesn't hurt" anyone... It's about a 1 second hop to justifying the same thing for digital copies of anything and everything.


Some people will create a rationale for anything they do, legal or not. Software was being pirated way before music was and I'm sure there is some degree of ebook pirating going on as well. Of course people have been selling cover-less paper books for a long time too, which is essentially pirating.


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## bobukcat

Stewart Vernon said:


> As for advocating illegal activities to prevent other possible wrongdoing... I don't want to go political here... but our country was kind of founded on doing just that... if you believe there is a wrong about to happen, risk breaking that wrong law to create justice. It is arguably not just a right but a responsibility.


I'm going to keep my response to this short, despite my gut instinct to do otherwise. Our country was primarily founded because of taxes that the colonists were being forced to pay to the crown. Not because they were worried they would have to pay taxes next year or next week, they were paying them and felt they were getting nothing of value in return.


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## trh

A couple paragraphs from the DOJ case against the publishers and Apple. *DOJ Case PDF*



> The Apple Agency Agreements [edit by trh: the term sheet that Apple sent to each publisher was called the "Apple Agency Agreement"] contained two primary features that assured Publisher Defendants of their ability to wrest pricing control from retailers and raise e-book retail prices above $9.99. First, Apple insisted on including a Most Favored Nation clause ("MFN" or "Price MFN") that *required each publisher to guarantee that no other retailer could set prices lower than what the Publisher Defendant set for Apple*, even if the Publisher Defendant did not control that other retailer's ultimate consumer price. The effect of this MFN was twofold: it not only protected Apple from having to compete on retail price, but also dictated that to protect themselves from the MFN's provisions, Publisher Defendants needed to remove from all other e-book retailers the ability to control retail price, including the ability to fund discounts or promotions out of the retailer's own margins. Thus, the agreement eliminated retail price competition across all retailers selling Publisher Defendants' e-books.
> 
> Second, the Apple Agency Agreements contained pricing tiers (ostensibly setting maximum prices) for e-books-virtually identical across the Publisher Defendants' agreements-based on the list price of each e-book's hardcover edition. Defendants understood that by using the price tiers, they were actually fixing the de facto prices for e-books. In fact, once the Apple Agency Agreements took effect, Publisher Defendants almost uniformly set e-book prices to maximum price levels allowed by each tier. Apple and Publisher Defendants were well aware that the impact of their agreement was to force other retailers off the wholesale model, eliminate retail price competition for e-books, allow publishers to raise e-book prices, and permanently to change the terms and pricing on which the e-book industry operated.





> In some cases, the agency model dictates that the price of an e-book is higher than its corresponding trade paperback edition, despite the significant savings in printing and distributing costs offered by e-books.





> Publisher Defendants also feared that the $9.99 price would drive e-book popularity to such a degree that digital publishers could achieve sufficient scale to challenge the Publisher Defendants' basic business model.


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## klang

> Publisher Defendants also feared that the $9.99 price would drive e-book popularity to such a degree that digital publishers could achieve sufficient scale to challenge the Publisher Defendants' basic business model.


I think they are too late, it has already happened.


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## Stewart Vernon

A couple of things regarding "Most Favored Nation"...

Consider the origin of the phrase... and how our own government (the same one that thinks such a clause is improper) actually has these kinds of agreements with other nations.

More on-topic... since this is a DBS forum... I do believe Dish and DirecTV have had "most favored nation" clauses with various programming providers... and it has been a point of contention when say Disney signs a deal with Dish that is lower than what they signed DirecTV... and then DirecTV says "hey, we have a most favored nation clause" and wants to pay less on their contract too.

So... I guess the point here is that a "most favored nation" clause in and of itself isn't something necessarily bad or illegal OR if it is, then a whole bunch of other companies and our own government need to go under the microscope.


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## Stewart Vernon

bobukcat said:


> As I and others have stated, there were many other things that happened in the same time frame as the pricing model changes. The largest one was definitely the introduction of the iPad and iBooks by Apple.


Yes... and no... IF the Amazon eBooks were consistently priced lower than the equivalent iBook offering... do you think the Apple share of eBook sales would have grown at all?

Also... points against Apple wanting to control everything... Amazon developed a Kindle app for the iPad and iPhone... and you can buy your books via Amazon using Safari on your mobile device and bypass Apple if you like... so Apple isn't even forcing you to only use the iBook app on your Apple device to the exclusion of other eBook readers.

I'm not sure if the reverse is true... Can you purchase and read an Apple store eBook from a Kindle device? Or can you only buy from Amazon to read on your Kindle? I really am being serious here. I don't know the answer.


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## trh

Stewart Vernon said:


> Yes... and no... IF the Amazon eBooks were consistently priced lower than the equivalent iBook offering... do you think the Apple share of eBook sales would have grown at all?


We've heard that Amazon had 90% of the eBook market before the Nook and iPad came out and that it went down to around 60%; anyone know what type of market share B&N and Apple each have?

Can Apple iBooks be read on the Kindle? -- Not if the book was purchased through iBooks. It has DRM that can only be read on an Apple device. Since the Kindle isn't app-based, there isn't an iBooks app to put on a Kindle (not sure if the same holds true for a Kindle Fire). There also isn't an Android app to read iBooks.


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## DogLover

Stewart Vernon said:


> A couple of things regarding "Most Favored Nation"...
> 
> Consider the origin of the phrase... and how our own government (the same one that thinks such a clause is improper) actually has these kinds of agreements with other nations.
> 
> More on-topic... since this is a DBS forum... I do believe Dish and DirecTV have had "most favored nation" clauses with various programming providers... and it has been a point of contention when say Disney signs a deal with Dish that is lower than what they signed DirecTV... and then DirecTV says "hey, we have a most favored nation clause" and wants to pay less on their contract too.
> 
> So... I guess the point here is that a "most favored nation" clause in and of itself isn't something necessarily bad or illegal OR if it is, then a whole bunch of other companies and our own government need to go under the microscope.


I thing what you are missing in the above example is that DirecTV and Dish are asking for "most favored nation" status on what is basically a wholesale price. They are fixing what the providers can charge the competitor, not what the competitor can charge the customer. That's the difference, and that's where it enters the realm of price fixing. (Whether it has crossed the legal line of illegal price fixing, is to be determined.)

The more appropriate analogy would be for DIRECTV and HBO, STARZ, etc.. To decide that DIRECTV is now just and agent for the premium channels. The providers can charge what they want for their channels, and DIRECTV will take 30%. However, the contract is contingent on the premium providers ensuring that Dish (and the cable companies) don't charge the customer less for those channels, forcing the cable companies and Dish to accept the agency model.

Would this be a good thing or a bad thing for the TV industry?


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## phrelin

In the end, the question is always "can every individual retailer set the price on the product it sells?" If the answer is "no" then there is a problem.


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## bobukcat

"Critics of lawsuit miss the mark, experts say"
http://online.wsj.com/article/SB10001424052702303978104577359741232993860.html

Nothing real new here except for experts weighing in on the main purpose of price fixing / anti-trust laws being to protect consumers, not to prevent businesses that can't compete from suffering / going out of business. They also say that DOJ has already been lenient by filling civil rather criminal suit and allowing those that settled a relatively short time period for the settlement terms to be in effect.


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## hdtvfan0001

*Here's the latest update on this case:*



> Apple and five big publishers are still on the hook to battle allegations of price fixing after a U.S. district court judge rejected their bid to dismiss a consumer lawsuit accusing them of colluding to maintain artificially high e-book prices.
> 
> Last month, the U.S. Department of Justice announced settlements with three publishers: Simon & Schuster, Hachette Book Group, and Harper Collins. Apple, Macmillan, and Penguin intend to fight the allegations in court.
> 
> Filed in the U.S. District Court for the Southern District of New York, the consumers' suit alleges that Apple acted as the ringleader of a coordinated attempt by the five publishers to push prices higher on e-books. Judge Denise Cote refused to throw out the lawsuit.


*The full update report is here:*

http://news.cnet.com/8301-13579_3-57434753-37/consumer-e-book-suit-against-apple-publishers-gets-go-ahead/


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## Laxguy

What, please, Sir, is news here? The article is from over a week ago, and a perusal doesn't reveal anything new from almost a month ago.

(Heh: I know you love anything that mentions bad Apples! :hurah: )


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## hdtvfan0001

Laxguy said:


> What, please, Sir, is news here? The article is from over a week ago, and a perusal doesn't reveal anything new from almost a month ago.


This was a milestone event that got limited press - in this case - the article shared was the first with this kind of detail.

There were a number in the media that though the case might either be dismissed or else settled in advance.


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## bobukcat

http://online.wsj.com/article_email...27211023581798-lMyQjAxMTAyMDEwNzExNDcyWj.html

Not to get political (and in full disclosure I don't think I've ever agreed with anything this man has ever said) but it certainly makes me wonder who he is looking out for with this position because it sure isn't the consumer IMO!


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## Steve

bobukcat said:


> http://online.wsj.com/article_email...27211023581798-lMyQjAxMTAyMDEwNzExNDcyWj.html
> 
> Not to get political (and in full disclosure I don't think I've ever agreed with anything this man has ever said) but it certainly makes me wonder who he is looking out for with this position because it sure isn't the consumer IMO!


Taken at face value, it seems to me his intent is to thwart an Amazon stranglehold on the marketplace.

After thinking about this for a while, and contrary to what Mr. Turow thinks, it seems to me the best solution is the publishers go to a wholesale model and let everyone set pricing as they see fit, so if Apple, Google or B&N want to run sales to draw customers away from Amazon, they can. It'd be a level playing field, like it is now with MP3s.

In that model, I assume authors would get paid based on the wholesale price, so no matter what the retailers charge for the books, it wouldn't affect their royalties. Just my .02.


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## klang

bobukcat said:


> http://online.wsj.com/article_email...27211023581798-lMyQjAxMTAyMDEwNzExNDcyWj.html
> 
> Not to get political (and in full disclosure I don't think I've ever agreed with anything this man has ever said) but it certainly makes me wonder who he is looking out for with this position because it sure isn't the consumer IMO!


I think it is probably safe to assume the big publishing houses are based in New York.


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## trh

The article says the average price of eBooks was lowered from $9 to $7 since Apple entered the market. It must be all the free books that were added to iPads that lowered the average as the new releases/best sellers all went up in price.


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## bobukcat

trh said:


> The article says the average price of eBooks was lowered from $9 to $7 since Apple entered the market. It must be all the free books that were added to iPads that lowered the average as the new releases/best sellers all went up in price.


Yeah, I think that's a statistic that's clearly designed to deceive. Best Sellers, by their very name, are the highest volume by far and those have almost uniformly gone up in price by at least 20%.


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## phrelin

bobukcat said:


> trh said:
> 
> 
> 
> The article says the average price of eBooks was lowered from $9 to $7 since Apple entered the market. It must be all the free books that were added to iPads that lowered the average as the new releases/best sellers all went up in price.
> 
> 
> 
> Yeah, I think that's a statistic that's clearly designed to deceive. Best Sellers, by their very name, are the highest volume by far and those have almost uniformly gone up in price by at least 20%.
Click to expand...

Also I think the ebook price average through all vendors is going to go up. Amazon's Daily Deal ebooks used to be 99¢, but seems to have risen to $1.99. It's been tough on a guy like me who was buying several of those "99-centers" a month. Grumble, grumble...:sure:


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## trh

phrelin said:


> Also I think the ebook price average through all vendors is going to go up. Amazon's Daily Deal ebooks used to be 99¢, but seems to have risen to $1.99. It's been tough on a guy like me who was buying several of those "99-centers" a month. Grumble, grumble...:sure:


Check to see whether your public library (or affiliate library) carries eBooks. Our county doesn't have them, but the librarian told me a neighboring county has them, and they have a reciprocal agreement with us. I had to drive 31 miles to sign up, but I've checked out more than 30 eBooks from them in the past year.


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## Steve

trh said:


> Check to see whether your public library (or affiliate library) carries eBooks. Our county doesn't have them, but the librarian told me a neighboring county has them, and they have a reciprocal agreement with us. I had to drive 31 miles to sign up, but I've checked out more than 30 eBooks from them in the past year.


I've been doing this as well. Both e-books and audiobooks. You sometimes have to wait a few days after you select them, because they are limited by the publishers as to how many copies can be "out" at any given time, but if you queue up a few of them, there's usually always something you want available for download at a given time.


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## bobukcat

http://techcrunch.com/2012/09/19/bi...r-big-publishers-terminate-their-agency-deal/

This article is a little short on detail and has at least one inaccuracy (the settlement that some of the publishers accepted in the US is not the same as dumping the agency model) but still worth a read if this topic is of interest to you. I'm still hoping the DOJ forces them to dump the agency model completely and go back to a wholesale model so my e-book prices return to pre-iPad levels!


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## Steve

bobukcat said:


> This article is a little short on detail and has at least one inaccuracy


Another may be that it benefits B&N. I'm pretty sure they preferred the agency model, since they're still the largest brick and mortar bookseller in the US. They operate about 700 B&N retail stores and 600 college bookstores.


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## bobukcat

Judge finds Apple guilty in e-book price fixing scheme, damages trial to be held later (and probably and appeal by Apple).

http://www.theverge.com/2013/7/10/4510338/apple-found-guilty-of-ebook-price-fixing


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## trh

Old topic, but update-worthy (IMHO).

I got my settlement check today from the E-Books AG Settlements Administrator (https://ebooksagsettlements.com/Home.aspx).$58.75. I thought I'd get less than $10 for the two-year period so I was quite happy when I opened the letter.



> *If You Bought an E-book during the Claim Period
> You Could Get a Payment from a $166 Million Settlement Fund *​
> Settlements have been reached with publishers Hachette, HarperCollns, Macmillan, Penguin and Simon & Schuster in antitrust lawsuits filed by State Attorneys General and Class Plaintiffs about the price of electronic books ("E-books").
> The lawsuits claim there was a conspiracy involving five of the nation's top publishers and Apple Inc. ("Apple") to fix and raise retail prices of E-books. All five of these publishers have agreed to settle the lawsuit. A separate lawsuit with similar claims continues against Apple.
> If you purchased one or more E-books from April 1, 2010 through May 21, 2012 that were published by any of the five Publishers (listed in Question 2 of the *FAQ's*), you may be eligible for a partial refund of the purchase price.
> The Settling Publishers deny they did anything wrong, but have agreed to settle to avoid the cost and risk of a trial.
> Additional information for these Settlements is available in the *Detailed Notices* on the Important Case Documents page on this Settlement website.
> The Court in charge of these cases approved the last of these Settlements on *December 6, 2013*.
> The distribution to eligible consumers began on or around *March 25, 2014*.


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## trh

Old thread. Sorry.

Today I received my check from Apple E-books Antitrust Litigation. $128.15.

Settlement web site ebooklawsuits.com


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