Is agency ebook pricing over?

[Varjak]

Yeah, IP, I think you're mixing up a few things. Company X can set a price; but they can't collude with Y and Z to set the price. They are supposed to compete. Agency pricing isn't in and of itself illegal (I don't think); but it became part of this conspiracy, which is partly what this was. Apple told the publishers, if you give us favored-nation status (no one can sell for less than us); we'll raise the price of ebooks so the pubs earn more money and Apple gets a bigger cut.

[internetpilot]

Internet pilot-its not that they dictate the MSRP. But imagine going to the grocery store and discovering that your local store can no longer offer you a coupon for milk. They can only discount milk if the dairy distributor wants to discount the milk, and then every store, from your local grocer to quick check, will offer the same discount, at the same time, for the same end price, in lock step. Same with eggs, bread, meat, etc.

That is the big issue here. It is that they specifically laid out a plan that banned discounting for the express purposes of harming one retailers growth. And the reason the government went after them was that it was blatantly, painfully obvious.

Sorry, but I think this happens every day. I know for a fact that several electronic industries make all stores selling their products sign minimum price contracts, and they won't sell their products in stores that refuse. A perfect example of this is just about all camera manufacturers.

So who is to say it was done to specifically harm Amazon? Maybe it was just good old greed and price fixing, but it coincidently didn't do Amazon's discount strategy for growth any favors? The manufacturer shouldn't be required to sell their product for less money just to stop a store chain from going out of business. The store chain needs to pick a different/better business strategy.

Where there is competition, there will always be losers. Just because the competition is simply better doesn't always mean they're cheating. In this case, I don't think they were.

[internetpilot]

Yeah, IP, I think you're mixing up a few things. Company X can set a price; but they can't collude with Y and Z to set the price. They are supposed to compete. Agency pricing isn't in and of itself illegal (I don't think); but it became part of this conspiracy, which is partly what this was. Apple told the publishers, if you give us favored-nation status (no one can sell for less than us); we'll raise the price of ebooks so the pubs earn more money and Apple gets a bigger cut.

But what's wrong with that? It's called an exclusive distribution contract, and happens every day. Why is it all of a sudden illegal just because Amazon didn't get the exclusive contract? That seems like sour grapes/sore loser rather than collusion.

I can easily see why publishers would feel Apple is the better choice for an exclusive contract -- all Apple products and apps are overpriced. What manufacturer wouldn't want to jump on the bandwagon where all the customers blindly and willingly overpay for everything?

[Varjak]

I agree, I too have seen some things I wouldn't say were legal. It doesn't mean they are. Not too long ago, the practices you list were clearly illegal. That's why there used to be more electronics discounters.

[Mi An]

DOJ Announces Terms of Settlement With 3 Publishers in E-Book Lawsuit | Epicenter | Wired.com

I was looking for an update on when discounting might return. Didn't find anything new, but I thought this article explained the terms of the settlement and some particulars better than any other single article I'd read.

This doesn’t kill the agency model outright, but does modify it well beyond what’s widely recognized today. Suppose a publisher prices a book at $10 list price, and a retailer agrees to a 30 percent commission, or $3 on a full list sale. Under these conditions, those retailers would be permitted to sell the book below list price, presumably taking the discount out of their own $3 commission. The publisher would still net $7, but lose its ability to maintain prices.

The DOJ’s proposed terms expressly permit publishers to set a soft floor on discounts, but not a hard floor. Publishers can enter into one-year agency agreements that stipulate that the retailer can sell individual titles at a loss, but must show a profit overall for all the books it sells from that publisher’s catalogue.

[Mi An]

Confused By the eBook Lawsuit? So Is Everyone else. - Peter Osnos - Business - The Atlantic

What justifiably alarmed publishers and other booksellers was the prospect of Amazon's overwhelming position in the emerging e-book market. At its peak in 2009, Amazon's dominance of the marketplace was about 90 percent of digital sales because of the early success of its Kindle reader and the $9.99 price it set for bestsellers and new releases. Ironically, the comparison most often made at the time was the way Apple -- through iTunes, the iPod, and charging just $0.99 per song -- had so completely taken over the online music market that, in a few years, national stalwarts such as Tower Records and Sam Goody's went out of business as album sales declined by more than half. Conceivably, with the experience of Apple's music strategy in mind, the Justice Department chose to preempt the possibility of anything like it happening again by dissolving the publisher's agreements. Of particular concern to the government as evidence of price fixing were the so-called "most favored nation" (MFN) provisions that assured that no prices would be lower than Apple's. "Instead of an MFN designed to protect Apple's ability to compete," the complaint alleged, "this MFN was designed to protect Apple from having to compete in price at all." Sharis A. Pozen, the outgoing assistant attorney general for the Justice Department's Antitrust Division, in a valedictory speech at the Brookings Institution, said that the case is "most importantly . . . about lower e-book prices for consumers."

For the time being, the long-term impact of the Justice Department's case on the publishing industry remains unclear, but Amazon certainly comes out ahead, with its position as the leading retailer of e-books reinforced, which also benefits its role as a major seller of traditional print books, self-published books, downloadable audio, and now also as a publisher. Microsoft's surprise announcement Monday that it will invest hundreds of millions of dollars in Barnes & Noble's Nook division adds yet another major component to the electronic book market and assures that competition will intensify. Ultimately, with so many factors to consider, I agree with Senator Charles Schumer (D.-New York) who said, "I feel absolutely befuddled by the lawsuit. For the Antitrust Division to step in as the big protector of Amazon doesn't seem to make any sense from an antitrust point of view. Rarely have I seen a suit that so ill serves the interests of the consumer." On the other hand, according to the Wall Street Journal (in the piece illustrated with a color photo of Picholine), a consensus of antitrust experts agreed that the Justice Department had reason to believe the publishers were acting together. "Price fixing is kind of the first-degree murder of antitrust violations," Herbert Hovenkamp, a law professor at the University of Iowa said, and the government had to act on "what appears to be a strong set of facts that if true, are one of the most central of antitrust violations."

People like Chucky really annoy me. He's not even equating success and price-fixing -- he's actually saying honest success is worse than competing publishers meeting to rig prices against consumers.

I, too, have often compared the Amazon share of ebooks to the Apple share of digital music. How did the later work out for the consumer? Apple's monopoly allowed them to force DRM-free mp3s on the industry (and removed their incentive to push monopoly-building DRM -- they already had their share and inertia would help them maintain it), ending the nightmare of competing formats and hardware support and disappearing DRM servers that made your music disappear too, all while giving consumers more freedom to choose the songs they like instead of getting forced to buy entire albums worth of songs they didn't want (boohoo to the companies that folded because they couldn't leverage good songs to sell bad ones anymore, and to the horse and buggy protectionists as well) to get the ones they did, and having a consumer-friendly price model.

I'm not suggesting Amazon would never behave badly, but I can't for the life of me understand people (chucky) who rail against corporate malfeasance all day long enabling it among these gigantic corporations (destroying smaller retailers in the process) on the theory that one other gigantic corporation may behave badly SOMEDAY. Here's an idea, why not wait to punish Amazon until they've actually done something wrong, and let's punish the colluding corporations now, seeing as how they've been incahoots against consumers and small ebook retailers for 2 years now.

If you want to read about illegality, QF will have to help you out. I honestly don't care.

Okay, I care a little, but more about the political hypocrisy than the actual legality. If I never again hear another journalist praise the big 6 cabal as the heroes saving consumers from Amazon's... low prices ( ), it will be too soon.

[questionfear]

Well said, Mi An.

Also, for anyone who was convinced the death of agency=immediate rise of Amazon, all you have to do is point to Microsoft and B&N teaming up. There's always going to be a desire for companies to outdo each other, and the ebook market is too volatile, and too many companies see dollar signs, for anyone to just hand the opportunity to Amazon and walk away.

[Varjak]

Chuck Schumer is a bloviating, showboating hack. It's well known that the most dangerous place in D.C. or NYC is between Schumer and a TV camera. And he's probably too busy protecting the carried interest tax loophole for his hedge fund buddies to read up on intellectual property.

[LandSurveyor]

What exactly is MS contributing to the effort (just big dollars?) and what will they be getting out of it? Not sure I like the idea of MS inserting their "expertise" into the Nooks, which already seem pretty simple and mature.