Macmillan

E-book Price Fixing Update

February 10, 2013 By Mark Leave a Comment

Two years after the heavy hitters in the publishing industry colluded with Apple in order to fix the price of e-books, most of the legal dust has finally settled. Today Macmillan threw in the towel on anti-trust charges brought by the U.S. Justice Department:

A small firm that is also known as Holtzbrinck Publishers LLC, Macmillan was the lone holdout among five publishers that the government sued in April 2012. Three publishers settled immediately and the fourth, Pearson Plc’s Penguin Group, settled in December.

The Justice Department will continue to litigate conspiracy allegations against Apple Inc, the department said in a statement. It accuses Apple of conspiring with the publishers to raise prices and fight the dominance of Amazon.com Inc.

More here and here.

The lone holdout, Apple, is probably betting that its haughty image and cultural cachet can keep it from becoming associated with yet another revolting act of corporate brutality. The Apple vs. Amazon battle is of course a deeply cynical dispute in itself, with both companies striving to dominate (meaning, monopolize) the distribution of digital content. In years to come it won’t be surprising if Amazon finds itself the target of anti-trust investigations on multiple fronts, including, ironically, attempting to monopolize both the sale and resale of digital content, thereby effectively allowing it to fix prices.

— Mark Barrett

E-book Price-Fixing Update

September 7, 2012 By Mark Leave a Comment

A settlement has been approved in the federal government’s suit against Apple and five of the largest publishing companies, all of which were charged with colluding to fix the price of e-books:

For the next two years, the settling publishers may not agree to contracts with e-book retailers that restrict the retailer’s “discretion over e-book pricing,” the court said. For five years, the publishers are not allowed to make contracts with retailers that include a most-favored nation clause. “The time limits on these provisions suggest that they will not unduly dictate the ultimate contours of competition within the e-books industry as it develops over time,” Judge Cote wrote.

It’s not often that such obvious abuses are so quickly corrected by regulators. There is now no floor under the price of e-books, which means publishing will have to adapt and evolve that much faster, as opposed to conspiring against consumers.

To the extent that this seems to empower Amazon as a mass-market e-tailer, Amazon will ultimately face its own price pressures as content inevitably decreases in price. (Which may be why Amazon seems to be relying so heavily on advertising on its Kindle e-readers for revenue.)

Context and previous Ditchwalk commentary here. Additional cranky commentary here.

— Mark Barrett

Where Were We?

April 11, 2012 By Mark Leave a Comment

Two years ago, when the major publishing houses got together with Apple and conspired to fix e-book prices, they did so not because Apple was sexy and Steve Jobs was a benevolent god and the iPad was about to launch, but because Amazon was the devil.

Somehow, in the intervening era of Apple-mania, that narrative has been skewed. But that skewing is about to snap back with a vengeance:

The government’s decision to pursue major publishers on antitrust charges has put the Internet retailer Amazon in a powerful position: the nation’s largest bookseller may now get to decide how much an e-book will cost, and the book world is quaking over the potential consequences.

This is, in fact, exactly what drove the publishing industry en-mass into Apple’s price-fixing arms two years ago. Because if Amazon can sell e-books at prices below what the publishing industry sets — as a loss leader for the Kindle, or simply as a way to stab the publishing industry in the heart until it begs for mercy — the publishing industry effectively loses control of its product. And that’s the last thing quarterly shareholders want to hear.

— Mark Barrett

Publishing is for Professionals

April 11, 2012 By Mark Leave a Comment

Despite public acceptance of self-publishing as a viable means of expression, the traditional publishing industry continues to claim that it is the final arbiter of what’s good and right and culturally relevant. Today the U.S. Justice Department agreed that self-publishing authors pale in comparison with their industrial counterparts:

The U.S. Department of Justice filed a lawsuit against Apple and several book publishers Wednesday morning, claiming they worked together to artificially prop up prices for e-books. .

The publishers sued were Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster. The suit was filed in a district court in New York.

“Apple facilitated the publisher defendants’ collective effort to end retail price competition by coordinating their transition to an agency model across all retailers,” according to the complaint.

Real publishers illegally conspire with giant, anti-competitive, ruthless, monopolistic media companies like Apple to fix prices and screw their own customers in pursuit of profits. Self-publishing authors don’t do any of that, and probably never will.

— Mark Barrett

E-Book Price Fixing

March 8, 2012 By Mark 3 Comments

In March of 2010, in the face of growing downward price pressure from e-books and open competition on pricing from online retailers like Amazon and Apple, the publishing industry took control of the price of its own products. It did so by abruptly and collectively by abandoning the long-time industry-norm of wholesale pricing and adopting instead what is called the agency model, in which retailers get a percentage of any sale rather than being allowed to set the price of goods themselves. (Like real estate agents and stock brokers, retailers who embrace the agency model never own the products they sell, they simply collect a fee for uniting buyer and seller.)

Fully two years later the federal government is signalling that the price-fixing party may be over:

Among the reported gripes the Justice Department has with the way Apple and publishers are doing business is a move toward setting standard prices and giving Apple a 30% cut of revenue for e-books sold on its devices. The business model, which Apple rolled out with the launch of its first iPad tablet in 2010, differs from what publishers offer to traditional bookstores, which is to sell books to retailers for about half of the suggested cover price and let the booksellers charge whatever they’d like.

As e-books have become more popular and brick-and-mortar bookstores have struggled, the industry has moved to the “agency model” Apple dictated with the iPad and, the Justice Department believes, publishers have acted in concert to replicate Apple’s model with Amazon and others. Publishers have denied such collusion, the report said.

So now you know. If you want to openly conspire to set prices in order to protect your market and limit competition at the expense of the consumer you will only be able to get away with doing so for two years, plus however long it takes the government to drag you into court, prove anything, and penalize you with a slap-on-the-wrist settlement in which you ultimately offer consumers a small price break they will almost certainly never take you up on for products they probably don’t want to buy anyway.

Or, you can avoid the icky, scummy feeling of being a money-grubbing liar by self-publishing your own books.

— Mark Barrett

Consumer Expectations and Price

March 19, 2010 By Mark 1 Comment

I am publishing a collection of short stories as an e-book. Continuing a series from last week, I’m trying to work through the relevant pricing issues and set a price for that content.

We all have expectations. Sometimes, particularly when we’re young or old, our expectations can be out of step with reality. When we’re young we don’t have the cognitive ability to understand the world as it is, so we fantasize. When we’re old we may have trouble keeping up with the pace of change, and the world may move on without us.

Perhaps no other aspect of daily life in America defines our expectations more than the price of goods. We are a consumer society, and as such we gauge our worth and meaning by what we have and what we can afford. Goods that are priced out of reach make us feel poor. Goods that are within reach make us feel wealthy — or at least as if we have options.

Everyone has heard a child request a new car or new house in the same way that they ask for a piece of candy or scoop of ice cream. To a child price is no object because money has no meaning. And who hasn’t heard an elderly person comment that a candy bar used to be nickel or a gallon of milk a dime? To an elderly person prices may mark the zenith of their life experience, while also serving as a reminder of the threat posed by inflation and rising prices.

People in the prime of their working lives generally have more realistic expectations about prices, but they can still experience dissonance when the cost of goods change. Gas at $4.00 a gallon is an outrage. Gas falling back to $2.50 is a windfall. But note: these emotions and responses are usually relative, not based on an actual understanding of the costs of production. Because we live lives abstracted from our own survival needs, and because our economic lives are abstracted through bank accounts, direct-deposit paychecks and credit cards, there is often no contextual reality to the prices we pay. We pay what we pay because that’s what an item costs, not because we know that’s what an item is worth. [ Read more ]

The Empire Strikes Back

March 4, 2010 By Mark 7 Comments

Whatever else may be happening in the book business these days, it’s now clear that the publishing industry has decided to fight back on the fundamental issue of pricing its products. It’s also clear that this is a concerted effort, as against the general aimless flailing demonstrated over the previous six months.

After a protracted price decline took hold last fall and accelerated toward the holiday season, the core issue of product pricing came to a head at the end of January when Amazon pulled Macmillan’s titles from its site rather than agree to Macmillan’s demand that e-book prices be raised. (Amazon has an interest in keeping e-book prices low because it spurs demand for Amazon’s e-reader, the Kindle.)

Despite Amazon’s large customer base and beloved-brand status, after only a few short hours people began excising Amazon’s dead links from the consumer loop and pointing those links to other sites carrying Macmillan’s products. Demonstrating once again the shallow loyalty of online associations, as well as the vast difference between hosting and controlling a social network, Amazon was also reminded that even though it is (or rather was; more on this in a moment) one of the publishing industry’s biggest wholesale customers, from the point of view of the end user it’s just another easily replaced retailer. (Because of its Kindle e-reader Amazon is also a direct competitor for publishing dollars, further weakening the publishing industry’s interest in supporting Amazon’s pricing decisions.)

Sufficiently humbled by the experience, Amazon relented, providing everyone an opportunity to draw the wrong conclusions about who won and who lost even though the jury is still out. The only issue that was settled was the question of who will be calling the shots on pricing. Whether those prices will be met or rejected by consumers remains undecided, and it remains the obvious basis on which other interested parties can attempt to compete. [ Read more ]

Piracy is Piracy

September 25, 2009 By Mark 4 Comments

There’s a note going around today that 90% of MacMillan’s frontlist (their new books for this year) has been pirated. Predictably, this somewhat less-than-surprising factoid is being exploited by a number of interested parties, including the anti-DRM nuts who are always eager to remind us that DRM doesn’t work.

Well, we know DRM doesn’t work, and probably won’t ever work. But that doesn’t mean the idea behind DRM is wrong.

I also don’t like it when two sides in an argument promote extreme views that intentionally distort reality, then demand that I declare an allegiance. Since the internet first took hold of public consciousness the very question of content piracy and what piracy means has been distorted by two notable and related running battles featuring factions that I don’t respect. [ Read more ]