Obviously, collusion is illegal — so we'll see what they find there. But bigger picture: Apple working with the publishers to shift to the agency model did seem to break Amazon's de facto monopoly on e-books.
It's a strange situation since that meant *higher* prices for consumers and *less* money for publishers, but it ensured that one company couldn't control the market going forward. Hard to know if that would have ultimately been bad or good.
What struck me about Apple's statement was that it's basically accusing Amazon of doing exactly what Apple itself did to the record labels in the early days of digital music -- so I wrote a blog post that basically says that: gigaom.com
Is Amazon just trying to stimulate the market for e-books with lower prices, the way Apple did with music? Or is it trying to control the market and decimate the traditional publishing industry? I think you could look at it either way.
One key difference is that Amazon is getting into book publishing itself. Apple did not get into music publishing. That (I think rightfully so) scares the shit out of the traditional publishers. And that's why they're willing to take less money to ensure Amazon did not dominate e-books in the way that Apple has with music.
Amazon selling the books at below cost seems insane until you think long term when they're the publisher of most of those books and the structure flips...
That's a fair point -- Amazon is acting as publisher as well as retailer/distributor and therefore it is disintermediating the publishers in a way Apple never did with record labels (although it probably could have).
Two things: (1) This is bad for the publishing industry - including readers long term - because it is setting up Amazon to be a monopoly. They've refined low margins/high volume to a science, and their massive diversification into other goods (diapers, electronics, clothes etc.) will allow them to do the so-called 'insane' below-cost pricing that MG refers to above. No one will be able to compete, and they'll quickly be the only ones left standing...
...when, of course, they'll have the freedom to jack prices up. According to Authors Guild president (& 'Presumed Innocent' scribe Scott Turow) Amazon may well have "more than half the U.S. book business across all formats by the end of this year." This is in addition to Audible.com (audiobook downloads), BookSurge (on-demand printing of individual titles) & Kindle Singles (a pretty brilliant innovation). Oh and its own publishing house. Diversification + deep pockets = outprice & oulast.
[See, Turow on the "Darth Vader of the literary world": bloomberg.com and David Hornick on Bezos' low margins/high volume: ventureblog.com
(2) This will in turn help Amazon get even *more* share as their ereaders become that much more valuable (currently there are claims that they're selling the Kindle Fire for below cost: forbes.com). And *this* push Amazon further into the world of high margin/high volume: consumer electronics.
Basically Jeff Bezos is a genius.
I don't buy Scott Turow's fear-mongering at all. The man has never met a book or publishing innovation he didn't hate, including the Google Book Project, about which he made almost the exact same arguments. Read JA Konrath and Barry Eisler's response to him for the opposing case. Are publishers up against it? Sure they are. But competition is not impossible -- Amazon's market share is now in the 60s instead of the 90-percent range. Was that all thanks to agency pricing? Unlikely.
The real risk is that publishers are becoming less and less relevant, just as record labels did. Authors have the ability to reach readers directly and keep more of the revenue at the same time. And who is helping them reach readers as cheaply and efficiently as possible? Amazon is. Maybe instead of whining about monopolies or trying to keep prices artificially high, publishers should try to compete based on how much they are helping authors.
To be fair to Turow, that 60/90 stat was in his article...agency pricing certainly seems to have been part of it! I'm all for innovation but monopolies don't generally serve that end...
Amazon had a monopoly because it pretty much invented the entire e-book industry singlehandedly -- now there is more competition, and likely would be even more if publishers would try to adapt instead of creating barriers and trying to protect their own monopoly position.
Wellll....one the one hand there's collusion and on the other there's predatory pricing, and both violate the Sherman Act (U.S. antitrust act). Pretty sure no one's hands are totally clean here. But what is best for industry and consumer is competition, and where Amazon becomes a monopoly that will ultimately not be the case.
Define predatory pricing :-)
Predatory pricing - pricing below cost with the intent to drive competitiors out of the market. See FTC.gov: "Pricing below your own costs is [not] a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses."
ftc.gov
That's a lot of "ifs" :-)
Plus, I know that Amazon is accused of pricing individual books below their costs for those specific books -- but is it pricing ebooks in general below its overall costs?
As you probably know, the Supreme Court has been pretty skeptical that predatory pricing even exists according to that definition, or that antitrust lawsuits are the appropriate remedy -- as far as I know, the FTC hasn't successfully made such a case in more than 20 years.
Also, predatory pricing is less likely to persist or be a problem where there are a multitude of sellers -- in the age of ebooks, every author is a seller, and gets to set his or her own price. Problem solved.
Ha ha problem solved! 'Cause surely there are no economies of scale invovled here, or at any stage of the publishing process. ;) SURRENDER TO YOUR AMAZON OVERLORDS, EARTHLINGS!
I think SCOTUS probably considers predatory pricing on par with strip searching - namely, game on! As long as it's not broccoli. Here's a Cali case from 2010 finding against a co for predatory pricing: inc.com
Not sure where this multitude of sellers will be if everyone's gonna get priced out...
:)
How do authors get "priced out?" All I care about is authors and readers -- i.e., consumers -- not about a cartel of major publishers who can't compete on costs and are trying to erect barriers to competition.
The more a publisher is squeezed the more it has to cut back on the 'riskier' projects which leaves less bankable authors in the lurch...so it will be fine for the established authors or the celebrities (don't worry, Snooki, you're safe!) but there will be less room for the longshots and first-timers and up-and-comers and randoms. Like, say, J.K. Rowling.
But, you know, if you hate children...
Yes, yes -- all the same arguments that the record industry made for why it needed protection, why it needs special status to fight piracy, etc. -- because they are the only friend to the content creator. That's largely BS.
I refer you to @MGSiegler's second post...I think we've officially entered Mobius Strip territory here...
A pretty thoughtful piece, nytimes.com
It is thoughtful, but I'm not sure it is correct in terms of emphasis -- I think these two are much better: baldurbjarnason.com and this one from David Pakman: pakman.com
Thanks for your feedback! Team Branch
