Tag Archives: Amazon

Here come the ebook price cuts

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Apparently we were waiting for a federal judge to sign off on the settlement between the DOJ and the three publishers — Hachette, Simon & Schuster, and HarperCollins — before we got them.  Here‘s the story in the Times.

The settlement approved on Thursday called for the publishers to end their contracts with Apple within one week. The publishers must also terminate contracts with e-book retailers that contain restrictions on the retailer’s ability to set the price of an e-book or contain a so-called “most favored nation” clause, which says that no other retailer is allowed to sell e-books for a lower price.

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 includes a most favored nation clause.

In other news, Amazon announced a new generation of Kindle Fires, probably putting them in direction competition with iPads.  (And who knows what Apple has up its sleeve at its announcement next week?)

So, clearly Amazon is going to cut ebook prices, presumably to help Kindle sales and freeze out other vendors:

Amazon, which in April called the settlement “a big win for Kindle owners,” has vowed to drop prices on its e-books, probably to the $9.99 point that it once preferred for most bestsellers and newly released e-books.

Then what?  Presumably some or all of the following:

  • Barnes & Noble and other ebook vendors will try to cut prices to match.  Maybe they won’t be able to, and they will lose their reason for existing.  Apple will obviously continue to exist, but they’re not gonna be happy about having to compete with Amazon.
  • There will be increasing pressure on the other three publishers in the suit to settle, as their ebook prices start looking ridiculously high next to those of the competition.
  • Brick & mortar bookstores will also come under increasing pressure, as lower ebook prices and better devices on which to read them cut into their business model.
  • Publishers will therefore need to reevaluate their own current business models, which rely on ebooks to be priced high enough not to cannibalize sales from print books.  With less ability to sell print books, some of them may lose their reason for existing.
  • New online ebook vendors will pop up that can figure out a way to compete with Amazon.  (Buy ten ebooks and get one free, 40% off all fantasy novels this week only, etc.)

What did I miss?  Whatever happens, the publishing world will start looking a lot different over the next couple of years.

Great books, bad Amazon reviews

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Here‘s a delightful article that simply quotes one-star reviews of great books on Amazon.  (I read about it in the Boston Globe this morning and assumed it was recent–but it’s actually from way back in 2005.)

Some of the reviews just kinda miss the point, like this one of Slaughterhouse-Five:

“In the novel, they often speak of a planet called Tralfamadore, where he was displayed in a zoo with a former movie star by the name of Montana Wildhack. I thought that the very concept of a man who was kidnapped by aliens was truly unbelievable and a tad ludicrous. I did not find the idea of aliens kidnapping a human and putting them in a zoo very plausible. While some of the Tralfamadorians’ concept of death and living in a moment would be comforting for a war veteran, I found it relatively odd. I do not believe that an alien can kidnap someone and house them in a zoo for years at a time, while it is only a microsecond on earth. I also do not believe that a person has seven parents.”

Some of them simply employ different critical standards from the rest of us. Here’s a one-sentence pan of Lord of the Rings:

“The book is not readable because of the overuse of adverbs.”

And some of them do have a point.  Here’s a takedown of Gravity’s Rainbow:

“When one contrasts Vonnegut’s Slaughterhouse-Five with this book, it’s like comparing an Olympic sprinter with an obese man running for the bus with a hot dog in one hand and a soda in the other.”

And this one pretty well sums up The Sun Also Rises:

“Here’s the first half of the book: ‘We had dinner and a few drinks. We went to a cafe and talked and had some drinks. We ate dinner and had a few drinks. Dinner. Drinks. More dinner. More drinks. We took a cab here (or there) in Paris and had some drinks, and maybe we danced and flirted and talked sh*t about somebody. More dinner. More drinks. I love you, I hate you, maybe you should come up to my room, no you can’t’… I flipped through the second half of the book a day or two later and saw the words ‘dinner’ and ‘drinks’ on nearly every page and figured it wasn’t worth the risk.”

I just love that last sentence.

I wonder if you could chart a book’s reputation over time by the customer reviews.  The Sun Also Rises has 621 reviews; On the Road has 811; Slaughterhouse-Five has 911. That’s getting to be a reasonable sample size.  In any case, writers can take comfort that you can’t please everyone; some people are bound to hate even the best books.  Everybody likes To Kill a Mockingbird, right?  It now has 87 one-star reviews in Amazon.  Here’s one:

i had to read this book in 9th grade. i heard that it was supposed to be this wonderful american classic, and i actually looked forward to reading it. well, all i’m gonna say is that it sucked. it was just like any other book, nothing special. yes, the prejudice part was good, i think it could show people that we need to accept our differences, but it just wasn’t that deep. i got bored after 20 pages. all in all, i was very disappointed and to whoever gets an assignment to read this, good luck.

The ebook settlement with the states

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The three publishers (Simon & Schuster, Hachette, and HarperCollins) who settled with the Feds and the state AGs over collusion in ebook pricing have settled with the states.  Here‘s a good summary.  Recall the basics:

The feds’ lawsuit demands that publishers change their pricing model so that Amazon and others can set the price they want (even it the price is below cost). The lawsuit by the states is instead about money; the states want to collect refunds on behalf of ebook buyers.

The settlement with the states means people who bought ebooks from the publishers on Amazon or other ebook vendor will get smallish credits someday:

If you bought an e-book from one of the five big publishers between April 1, 2010 and May 23, 2012, you will get a 25-cent refund for each old title you bought and $1.32 if the title was a recent New York Times bestseller. The refund will come in the form of a credit to your Amazon, Barnes & Noble or iTunes account; you’ll get a check if you bought from Sony or Google. The retailers have your email address so it will not be hard to notify you.

That’s fine but, as the article notes, you’ll probably just take that credit and buy more ebooks, so it’s probably not that much of a hardship for the publishers.  Also, it will take years before you actually see the money.

In any case, this is small potatoes.  What really matters is getting Amazon to discount books from the publishers who have settled.  In an article in the Boston Globe, an expert says it’s happening.

“The price reductions are already happening,” said Michael Norris, a senior analyst in the Trade Books Group at Simba Information, a market research firm in Stamford, Conn. “Amazon is already starting to lower the prices of e-books.”

Hmm, I haven’t noticed this happening.  Have you?  A glance through some Simon & Schuster titles still shows most of them at the same old $12.99 price point.  Maybe I haven’t been paying sufficient attention.  I would think that Amazon would start aggressive discounting as soon as it can, to put pressure on its competition and to increase the value proposition for the Kindle.

Barnes & Noble would prefer not to compete with Amazon on ebook pricing

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This is dog-bites-man news, I suppose, but Barnes & Noble is opposed to the idea of having to compete with Amazon on the price of ebooks.  They have made their case in a court filing in the Department of Justice’s lawsuit against Apple and several publishers.

“We think that the Department of Justice got this wrong,” Gene DeFelice, the company’s general counsel, said in an interview. “The settlement destroys independently negotiated commercial relationships. It harms authors, innocent publishers and bookstores, including small-business owners. And it also punishes consumers who stand to benefit from increased competition and lower prices brought about by the agency model.”

Here’s some background on the DOJ suit.

The crux of the disagreement, it seems, is whether the “commercial relationships” were “independently negotiated.”  The DOJ contends that there was collusion, because none of the publishers could afford make a deal with Apple that guaranteed higher ebook prices (via the agency model) if its competitors weren’t going to follow suit (and, probably, Apple wouldn’t have made that deal).

Note that it’s not just the agency model that’s at issue, but the “most favored nation” status granted Apple, in which publishers agree that they must use the agency model with all other ebook distributors if they use it with Apple.  This is what prevents Amazon from undercutting Apple’s prices.

In any case, Barnes & Noble (who isn’t a party to the suit, just a very interested bystander), claims that prices will go up as a result:

Barnes & Noble replied to us with a statement from general counsel Gene DeFelice, who says “The settlement is likely to lead to predatory pricing and increase monopoly by Amazon.” The settlement will also decrease competition, leading to “less choice and increased prices in medium and long term,” DeFelice said.

This is the scenario that I just don’t get.  Right now I buy ebooks on Amazon and read them on the Kindle app on my iPad.  If Amazon starts raising prices, I’ll just go buy my ebooks at the Apple store and read them on the Apple reader for the iPad.  Further, if ebook prices do go up, that would make the prices of hardcover and softcover books attractive once again, which should please Barnes & Noble (assuming they’re still around at that point).  Where does the monopoly pricing power kick in?

Of course, authors are worried, because their royalties may go down.  Bricks-and-mortar bookstores are worried, because their sales may go down.  The world is changing, for everyone.  The question is what can the various parties do–legally–to protect their interests in the new world.

Lower prices coming on ebooks

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The Department of Justice has brought suit in the ebooks pricing case, and three publishers (Hachette, HarperCollins, and Simon & Schuster) have settled.  We mentioned the possibility of the suit here.  The government is saying that five publishers and Apple colluded to force the “agency model” onto the ebook business.  In the agency model, the publisher sets the price, and the seller gets a percentage of that price for each sale.  There’s nothing illegal about the agency model; it’s the collusion that got these guys in trouble.  Apparently the government has pretty good evidence of the collusion.  Here’s the DOJ’s statement, which says in part:

During regular, near-quarterly meetings, we allege that publishing company executives discussed confidential business and competitive matters – including Amazon’s e-book retailing practices – as part of a conspiracy to raise, fix, and stabilize retail prices.   In addition, we allege that these publishers agreed to impose a new model which would enable them to seize pricing authority from bookstores; that they entered into agreements to pay Apple a 30 percent commission on books sold through its iBookstore; and that they promised – through contracts including most-favored-nation provisions – that no other e-book retailer would set a lower price.   Our investigation even revealed that one CEO allegedly went so far as to encourage an e-book retailer to punish another publisher for not engaging in these illegal practices.

The three publishers who settled have agreed to abandon the agency model for two years.  Amazon is already saying it’s ready to lower e-book prices:

“This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books,” said an Amazon spokesperson, referring to a settlement the Justice Department reached with Hachette, HarperCollins and Simon & Schuster.

But the Wall Street Journal warns:

The settlement allows publishers to negotiate limits on how much retailers can discount, ensuring retailers can’t lose money overall on e-book sales. Moreover, Amazon may be cautious about across-the-board discounts because its profit margins are already thin.

This is clearly bad news for publishers and bookstores.  Lower prices on ebooks means lower sales of print books.  Amazon may not do across-the-board discounts, but this still opens up the possibility of price-shopping for the best deal on any given ebook.  So it’s good news for ebook readers, at least in the short run.

In the long run, who knows?  What if Apple leaves the ebook business, Barnes & Noble goes bankrupt, and only Amazon is left as a major ebook retailer?  Monopolies aren’t good for consumers.  On the other hand, the barriers to entry in the ebook market are pretty low.  All these vendors have their own reading devices for ebooks, so there is a convenience element to buying and downloading books from their online stores, but I’m not sure how big a deal that will ultimately be.

And, as I mentioned before, this doesn’t affect people like me, who are essentially independent publishers.  Both the wholesale model and the agency model work fine for us, as far as I can tell.  We just have to get people to buy our stinkin’ books.