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back to article Could tiny ebooks really upset the mighty Apple cart?

You wouldn't think that Apple had any problems right now. Its share price is so grossly high that it is ranked as the most valuable company in the world. Fans will queue up in their thousands for the chance to buy its latest iDevice – the new iPad – so much so that there won't be anywhere nearly enough devices in stock to …

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Painted into a corner

Doesn't look too good for any of them and trying to prove that they all decided independently on the same thing at the same time and then told it to Amazon is going to take some professorial trick-cycling.

Popcorn please!

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Anonymous Coward

Too bad its only "reportedly"

"We told the publishers ... you set the price, and we get our 30 per cent, and yes, the customer pays a little more, but that's what you want anyway," Jobs reportedly said

If they could clearly attribute that statement, it would make it a lot easier to find them guilty.

What Apple had to gain was 30% of the eBook market revenue.

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'But we had nothing to gain'

Most normal people don't know the difference between an iPad and a Kindle and if they are going to be buying something to read books they will consider both. Their argument is obvious BS.

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WTF?

Re: 'But we had nothing to gain'

The only BS is claiming that people can't tell the difference between a monochrome, keyboard enabled, non touch kindle and an ipad.

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Facepalm

Re: 'But we had nothing to gain'

"The only BS is claiming that people can't tell the difference between a monochrome, keyboard enabled, non touch kindle and an ipad."

Clearly you haven't been paying attention so here you go.

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Pity this did not happen before

It is good to see the e-book market is being properly scrutinised to ensure it is competitive and free of price fixing.

Pity the same was not done for the music and movie industries a while back, hmmm?

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Re: Pity this did not happen before

Whatever about movies, hasn't the price of music singles and albums been declining constantly over the last few years? Ten years ago a single cost ~£4, now you can often buy the single for <£2 and the title track for <£1. If not a function of competition, where is the price pressure coming from?

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Re: Pity this did not happen before

Price fixing == same price at a given time != same price all the time.

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Re: Pity this did not happen before

There was no competition, that was the point. No matter which shop you went to, all the CDs cost the same because the shops had to play ball with the publishers who all agreed (legal partlance - colluded) on the price.

The price went down when people began downloading free copies on the internet on mass. Competition did not do it, new technology did. Apple, to their credit, changed the rules of the game with the Ipod, but not after having to sort of play to the same rules for a while. It should have not happened this way, the EU/US should have slapped the music publishers to allow price competition, like they are doing now with ebooks.

What this case shows is that Amazon played competitively (agressively so but it is within the rules) and anyone else is allowed to do the same, but Apple attempted to set the price with the publishers who in turn tried to dictate that model to Amazon. If everyone starts to set the same prices, you have effectively little to no competition.

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Anonymous Coward

Re: "on mass"

The term you were looking for is "en masse".

http://en.wiktionary.org/wiki/en_masse

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I wonder if Amazon are powerful enough to run this over the try line or will Apple and co. do what they always do and buy their own "justice" even though they are guilty.

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Alert

Well, actually...

Apple and the publishers may settle with the US and EU regulators (its in both sides best interests), but I can't see any way possible that they'd be able to settle the class-action lawsuit. In the end, Apple and the publishers will pay a lot of cash and, more importantly, will suffer tremenously in their public reputations.

There's no real way to justify their actions on any level. Anyone with even a rudimentary knowledge of US antitrust law can see this as agreements "in restraint of trade". Could be bad news too, since Apple used their dominance in tablets to push their deal through with the publishers. Double ouch.

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Anonymous Coward

Re: Well, actually...

Can you explain how there's any actual restraint of trade? Do you know what that means?

There was never any limitation that books could only be sold on Apple devices if that's what you are thinking. Apple had 0% marketshare in books at the time of the agreements, do you think publishers would go exclusively with them?

Perhaps you shouldn't comment based with such rudimentary knowledge of US antitrust law, and the industry in general.

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Re: Well, actually...

"Can you explain how there's any actual restraint of trade? Do you know what that means?

Perhaps you shouldn't comment based with such rudimentary knowledge of US antitrust law, and the industry in general."

Nice smug view from your hair-splitting high horse?

Not restraint of trade, price fixing and collusion - if true (and the EU's position does sound awfully like they already have enough evidence to convict) its clearly in violation of antitrust law.

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"Apple used their dominance in tablets"?

"Apple used their dominance in tablets to push their deal through with the publishers."

Apple launched iBooks with the iPad. They had no dominance in tablets when they did these deals.

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Re: "Apple used their dominance in tablets"?

"Apple launched iBooks with the iPad. They had no dominance in tablets when they did these deals."

The deal under scrutiny is the last one that Steve Jobs signed for Apple before he tragically became too ill to continue as CEO.

Apple most definitely had a dominance of the tablet market at that stage.

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Anonymous Coward

Evidence please

Can you please point to an example of Apple "buying justice"?

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Re: Evidence please

Practically no-one can defeat Apple in a patent dispute. These things are virtually never won on the basis of who is right or wrong, but on how much money you have.

Which is why so many people think the patent system is so broken especially in the US.

That's as good an example as I can think of.

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Joke

Re: Evidence please

Well, they sure never have been found guilty of buying the judge, if that's what you mean...

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Anonymous Coward

@skelband

So you have no evidence therefore Apple must be guilty. Can the hating get any more blatant & pathetic!

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Anonymous Coward

Pure evil

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Anonymous Coward

Price of e-Books already gone down

No, not because of any competition issue, but because at the beginning of the year the VAT on e-books dropped from 15% to 3% (both Amazon and Apple have their media sales units located in Luxemburg to get this "break")

But don't get the fireworks out yet, in 2015 the VAT on digital media will have to be charged at the rate of the consumer's - not seller's - country. If the UK is still applying 20% to e-books by then prices will go up again.

For now not sure why are people still complaining though, aren't e-books cheap enough already? Looking at both Amazon and iBooks many of the books on the top charts cost only 99p.

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Re: Price of e-Books already gone down

Don't know what books you're looking at but all the books I've bought in the last year the eBook version was roughly the same price as, and in a few cases more expensive than, the dead tree version. That was one of the reasons I haven't bought any eBooks.

Mrs Iron has bought cheap eBooks recently but they were all either by long dead authors like Jane Austin or chick lit books that were also cheap in dead tree format.

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Anonymous Coward

Re: Price of e-Books already gone down

I'm looking at many books on the top charts. Examples:

Number one seller on the iBookstore, "Confessions of a GP" by Benjamin Daniels.

£0.99 on iBookstore or Kindle, Amazon Paperback £5.75

Number one on physical books "Before I Go to Sleep" by S.J. Watson

Kindle £2.39, iBookstore £2.99, Amazon Paperback £3.85

Sure some digital books are more expensive than the heavily discounted paper ones, but you can already find very good bargains in the digital side of things.

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Anonymous Coward

Re: Price of e-Books already gone down

Er, I think you'll find that those 'best sellers' are top of the digital charts because of their low price. The prices are that low because they are currently on special offer. You couldn't pick a more loaded selection to back up your point. On a related note, do you only read what the 'charts' tell you to read?

Instead look at the prices on a wide selection of books chosen at random, not the ones being heavily promoted by publishers and merchants alike with heavy discounts. The reality is that most the time the digital versions are barely cheaper than the paper versions, albeit still cheaper, however there are still many cases where they are in fact more expensive too. Even when it's cheaper by 20-50p can that really reflect the difference between the digital and paper versions? The latter requiring printing, paper and physical distribution to homes and stores plus you can lend the paper copy to a friend or sell it on the second-hand market. There is clearly added value in the paper copy that isn't reflected in the price.

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Re: Price of e-Books already gone down

So, has any one got a list of Luxemburg proxies?

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Mushroom

Isn't Product Dumping Illegal?

In a prior life I used to design cars in Detroit. Just a little before my time the Japanese got in trouble for "dumping" mini-vans. This basically meant they were selling them below cost to break into the market. This was illegal. (source: http://articles.latimes.com/1991-12-21/business/fi-528_1_officials-rule)

So how can Amazon sell the Kindle or eBooks for less than cost and have it NOT be illegal dumping? In fact, how can Sony and MS charge less for their PS3 and XBOX 360 and also have it NOT be illegal dumping?

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Re: Isn't Product Dumping Illegal?

Cars are not Books.

With books it is a loss-leader. The idea is to use a below cost item to get you to go somewhere and convence you to ALSO buy enough other stuff to still profit. This is a long-held and common-place (legal) marketing tactic.

Auto distributors cannot clam to be doing this though. It would be a idiotic."oh we where selling the minivan below costs to get you to also by the sports car! Ergo, dumping, not a loss-leader.

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Anonymous Coward

@Oninoshiko

A loss leader for what since both the Kindle AND e-books were being subsidised.

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Re: @Oninoshiko

Presumably, for some of the books which are not being subsidised.

(off the topic of this thread, but something about this that bothers me)

The reality is, the arguement of collusion is somewhat silly. It assumes that all books are equivlent, this is clearly not the case. There are a number of works I would hold as great prose and important ideas, there are others I wouldn't accept to use as heating material. (I leave sorting what is in what catagory as an exersize to the reader).

"The DaVinici Code" isn't "Harry Potter" isn't "The Foundation" isn't "The Fountanhead" isn't "A Midsummernight's Dream" isn't "Das Kapital"

You want to solve the problem of monipolistic behavior in publishing, fix copyright.

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Headmaster

Selling the minivan at below cost to get you to buy the sports car

A better analogy would be to say that if there existed a car manufacturer that also sold fuel, it would be legal to sell the car at below cost if it would encourage you to buy the fuel. A Kindle without content to read on it is almost as useless as a car without fuel.

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Holmes

Re: Selling the minivan at below cost to get you to buy the sports car

"A better analogy would be to say that if there existed a car manufacturer that also sold fuel, it would be legal to sell the car at below cost if it would encourage you to buy the fuel. A Kindle without content to read on it is almost as useless as a car without fuel."

Or if there was a razor manuafacturer who gave away the razor to get you to buy bla...

Oh, wait.

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"... a settlement is effectively an admission of guilt ..."

Is it? If you can demonstrate a clear cost-benefit for settling over fighting a case, then it's your duty to reach a formal settlement for the benefit of your shareholders. In the accounts, it can be noted as 'Protection payment to a bunch of Euro-trash gangsters (unavoidable cost of doing business)'

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The radical answer

Enact laws which define digital property and mandate industry standard DRM and formats to regulate the content. The digital content should have properties akin to physical property, e.g. first sale doctrine, fair use and so on.

Then Apple can tie their devices to their bookstore but it does not prevent users from moving their books between devices, or buying them elsewhere or even selling / loaning them if they feel like.

It's eminently achievable and arguably should extend to all forms of media - books, music, pictures and video. It would have to be protected by a DRM but one which isn't lopsided, protecting the rights of the publisher but not the user.

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Anonymous Coward

Is this a quote or an opinion? Either way it is wrong.

"This was the point at which the publishers and bookshops were screaming that Amazon was undercutting them, destroying the publishing world and robbing authors of their fair due."

Wrong.

Amazon only affected the profits of bookshops - nothing to do with 'fair dues' of authors at all - if anything the authors got more money (as their income is based on the numbers of units shifted and Amazon shifts more). The price Amazon sold books at had no effect on the price they paid to the publishers and hence authors - the publishers got the same return if amazon sold for $1 or $100. The only people who moaned about amazon were the waterstones/smiths of this world (i.e. the brick and mortar bookshops). Don't make it sound like amazon are bad for authors - quite the opposite.

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Thumb Up

Re: Is this a quote or an opinion? Either way it is wrong.

What did this AC get neged for? It's a pretty well thought out responce. Just because it's not convienent for your world-view doesn't make it a bad post.

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Anonymous Coward

Re: Is this a quote or an opinion? Either way it is wrong.

Except Amazon created a scheme that pushed price of e-books to be less than $10.

If publishers priced their e-books at $9.99 or lower they'd get 70% royalties of sales (less download fees) however publishers selling e-books priced above this only got 35%.

So publishers would get the absolutely the same from a book priced at 9.99 or one priced at 19.8 - in both cases they'd make $6.9 revenue. To charge more they'd have to go higher than 19.8, thus the scheme only encouraged very cheap books.

Amazon also required that e-books be priced at 20% less that the paper version, to get the higher the royalty.

See: http://arstechnica.com/gadgets/news/2010/01/some-authors-still-split-on-amazons-70-royalty-offer.ars

These actions are what publishers got afraid of.

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Re: Is this a quote or an opinion? Either way it is wrong.

"Except Amazon created a scheme that pushed price of e-books to be less than $10."

iTunes created a scheme where music was U$99c against the music industry's wishes - what's the big deal?

"Amazon also required that e-books be priced at 20% less that the paper version, to get the higher the royalty."

Seems pretty reasonable given there's no dead tree to distribute - no printing, no transportation etc - reckon those would be more than 20% of costs.

Neither of which justifies illegal price fixing so that consumers pay more - its just Apple trying to avoid competition.

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Angel

Re: Is this a quote or an opinion? Either way it is wrong.

Oh it's just the Apple fanboi way: every Apple's competitor is the enemy, and like a true fundamentalist believer you have to try to bring the enemy and the people speaking for it down. Jobs, in his true narcisisstic manner, was really good at it, and the fanbois think it's their duty as well.

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Re: Is this a quote or an opinion? Either way it is wrong.

Err there is a slight difference between a publisher and author.... In regards to your post neither publishers or authors have to sell via Amazon. What the big 5 publishers have done is to remove a cheap option from the consumer for _their_ books

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LPF
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Re: Is this a quote or an opinion? Either way it is wrong.

Amazon is bad for Authors in that they have destroyed outlets that distributed a range of books, what happens then is that when you have the book distribution industry sewn up as your the only game in town , you can then tell the publishers , that you either get a discount, or they dont get listed.

Seriously you are so naive , you had to have someone tell you this???

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Re: Is this a quote or an opinion? Either way it is wrong.

Amazon *are* bad for authors in a lot of cases, especially direct publishing. Look at their direct publishing terms. If you publish a book on Amazon and set a list price then Amazon can discount your book all the way down to nothing of its list price and screw you if you don't like it. It's at their sole discretion what price they sell for. It's not like physical books where Amazon buy books at a wholesale price and you get the same amount regardless of the retail price.

They don't even have to do it because lowering the price sells more copies. They might do it to hurt a competitor. e.g. they see your book at $8.00 on B&N so they sell it for $7.00 on Amazon. You as the author have no say in this and you end up with less money.

So perhaps the incentive is for authors to overprice their books to mitigate the effects of discounting. But if you price your book over $10 you get whacked with a royalty rate of only 35% instead of 70% so the incentive is not to do it at all except for specialist titles.

So either way you lose. It's a hideously lopsided contract and you are on the losing side.

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Re: Is this a quote or an opinion? Either way it is wrong.

"iTunes created a scheme where music was U$99c against the music industry's wishes - what's the big deal?"

The "big deal" is I might be writing a book for a limited audience and I need to price the book higher to recoup my costs. I might decide that $40 is a good price for my book (and there are plenty of real books that cost $40), yet I only get $14 royalties and the rest goes to Amazon. Or Amazon could shaft me by dropping the price to $20 and then I only get $7. Or maybe they sell it for $10 *anyway* and give me $3.50 instead of $7 which I was due if I had priced that way in the first place.

Basically it's designed to force authors to set their list price to what Amazon wants to sell books for, not what the author would like even if they have good reason. If an author were selling a real book with an ISBN they could set any wholesale price they like and it would be up to the retailer to put a margin on top. In the electronic model it is the author who gets screwed.

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Re: Is this a quote or an opinion? Either way it is wrong.

I see from the few thumbs down that some people really have no clue. The ways that Amazon & Apple hurt authors are right there in the terms and conditions they require them to agree to.

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Anonymous Coward

Single opinion

Perhaps this article is too much of a single lawyer's view of the problem, and makes me wonder if there's any conflict of interest from other companies who get legal advice from Taylor Wessig - I know they have worked with Google in some deals.

The fact is in other European countries such as Germany (and several others) the fixed price model for books has been in practice (by law, even) for over an hundred years and the industry is thriving - latest stats show Germany publishes 90,000 new books a year from 20,000 publishers in 5,000 booksellers. It's a scheme that is even protected by the European Union!

Is it really better - from a market competition view - to let Amazon run their predatory pricing until only they can sell e-books?

I'd love if The Register could get other opinions into the article.

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Re: Single opinion

Aren't Germany's, like France's, laws on book retailing explicitly protectionist though? Hardly makes the case that the alleged collusion was in the interests of consumer!

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Re: Single opinion

Yes, they protect the little book stores. Which is the whole point of the laws. There's far more little bookstores in Germany than in the UK where in most cities you only have Waterstones and Bord... oh wait, just Waterstones in fact.

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Re: Single opinion

I don't see why consumers should pay more to protect uncompetitive business models.

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Apple's argument falls down ...

... on the simple question of ...

Why do they need a clause prohibiting the sale of a book cheaper elsewhere ?

The answer is simple, if it's cheaper at Amazon, then people will buy from Amazon and use the Kindle App - and Apple gets nothing while people are building up a library of non-Apple books. Such customers will have little reason to stay with Apple if they find another device they prefer.

By ensuring Amazon can have no price advantage, they can punt books to users who will see no incentive to go outside of the iTunes store. Thus punters will build up a library of i<whatsit> only material and so will be less inclined to go elsewhere in future - they will find that they cannot take their iBooks to any other device.

This is all about capturing customers and trapping them inside a walled garden so that they are less and less able to spend any of their money with competitors - that clink, clink noise is that of more bricks being stacked on the wall.

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Anonymous Coward

Re: Apple's argument falls down ...

I keep hearing about this supposed clause yet never seen a factual source for it.

It doesn't help that when I go look at both stores there are several Kindle e-books on Amazon available at lower prices than on Apple's iBookstore (and vice-versa)

In the real world it's not what's happening.

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