back to article Apple: ebook price fixing? Nooo, nothing to do with us, no siree

Apple has told a US court it certainly wasn't involved in any conspiracy to rig the prices of ebooks. The fruity firm said that it was neither involved in nor knew of any meetings or conversations between the publishing houses that "allegedly formed the basis of the purported conspiracy". "Apple did not conspire to fix e-book …

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Anonymous Coward

I doubt Apple cares one jot about the price of books, they take their cut and are happy, the sale of books I suspect accounts for 0.0001% of their income.

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WTF?

Too much marketing information (for Apples peace of mind)

Learning the back room deals that Apple sets up is very interesting and enlightening.

If they do this for books, just imagine how much this sort of agreement is costing Apple customers with all their products.

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Re: Too much marketing information (for Apples peace of mind)

You think Amazon is losing money on ebook sales today with the intent of losing money forever? The instant they believe they have the market sewn up and the definitive only ebook reader is Kindle, prices will skyrocket. History has shown this time and time again. Amazon knows history and was looking to repeat.

On the other hand villain Apple enters the market in the only possible way so as not to lose money on every sale in attempt to steal market from Amazon. And clueless leftist government lawyers who know nothing of economics sue like perfect patsies for Amazon.

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Re: Too much marketing information (for Apples peace of mind)

The trouble is that with Android taking the lead in the mobile market and with mutli-purpose tablets reaching ubiquity, the market is anything but clear. Sure the nook and Sony markets are tame compared to Amazon, but there's less lock-in with Android devices. Which means Amazon gaining a complete monopoly would be difficult—there's still plenty of room for market disruption.

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Multi-purpose deal

The were probably a lot of factors in the deal that was (almost) done as it would have had guaranteed income for Apple with little or no effort to achieve it, higher income for the publishers as they could set the same price for eBooks as for the dead-tree variant and it would have frozen out any competition due to the 'favoured nation' clause.

Of course there would have been two distinct losers in that scenario, Amazon and every single person who anted to buy an eBook.

Until Amazon put in the effort there was effectively no eBook market, once they had done the work and showed possible volumes then suddenly the publishers woke up and realised there was a cash cow to beat to death. They just needed a partner who had the right moral stance.

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Re: Multi-purpose deal

Your argument that Amazon saved the e-book market, would have some credit if the resulting outcome was the publishers and such, were able to reduce their wholesale prices to Amazon, because they Were making too much profit from the prices. Ultimately however, the opposite situation is caused, whereby no-one but Amazon can buy from the publishers, as the publishers prices are too high to sell at, but the publishers them-selves can't reduce the price or they would go out of business. Its called a false economy, and the fact that Amazon has been using this model now for well over a decade in many different ways to get itself to where it is now (with large investments in the process to stem off their massive losses they made early on), is a rather sore point that no-one seems to want to address.

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Although they've made the argument that stopping Amazon's climb to a potential monopoly is good for competition

Conveniently ignoring iTunes, I'm assuming.

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Even assuming you call iTunes a monopoly, it was a pretty benign monopoly since Apple never gouged the customers. In fact, Apple wanted to keep the uniform 99 cent pricing and was only pushed to the $1.29 pricing by the record labels, who found they weren't making as much money.

Surprise surprise, when people are given the option to buy a single song for 99 cents or even $1.29 they'd rather buy the one or two songs they actually WANT rather than buying the whole album that includes all the filler most people don't want.

The labels kind of knew that already, which is why back in the dark days when CDs cost $15 they sold "CD singles" for $5 to $7! I can only imagine Steve Jobs was able to talk them into signing up with iTunes because they figured the business would never go anywhere. Probably the same reason the publishers originally signed up with Amazon.

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As far as I am aware, (feel free to reference something that proves me wrong), but iTunes isn't based on selling products below their production value, and actually is a healthy and valid revenue stream for artists.

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Mandy Rice Davies

and her quote springs to mind.

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Price fixing

I didn't think anyone cared about whether they used an agency pricing model. The problem was that the "you can't sell it cheaper else where model" If this isn't price fixing then would someone please explain what is?

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WTF?

Just what is "Cost" for an e-book?

The cost of a printed book includes paper, printing etc. For an e-book - nothing.

Only the one-off costs of the author, illustrator and picture rights.

For a per-item basis, it depends on how many are sold.

How could Amazon sell below cost?

Surely by pricing it lower, they sold more and thus amortised the fixed costs even quicker?

Reducing the cost for everyone else.

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'Cost' for an e-book

Well, off the top of my head....

Distribution costs (servers aren't free)

The Editors and proofreaders?

Marketing - those posters in bus shelters aren't free, neither are the lunches for the newspaper and TV correspondents.

Royalties for authors, illustrators etc generally aren't a one-off cost - they tend to be based on sales. I'm sure J K Rowling wouldn't have been too happy to sell the rights to her manuscript for a one-off payment of a few grand

But having said that, e-books are generally vastly over-priced.

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The publisher demands $$ for each ebook sold

The publisher will allow Amazon (or Apple or any other eBook store) to sell eBooks in exchange for a fee for each eBook sold. If Amazon sells the eBook to the public for less that it costs them from the publisher then they will make a loss on the book. (This is usually done to advertise other products and overall Amazon will make a profit.)

The incremental cost of a eBook is effectively zero but there are fixed costs in the production of a eBook and the author and publisher expect to make money otherwise there is no point in writing.

For people just writing for their own pleasure there are outlets such as Storiesonline.net but most of the stories there are not as well polished as the better commercial stories.

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Re: 'Cost' for an e-book

"But having said that, e-books are generally vastly over-priced."

More often than not I can get a paper copy of a book posted to me cheaper than the price of an ebook

Ebooks are a total rip off

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Re: 'Cost' for an e-book

Agreed on this point. Especially when it comes to the larger books, the ones with several hundered pages.

The larger the book generally the bigger the savings when sold as an ebook. But seeing a book being sold for £30, and then the ebook for £50 (yes I have seen this on amazon before) you have to wonder what they're thinking.

Only the one-off costs of the author, illustrator and picture rights

Also I think what the guy meant here by one off costs was one off cost per book. Each book sold has a fixed price which is basically royalties, and of course server costs.

On the other hand a paper book you have manufacturing, quality control, transport, brick and mortar stores rent, storage space etc etc.

In comparison to a paperback, and ebook is pure profit. (excluding royalty payments and getting the initial electronic file to market)

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FAIL

Re: 'Cost' for an e-book

Bullshit.

To quote Charlie Stross, who knows a thing or two about publishing:

"In particular, about 80-90% of the cover price of a book has nothing to do with the paper and ink object you buy in a shop; indeed, using current production standards, ebook production requires nearly as much work as paper book production. (Paper and ink are dirt cheap; proofreaders and marketing teams aren't.) "

http://www.antipope.org/charlie/blog-static/2010/05/cmap-9-ebooks.html

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Re: 'Cost' for an e-book

ebook production requires nearly as much work as paper book production

So what you're in fact saying is that physical and ebooks are both a complete rip off, since proofreading and marketing are one off costs. So let's say the first 1000 books pay them off, anything after that is pretty much pure profit?

But either way, selling more, cheaper is still better, or the same, as selling less at a higher price. Or not?

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Re: 'Cost' for an e-book

@Pen-y-gors

Indeed they are overpriced, so much so that I have gone back to buying paper books secondhand unless the ebook version is reasonably priced.

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Re: 'Cost' for an e-book

What if the proofreaders, editors, and the like, like the authors, work on commission or royalty, such that the cost is not one-off but per-book?

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Anonymous Coward

Re: 'Cost' for an e-book

@Charles 9 : Then the comparative costs of e-books and tree-books would be a function of the distribution costs; and, as far as I know server space costs a lot less than maintaining a chain of brick-and-mortar retail outlets.

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Re: 'Cost' for an e-book

@SundogUK... "Paper and ink are dirt cheap; proofreaders and marketing teams aren't"

Fair enough. How does he explain examples like this:

Grapes Of Wrath. Kindle price £7.99, paperback £6.89

No proofreading, no marketing. All that was done in the 1930's

There are costs to be recouped on sales on new books, that is understandable. Books written over 70 years ago have no such costs to recoup. That is pure profiteering.

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Boffin

Re: 'Cost' for an e-book

If the prices are a rip off then people wouldn't buy. As people clearly are buying these best-sellers then the price is acceptable to a large number of people. They may get more profit at a lower price with more sales, or they may get more profit with a higher price and less sales. Without seeing their accounts we can't possibly know.

Prices are not based on cost (+ reasonable profit) but on value. If people are willing to spend £10 on a book it is irrelevant if the costs are £1 or £9.

Publishers need to get the most profit they can from all books they publish. But (I imagine) the book market is really hard to segment. Traditionally the only segments are hard & paperback. Now they have ebooks as another segment.

But how do you price that segment?

Again, this depends on value, how much are people willing to pay?

Some people (seems like quite a few on the reg comment boards) prefer printed books and against ebooks on principle. You can't consider these people for pricing as no matter what price the ebook they will never buy.

Currently (I would hazard a guess that) most people value the printed work over an ebook, thus ebooks lose value (This may be because they think ebooks cost significantly less to produce).

However Ebooks have many advantages over printed books, instant download, easy to take on holiday, don't take up shelf space etc etc. So ebooks gain value.

Publishers view ebooks as another sales channel, so the per ebook profit margin must not be less than the per printed book profit margin or they run the risk of cannibalising their market.

It is perceived there is a higher risk of piracy with ebooks (which may or may not affect sales) so should the price should be higher to compensate, or lower to encourage legitimate purchases?

Also ebooks get charged VAT so they should cost more.

So how much do you charge for your ebook? Depends on how much the market values it not cost.

If you are hell bent on thinking about costs, remember you can't look at one book in isolation. The publisher has no real way of knowing which books will become best-sellers or flops so must cover the cost of the flops with the profits from the best-sellers. By taking risks on usual manuscripts they can discover great new (profitable) authors which benefits everyone, but they are more likely to discover a flop. I wouldn't like a market where all the proofread and edited books are about moaning teenage vampires.

Yet another thread to consider is the growing number of self publishers. When the costs of printing are reduced to practically zero then assuming you abandon proof reading, editing, commissioning book art and marketing and paying yourself for the time you spend writing, you can sell the ebook dirt cheap and everything is pure profit (apart from Amazon's cut).

Of course this means there is a huge number of cheap and free ebooks from unknown authors of various quality. Hidden in amongst this load of crap and spam there are a number of excellent books well worth reading. Some of these authors have spent time and money proof reading, editing, getting a good cover and generally polishing their work. However at the price they are charging and number of sales they are getting I can't see how they are covering costs let along making profit. So people are getting used to paying an unsustainable price for these ebooks.

This could be a massive threat to publishers, if they are no longer needed for publishing they how will they continue to exist? The problem that seems to be happening now is a lack of quality control in the market place and marketing. Quality control is really Amazon's problem (or Google books or Apple or whoever owns the marketplace). If this was sorted then the threat gets even bigger to publishers, high quality books from big publishers for £6.99 or high quality books from a little publishers for £0.77?

Publishers could reinvent themselves to provide services to authors, on-demand Proof reading, editing and marketing etc but this is a hell of a culture change from being a gatekeeper (and somewhat a reduction in grandeur) and there are already services offering this.

These days I tend to download a lot of free ebooks. If I find a book I enjoy and the author has other books for sale then they will get a sale from me. I get high quality entertainment for a fraction of the cost in a more convenient format. The only other cost to me is the time I spend reading crap books before deleting them.

I guess I'm glad I'm not a (big) publisher.

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WTF?

Re: 'Cost' for an e-book

> Grapes Of Wrath. Kindle price £7.99, paperback £6.89

> No proofreading, no marketing. All that was done in the 1930's

I'm curious so lets run the numbers as close as we can:

Stross is quoted above as saying "80-90% of the cover price of a book has nothing to do with the paper and ink"

So if we assume 10-20% of the cost is printing costs and everything else if profit:

printed book profit: £5.51 - £6.20

ebook profit: £7.99

but ebooks charge VAT so:

ebook profit: £6.66

Amazon book fees are 0.86 + 17.25% of selling price for printed books and 30% for ebooks

printed book profit: £3.70 - £4.27

ebook profit: £4.67

So, based on cost, using these rough number and my (probably) dodgy maths, it appears ebook is 40-97p overpriced. But prices, and purchasing decisions aren't made on cost but on value.

> That is pure profiteering

No it isn't. Profiteering usually refers to raising prices during an emergency, especially on critical products. This is not profiteering but capitalism, the seller has the rights to sell this product at whatever price they want. If you like the product and the price you can buy it. If not you are free to look elsewhere or for something else. You could even contact the seller with a counter-offer but good luck with that.

> no such costs to recoup.

The aim of selling isn't just to recoup costs but to make profit.

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Holmes

My Top 10 suggestions for Apple's defence strategy

1. The Oliver North defence: "I have no clear recollection of that," typically repeated several hundred times

2. The Chewbacca defence: "Look at the wookie!", a.k.a. the Monkey Island defence: "Look, a three-headed Monkey!"

3: The Dragon defence: "FYIAD"

4. The Twinkie defence: diminished capacity due to Twinkie-induced depression, a.k.a. pleading insanity

5. The Playground defence: "IKYABWAI"

6. The Thatcher defence: "I refer the honourable gentleman to the answer I gave some moments ago."

7. The "Found It" defence: "It was like that when I found it."

8. The King Kong defence: Denying culpability for wilfully facilitating a crime in which one did not otherwise participate

9. The "Everybody Does It" defence: Claiming that the fact that other people commit crimes means one should be able to do so with complete impunity

10. The Idiot defence: Disingeneously claiming ignorance of extremely obvious facts

Although most people probably expect Apple to go with the Idiot defence, my money's on them going with the "Fuck You I'm a Dragon" strategy, like they did recently with Judge Colin Birss.

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Anonymous Coward

Of course Apple are in on it.

Half the problem is the ridiculous price points that Apple introduced, publishers then have to fudge the price of their books including VAT to meet the specific price point Apple dictate.

I doubt very much it's just the publisher I work for that have to go through this routine.

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WTF?

I am amazed

The vast majority of the debate above seem to want to know the exact costs of the whole process in order so that they can come to some sort of "acceptable" profit margin value, or perhaps it should all be done altrustically at cost, as anything more is expensive?

Perhaps the reason that books are cheaper than e-books is that they won't sell if they were dearer, and once the paper and ink is used, if there is dead-stock around, it is probably costly to keep, rather than sell.

However, what I find suprising is that this kind of debate doesn't seem to happen in most other high margin industries, such as Fashion. Sure,you have the articles or investigations into people being forced to work in sweatshops and unsafe conditions, but that is morality. When a fashion house sells a dress for £200 that cost them £10 to produce (if that), no-one starts questioning if its really worth that margin, well some do, but not really a vocal majority. They just decide not to buy the item. It should be same with Books, Electronics and so forth. However, it seems nowadays, and often due to companies like Amazon, we have been given a sense of entitlement that makes us forget that without people being able to actually make a living out of making products/books/music, then there will be no new items out there - after all, why would I want to put some of the best years of my life, into something - when I knew at the end of it, I wouldn't make anything from it? Unless of course, there was alternative reasons (charity, etc).

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That quote makes the case...

I think the quote from Jobs at the end of the article makes the case right there.

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