Home » Big Publishing, DOJ » DoJ Deal Will Lead to the ‘Systematic Elimination of Competition’

DoJ Deal Will Lead to the ‘Systematic Elimination of Competition’

28 June 2012

From Publishers Weekly:

Readerlink has sent its own letter to the Department of Justice giving a wholesaler’s perspective on the proposed agreement with HarperCollins, Hachette and Simon & Schuster. According to Readerlink, the settlement, by encouraging a return to predatory pricing, “sets the stage for the systematic elimination of competition by Amazon.”

Readerlink… distributes print books to over 24,000 retailers, including most of the major mass merchandisers and warehouse clubs. Before the agency model was introduced, Amazon’s practice of selling e-books below cost both discouraged retailers from carry print books and from entering the e-book market themselves, Readerlink said. Due to the vast difference in price between print books and e-books, many of Readerlink’s retail partners reduced or ceased offering print books in their stores, a move that reduced consumers’ access to books, particularly among readers who can’t afford digital reading devices. ….

In taking issue with the government’s contention that the agency model led to an increase in all e-book prices, Readerlink maintained that the only prices that actually rose were those on bestsellers that had been “artificially” lowered by Amazon’s below-cost pricing.

The approval of the settlement, Readerlink argued, will “lead to the death of many print book sellers who provide the only way to buy books for an abundance of the American book-consuming public.” If the government protects Amazon’s ability to engage in predatory pricing it will “eliminate less financially strong or diversified competitors,and kill off the only other option for the reading public, the retail sale of print books in brick-and-mortar retail stores. And, then, there will be none; no more competition and on other options.” ….

 

Please link to the full story at Publishers Weekly 

If you’re not familiar with Readerlink, click here to learn more about who they are.

 

~contributed by guest blogger Kat Sheridan

Big Publishing, DOJ

37 Comments to “DoJ Deal Will Lead to the ‘Systematic Elimination of Competition’”

  1. In other words, it is essential that buyers of ebooks subsidize print books, because the publishing industry already let too many entities set “artificially” low prices on bestselling print books and we can’t undo that.

  2. No, you didn’t link to the right page. THIS is the relevant link: http://readerlink.com/Customers.aspx

    This is the company responsible for authors losing royalties by publishers selling print books at super-low cost in places like Target and Costco, the places where authors’ royalties disappear. So apparently, Readerlink is in favor of low prices–but only when they are the ones setting them.

    • “So apparently, Readerlink is in favor of low prices–but only when they are the ones setting them.”

      Never underestimate the ability to rationalize self-interest.

  3. All these whiners are overlooking one very important thing. If you can be put out of business that easily, you weren’t actually competition to begin with.

  4. As usual, more complaining about Amazon, despite Amazon not being part of this case.

  5. OK, so if Readerlink are supplying Kmart, Target, Walmart etc., isn’t their problem more that they are selling at the low end of the genre market, and many of those books have (umm) Fabio-like covers?

    The reason many romance readers have switched to ebooks is only partly about price. It’s also because now they can read in public, and when people comment it’s about the cool device, not a judgement on a person who would read a book with such a cringe-inducing cover.

  6. So… before agency pricing, book stores stopped carrying the $25 hardcovers because they couldn’t compete with the $9.99 e-books, and this kept underprivileged readers from being able to purchase books because they could not afford expensive $100-$150 e-readers. Is that right?

    Well, maybe if they stopped buying $25 hardcovers, they could afford the e-readers.

  7. One really must laugh uproariously at the very notion of “predatory” pricing. What do they do — ambush you and force discounts on you? Give. Me. A. Break.

    M

  8. Amazon is going to have competition, but that’s not going to save bricks and mortar bookstores. Google’s announcement of its Nexus tablet is a pretty clear competitor to the Kindle Fire, and if Amazon is losing money on the hardware of each sale of the Kindle Fire, Google is probably losing more. Google is going to need to sell content for the Nexus; that means apps, movies, and books.

    • This is the key – the market will adapt. The only real question is whether that adaptation will come from those currently in the market, or will it come from someone new?

  9. The approval of the settlement, Readerlink argued, will “lead to the death of many print book sellers who provide the only way to buy books for an abundance of the American book-consuming public.” Er. If they’re the only suppliers for most of the book-consuming market, why are they in danger?

    Egad. Amazon’s evil ways are more subtle than I guessed!

  10. Overlooking, for the moment, the fact that Readerlink is part of the very sort of deep-discounts methods that they;’re maligning…. AGAIN, what is the solution being proposed here? That the DoJ CEASE PROSECUTING ANTITRUST VIOLATIONS??? Do all of these whining rants–from the AG, the AAR, the ABA, Readerlink, etc., etc.–REALLY mean to say, as they certainly APPEAR to be saying, that FEDERAL LAW designed to protect consumers from price fixing SHOULDN’T BE APPLIED TO PUBLISHING????

  11. I think it is very hard to feel as though your livelihood is in jeopardy, so I do have some sympathy. But, on the other hand, it’s much better to face reality.

    Amazon is not killing print. The technology of e-books will kill print, except as a specialty item. This is an inevitability. It’s not Amazon’s fault that a new, more efficent and accessible technology arose, they were just smart enought to jump on the bandwagon.

    If it isn’t Amazon, it will be someone else. Pointing fingers at Amazon in an attempt to save print is just pointless. The technology shift will happen.

    But, again, I understand it’s scary to see your livelihood threatened, so I have some sympathy – more than I have for New York Publishing. They could choose to compete with Amazon, their parent companies have pockets that make Amazon look like a pauper, but instead they prefer to fling themselves in front of Amazon so they can slow it down, while still benefiting from selling their books there. I have trouble respecting that.

    • Mira, I am not sure your statement is accurate.

      They could choose to compete with Amazon, their parent companies have pockets that make Amazon look like a pauper,

      AFAIK, Amazon’s annual revenues are higher than any of the multinational conglomerates that operate in the publishing industry. Yes, the annual net profit of many of these companies is currently higher than Amazon’s-but Amazon’s growth curve could reverse this situation over the next decade.

      • Stephen,

        I don’t think I made my point clear, sorry. When I say “deep pockets” I’m not talking about revenue, I’m talking about net worth.

        Apple leaves Amazon in the dust in terms of net value as do the massive conglomerates that own N.Y. Publishing. Publishing is a very small piece of their pie. They are worth billions more than Amazon, and their reserves are undoubtedly quite deep. They could choose to invest in e-books and give Amazon a run for its money. They are not choosing to do so.

        Whether Amazon COULD grow bigger than they are – well, sure. If companies choose not to compete, they really can’t complain if the market goes to the one who is offering a service. Amazon is smart, fast, adaptive and creative. Those qualities often help a company thrive.

        • I think News Corp is the largest publishing conglomerate. The balance sheet shows 12 billion in cash, 62 billion in assets and 15 billion in long term debt. 33 billion in annual revenues with a market cap of 54 billion.

          Amazon has 5 billion in cash, 25 billion in assets and very little in long term debt. 48 billion in annual revenues with a market cap of 100 billion.

          Amazon is a much larger company than your comments allude to.

          • Stephen, I never said Amazon was small! I said comparitively small.

            Actually, I think Newscorp is the 2nd largest, btw.

            So, not sure where you’re getting your stats, but assuming your stats are accurate I think you are still proving my point. 12 billion vs. 5 billion in cash. 62 billion in assets vs. 25 billion in assets.

            Billions, Steve. Projected income and debt management are not relevant, we’re talking about current status and ability to compete.

            Now, add in the OTHER major conglomerates. Now add in Apple. Now put ALL of them up against Amazon.

            Do you really think they couldn’t compete with Amazon, Steve, if they choose to do so?

            • You’re conveniently ignoring the debt load of News Corp ($15 bil) v. Amazon ($2.6 bil).

              Servicing of the debt does impact what a company can or cannot do.

              And publishing is a VERY low margin segment of the multinational conglomerates. The BODs at the media conglomerates don’t want to plow money into some initiative that’s not going to give them sufficient ROI to make it worthwhile.

            • Nadia, I didn’t ignore the debt load, I didn’t think it was entirely relevant. But let’s say it is. New Corp’s entire long term debt is less than half of ONE year’s annual revenue. I don’t think it’s crippling them.

              I also think if Amazon is smart enough to keep their debt down – well, good for Amazon.

              As for why the mega-corporations aren’t competing with Amazon, I have no idea. Your reasoning may very well be on target. I’m just saying that they could do so, if they wished to. N.Y. publishers like to represent themselves as poor, defenseless entities without any recourse other than to commit criminal anti-trust actions in order to protect themselves. It’s just not true. Their CEOs are very rich, their parent companies are massive, and there are many, many other options available to them.

              Btw – News Corp announced yesterday that they are separating their entertainment and publishing divisions. That’s interesting. They may be entering the ring after all. There is ALOT of potential money in e-books.

            • I only spent an hour researching but News Corp came up as the largest of the companies in question. Which company do you believe is larger?
              Numbers were taken directy from published financial statements.

              I never questioned your statement that the publishing conglomerates have the resources to compete against Amazon. I questioned your description of Amazon’s scale in relation to the conglomerates. I still do.

              Projected income and debt management are more relevant to a company’s ability to compete than the valuation of fixed assets on a balance sheet.

              The stock market believes Amazon is worth more than News Corp. I am merely trying to show you that Amazon plays in the same ball park as the conglomerates in question. Their pockets are as deep as the conglomerates but contain less profits/assets as they are currently plowing the majority of their profits back into the business in order to maintain a steep growth curve.

            • Steve – I was thinking of Disney. They own Hyperion, which isn’t a Big Six, so perhaps you weren’t thinking they were as relevant – and perhaps they aren’t……although, Disney would be a force to be reckoned with if they chose to enter the e-book market.

              So, okay. I still think that Amazon is the new kid on the block, but you’ve kindly agreed to my point – which is that the mega-corps have the resources to compete – so, I’ll agree that Amazon is a healthy and growing financial powerhouse.

            • Um…newscorp or splitting in two http://www.bbc.co.uk/news/business-18621949 and they are lumping HarperCollins in with the newspapers, which, since the newspapers are the ones under fire for phone hacking, raises the question…if they close down or sell off that part of the business, because it is tainted and losing money, what will happen to HC?

            • Nadia, I think you missed the gist of my post, which was that a debt load equal to less six mon th’s annual income can not really be considered a heavy load.

              As for how News Corp spends its money, I have no clue, other than to be certain they spend it extremely well and wisely and in ways that will ultimately benefit the public good.

              I’m curious about your interest in this topic, though. You’ve chimed in a couple of times to disagree about debt management, but you’ve not said why that matters to you or what underlying point you’re trying to make…

              ….and this posted above your comment to me! 🙂 Darn reply limits!

          • Dammit, that’ll teach me for commenting before reading all the replies. Mira already covered the NewsCorp split, though she does have a slightly different read on it to me.

            I’ll happily answer to PK, to avoid confusion with Stephen BTW (there’s a lot of us about, even with the PH of class in our names)

            • Mira,

              Actually revenue is not as relevant in managing debt load. Cash in & cash out, however, are very crucial — need cash to pay off the interest plus principal, etc. When you have a heavier debt load, you have to use up more of your valuable cash to service your debt.

              As for the potential HC & News Corp split — I don’t think it’s because of some incredible desire to go out and compete with Amazon. It was sort of inevitable given what is going on with News Corp, and I won’t be too surprised if Amazon bids to buy HC to acquire its publishing assets.

  12. Jason Brook Jr.

    “… eliminate less financially strong or diversified competitors,and kill off the only other option for the reading public.”

    AHEM… LIBRARY… CHOKE… CHOKE…

  13. Omg! This doesn’t surprise me at all that this was in PW.

    “The approval of the settlement, Readerlink argued, will “lead to the death of many print book sellers who provide the only way to buy books for an abundance of the American book-consuming public.” If the government protects Amazon’s ability to engage in predatory pricing it will “eliminate less financially strong or diversified competitors,and kill off the only other option for the reading public, the retail sale of print books in brick-and-mortar retail stores. And, then, there will be none; no more competition and on other options.””

    I don’t even know where to begin sorting through the bs in this statement. Where are Joe and Barry when you need them?

  14. Yesterday’s story is that Newscorp is splitting in two, with its publishing arm (including Harper Collins) being part of a new company: http://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/52809-news-corp-to-split-hc-to-join-publishing-group.html

    How do you think this will impact the debt load discussion?

    • Kat – yes, isn’t that interesting!? I could be wrong, of course, but I really suspect this is a prelude to setting up competion with Amazon.

      Should be fascinating!

      As for debt, no idea how they will cook the books…..er, I mean, make fiscally responsible decisions in the best interest of their stockholders.

    • Since the move is to separate highly profitable from legacy/not very profitable, I will guess that there will be trickery involved and that the publishing arm will be saddled with as much debt as would be legal.

      • Well looks like I am completely and utterly wrong.

        “Rather than transferring debt to the new company, as most spinoffs take on by issuing new bonds to pay down parent debt, Murdoch said the new publishing company will start with as much as US$2bn of cash and no debt on its books.

        “It will have positive cash flow from day one,” Murdoch said in a television interview on Thursday. “And it will have no debt. It will also have cash reserves.””

        From: http://in.reuters.com/article/2012/06/29/markets-credit-idINL2E8HT7YO20120629

        • Hmmm…that does put a different spin on it.

          But, Murdoch is an old-time newspaper man (I will refrain from uttering my opinion of him as a person. Hint: I’m British and left of centre politically) and NewsCorp have had a group, within their board — led by some of Murdoch’s children — who have wanted to off-load the Newspaper business for years.

          Now with the phone-hacking scandal jeopardising their bid for BskyB (there is a definite possibility that whomever runs the business related to the, now closed down, ‘News of the World’ newspaper will be declared unfit to run a media organisation by the British Regulator, which would destroy the bid) they have got their wish to split the business in two.

          However, to make the old man happy, they are not saddling the publishing business with all their debts. Note that the Murdoch family will own 40% of both companies. So the publishing business might well die with good old Rupe.

          And yes, I really do think this is predicated more on family politics than business strategy. (The Murdochs are more akin to robber barons not businesspeople at this stage of the game IMHO)

          Caveat: I may not know what I am blathering about.

          • Steve, really interesting. And the other Steve, PK, too.

            Caveat: I’m positive I have no idea what I’m blathering about when it comes to why NewsCorp is splitting!

  15. Normally, I’d click through and read the entire article, but, to be honest, I couldn’t be bothered to read the entire excerpt.

    Sheesh…this is getting ridiculous.

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