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Indie Publishers Criticize DOJ Deal

26 June 2012

From Publishers Weekly:

Nine independent publishers have combined to file joint comments objecting to the pending settlements of the Department of Justice’s lawsuit with Hachette, HarperCollins, and Simon & Schuster related to e-book pricing. The publishers noted that while they continue to sell e-books under the wholesale model, they have “benefitted significantly”–along with authors, booksellers and consumers,– from the ability of the Big Six publishers to adopt the agency pricing model with Amazon, since those arrangements, “contributed dramatically to increased competition and diversification in the distribution of e-books.”

In their comments, the publishers argue that the ruling would effectively ban the use of agency pricing at the three houses, something that would “harm rather than enhance competition—allowing one large retailer (Amazon) to regain a monopoly or near monopoly position through below-cost pricing.”

…..the publishers — Abrams Books, Chronicle Books, Grove/Atlantic, Inc., Chicago Review Press, Inc., New Directions Publishing Corp., W. W. Norton & Company, Perseus Books Group, The Rowman & Littlefield Publishing Group, Inc. and Workman Publishing– pointed to a study they did among six of their members on Amazon’s pricing policies. …..Using the average rule of thumb that the average wholesale discount is 50%, the publishers stated that “where it can (i.e., where there are no agency agreements), Amazon engages in widespread below-cost pricing.” It is the agency model, that by preventing Amazon from using its scale to price e-books below cost, that has allowed other companies to compete for the distribution of e-books “and for the sales of physical books through bricks and mortar retail.”

 

Read the rest at Indie Publishers Back Agency Model 

 

~contributed by guest blogger Kat Sheridan

Amazon, Big Publishing, Bookstores, Indie Bookstores

25 Comments to “Indie Publishers Criticize DOJ Deal”

  1. They don’t get it. Setting the same price at all retail outlets is even more non-competative than letting retailers, Amazon included, to discount. You don’t squelch competition as a solution to prevent a “monopoly” (because that creates another one), you allow the market to work. The law isn’t in the business of picking winners and losers, just to make sure no one is being underhanded about it, like price fixing to prevent low prices.

  2. I couldn’t possibly care less. Find a legal way to compete, or wither and die. The market doesn’t owe you an existence.

  3. And another thing: How is amazon in any way a monopoly? Granted, I’m no economist, but I thought that, in order to be a monopoly, an entity had to produce the goods, meaning they can control pricing and availability and the consumer has no recourse. Outside of a handful of books that Amazon publishes through their own imprint, they don’t actually produce books. They are supplied books by publishers and creators. If the publishers want to “hurt” Amazon, they should refuse to supply them.

    • But…but…but… they BIG!

      And…and…and… I can’t figure out how to do what they do so they must exerting their Evil Bigness Powers to stop me!

      They’re eating my lunch (which I stole from the other kids in the first place). They MUST be a monopoly.

    • Yeah, but then they lose a huge source of revenue and distribution. They’ll stick by their principles until it hurts their wallet.

    • Google on “monopsony” and… I think it was Stross?

      The thing that publishers fear — and that all suppliers to Amazon should be wary of — is that Amazon will become big enough to dictate terms to the suppliers (that includes us) which are unfavorable to the suppliers… while passing those savings on to the customer.

      It’s nice for the customer, but depending on the publisher’s overhead (and I’m including self publishers here), it may mean the difference between “makes sufficient money” and “doesn’t make enough money to continue doing this.”

      So long as there are challengers to Amazon’s monopsony, they will at least seek to keep some of their suppliers happy (like indie authors), to prevent a mass exodus to better deals. This keeps Amazon a profitable tool for indie authors. (Dunno about the small publishers — with fewer books, they have less clout, and considering distribution stuff, quite possibly more to lose than the big publishers, if they pull out of Amazon deals.)

  4. Monopoly means only one seller exists for a particular product within a certain market. Say, for example, there is only one brand of gas station in your region. As a driver, you might be able to devise clever ways to obtain crude oil and refine it into gasoline, but in practical terms you’d still have only one place to buy your gas.
    This situation is perfectly legal because the market remains open to competition.

    • Not to mention, as PG has said in the past, being a monopoly isn’t illegal. It is abuse the power of a monopoly that is illegal. When a business has a monopoly, they can charge whatever they want and no one can do anything about it. That is what is illegal.

      Amazon is not, and will not be able to sell books at high prices. There is no way they can be illegal. Which I go into in my recent article at Grasping for the Wind:

      Predatory Pricing and Amazon
      http://feedproxy.google.com/~r/GraspingForTheWind/~3/nhn9RyBQguw/

  5. Abusing a monopoly means charging higher prices, not lower. Or it means charging lower prices to force all the competition out, with the intention of raising prices so high that the monopolist recoups all their losses from the low prices, plus makes an additional, illicit, profit. There’s no evidence whatsoever that Amazon has any intention of doing this, nor that they’re forcing anywhere near “all” their competitors out of business. Heck, the publishers aren’t really their competitors anyway, except on a very small scale through Amazon’s in-house publishing lines.

    What this is actually about is the publishers being afraid that the customers will begin to see Amazon’s lower prices as normal, which they should. Heck, IMO $9.99 is still to high a price for an electronic novel, but it’s heading in the right direction. But it’s that, “Wait, isn’t this supposed to be cheaper?” response from the customers that the publishers are dreading, not any actual destruction of the free market.

    And of course, this is a classic case of, If they’d put half the effort into fixing the problem on their end that they’re putting into griping and whining and throwing their price-fixing tantrum, they’d have solved the problem by now and would be strong competitors once more.

    Angie

    • Gripeing works if you want to maintain the status quo for as long as you can. Delay tactics 101.

      • It’s sort of funny how indies see and want a solution, but T. Pubs want to avoid it at all costs. Maybe deep down we all want back in? Some sort of mummy fetish.

        (I’m making a general comment, Angie. This isn’t directed at you. It’s just convenient to link to the above.)

        • No offense taken. 🙂

          On my part, when I want to smack some brains loose in the NY publishers, I’m mostly wearing my reader hat, and the part of my writer persona that empathizes with the customers. I agree that the stupid-high prices they want to charge for e-books make the indies and the small presses look really good, and that’s a benefit for us, at least in the short term. I don’t think it’s good for the industry as a whole, though; the more pressure builds up, the higher the likelyhood that something will finally break explosively, and we could all get hit by the shrapnel.

          At the very least, if the big publishers win, I could have a hard time affording a lot of the books I want to read, if NY eliminates eight dollar MM paperbacks in favor of fifteen dollar e-books. That’d suck. :/

          Angie

    • My spouse does note that the price of Amazon stock, relative to its earnings, tacitly assumes that they will exert monopoly power in the future.

      This says nothing of Amazon’s intentions (I believe they will only exert monopsony power on their suppliers, given the chance), but it sure does say something about expectations.

    • “Abusing a monopoly means charging higher prices, not lower.”

      Actually, Amazon does charge higher prices than the publisher list price when it can get away with it. I noticed an ebook with a $10.23 list price this weekend (which has now gone up to $11.03) that one of the big publishers is selling for $7.99 list on their own web site.

  6. Sigh. BUT I LIKE THE AGENCY MODEL. Why would I do that? Because it provides a lovely price comparison. My $9.99 novel looks like a steal when consumers expect $14 (etc.). So I say LET THEM HAVE IT! I don’t read trad. bestsellers anyway; I read indie. All of their high pricing strategies make my $2.99 short stories plausibly purchasable. Without it, the rise of the short style *could* die then I’d be back writing mass exposition to fill pages. Meh, sad face.

  7. Amazon as a monopolist? Perhaps someone can give us a real world example of a retail monopolist.

    • I remember PG saying Amazon is not actually a monopoly, which makes sense, ’cause there are plenty of other bookstores, and most books are still sold through brick-and-mortar establishments.

      The only monopolist I can remember is Ma Bell, before they were forcibly broken up.

      Other than that, there are the “trusts” from a hundred and some years ago that I vaguely remember from US History — the Beef Trust, the Steel Trust, all that sort of thing, which was groups of companies getting together and colluding to keep prices high. Gee, familiar…?

      Angie

  8. How much more self-serving could these guys be?

    “Uh, we’d like to thank the NBA all-stars for handcuffing their ankles together in order to give us benchwarmers a chance. We deny that this is some kind of organized protest on their part aimed at raising their pay, and we especially protest against the people that want to force them to take the cuffs off and compete with us properly.”

    Maybe a different example?

    “We’d like to thank the enemy forces for pointing their guns at their own heads…”

    And honestly, as an indie author I also like it when the Big 6 hobble themselves. Why wouldn’t I? That would be like… okay, fine, no more examples.

  9. The word that the publishing industry is looking for is monopsony. That is when all producers or wholesalers have to go through a single retailer to reach consumers. A real world example would be the market for iOS apps. You have to through Apple and meet their fairly strigent (and often arbitrary) rules to be able to sell your app. Not that there is anything wrong with that, in and of itself.

    Arguably, Amazon has been close to being a monopsony in ebook retailing, but there is no credible evidence that they have abused their position. They certainly through their weight around and can be a dangerous business partner, but that is par for the course in the tech business (see Microsoft, Intel, IBM, Apple, Oracle, etc.).

    • Abuse is relative.

      Remember that when Amazon first offered e-publishing, the royalty was 35% (or 30? I’m running on 2 hours sleep here…), and the contract actually had no clause for the author to get out of it except if Amazon changed the contract — and then you had 30 days to notice that they’d changed it, and send a letter via snailmail. (They also had absolute control over the sale price, which did not exclude them raising the sale price and paying you based on the suggested price, if they felt like it. I prefer agency-style pricing, as an indie author, myself.)

      At the time, other ebook royalties were ranging from 60% to 80%, from smaller ebook-sellers. (And the SF&F author’s guild (SFWA, isn’t it?) wrote a scathing pick-apart of the contract! It’s probably around on the net somewhere.)

      When did we see 70% for some (though still not all) markets? (Less transfer fees, of course.) When Apple entered the ring with the iPad and iBookstore, and the expectation that they would just recycle the 70/30 split they offered their app developers.

      Even now, Amazon has some… annoying… business practices. One that makes me grumble a bit is that each of their Amazon stores has separate accounting — you have to get to the equivalent of $10 USD in a given store (US, UK, DE, etc.) before you get that direct deposit. Another is the 35%-if-sold-outside-of-“zone” — which may be on top of charging an extra $2.

      If a big publisher did that sort of thing, everyone here would scream about how it was greedy overhead-heavy publisher tactics.

      Amazon is in it for the money. The only reason they have to change those annoying practices is for good press when they move into a new zone. They’re not altruistic. They made author-friendly changes when they felt threatened by another provider, and not before.

      Inertia might protect the wee indie authors, even if Amazon re-establishes its monopsony. (If it ever really lost it…) But then again, it might not. They have not behaved as anything but a Business in the past, and I don’t expect anything less from the future.

      It is to our advantage — as authors and readers both — to have a hungry Amazon, not a complacent one.

      • No one’s assuming Amazon is at all altruistic — of course they’re in it for the money. They’re significantly less abusive than the big publishers right now, though, so that makes them the relative good guys, out of all the various people who are trying to squeeze us for money.

        Amazon didn’t exist more than a dozen years ago. If they get too abusive and leave doors open for competition to do it better, someone else will come along and take them down. No one thought anyone could beat out Borders and B&N ten years ago, but that wasn’t true. Everyone in the computer industry expected Broderbund to be around for the foreseeable future, but most people here are probably thinking, “Who?” Pan-Am is gone, IBM is much less influential than it was, and even McDonald’s is no longer the number one fast food company.

        I think Bezos is smart enough to realize that if he gets too greedy in the wrong ways, someone else will come along and stomp him. And if he’s not that smart, well, then someone will come along and stomp him. We’re not counting on him being some kind of guardian angel to indie writers, but rather on his self-interest marching with ours for the foreseeable future.

        Angie

        • No one’s assuming Amazon is at all altruistic

          You haven’t read some of the people rebutting the Amazon is Evil fanatics! 😀

          Yeah, Amazon is better than the Big Six. Amazon at its worst was arguably better than the Big Six.

          That doesn’t mean that we should smile and baa and not keep an eye on what Amazon is doing (or is not doing), assuming that Amazon is our Friiiiiieeeeeeeend.

          It’s a tool. It’s possibly lower-case-e evil. (Actually, it is — they bought out Stanza and incorporated almost nothing of Stanza’s powerful library-organizing abilities and format-options into the Kindle app, then let Stanza pretty much wither on the vine. Raises my blood pressure just thinking about it, because even withering, Stanza is still the best iOS e-reader app that I’ve found.)

          Where was I? Ah, yes. The thing is… a monopsony can be powerful; it has inertia. As long as the customers are not inconvenienced, and find benefit in the monopsony… Why would they move to Some Other Upstart? (This is why I don’t think Amazon will ever behave like a monopoly to its customers, even though the Stock Market apparently does think this.)

          Constant Vigilance. Constant assessment of our ideals vs. practicalities. It’s possible that with a bit of luck combined with being aware and willing to poke sticks at the dubious bits, we won’t have a dark period of being ground beneath the Amazon’s Stiletto Heel before someone comes to challenge the monopsony.

          I’d like to have Amazon as a useful tool among other useful tools. But it’s like fire — great servant, lousy master.

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