Home » Amazon, Apple, Author Earnings, Big Publishing, Ebooks, Pricing » How Apple and Big Publishers Pushed E-Books Toward Failure

How Apple and Big Publishers Pushed E-Books Toward Failure

8 March 2016

From Bloomberg Business:

Apple suffered a final defeat in its legal fight with the Justice Department over e-books Monday, when the Supreme Court refused to hear the company’s appeal. When the case was filed in April 2012 it was seen as a fight over the future of the digital book industry, with Apple Inc. and the five biggest publishers aligned against Amazon.com Inc. While Apple and its allies lost in court, their vision for the industry won out. It hasn’t been good for e-books.

The Apple case centered on whether publishers or online retailers  would determine the prices for e-books. At the time, Amazon was selling e-books at a loss, buying a book for, say, $14.99 but then charging Kindle users just $9.99. Publishers worried that tactic would train customers to expect books to come cheap forever.

. . . .

While Apple fought through the courts, the publishers all settled with the Justice Department. Meanwhile, Amazon decided that letting publishers set their own prices wasn’t such a bad idea, after all. Its newest deals with the big publishers allow them to do so. If Apple hoped to gain an advantage over a rival, it failed. Amazon controls about three-quarters of the U.S. e-book market, according to Good e-Reader, a website that follows the industry. In 2010 it made up 54 percent of the market.

Once Amazon gave up on its goal of setting a $10 standard price for e-books, the prices began to rise. Today, three of the top five best-selling books on the New York Times list for fiction cost at least $12. It’s not unusual to be able to buy a paperback book for less than the cost of the digital version.

There’s a widespread assumption that digital media always wins out over physical media. But even the Internet isn’t immune to the basic laws of economics. E-book sales declined 12.3 percent over the first 10 months of 2015, compared with the previous year, according to the American Association of Publishers, which compiles data from 1,200 companies.

. . . .

“It’s a fascinating question and clearly what it shows is that purchasers make a decision based on price,” said Robert Thomson, the chief executive officer of News Corp., which owns Harper Collins, in a recent call with investors. “They are valuing a print book versus an e-book.”

Thomson said he still expects e-books to grow as a percentage of the company’s overall book business, but acknowledged that people have lots of choices on their devices, and won’t necessarily choose books over other forms of entertainment.

Link to the rest at Bloomberg Business

Amazon, Apple, Author Earnings, Big Publishing, Ebooks, Pricing

24 Comments to “How Apple and Big Publishers Pushed E-Books Toward Failure”

  1. Title needs fixing …

    “How Apple and Big Publishers Pushed [Trad-pub] E-Books Toward Failure”

    As non-qig5 ebooks seem to be doing nicely …

    • @ Allen

      Bloomberg Business is another Manhattan entity, just like the NYT and Big 5. Their myopia re self publishing is quite evident.

      • Yeah, my dad used to get that rag, only good for smallish fish. (Amazing how may ‘please come back’ notices we’ve gotten from them since he passed and we let all his rag-mags expire.)

      • Why would you say it is myopic? The same piece included this paragraph
        “None of the statistics highlighting the recent decline in e-books include independent and self-published e-books. These are generally much less expensive than what’s coming out of the major publishing houses, and people within the self-publishing world insist that it continues to thrive. Author Earnings, an advocacy group for writers, says that nearly 60 percent of Kindle books come from outside the traditional publishing process. These books account for about 40 percent of total consumer spending. The group describes gains among independent authors as driving the declines among major publishers. “

        • “Why would you say it is myopic? “

          The headline. Emphasis is everything. The thrust of the article is BigPub-centric. And a short paragraph thrown in as a small cautionary doesn’t change that.

          I have to wonder if a savvy editor insisted that paragraph be included, or if the original article writer wrote it.

          • Added would be my guess, different tone to that little bit.

            One problem BB and the other anti-Amazon types have is if they stress their points too one-sided on things like this, readers start wondering what else BB is only telling one side of.

            Since this still claims ‘Amazon was doing some bad things — and that be why the qig5 and apple did what they had to!’ I just mutter ‘Bullsh**ing’ and get on with my pretending to write yet another chapter in the life of a crazy man (while one of my better proofreaders goes over the last one … 😉 )

            • I think you are letting your preconceptions color the way you read the article. Nowhere did it claim Amazon was in the wrong. Nowhere did it state Amazon was using predatory pricing. Instead it stated that it sold ebooks at a loss and the publishers didn’t like the prices it was selling them for. Sure they could have go n e into the nitty gritty details and explained that Amazon originally lost only a penny until the publishers increased the prices they charged Amazon to force higher prices but Amazon are the loss instead but why would the average reader care about those. Instead Apple was he villain of the piece not Amazon. I have defended Amazon in many articles written about this case. In the Bloomberg article, Amazon doesn’t need to be defended.

              • “At the time, Amazon was selling e-books at a loss”

                As I recall, the very first time the DoJ looked into it this bit was disproved, but the qig5 mouthpieces keep spouting it.

                “Meanwhile, Amazon decided that letting publishers set their own prices wasn’t such a bad idea, after all.”

                Contract time came around and the qig5 insisted on playing their agency cards. The big H let theirs expire and tried to hold out for better terms with Amazon, but quickly folded when the others didn’t even wait for their own contracts to lapse before signing new agency ones with Amazon.

                “Once Amazon gave up on its goal of setting a $10 standard price for e-books, the prices began to rise.”

                More like: “Once agency took affect, the prices began to rise.” Once again, not something Amazon ‘did’, so no need to mention them — is there?

                Why I would like to know did the writer even mention Amazon?

                There was no real reason to even mention Amazon in a report on how Apple and the qig5 screwed the pooch — other than to try and pass blame for the stunt Apple talked the qig5 into.

                And it all worked out quite well for all parties involved.

                Agency — which Apple wanted and Amazon didn’t, doesn’t help Apple at all because they can’t compete with Amazon on price and can’t seem to make it as ‘easy’ for the writers and readers to buy and sell as Amazon does (I for one am not buying a mac just to be able to sell ebooks through the Apple store! 😛 )

                Agency — Before agency the publishers (and their writers) ‘were’ getting their full price even when Amazon was discounting their ebooks (just like they do when B&N or Amazon discounts their hard/paperback books). After agency they are selling far fewer ebooks at their higher prices, but now if they (because Amazon isn’t allowed to under agency!) lower those prices to get more sales, they (and their writers) eat the lower amount per sale — not Amazon.

                Ever time the qig5 and their minions try to change history and blame others (most often Amazon) for their own mistakes and misdeeds they need to be taken to task for it — least some poor misguided souls start believing them.

                • Heh, just got another ‘please come back’ from Bloomberg Businessweek

                  Their ‘pitch’? A $274.50 ‘credit adjustment’ so 50 issues cost $25 rather than $299.50

                  So even they admit their rag isn’t actually worth fifty cents — counting the postage.

                  I know I should eat more fish, but not that much more …

          • Absolutely. Old reporting trick. Studies show people don’t read the entire article (some do; most don’t). So you put your bias up at the top, the quotes supporting your bias in the middle, then the mitigating circumstances at the bottom.

            Sometimes, you just leave the M.C. out entirely. I remember this whenever the Associated Press wrote about how President Bush rejected the Kyoto Accords on global warming climate change. They always forget to add that the Senate voted unanimously not to consider taking up the pact (it was a “sense of the Senate” resolution).

            Nope, easier to blame Bush.

            • Hehe, I got in a small discussion over why do people blame Obama, Bush, Clinton, etc. for the deficit when Congress is the one who passes it. Sure Presidents can veto if the votes aren’t high, but why give 500 people who wrote the bill a pass?

              And then blame the one guy who often would have to screw thousands waiting on paychecks just to crush the bill created by the people elected to do it.

              Much easier to blame one guy was my guess.

            • Studies show people don’t read the entire article (some do; most don’t).

              We have software that shows us that in real time. Half the readers quit by the middle. The percentage who get to the end are in the single digits.

  2. Felix J. Torres

    Note Amazon’s share in early 2010 after Nook came out (but before the 4 hour price war):

    Amazon 54%
    Nook 26%
    Sony, Kobo, Google and assorted generic epub 20%.

    Market forces were doing their job.
    The conspiracy wasn’t just illegal, it was counterproductive.
    Doubly stupid.

  3. The article says that Apple refunds can only be used for e-books, while I’ve seen it said elsewhere that the refunds can be used for any purchase. Who’s right?

  4. “At the time, Amazon was selling e-books at a loss, buying a book for, say, $14.99 but then charging Kindle users just $9.99.”
    It’s weird how a business article can have that basic fact so wrong. If say they were taking 30%, then on a $14.99 novel they paid the publisher $10.50. So on a few select bestsellers they lost maybe(just a rough guess) $0.51 per book to get people to buy other books that weren’t as discounted.

    • Good point. Thanks.

      • Actually, the way books (and most retail sales) always worked was that the distributor (in this case Amazon, but it would apply equally to Costco), pays the seller half the cost and then sells the book for whatever they want. So Amazon was buying a $14.99 book for $7.50. Very few books were actually being sold at a loss at all. It’s a ‘loss’ only because a huge percentage of retail is 100% markup as a matter of course.

        Now, Big Pub could have set the price of the ebook at $20, Amazon then charges $9.99 and loses 1 penny on the sale. But again, the DOJ determined that their overall sales were in the black and they were doing this only with a few books–known throughout the retail world as ‘loss leaders’.

        • For paper books you are right, but I think for eBooks it depends if they were under reseller or agency.

          Reseller for eBooks was 50%, which meant that it’s unlikely Amazon was taking a loss for almost any eBook sold at $9.99.

          Agency for eBooks was 70%, which I used above as the most favorable to the usual meme but even there it’s still weak. Macmillian I believe got this earlier than the rest, if my memory of the timeline is correct.

  5. Ah, another failure to understand economics. Joshua Brustein, take a bow! You are economically illiterate.

  6. Patricia Sierra

    Something I think is left out of articles saying consumers choose print when digital is similarly priced or even lower: What about those who won’t read anything but digital, thus the sale is lost?

  7. Al the Great and Powerful

    I won’t buy print from the qig5 if its cheaper because they made the ebook more expensive. I’ll buy used, I’ll borrow from the library, but those publishers get NO MONEY from me for that trick.

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