But Amazon pretty much, right now, has a monopoly on online bookselling. They’re huge. As a result, this becomes nearly a form of de facto price fixing.
This is not a reason to prefer Macmillan over Amazon. Amazon might arguably have something that is almost a monopoly on online bookselling, allowing them to de facto dictate the price of books purchased online (though not offline, except to the extent that price wars dictate that competitors charge less).
Macmillan has an actual monopoly, guaranteed by Congress, on producing Macmillan books. Macmillan is telling Amazon to engage in actual price fixing. Macmillan has told Amazon that if Amazon does not set their prices to exactly what Macmillan says they should be, when Macmillan says this should be, Macmillan will use its actual monopoly to forbid Amazon from distributing their books.
Macmillan is doing this to avoid channel conflict -- i.e. establish actual price fixing backed up by the power of law to forbid there to be price-based competition among the various outlets who sell their books.
It turns reality on its head to portray Macmillan as the pro-consumer champion of a vibrant, competitive market here.
At the same time, it also turns reality on its head to portray Amazon as being pro-consumer in this case (where's the good old Amazon that helped force Apple out of music DRM by launching Amazon MP3?). In this struggle, it seems that both sides are trying to price-fix, but to different prices, and without much concern for either the consumers or the authors that are so directly affected by their falling-out.
The question of which is ultimately better for the consumer is non-trivial to my mind. Not to mention that, because publishers tie author royalties to the physical cost of production, the authors stand to lose a lot in this struggle.
If something won't be profitable to make, it won't be made. The best price for the consumer is the lowest price at which the item desired by the consumer can still be produced.
If something can't be made it's price is infinity. If it's custom but possible to create it's price is high. If it's mass produced it's price drops. If it's pubic domain it's free.
PS: Saying people will not make it at some price just means it's actual price is higher.
My point with the parenthetical note is that Amazon is not acting in a consistent manner. With music, they trumpeted the virtues of going DRM-free and allowing for dynamic pricing, while with books, they're sticking to DRM and not allowing dynamic pricing.
As for price-fixing, if there were multiple vendors for e-books on Kindle readers, then yes, I would agree that Amazon is not at all price-fixing. Since they are, however, the sole provider of e-books for the Kindle (more or less-- you can convert other formats to Mobipocket with mixed results, and the Kindle 2 and DX versions have limited PDF support), their insistence on uniform e-book prices can reasonably be seen as a kind of price fixing. This is part of why I opined over at Chad Orzel's blog (http://scienceblogs.com/principles/2010/01/the_amazon_kerfuf...) that an upshot of this falling-out should be that in order to keep their platform viable, Amazon should drop DRM and support ePub or some other standard format. If they followed their own example of Amazon MP3, then they really would be consumer advocates by taking issue with Macmillan.
As Cory Doctrow points out, Amazon has not revealed exactly what they mean by DRM-free. Moreover, the difference is not labelled on the Kindle store for consumers to see. Thus, while it is absolutely true that the publishers deserve blame in this case, my point is that Amazon is not helping to kill DRM and make their platform open to non-Amazon sellers. Of course, the big difference between this and the Amazon MP3 store cases is that with the Kindle, Amazon makes the device.
"DRM-free" implies to me that I can use the download on any hardware that can play the format. IIRC, Amazon's "DRM-free" titles still carry a license that prohibits their use on any platform other than Kindle.
You have a guaranteed monopoly on the price of Bingo Card Creator. I am not sure you would appreciate it if Paypal/(Insert other card processors here) said that they will only let you sell via them if you sold it for 9.99$. I don't that not fair either. You should be free to set the price of your goods, it is not a question of pro-consumer, its a question of using near monopoly to get a power which the market enabler should not have.
(Sorry if the last para reads like a personal attack, as it uses a personal example. That is to use an example which you and other hacker news readers are familiar with.)
That's not really right, though. Amazon is a store. They should have the right to purchase books at the rate they can negotiate and sell the books for the price they feel the market can support.
MacMillan, on the other hand, is trying to force retailers like Apple and Amazon to sell them for the same price, eliminating competition and create artificially high prices (aka price fixing). And really, trying to argue that price fixing is good for consumers is a very difficult position to defend.
I am not arguing whether this is good for consumers or bad(I have no opinion/idea), I am arguing that "Goods producers" should have should have right to fix prices for their products.
I have trouble seeing Amazon a store for Kindle ebooks. In my worldview they are a middleman/affiliate/market creators. (keep no inventory, Publishers get paid after purchases etc.)
Good producers have a right to fix prices for their products. Stores have a right to refuse to stock items that it believes are too expensive. I don't see the problem here.
I don't see why you have any problem calling Amazon a store for Kindle ebooks when you're willing to see publishers as "goods producers". They're both essentially middle-men.
The producer is still setting a price and getting paid that price.
If you're saying that nobody should ever be able to resell at a different price, then you're outlawing free giveaways, promotions, markups, etc... basically neutering the whole "free market" concept.
Always makes me smile when people apologize for using Microsoft when they (in theory at least) could have used someone else. (this is general, nothing personal intended ximeng)
I haven't really been following this situation, and I'm far from an economics expert, so I have a few questions for anyone who understands this stuff better than I do:
First off, I'm not quite sure about what the issue is. I seem to remember that Amazon said they wanted a hard ceiling, no books selling for >$10. The article claims that what the publisher wants is the ability o change book prices based on demand. Correct me if I'm wrong, but I thought that all Amazon was saying was "You know the $10-15 range you wanted to price eBooks at? You can't do that."
Second is more of an economics question. The article mentions Price Fixing in relation to gas prices, and how fixing the prices caused gas prices to go up due to hoarding. How does that work in a Monopoly, where the publisher not only controls the only source of the books, but can also make more of a single work at a negligible cost? (Yes, I understand that there is an outlay at the beginning, but after that the cost of producing additional copies of the eBook is nearly non-existent. You don't have to keep a stock of the eBooks that you can potentially lose money on, you don't have to pay in advance to have each copy produced. This changes things, but I don't know how.)
> I thought that all Amazon was saying was "You know the $10-15 range you wanted to price eBooks at? You can't do that."
What do you mean by "all Amazon was saying"? That's the crux of the issue: whether publishers will allow themselves to be told by Amazon that they cannot sell over a certain price in their market, or whether they will be allowed to sell at whatever prices they choose.
It's a fundamental question about how the online book market, so dominated by Amazon, will work.
Your second paragraph doesn't have a clear question; what exactly do you want to understand? I'll try anyway:
The marginal cost of producing eBooks doesn't really effect the price-fixing problem. The OP's point is that publishers need the flexibility to try out pricing schemes on the Amazon marketplace to discover what works, but Amazon won't let them. Ultimately, he claims, this will lead to worse results for the consumer because Amazon will be an inefficient marketplace due to the inability of the publishers to recoup costs on books with high initial prices which they can then follow with low prices later.
The "All Amazon was saying" is because, reading the article with little-to-no outside information about the situation, the author makes it sound like Amazon isn't setting a price ceiling, but an absolute price. I was trying to verify that that was the case, since the article seems to be saying that the only price point will be $9.99.
I seem to remember a price point being thrown around in one of the threads here that The Publisher/Author share 30% of the price of the book, the distributor takes ~40%, and the marketplace (Amazon, bookstore) takes 30%. From what I've read from these posts, it seems like the Publishers were fighting over the wrong thing entirely. If Amazon is acting like both Distributor and Marketplace, they currently take 70% of the sale price of an eBook. Why are Publishers arguing about the total price, rather than their cut of it?
Looking at the recent move, Amazon now offering 70% to the publisher, with the requirement that they get the lowest price point, and that that price point is less than $10, it seems like that should have been what the publishers were fighting for the entire time. If both distribution and selling of the book are being by the same company, for the same effort as just selling the book, there's no real reason for them to be double-dipping and taking that huge of a portion of the sale price.
The article mentions Price Fixing in relation to gas prices, and how fixing the prices caused gas prices to go up due to hoarding.
The gas price fix caused shortages at the pump, not higher prices. Because most rational sellers won't sell something for less than they have to pay for it unless they make it up elsewhere, which most gas stations don't.
And this author is saying the same thing may happen for eBooks. He doesn't think he can make enough money on eBooks to make a living, so many people in his situation may not write as many books, which may lead to the there being less new books in the world.
His ebook costs breakdown is pretty revealing. $3000 for an original cover? I hardly realize my Kindle books have covers, since they auto-open to the first page. $1000 for a designer? Use a standard font and template.
Book publishers have crazy overheads, with authors typically receiving only 10% of the cover price. Editors and proofreaders make sense, but it's hard to see how everything else adds value. The current publishing model seems to be a big part of the problem here.
The Kindle book cover would also probably be used for the Amazon thumbnail image, as well as other marketing purposes. Standard template sure, but little things do make a difference, and tweaking is a smart thing to do.
There will be room for quality design in e-publishing, just like there is in print.
$3000 would be a lot for self- or niche-publishing, but if I were making a mass market attempt, I could see spending that much. It makes a difference.
Marketing is worth spending money on if it brings in more money than you pay. I'd agree that it might be worth it if you're shooting for a bestseller, but the author lays it out as an unavoidable expense.
I love books, and being a writer sucks as a way to make a living even for very talented people, but the solution has to involve radical change to the publishing model. Big publishers seem to take a massive cut without improving the quality of the end result. I'm a big supporter of authors looking at alternative models, like Peter Watts with free downloads in the hope of donations:
Submitted for having a pretty good explanation of the economics of ebook publishing (through major publishers), and discussion of the recent Amazon-Macmillan dispute.
Specifically, the big point I thought interesting: at the moment ebooks seem to have a pretty small demand which falls off fast, so they sell more like limited editions than mass-market. This might make it difficult to justify releasing to ebook without higher prices.
(I don't have a strong opinion on who's right or wrong here, as I can argue it from both sides. But I'll admit I generally sympathize more with authors than anyone on this, and they seem to have the least amount of control in the publishing process.)
Well he is being pretty misleading about the issues surrounding price fixing. Yes with physical goods it causes shortages and surpluses, but with eBooks the entire argument is bull. The amount supplied is exactly equal to the amount demanded in eBooks, and the only relevant issue is whether the publisher makes back the initial costs. Pretending ebooks fit into the same category as rivalrous products is dishonest.
Amazon real issue may not be the price issue but that Amazon
isn't dictating what the price shall be, someone else is.
Amazon may think that if they loose control over price, they loose control over their site.
This is not a reason to prefer Macmillan over Amazon. Amazon might arguably have something that is almost a monopoly on online bookselling, allowing them to de facto dictate the price of books purchased online (though not offline, except to the extent that price wars dictate that competitors charge less).
Macmillan has an actual monopoly, guaranteed by Congress, on producing Macmillan books. Macmillan is telling Amazon to engage in actual price fixing. Macmillan has told Amazon that if Amazon does not set their prices to exactly what Macmillan says they should be, when Macmillan says this should be, Macmillan will use its actual monopoly to forbid Amazon from distributing their books.
Macmillan is doing this to avoid channel conflict -- i.e. establish actual price fixing backed up by the power of law to forbid there to be price-based competition among the various outlets who sell their books.
It turns reality on its head to portray Macmillan as the pro-consumer champion of a vibrant, competitive market here.