July 11, 2013
Will E-Book Prices Change After Apple’s Loss in Court?
The writing was on the wall from the start. Apple went to court to defend itself against e-book price fixing claims after its five co-conspirators in the case had all previously settled with the government. So, when U.S. District Judge Denise Cote ruled against Apple, it didn’t come as big surprise to anyone outside of the reality distortion field that surrounds Cupertino, CA. But now, after all the legal wrangling, to the real question: Will any of this lead to a change in the way e-books are priced in the market?
A Bloomberg Businessweek article points out that since the publishers had previously agreed to change their pricing practices, Apple would be involved in a conspiracy of one if it did not. Since consumers have been quite willing to buy e-books from Apple at a discount to what they would typically pay for paper versions, they are not likely to begin abandoning the company in droves with Judge Cote’s ruling.
For its part, Apple continues to deny the charges brought against it.
"Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations," Tom Neumayr, a spokesperson for Apple, said in a statement to Bloomberg News. "When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon’s monopolistic grip on the publishing industry. We’ve done nothing wrong and we will appeal the judge’s decision."
The big winner in this case (if there is one) appears to Amazon.com, although it’s hard to see how it would benefit from a market share perspective, as an example, if Apple suddenly begins lowering prices on e-book titles. In her ruling, Judge Cote wrote that Apple’s agreements with publishers drove e-book prices up as much as 50 percent in some cases.
A piece on Forbes.com argues Apple needed to bring its own suit against Amazon.com back in 2010 instead of striking a deal with the publishers. Amazon, according to the article, was engaged "in predatory pricing by selling below cost and had nearly 100 percent of the e-book market at the time." Today, Amazon’s share is closer to 50 percent of the market.
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Recent Discussions
Discussion Questions
Do you agree with the ruling that Apple was involved in price fixing e-books? How will the e-book retail market change as a result of this case?
Poll
I suppose the answer to the first question has been determined by the courts although price fixing by a party of one only makes sense if that one had a monopoly.
As to prices, competition usually—but not always—lowers them.
I don’t see a big change in e-book pricing resulting from this ruling. A recent news story documented the diminishing discounts being offered by Amazon, and anybody who buys books on their Kindles can attest to this. There may be more deep discounting of a handful of best-sellers, but overall, Amazon continues to gain pricing power especially with B&N pulling back from the e-reader market.
Every item on today’s RW is about legal issues and the possibility of wrong doing by big corporations. Depressing really. And I was having a perfectly fine day.
The sad truth is we’re at the point where we don’t trust ANY corporation or government. If they’re not poisoning our food and water they’re taking our money to fuel their own self-interests. The game seems to be ‘who can out-crook the other crooks’? So will Apple, Walmart, JC Penney or whoever win? I’m not sure many people care anymore; well they care but they’ve given up.
Gotta run…have a motivational speech to get ready.
As the Bloomberg article states, the issues here have already been handled. what is at play here is Apple’s reputation. On the heels of their tax avoidance schemes, it is yet another black eye. They love to promote the fact that their products are made or at least developed in California, but they choose to not pay their fair share in taxes to their home state that sorely needs it, not to mention the federal taxes.
Are they breaking the law? No, but just because they can get away with it, doesn’t mean they should. Plus, come on, how much money do you need? I believe Apple needs to start acting in a more kinder, gentler way. Remember when they were making Microsoft out to be the big brother?
What is content worth? Consumers want electronic content to be free or low cost. Content creators want to be compensated; in some instances, very well compensated. In the 15 years that e-content has been widely available, this question is still unresolved.
The music industry did not take the question seriously and almost wound up in oblivion. Newspapers wrestle with it every day, as their profits continue to decline. Book publishers will soon face their day of reckoning.
How much does it cost to print and sell an e-book? Certainly not as much as a physical book.
In the coming years, the marketplace will decide the value of content. Content providers need to be realistic in their expectations, while consumers need to understand that quality content comes with a price.
I have been on both sides of the conundrum that Max Goldberg points out. As someone who has authored books, my royalties take a HUGE hit when someone downloads it as an E-Book (of course, on the other hand, if it was not available in that form, would they have forked over the larger amount? Is a small piece of the pie better than no pie at all?). Then, as a shopper/consumer, if the price for a download is not free or pretty darn close to it ($2.99 or $3.99), I tend to balk and consider the purchase more closely.
So, I find myself arguing with and against my own interests and coming up with no answers. No surprise here, but the competitive landscape is changing and while I do not know where the finish line is, I do know I had better change horses (because I am the only jockey I have!).
The case is on appeal and I think the e-book market has bigger fish to fry, e.g., consumer device preferences long-term. This will fuel the e-book market and pricing may increase as access to more devices and title becomes more ubiquitous. The market will indeed drive pricing.
Unless the decision is overturned on appeal, that decision was made. Offering one price structure appears to be price fixing in terms of the publishing industry, but it is difficult to see how it is price fixing unless all other electronic book prices were the same. If electronic outlets were charging different prices, then publishers could choose to offer their products on whichever electronic outlet they chose, as is being done in the music industry. If different prices are charged for the same book, consumers may shop around for the lowest price. If prices are lowered across the board through Apple, that will increase sales at Apple.
The marginal cost to the publisher of producing and delivering one more copy of an existing e-book title is close to zero. So we might argue that at $1.99 or $9.99 or $29.99, the revenues are nearly all profit.
However, book consumption is not infinitely elastic. Individuals have only so many available hours for reading, which may put an effective ceiling on unit sales. So everyone involved should have an incentive to encourage higher-margin transactions.
The micro-economic wild card in this situation is the competition between e-book platforms, which I would argue has led to some irrational e-book pricing tactics.
Amazon has under priced the market because it has a strategic objective to establish Kindle as the de facto standard. Apple and B&N each have their own aspirations to prevent that and promote their own formats. Publishers don’t want to see their unit margins slip as a result of this competition, so they try to establish a price floor.
Oops. That’s where the anti-competitive activity enters the picture. Publishers got snagged for trying to rein in their distributors, who were in fact not pricing their products “rationally.”
If there were a single e-book standard, book prices might tend to settle at naturally competitive levels. Since that’s not about to happen, I don’t think this ruling about Apple will change matters much.
Price-fixing was part of the game when the ebook market was in the early growth phase—seems like everyone did it. With the major competitors already changing their pricing practices based on the settlement, it seems like Apple had little room to charge premiums now—the market would not permit it.
As a result, all that comes out of this ruling are some more smudges on Apple for arrogance, which we already knew. If their products weren’t so great, many of us would abandon them….
Let’s see here. Apple decides to move their headquarters from the good ole USA and begins the investment process. The USA suddenly discovers they might be some price fixing amongst several electronic gadget makers within the boarders of the USA, wherever they are. Oh look!…Apple made the list of super crooks. Or was the government the one that took the first shot in this useless exchange of legal papers? And so the story goes…on and on! Yes. I am sure there was price fixing going on here. I am quite confident that it was tolerated for a while until someone became upset with the other side.
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I suppose the answer to the first question has been determined by the courts although price fixing by a party of one only makes sense if that one had a monopoly.
As to prices, competition usually—but not always—lowers them.
I don’t see a big change in e-book pricing resulting from this ruling. A recent news story documented the diminishing discounts being offered by Amazon, and anybody who buys books on their Kindles can attest to this. There may be more deep discounting of a handful of best-sellers, but overall, Amazon continues to gain pricing power especially with B&N pulling back from the e-reader market.
Every item on today’s RW is about legal issues and the possibility of wrong doing by big corporations. Depressing really. And I was having a perfectly fine day.
The sad truth is we’re at the point where we don’t trust ANY corporation or government. If they’re not poisoning our food and water they’re taking our money to fuel their own self-interests. The game seems to be ‘who can out-crook the other crooks’? So will Apple, Walmart, JC Penney or whoever win? I’m not sure many people care anymore; well they care but they’ve given up.
Gotta run…have a motivational speech to get ready.
As the Bloomberg article states, the issues here have already been handled. what is at play here is Apple’s reputation. On the heels of their tax avoidance schemes, it is yet another black eye. They love to promote the fact that their products are made or at least developed in California, but they choose to not pay their fair share in taxes to their home state that sorely needs it, not to mention the federal taxes.
Are they breaking the law? No, but just because they can get away with it, doesn’t mean they should. Plus, come on, how much money do you need? I believe Apple needs to start acting in a more kinder, gentler way. Remember when they were making Microsoft out to be the big brother?
What is content worth? Consumers want electronic content to be free or low cost. Content creators want to be compensated; in some instances, very well compensated. In the 15 years that e-content has been widely available, this question is still unresolved.
The music industry did not take the question seriously and almost wound up in oblivion. Newspapers wrestle with it every day, as their profits continue to decline. Book publishers will soon face their day of reckoning.
How much does it cost to print and sell an e-book? Certainly not as much as a physical book.
In the coming years, the marketplace will decide the value of content. Content providers need to be realistic in their expectations, while consumers need to understand that quality content comes with a price.
I have been on both sides of the conundrum that Max Goldberg points out. As someone who has authored books, my royalties take a HUGE hit when someone downloads it as an E-Book (of course, on the other hand, if it was not available in that form, would they have forked over the larger amount? Is a small piece of the pie better than no pie at all?). Then, as a shopper/consumer, if the price for a download is not free or pretty darn close to it ($2.99 or $3.99), I tend to balk and consider the purchase more closely.
So, I find myself arguing with and against my own interests and coming up with no answers. No surprise here, but the competitive landscape is changing and while I do not know where the finish line is, I do know I had better change horses (because I am the only jockey I have!).
The case is on appeal and I think the e-book market has bigger fish to fry, e.g., consumer device preferences long-term. This will fuel the e-book market and pricing may increase as access to more devices and title becomes more ubiquitous. The market will indeed drive pricing.
Unless the decision is overturned on appeal, that decision was made. Offering one price structure appears to be price fixing in terms of the publishing industry, but it is difficult to see how it is price fixing unless all other electronic book prices were the same. If electronic outlets were charging different prices, then publishers could choose to offer their products on whichever electronic outlet they chose, as is being done in the music industry. If different prices are charged for the same book, consumers may shop around for the lowest price. If prices are lowered across the board through Apple, that will increase sales at Apple.
The marginal cost to the publisher of producing and delivering one more copy of an existing e-book title is close to zero. So we might argue that at $1.99 or $9.99 or $29.99, the revenues are nearly all profit.
However, book consumption is not infinitely elastic. Individuals have only so many available hours for reading, which may put an effective ceiling on unit sales. So everyone involved should have an incentive to encourage higher-margin transactions.
The micro-economic wild card in this situation is the competition between e-book platforms, which I would argue has led to some irrational e-book pricing tactics.
Amazon has under priced the market because it has a strategic objective to establish Kindle as the de facto standard. Apple and B&N each have their own aspirations to prevent that and promote their own formats. Publishers don’t want to see their unit margins slip as a result of this competition, so they try to establish a price floor.
Oops. That’s where the anti-competitive activity enters the picture. Publishers got snagged for trying to rein in their distributors, who were in fact not pricing their products “rationally.”
If there were a single e-book standard, book prices might tend to settle at naturally competitive levels. Since that’s not about to happen, I don’t think this ruling about Apple will change matters much.
Price-fixing was part of the game when the ebook market was in the early growth phase—seems like everyone did it. With the major competitors already changing their pricing practices based on the settlement, it seems like Apple had little room to charge premiums now—the market would not permit it.
As a result, all that comes out of this ruling are some more smudges on Apple for arrogance, which we already knew. If their products weren’t so great, many of us would abandon them….
Let’s see here. Apple decides to move their headquarters from the good ole USA and begins the investment process. The USA suddenly discovers they might be some price fixing amongst several electronic gadget makers within the boarders of the USA, wherever they are. Oh look!…Apple made the list of super crooks. Or was the government the one that took the first shot in this useless exchange of legal papers? And so the story goes…on and on! Yes. I am sure there was price fixing going on here. I am quite confident that it was tolerated for a while until someone became upset with the other side.