Monday, 15 August 2011

They're At It Again

According to The Guardian:

"A class-action lawsuit has been filed in the US alleging that Apple and five major publishers "colluded ... to illegally fix prices" of ebooks."

Here we go again. The big publishers, in this case HarperCollins, Hachette Book Group, Macmillan, Penguin and Simon & Schuster are accused of conspiring with Apple to set prices and force Amazon out of its 'cut prices to win market share and expect the publisher to take the hit' business model.

The complaint centres on the agency model – used by Apple for iTunes and by most major publishers for ebook sales – in which the publisher, rather than the retailer, sets the retail price of ebooks.

It's interesting, because what they say about the agency model makes it sound as if the publishers are calling the shots. Not so.

Here's the way it works. Normally, we set the cover price and the retail discount level, and retailers can sell the book for whatever they want. Makes no difference to us if they make any money on it, we still charge them the same wholesale price.

But with agency pricing, we set the end user price, and the retailer, in this case Apple, takes their margin out of that. Essentially, their retail margins are protected by the fact that they tell us how much profit they want and we then have to price the book to allow us, and the author, to make some money too.

So agency pricing is not in the publisher's interests at all. Nor the authors. Guess who it benefits? Oh yes, Apple.

We have an iPad. Most of the time, iTunes doesn't work, and iTunes is the only way to get anything onto the iPad. The latest problem was a continuous loop of having to verify an email address that prevented logging into the iTunes Store. It seems that Apple's attitude is that their products are perfect, therefore everyone wants one, and all content producers want to work with them.

We don't like Amazon's cut price policy any more than anyone else does, except of course readers, who are always on the lookout for a bargain. But we protect ourselves against a financial loss by setting our retail discounts accordingly. In the past, we mistakenly joined Amazon's Advantage program. Guess who it's an advantage for? Amazon. On two books, we made a loss thanks to their non-negotiable 60% discount.

So now we treat Amazon like any other retailer, and everything works well. Customers still buy books, we get our wholesale prices, the author gets their royalties, and Amazon have to make a living like everyone else - by not abusing their suppliers.

Of course, in an agency pricing world, if we were to start talking to Apple and agreeing to fix prices, which would only happen if we were a really big publisher, then that wouldn't be fair at all. It would mean that Apple wasn't treating its supplier relationships fairly and equally. Could you imagine such a thing?

The lawsuit alleges that "the five publishers "feared" Amazon's move to price ebooks at $9.99 – a figure considerably below physical book prices. The pricing "threatened to disrupt the publishers' long-established brick-and-mortar model faster than [they] were willing to accept", and to set low consumer expectations for ebook prices."

Oh, shame. Don't we all feel sorry for them?

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