A Casual Vacancy, a serious rip off?

There’s a bit of a surprise in store for you if you go to buy the electronic book version of the new J.K. Rowling novel, “A Casual Vacancy.” Despite it’s best-seller status, the ebook’s price is not $9.99 or $12.99 or even the high-end of best-sellers brought to you by the price fixing cabal of $14.99. Nope. At Amazon’s Kindle store it’s $17.99. And it’s the same price at the Google Play store, at Barnes & Noble and at iTunes.

How could this be? After all, the Justice Department smashed the price fixers and three of the big publishers, including Hachette, which sells the new J.K. tome, agreed to settle all charges and allow discounting to resume. The answer, it seems, is that “A Casual Vacancy” hit at just the wrong time.

Under the settlement, Hachette almost immediately had to cancel its contract with Apple’s iBooks store, the one that would have automatically priced the ebook lower while banning any discounting. But it didn’t have to renegotiate its contracts with others ebook sellers at the same pace. Laura Hazard Owens at PaidContent says it could be 60 days or so before new deals must be in place with other retailers. Once the deals are done, Amazon will be allowed to discount again. The giant online book seller already has a new deal with HarperCollins, for example, so ebook versions of Mitch Albom’s “The Time Keeper” are only $9.99 on the Kindle. But until all the deals are done, only Apple has price flexibility and it has little interest in discounting when all its competitors must sell at the high, Hachette-dictated price.

Some have gone so far as to argue that the high price shows consumers will be hurt by the DOJ price fixing settlement (see some of the comments on the PaidContent piece linked above). But when the only ebook retailer given price flexibility is the one that was among the accused price fixers and the one that hates to discount, it doesn’t prove much of anything.

Still, JK’s ebook is selling. It’s number 2 among paid ebook best sellers at the Kindle store as of right now. For a book with such high expectations, it’s hard to say if that’s actually a success or a disappointment. But assuming discounting resumes shortly, many folks may be holding off until the $9.99 version arrives. And while they wait, they’ve got plenty of time on their hands to ding the book with one-star reviews, it looks like.

UPDATE: On October 13, I checked again and the publisher on its own has cut the ebook price to $14.99. That may be because the book was slipping down the ebook best seller list at the original price. Then, at the end of December, with discounting back in Amazon’s control, the ebook price was down to $12.74.

Reality Bites: DOJ takes down Apple, publishers ebook defenses

Since the Department of Justice stood up for fans of digital books a few months ago and sued the major publishers and Apple over their 2010 conspiracy to raise prices, the amount of whining, spin and flat out lies emanating from some of the publishers and Apple has been both impressive and depressing. That so many journalists and bloggers who should know better repeated much of this truthy crap storm is even more depressing.

So it was like a breath of fresh air yesterday when the Department of Justice released, along with some 868 comments it received, a powerful and straightforward brief refuting much of the garbage that lately passed for analysis and history of the ebook market. The whole 66-page brief (PDF) is worth reading — actually should be required reading for reporters and bloggers covering the issue — so I’ll limit myself to highlighting just a few key points. To start, the brief offers a simple, concise explanation of what went wrong:

When Apple launched its iBookstore in April of 2010, virtually overnight the retail prices of many bestselling and newly released e-books published in this country jumped 30 to 50 percent—affecting millions of consumers. The United States conducted a lengthy investigation into this steep price increase and uncovered significant evidence that the seismic shift in e-book prices was not the result of market forces, but rather came about through the collusive efforts of Apple and five of the six largest publishers in the country. That conduct, which is detailed in the United States’ Complaint against those entities, is per se illegal under the federal antitrust laws.

It’s really as simple as that.

Among the many detailed refutations and take-downs in the brief, the main one I want to focus on is about the role of Amazon. Recall that for more than a decade, the ebook market was nearly moribund. It wasn’t until November, 2007, when Amazon introduced its Kindle ereader and related ecosystem that the market exploded. A critical component, of course, was the deep discounts Amazon offered on some Kindle books, although that was far from the only innovative and important feature that helped the platform succeed where so many others had failed.

Publishers and their allies have centered their defense on outlandish claims that Amazon was simultaneously discounting them to death (even though they still had full control over how much Amazon paid them) and creating a monopoly to rip off consumers (even though Amazon’s entire business was predicated on low prices).

The Justice Department’s brief offers at least three powerful rejoinders:
-Amazon wasn’t do anything wrong
-The ebook market was vibrant and competitive
-“He hit me first” isn’t actually a viable legal defense

First, the Justice Department noted that it investigated allegations against Amazon and found no evidence of predatory pricing or other illegal conduct. Amazon’s ebook effort was consistently profitable, as only some ebooks, such as best sellers, were sold at $9.99, the money-losing price point so hated by publishers.

“Loss leaders,” two-for-one specials, deep discounting, and other aggressive price strategies are common in many industries, including among booksellers. This is to be celebrated, not outlawed. Unlawful “predatory pricing,” therefore, is something more than prices that are “too low.” Antitrust law prohibits low prices only if the price is “below an appropriate measure of . . . cost,” and there exists “a dangerous probability” that the discounter will be able to drive out competition, raise prices, and thereby “recoup[] its investment in below-cost pricing.” Brooke Group v. Brown and Williamson Tobacco Corp., 509 U.S. 209, 222-24 (1993). No objector to the proposed Final Judgment has supplied evidence that, in the dynamic and evolving e-book industry, Amazon threatens to drive out competition and obtain the monopoly pricing power which is the ultimate concern of predatory pricing law. The presence and continued investment by technology giants, multinational book publishers, and national retailers in e-books businesses renders such a prospect highly speculative. Of course, should Amazon or any other firm commit future antitrust violations, the United States (as well as private parties) will remain free to challenge that conduct.

Second, the agency reviewed some of the history of the ebook market after the Kindle arrived and before the illegal price-fixing conspiracy, which has been the subject of some of the most ridiculous propaganda from Apple and the publishers. And what was the condition of that market? Highly competitive and filled with innovation. Barnes & Noble, for example, not only had already introduced its popular Nook reader and garnered over half of ereader sales, but Google and Apple were far along in planning to launch their own offerings as well. Color ebooks, to pick one particularly silly example offered by Apple, were coming soon whether or not publishers colluded to raise prices.

The idea that somehow Amazon could now gain a monopoly is even sillier. The company has only a fraction of the profits and cash flows of its competitors, Apple, Google, Microsoft and Sony. Barnes & Noble was in a bit of financial turmoil earlier this year but got a $300 million injection from Microsoft as part of a wide-ranging alliance and remains a highly competitive number 2 in the market.

Third and finally, even if Amazon was in the midst of some heinous scheme to monopolize the ebook market, U.S. law still does not permit a bunch of companies to get together and agree to raise prices.

When Congress enacted the Sherman Act, it did “not permit[] the age-old cry of ruinous competition and competitive evils to be a defense to price fixing,” no matter if such practices were “genuine or fancied competitive abuses” of the antitrust laws. See United States v. SoconyVacuum Oil, 310 U.S. 150, 221-22 (1940); see also, e.g., FTC v. Superior Court Trial Lawyers Ass’n, 493 U.S. 411, 421-22 (1990) (“[I]t is not our task to pass upon the social utility or political wisdom of price-fixing agreements.”). Competitors may not “take the law into their own hands” to collectively punish an economic actor whose conduct displeases them, even if they believe that conduct to be illegal. See FTC v. Ind. Fed’n of Dentists, 476 U.S. 447, 465 (1986) (“That a particular practice may be unlawful is not, in itself, a sufficient justification for collusion among competitors to prevent it.”); Fashion Originators’ Guild of Am. v. FTC, 312 U.S. 457, 467-68 (1941) (rejecting defendants’ argument that their conduct “is not within the ban of the policies of the Sherman and Clayton Acts because the practices . . . were reasonable and necessary to protect the manufacturer, laborer, retailer and consumer against” practices they believed violated the law (internal quote omitted)); Am. Med. Ass’n v. United States, 130 F.2d 233, 249 (D.C. Cir. 1942), aff’d 317 U.S. 519 (1943) (“Neither the fact that the conspiracy may be intended to promote the public welfare, or that of the industry nor the fact that it is designed to eliminate unfair, fraudulent and unlawful practices, is sufficient to avoid the penalties of the Sherman Act.”). Thus, whatever defendants’ and commenters’ perceived grievances against Amazon or any other firm are, they are no excuse for the conduct remedied by the proposed Final Judgment.

No excuse, indeed…

(please note: Comments are moderated. Please keep it clean and relevant)

Steve Jobs’ ebook logic: I win, All of you lose

Soon we’ll know just what Apple’s new tablet will really do, how much it will cost and whether it can save the world from global warming. Okay, just joking about that last bit — I think. In any event, many believe the tablet will shake things up in ebook world where Amazon’s Kindle is the leader followed by improving entries from Sony, Barnes & Noble and others.

Today, The Wall Street Journal has yet another story about Apple’s ebook strategy and efforts to woo book publishers. There’s something kind of wacky about the situation, however. The only party that comes out better under Apple’s apparent strategy is…Apple.

Start with readers, aka consumers, aka you and me. We get to read ebooks on cool Apple mobile devices. Oh wait, we can already do that on the iPhone and iPod Touch. What we do get is higher prices. $9.99 is out and the new normal is $12.99 or $14.99. Sounds kind of like last year when Apple caved to the record labels and hiked music prices across the board. I’m still waiting for all those 69 cent songs I was promised.

Okay, so we lose but what about publishers. They’re bitterly complaining about Amazon and it’s terrible prices that devalue books. So they must make out? Well, actually, no. As the article points out, Amazon pays them half the cover price of a digital book, which in most cases is more than the $9.99 retail price Amazon charges its customers. Say the hardcover price is $24 — Amazon pays the publisher $12. Amazon is subsidizing the ebooks, losing money on most of those sales. But Apple is only to pay publishers 70% of the two price points I mentioned, which means they get $9.09 0r $10.49.

So why would they do that? The Journal coimes up with this nonsensical rationale:

But there is nevertheless a strong draw: In adopting the Apple model, the balance of power would shift at least partly back to publishers, which regain control of pricing. In setting higher prices, they could provide a level playing field for all e-book retailers. The potential for publishers is that the device may generate greater volume for e-book sales.

Now, publishers could generate a greater volume of sales to tablet users through the existing crop of ereader apps, if they wanted to. They don’t need Apple for that. But how would the “balance of power” shift to them on pricing? As the article already noted, Jobs is pushing two retail price points and a fixed 70% payout. It’s also very unclear how this results in a “level playing field” for ebook sellers. In fact, publishers would be charging Apple less than they get from Amazon, Sony and Barnes & Noble. It’s a sweet heart deal that benefits…you guess it, Apple.

If I had to put a stake in the ground, I’d predict that this poorly thought-out pricing model ignores what customers want and does little to help the publishing industry. It will get vast amounts of attention and hype but will end up a dud in the marketplace.

Nook Delays: Why Barnes & Noble hates its customers

features_einkv4Back in October, when Barnes & Noble finally took the wraps off its Nook E-Reader, I expected to see David Pogue, Walter Mossberg and the whole rest of Gadget World publish their reviews within a few days. After all, Barnes & Noble was happily taking customer orders (and customer money) on their web site. At that point almost no one had seen the Nook except at the press conference. Barnes & Noble was promising early orders would be in customers’ hands within a month and working models would be in stores soon.

But then nothing happened. There were no reviews. There were no working models in stores. There were no units delivered to customers. October turned to November. November turned to December. And only now, fully seven weeks since the Nook was introduced and no doubt after tens or even hundreds of thousands of pre-orders, has Barnes & Noble put working Nooks in its stores and, more importantly, handed out review copies.

And the reviews are pretty savage. Here’s just a smattering:

Overall, after testing the Nook for about a week, I don’t think it’s as good as the Kindle, at least not yet. At launch, the Nook has the feel of a product with great potential that was rushed to market before it was fully ready. –Walter Mossberg

Those missing features are symptoms of B&N’s bad case of Ship-at-All-Costs-itis. But the biggest one of all is the Nook’s half-baked software. To use the technical term, it’s slower than an anesthetized slug in winter. And it’s buggy. –David Pogue

I’m glad I didn’t pre-order. Disappointed, but glad. If the Sony Daily Edition or the mythical Apple Tablet can’t top this, then I’ll just stick with my Sony 300 and iPhone ’til things have had a chance to mature. Being a gadget hound isn’t all that fun if the gadgets don’t behave to function… –Jean Kaplansky on TeleRead

If Gadget World had its own justice system, B&N would be tried and convicted of heinous abuse of its customers and sentenced to years of solitary confinement. So does Barnes & Noble hate its customers or what?

And just to throw one more log on the fire roasting the Nook, before you buy a Nook be sure to check out the comparison Inkmesh did of ebook prices. Out of some 11,604 ebook prices they checked on a handful of sites, Amazon had the lowest price by itself on 3,263 and tied for the lowest price on another 5,329. B&N had the lowest price on a whopping 463 and matched low prices on 4,837. Sony was by far the worst, showing the lowest price just 18 times and matching low prices only 423 times.

N.B. Thanks, as always, to the excellent Teleread blog for linking to all the reviews and generally keeping us up-to-date on all things e-bookish.

With growing Apple tablet excitement, misguided Kindle whining returns

imagesWe’re coming up fast on the 2nd anniversary of the introduction of  Amazon’s Kindle e-reader. Yet despite the many improvements and price cuts in KindleWorld, we’re still subject to the same weird, off-base complaints we first heard back before anyone even had even gotten their hands on one. Recently, my favorite Mac guru, John Gruber, and my favorite, favorite curator of interesting web matter, Jason Kottke, offered their own takes of the same-old, same-old. The usual quality of these fellows’ writing makes their anti-ereader rants all the more puzzling. Gruber’s most recent post was very short, though it’s hardly his first¹. Here’s Kottke at greater length:

But all these e-readers — the Kindle, Nook, Sony Reader, et al — are all focused on the wrong single use: books. (And in the case of at least the Nook and Kindle, the focus is on buying books from B&N and Amazon. The Kindle is more like a 7-Eleven than a book.) The correct single use is reading. Your device should make it equally easy to read books, magazine articles, newspapers, web sites, RSS feeds, PDFs, etc. And keep in mind, all of these things have images that are integral to the reading experience. We want to read; help us do it.

His final point – no good rendering of images – is at least a fair criticism given the lack of color e-ink screens. But the rest is more than a bit off. Mind you, we don’t even really know what the user experience will be like on the Nook or Sony Daily Edition.

Even if you grant Kottke his weird premise that book reading shouldn’t be the primary focus of ereaders², he’s still missing the target, particularly for the Kindle. It’s incredibly easy and pleasing to read magazine articles, blogs, miscellaneous web postings, RSS feeds and PDFs on my Kindle DX. I subscribe to The New Yorker and love how it gets delivered Sunday nights with all the stories and tidbits and even the CARTOONS. I regularly use the included browser and FREE mobile 3G access to read RSS feeds on the mobile version of Google Reader. There’s also the much-loved Kindlefeeder service, though I don’t use it personally.

And have I somehow not raved enough about how incredibly useful Instapaper‘s “Send to Kindle” feature is? Well, some but clearly not enough. Super short version: Find a long article or posting on the web you want to read later on your Kindle. Hit your “Read later” bookmarklet. Turn on your Kindle. That’s it. Brilliant. B-R-I-L-L-I-A-N-T. And p.s. Instapaper (and Tumblr) developer Marco Arment, in his own post shooting down Kottke, mentions that he’s about to unveil a “much better version” real soon now.

So I guess the question is why are they so off? Sure, there’s been a lot of hype around the new Nook and Sony’s revamped ereader line-up and hype naturally draws a backlash. But I think the deeper answer is the rumored, imminent Apple tablet which some people think will slay Kindle and Nook and all their single-focused brethren. It seems like some usually bright commentators have been fixating on how great the tablet will be that they have already decided that it’s is a “Kindle Killer.” And since the tablet is still vaporware, with exact pricing and features unknown, that precognition is seeping out into general dissing of the current crop of ereaders. Too bad, because taken on their own terms, ereaders are a great product. And they’re best suited for avid readers who buy a lot of books and sometimes read on the go. That’s likely not as many people as own iPods or cell phones, but its multiple tens of millions of people.

Prior coverage:

Apple still isn’t going to kill Amazon’s Kindle, or any other ereader (9/12/2009)

Instapaper’s instantly useful for sending articles to Kindles (3/17/2009)

The Kindle is for readers, the Kindle is for readers (6/20/2008)


¹Gruber’s been wrong about the Kindle since Day One: “After chewing it over all day, I’ve concluded that Amazon’s Kindle is going to flop.” He also pointedly disagreed with my more optimistic view that day.

²I’m not a big fan of the “what about my needs” school of product criticism.

Amazon Kindle competitor EReader slashes ebook prices

I’ve been pretty tough in the past on the high prices at Amazon Kindle competitors eReader.com and Fictionwise.com, the twin pillars of Steve and Scott Pendergrast’s ebook empire. The Pendergrasts sold the company to Barnes & Noble back in March and now things seem to be changing in a hurry. The other day they announced new, cheaper prices across the board at their eReader.com site:

# All new titles are $9.95 or less for the first week after release at eReader.com.
# After one week, all new titles are set to the publisher list price but will not exceed $12.95.
# No title is priced over $12.95.
# All titles on the New York Times best seller list at eReader are $9.95. The New York Times best seller list at eReader is updated every week.
# All titles receive 15% eReader Rewards.

This actually could be better than Amazon’s previously unmatched Kindle ebook pricing. I had hoped eReader’s move would generate some pressure on Amazon to reverse the trend of prices creeping higher for Kindle books. But on a closer examination, it looks like the competition might not be generating any pressure on Amazon at all. Well, at least no more pressure than a 4 cent discount creates.

That’s because I had trouble finding any of the best-seller type books Amazon is currently selling for more than $9.99 in the EReader store. Brad Thor’s Apostle: A Thriller costs $14.57 as a Kindle book but it’s not among the seven Brad Thor ebooks offered by eReader.com. Breaking Dawn, the most recent volume of Stephanie Meyer’s Twilight series, is $11.38 as a Kindle book and $12.95 at eReader.com. Finger Lickin’ Fifteen by Janet Evanovich, which came out on June 23, is $15.37 in the Kindle store but not available from eReader.com.

And amongst the back catalog books, my admitedly cursory survey found Kindle still offering much better prices. Twilight, the first book in Meyers’ vampire series and available as  a paperback for $6.59 from Amazon, is $6.59 at the Kindle store but a whopping $10.99 from eReader.com. And, p.s., can I just say again how it is really annoying and customer unfriendly that Amazon has stopped showing the prices of other editions and formats on Kindle book pages.

Of course, there’s no way to compare comprehensively the selection and pricing policies across the two sites. Please feel free to post counter-examples in the comments. I also dropped a line to the Pendergrasts to see if they wanted to respond.

Prior coverage:

As feared, Kindle prices appear to be rising (6/22/2009)

Apple gives stage to overpriced ebook developer Scrollmotion (6/9/2009)

Fictionwise improving its e-reader and web site for iPhones and iPods (8/27/2008)