Penguin chief: Apple's ebook plan 'dramatically changed' market

[ctg]

The CEO of publishing house Penguin has admitted that Apple's arrival in the ebook market triggered a dramatic shift in how the digital tomes were sold.

David Shanks said, under questioning from the Department of Justice's lawyers in the ongoing Apple ebook price-fixing trial yesterday, that he understood all publishers signing a contract with the fruity firm would be getting a similar deal.

Accepting Cupertino's agency model of book pricing, Shanks testified, would force other retailers to do the same, according to reporters present at the hearing.

The agency model, where publishers set the price of ebooks and retailers take a cut, took over from the well-established wholesale pricing model, where books were sold at cost and retailers set the price for customers, after Apple came on the scene.

Shanks also claimed the “most favoured nation” (MFN) clause in the agency contracts, which stopped publishers from offering better deals to other retailers than they'd given Apple, was "certainly a factor" in trying to get other booksellers, like Amazon, onto the agency model.

"The fact that the parity clause was in the contract more or less made it a given we'd have to be at [sic] agency," he told the southern New York court.

However, when questioned by Apple's lawyers, Shanks said Penguin and the iPad giant didn't agree on every point of the final contract. Shanks claimed he didn't want the MFN clause in the final deal, and he tried to stop Apple putting price caps of $12.99 and $14.99 on books.

"I did not get the deal I wanted, but I wanted to be sold to Apple's customers," he told the judge.

Before the late Apple co-founder Steve Jobs took his multibillion-dollar biz into the ebook world, Amazon maintained its dominant position in the market by selling ebooks at low prices (frequently at or below cost) to encourage sales of Kindle ereaders. Shanks said Penguin believed Amazon was holding prices at artificially low levels with its strategy, and the publisher wanted to see what price customers would actually pay for ebooks.

Shanks heads up one of the “big five” publishers that have already settled with the US government in the price-fixing case, including Hachette, Macmillan, Simon & Schuster and HarperCollins.

The trial continues. ®

http://www.theregister.co.uk/2013/06/05/penguin_testifies_apple_trial/

 

[ctg]

A top Amazon executive has said that publishers gave the etailer an "ultimatum" to let them set the price customers would be charged for ebooks.

Testifying at the fruity firm's trial for price-fixing, Russell Grandinetti, veep for Kindle content, said that if Amazon had the choice it would still be on the old wholesale model of pricing under which it bought books from publishers and then sold at any price it liked - even if this was less than it had paid.

"Certainly if someone offered reseller, we would have taken them up on that offer," he said in testimony reported by Reuters, the Wall Street Journal and others.

Macmillan was the first to go to Amazon about changing to the agency model, where retailers took a cut from a price set by publishers. Graninetti said the first meeting was "tense" and Amazon ended up taking the company's books off its virtual shelves for a few days before later agreeing to a three-year deal to get 30 per cent of each sale.

"We wanted to avoid losing most or all of their titles from our store," he said.

Other publishers started following suit soon after, a situation that Amazon considered to be at least partly intended to "slow down the success of the Kindle".

The US government has accused five major publishers, also including Simon & Schuster, HarperCollins, Penguin and Hachette, and Apple of using the agency model to raise and then fix the price of ebooks - at a cost of millions to ordinary customers. The DoJ has said that it believes part of the motivation for the fix was to destroy the already substantial market domination Amazon had built up, particularly since it was selling at cost or below cost to encourage sales of its Kindle readers.

Amazon also pursued the most favoured nation clause that the Department of Justice has now forced publishers to pull from their contracts. The MFN clause stopped the book houses from offering better prices to other retailers, something Apple also insisted on, which left ebooks at a more or less uniform price for customers no matter where they were bought.

Grandinetti said that Amazon wanted the MFN clause because it didn't want to be "further discriminated against by these publishers".

The five publishers have all settled with the government, agreeing to financial penalties of $164m so far; and to tear up present contracts and restrict future contractual dealings. ®

http://www.theregister.co.uk/2013/06/06/publishers_gave_amazon_ultimatum/

 

[Vertigo]

It will be interesting to see how this all works out once the dust has settled.

 

[ctg]

I agree. The thing that frightens me most is how easily they went hand-to-hand with the new business, but how slowly they have really adapted to the changing world around them. Then again, the big five publishers seem to wield quite a power in their hands and they are to do almost anything to stay in the business, which from writers perspective isn't always the nicest thing possible.

 

[ctg]

This was the week when the ebook price-fixing trial got off the ground in the US - and the "incredibly stupid" comments of dead technology legend Steve Jobs weren't making Apple's case any easier.

The government kicked off its condemnation of the fruity firm with a string of email evidence from executives at Amazon, Apple and the five major publishers, including an exchange between Eliza Rivlin, then general counsel of publisher Simon & Schuster and Carolyn Reidy, chief exec at the same firm.

The executives were discussing Steve Jobs' recent meet-the-press event where he announced the iPad. When asked by reporters if he was bothered that Apple was pricing ebooks at $12.99 and $14.99 when Amazon's were going for $9.99, Jobs replied that he was very not bothered, saying:

That won’t be the case. The prices will be the same.
​

Rivlin didn't feel like the remark was the smartest one to make, perhaps because it could be inferred that Jobs knew something the public didn't (which the government would have you believe was that Apple was fixing prices with the publishers). She wrote:

I can’t believe Jobs made the statement … Incredibly stupid.
​

However, Apple attorney Orin Snyder accused the government of trying to make something out of nothing:

Read More: http://www.theregister.co.uk/2013/06/07/quotw_ending_june_7/

 

[Vertigo]

I agree. The thing that frightens me most is how easily they went hand-to-hand with the new business, but how slowly they have really adapted to the changing world around them. Then again, the big five publishers seem to wield quite a power in their hands and they are to do almost anything to stay in the business, which from writers perspective isn't always the nicest thing possible.

Yes I agree, the publishers, and to some extent the vendors as well, are being exceptionally slow to come to grips with technology that the rest of the media industry has already had to deal with. Not always very well maybe, but still it is coping. Does anyone remember when some companies produced vinyl records with an inaudible tone overlaid on it that 'beat' in resonance with the recording heads of tape recorders, superimposing a continuous tone over the recording (I still have one of those records). Or the regional licensing of DVDs; does that still go on?

The fact is that every time the industry comes up with a way of restricting the market the geeks/hackers come up with a way of getting around it. Do the book publishers (and vendors) really think they can control the distribution of ebooks in ways the rest of the media industry has failed?

 

[ctg]

Well, this is the latest in their long tradition.

A new form of DRM developed in Germany alters words, punctuation and other text elements so that every consumer receives a unique version of an eBook. By examining these “text watermarks”, copies that end up on the Internet can be traced back to the people who bought and allegedly pirated them. The project is a collaboration between researchers, the book industry and the Government and aims to be a consumer-friendly form of DRM.

http://torrentfreak.com/new-drm-changes-text-of-ebooks-to-catch-pirates-130616/

 

[Ursa major]

Personally, I'm not that bothered with issues surrounding DRM, but "text watermarking" is really not on.

What's the point of trying to get one's punctuation correct (i.e. conveying the precise meaning of one's text to the reader), if some dumb program is going to alter it?

I suppose it indicates the view of the programmers to grammar and punctuation: they don't think they're that important. Well, they are!


But if that isn't already bad enough:

While the general story-line will remain intact, the DRM shuffles some words around, inserts synonyms, changes the paragraph format or the punctuation. For example, the word “unsympathetic” could be changed to “not sympathetic,” and so forth.

Shuffles words around! Inserts synonyms! (If this is anything like the use of synonyms in crossword puzzles, it'll be a disaster.)

Think of all the threads on the Chrons worrying about words and if they fit in with, say, the setting of a story (e.g. can I use this religion-derived word in a culture that has no gods? was this word used that far back in history) and then let some excuse for a program completely ruin the author's careful use of words.

This is idiocy of the highest order. Most (though not all) things worth stealing will be carefully written. On the other hand, while changing a lot of the drivel out there will make less of a difference, what's the point of wasting effort protecting that sort of rubbish from online theft?


(And what about litotes and other subtleties? No doubt the idiot software would change "I'm not unsympathetic to your cause" to "I'm sympathetic to your cause" i.e. two statements that are very different in intent and meaning.)

.

 

[AMB]

This was discussed over at The Passive Voice a couple of days ago. Some of the comments suggest this could actually be illegal in some instances, or at the very least lead to legal problems.

 

[Glitch]

Could the DRM software actually produce a body of work which isn't protected by copyright?

 

[ctg]

Thing about the copyright is that at the moment of writing it becomes yours, but at the moment a publisher applies DRM that changes the content, they have breached the law.

So how does that work?

 

[Glitch]

I would guess some of it is covered in the small print of the contact. Having not seen a publishing contract, I don't know. Do you grant the publisher rights to make editorial changes?

 

[ctg]

I would guess some of it is covered in the small print of the contact. Having not seen a publishing contract, I don't know. Do you grant the publisher rights to make editorial changes?

Of course, that's the deal and that is expected. But this is about a software the publisher are using after the "process" is finished. So as much as it is in their interest to see that your work is not plagiarised and altered it is the same deal to them. But then again think about situation, where the publishers apply strong crypto to your work as a form of DRM. And in this situation you have to think as a buyer because you wouldn't want to buy a paper copy of a book that is full of mumbo-jumbo, but because of the technology you can buy an e-book that is fully encrypted, and can be opened with only one device. Does that appeal you more than a DRM that alters the wording?

 

[ctg]

NEW YORK -- An e-mail from late Apple CEO Steve Jobs about e-book deal terms is no smoking gun, just a confused draft of a message, said a high-level Apple executive Monday during the e-books antitrust trial. Eddy Cue, Apple's senior vice president of software and services, testified that he never received an email from Jobs that said publishers would have to change their e-book sales terms with Amazon in order to reach an agreement with Apple. Cue said he didn't receive any of the four other drafts of the message, either.

http://news.cnet.com/8301-13579_3-5...y-cue-steve-jobs-was-confused-in-his-e-mails/

 

[Glitch]

The problem with DRM is that it seems to affect regular consumers more so that the pirates. I remember watching DVD's and thinking - if this was a pirate copy, the film would have started already - a reference to the many adverts they used to put on before the film.

How big a deal is pirating of ebooks? (I haven't seen stats) As writers, we carefully choose the words we want to use. Having software change words randomly doesn't seem right to me.

 

[ctg]

Apple won't have to restrict contracts with suppliers of movies, music and TV shows to iTunes in its ebook price-fixing injunction, a US judge said yesterday.

District Judge Denise Cote said in a court hearing that the final order on Apple, after the company was found guilty of conspiring with publishers to set the price of ebooks, would be narrower than the wide-ranging actions the Department of Justice had suggested – and against which the firm had so vociferously protested.

"I want this injunction to rest as lightly as possible on how Apple runs its business," she said, according to Reuters.

The DoJ wanted conditions set not only on booksellers supplying to Apple's iTunes store, but also on suppliers of other media as well. The department also asked for an external monitor to ensure that Apple didn't slide into bad anticompetitive habits, a provision with which Cote said she planned to agree.

The judge said that the monitor was necessary since the fruity firm had shown that it had failed to learn its lesson with "blatant" violations of antitrust law. The monitor will review Apple's internal compliance procedures and recommend changes as well as overseeing annual anticompetitive law training for employees.

Cote ruled in July that Apple had worked with five major publishers – Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster – to raise the price of ebooks and break rival Amazon's hold on the market.

She said that she expects to issue the final injunction next week. The trial on damages, which could reach hundreds of millions of dollars, is scheduled for May next year.

Apple maintains that it has broken no laws and is planning to appeal against the verdict.

Ebook judge: Guilty Apple must hire anti-antitrust watchdog to probe itself

 

[ctg]

​

Apple has received a new damages claim of over $840 million dollars for conspiring with publishing companies to raise the price of ebooks across the entire industry. The claim, filed Friday in New York by an attorney leading a class action lawsuit on behalf of ebooks customers in 33 states, stems from the US Justice Department's successful antitrust lawsuit against Apple that took place in the summer of 2013. Using evidence presented during the course of that trial last year, attorney Steve Berman begins by arguing that Apple owes American ebooks customers a bare minimum of $231 million in damages, and probably far more money than that.

Apple hit with $840 million damages claim for ebooks price fixing | The Verge

 

[tinkerdan]

That this is an issue is not the least surprising although the issue is clearly not related to DRM.

Traditional publishing has always had a paradigm for publishing that in the past was to hit the market with hard editions first and after measuring the success of that, the timing and or even potential for a paper edition were determined.

They likely would have ideally tried to go HB to TP to ebook. Putting ebook at the bottom of the chain because of their previous paradigm and their own interest in the bottom line of making the sale of the book a profitable.

As it is I believe they compromised and many of them do the Hard Edition then the Paper and the ebook at the same time. Which explains why they would tend to want to price the two equitably. And having someone undercut that and start selling the ebooks at a loss in order to sell kindles runs the risk of offsetting the market shares expected from the paperback edition.

That's all with the assumption that a larger share of the market would begin to trend toward the ebook and the kindle.

It would seem likely the publisher would rather suppress the ebook market in favor of continued success along the model they are familiar with. In their thinking there is clearly no reason to price the ebooks at less than the TP editions. This would especially hold true with any book that might not have a HB edition and go straight to TP.

In this particular market, the ebook, it might be argued that publishers never had a chance to see what the market would bear because it was subverted from the beginning by the efforts of Amazon to sell more kindles.

Though that does not give them the right to fix prices one might almost see where they managed to run afoul of the system when someone suggested helping them fix the price.

 

[ctg]

The US Department of Justice has urged an appeals court to uphold the verdict against Apple that found the fruity firm had violated antitrust laws and conspired with book publishers to fix the price of ebooks.

US DoJ to appeals court: Haha, no, seriously though

 

[ctg]

A US appeals court has rejected Apple’s attempt to delay the damages trial over its ebook price-fixing scandal. The iPhone maker had hoped to postpone the hearings until after it’s had a chance to appeal its guilty verdict.


In a very short order, seen by The Register, the Court of Appeals for the Second Circuit in New York denied Apple’s petition. The Cupertino company asked judges to hold off deciding how much it must pay until after it had appealed its conviction – Apple was found guilty of colluding with major publishers to fix the price of ebooks.



The second circuit appeals court said the damages-setting trial on 14 July should go ahead since the iPad maker had failed to “meet the requisite standard” to get it put on hold.


Around 33 state attorneys general and the Department of Justice are looking to get up to $840m (£501m) in damages out of Apple in the July trial, after District Judge Denise Cote found Apple complicit in the conspiracy to raise ebook prices in an attempt to break Amazon’s growing stranglehold on the fledgling market.

Oi, ebook price fixer. Yes, you, Apple