DOJ Reportedly Close To Deal That Would Lower E-Book Prices

Ever since Apple got into the e-book business, publishers have been determining their own prices for titles, meaning that e-books, in spite of having minimal overhead costs, are often sold for higher prices than their print counterparts. But it looks like the Justice Dept. antitrust investigation into this so-called “agency pricing” model is nearing an end — and may result in more affordable e-books for everyone.

According to Bloomberg, the DOJ is close to finalizing an accord with Simon & Schuster, HarperCollins and the Hachette Book Group and could announce details as early as next week.

What might delay the deal is that the two remaining publishers involved in the investigation, the Penguin Group and Macmillan, are reportedly not as close to an agreement as the other three book businesses.

On print books, Amazon and other retailers buy copies at wholesale prices (often around 40-50% of the cover price) and choose how much they want to discount the title. This model had been used until Apple unleashed the iPad and began offering e-books as downloads. To get a competitive edge in the market, Apple allowed publishers to set whatever price they choose, so long as Apple received 30% of each sale. This quickly became the model for e-book pricing with Amazon and other vendors.

Thus, you end up with things like the newly released Harry Potter e-books, which are more expensive than paperback versions of the same titles.

And last year, as Game of Thrones became a hit on HBO and readers clamored to catch up on the Song of Ice and Fire series of books on which the show is based, e-book users were livid over the fact that you could buy a boxed set of the paperbacks for around $20 but the Kindle price was around $36. That price has since dropped to $30, but is still significantly more than what you’d pay for paperbacks.

DOJ Said Near E-Book Pricing Settlement With Publishers [Bloomberg]

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  1. MutantMonkey says:

    Good. While I love my Kindle, the prices have become somewhat annoying.

  2. YouDidWhatNow? says:

    Meh. You choose to give up your ownership rights in favor of ebooks instead of real books, this is part of the deal.

    No one said ebooks had to be cheaper than real books. And the prices wouldn’t be that high unless people were paying them anyway. So if you want someone to blame, look in the mirror.

    • MutantMonkey says:

      Unfortunately this was a major selling point that Amazon and other e-reader/book sellers touted, which was upended when publishers colluded together to force the prices to go higher. Because of that I am looking at the publishers rather than the mirror.

      • elangomatt says:

        Exactly, and I’m NOT looking at Amazon either in this issue. They were just a backseat passenger in the change to the agency model. They tried to maintain the wholesale model but the publishers very likely would have just pulled their books from Kindle if Amazon hadn’t caved in to the agency model that Apple sold to all of the publishers.

    • Coffee says:

      Second what Mutant Monkey is saying…people actually did, in fact, say they would be cheaper, and it seemed self-evident because of the lower overhead cost. “Blame yourself” only goes so far when people are misled about something.

      • YouDidWhatNow? says:

        Fair enough then…so have you stopped buying ebooks?

        Cable was supposed to have fewer commercials when it came out too…since you, the subscriber, were directly paying for content. That last about 3 days. And naturally, pretty much everyone is still paying for TV…

        • AcctbyDay says:

          I stopped buying e-books. Quite frankly when there stopped being a discount my Nook went unused. I *like* paperbacks, but I *love* my money more. If it’s cheaper on the Nook, I’ll buy it there.

        • Preyfar says:

          I stopped buying books because I only have so much room. I used to read a book a day way back when, and I was going through them faster than I could. No libraries around me, so…

          After getting 300+ books… I started running out of spaces to put ‘em.

        • P=mv says:

          I stopped buying ebooks unless I found the free or $2 and less sales. I reconverted back to paperbacks otherwise because of the ridiculous price. I love “friends of the library” sales and constantly rotate books out of my house to prevent piles of books.

    • kujospam says:

      When it comes to digital you are kind of wrong. They can sit there for years and only have 3 people buy it. It’s not like it is taking up space. That type of harddrive space is less then a penny. Although it is true they can charge whatever price for it they want. Your logic is just faulty.

    • Firethorn says:

      I, the consumer, am saying that ebooks have to be cheaper than paper books. The way I look at it, if I don’t get 33% or more off the MSRP of a book, I’m not trying. 50% off hardcovers is common.

      Meanwhile, most ebooks are retailing at MSRP with no discounts, coupons, membership deals, etc…

      Screw that. At least I can resell the paper books.

    • OttersArePlentiful says:

      My husband gave me a Kindle, as he says, “out of necessity”. We have a very small home, and our shared office is packed nearly full of all my books. I had to make several trips just for them when we moved, because my books weighed down the car to the point that it was practically dragging its bumper along the road.

  3. Cat says:

    I blame Apple.

    But I’m pretty sure EA had something to do with it as well.

  4. krantcents says:

    I never understood why an ebook should cost so much since there is no printing. Maybe we will get justice and benefit of the ruling.

    • elangomatt says:

      The printing costs are a fairly small cost for dead tree versions of books. I think the agency model is to blame for the high ebook prices since the seller has no control over the price at all. The publisher prices the book where they want it for a certain amount of profit and the seller can’t take a smaller (or no) profit even if they wanted to.

    • Coyoty says:

      Maybe they’re trying to encourage more sales of printed books, because people aren’t buying as many with the Internet around.

    • Tiercelet says:

      That’s because the vast majority of the cost of a book is in editing, marketing, and advertising.

      And most books lose money.

      There’s nothing wrong with an agency model. All this ruling will do is empower Amazon and further crush publishers, which are already hemorrhaging cash because of the way Amazon undercuts their positions by forcing them to take too-low prices.

  5. dolemite says:

    Ebooks should be at least 50% cheaper. Same goes for magazines and comics.

    Sure, the amount of work in creating the product is the same, but there is no printing, ink, shipping, storage, distribution charges.

    • Veeber says:

      ebooks may be cheaper in cost, but that does not mean it has to be lower in price. You get other benefits from ebooks.

      I do think agency pricing is a pain and the other model that Amazon works a whole lot better overall.

      • mindaika says:

        What are the other ‘benefits’ to eBooks? The inability to sell or loan them out?

        • Kredal says:

          Off the top of my head, searchability, instant dictionary look-up, computerized reading aloud, changing text sizes/fonts for people with vision problems, storage space, weight, quantity of books you can bring on vacation…

      • Sajanas says:

        As far as I can see, the benefits of ebooks are just as high for the seller as the buyer. An ebook need never go out of print, requires no investment in any physical distribution or production, and the seller still owns the rights to the files they sell. Plus, I don’t think they have realized that if they made ebooks cost a few dollars, people would probably buy significantly more of them.

    • Cerne says:

      Any company that spends that much on physical production and distribution is doing it wrong.

  6. chefboyardee says:

    I own a lot of physical books. I mean, a LOT of books. E-books are more convenient, so I’m updating my collection to include many of the same books on my Kindle.

    I can afford to, and would gladly pay $5 for an e-book, even though I already own the physical copy, just to support the authors. The prices they’re charging now? Not so much. [walks to the nearest torrent site]

    And with torrents, they can’t just pull my content (remember the Amazon story a while back about that?). Whether what I’m doing is right or wrong, I don’t care to argue, but it is more convenient, and I sleep well at night knowing I already paid the author when I bought the physical copy.

    Publishers, if you’d rather have $0 than $5 per book, times many hundreds of books, stay the course.

  7. ILoveBacon says:

    Nice one, Apple. You’re happy, book publishers are happy. The consumers? Screw them, they’ll buy it anyway, right?

  8. elangomatt says:

    I wonder if there is anything in this “deal” about refunding any of the money consumers have spent in the last ~2 years on overpriced ebooks after they started the overpricing BS. I am not necessarily saying that they should have to give refunds, but it is something to think about.

    • Cerne says:

      No there’s nothing to think about there. You brought those books voluntarily at the advertised price. The end.

  9. NeverLetMeDown says:

    This could be a good or bad thing. The agency model does likely keep prices up. That being said, without it, we could well see ebooks become a virtual monopoly by Amazon. Amazon’s basically down to one meaningful competitor in the ebook market (Barnes & Noble), and there’s real concern that, without agency pricing, Amazon could decide to drive prices so low B&N would be driven down the Borders path. So, the abolition of agency could be short-term good, long-term bad, for consumers. We’ll just have to see.

    • redstapler says:

      If the nook tablet weren’t much better than the kindle fire I’d be more inclined to agree with you.

  10. jojo319 says:

    I’m not going to get too excited about this. It will probably be the equivalent to those multi-million dollar settlements that net the actual customers a $0.50 coupon. So I’m sure by “cheaper”, they mean about $0.50. Meanwhile the DOJ get’s to trumpet how they are “saving consumers millions”.

  11. Jawaka says:

    But… I thought that government intervention in a free market was bad?

    I guess it only is unless prices go down because of it, huh?

  12. Akuma Matata says:

    honestly, e-books shouldn’t price out at more than $5 per title.

    • Jawaka says:

      My guess is that you aren’t an author who may have spent a year or more of their life writing a book.

      • HogwartsProfessor says:

        If it were only $5, I imagine more people would buy it. I would sell mine in e-form for $5.

      • Akuma Matata says:

        1. As an author, each additional copy of a digital book I sell costs me essentially nothing, so it makes business sense to sell it for less since lower selling price means I can reach a wider market.
        2. As a consumer I’d buy more books if they were less expensive. I would be far more inclined to take a gamble on a book if it’s only $5 than if it were $20-$25 because if I didn’t like the book (or even if I end up never reading it), I’m not going to lose that much sleep over $5.

        • Cerne says:

          Basic economics. You need to sell more than 5 times as many books at the $5 price point than the $25 price point to make that worthwhile. That’s unlikely to happen for most books.

          • Akuma Matata says:

            I’d argue the opposite — it’s easier to find 5 people willing to spend $5 than 1 person willing to spend $25, especially when it comes to book.

  13. Sad Sam says:

    I don’t think an e-book should cost the same or more than a paperback of the same title. An e-book cannot easily be shared, many cannot be shared at all, I cannot resell an e-book, I can’t even give it away.

    Yes pricing should be somewhat based on what the market will bear, but in this instance the market was being manipulated by Apple and the publishers.

    There was a recent article on this very site at how those with e-readers are reading quite a bit more and most of us are paying for content but the price should have some relationship to the actual product. I think the publishers are getting close to pissing off the avid readers like myself that have switched to e-readers. I read at least a book a week and before I had my Kindle those books were coming from the library. You are now making bank from me, please don’t be unfair to a loyal customer.

    • jesusofcool says:

      I agree. E-books are more difficult to resell or share than physical media so there’s less real ownership involved. They’re also less costly to produce. No reason why they shouldn’t be 25% less than paper books.
      Frankly, it’s about time the DOJ broke up this party. Yet another case of Apple’s anti-consumer attitude. With so many people reading e-books and the convenience really encouraging young people to read, the prices need to come down so more schools and libraries can acquire them. In the end, I think lower prices will benefit Amazon, B&N and other e-reader manufacturers because it will open up a whole new market of people like me who can’t afford to pay more for digital content.

  14. jojo319 says:

    but I suppose the prices of Blu-Ray’s are perfectly fine? What about CD’s? I remember when those came out and people said they would be cheaper than album’s or cassettes because they were cheaper to manufacture. People say that eBooks “should” be cheaper. What about the fact that you can read your book on multiple devices and keep your place? I love that I can read at home on my iPad, then pick up my iPhone and continue where I left off. Comparing it to a paperback shouldn’t be part of the issue. They are not the same thing. When I buy an eBook, i look at the price and decide if I want to pay that much. Just because the hard cover, paperback, or whatever is more or less, who cares? all versions offer a different experience.

  15. Slader says:

    This is why I only get my e-books from my local library. If I don’t own it, why pay for it?

  16. ecuador says:

    So apple started this? It makes sense.
    I have a Kindle and so does my wife. When we want a new book we check Amazon. If the kindle version not more expensive than the paperback version, we buy the kindle. If not, (and the price lists as “set by publisher”) I actually search for a pirated version (yes, I manage to find it for most books) to “thank” the publisher for their kindness.

    • NeverLetMeDown says:

      “If not, (and the price lists as “set by publisher”) I actually search for a pirated version (yes, I manage to find it for most books) to “thank” the publisher for their kindness.”

      A responsible adult with any degree of respect for the work and property of others, would respond to a situation where the price on a product was higher than he wished to pay by not buying the product.

      By the way, I want to rent your car tonight. I’m prepared to pay you $10 for it. If you don’t like that, I’ll just take it anyway. I assume you’re fine with that.

      • Blueskylaw says:

        “By the way, I want to rent your car tonight. I’m prepared to pay you $10 for it. If you don’t like that, I’ll just take it anyway. I assume you’re fine with that.”

        Problem with your analogy is that even if you took his car he could create another car, or even a million more with the push of a button for pennies, since you’re not taking a physical product.

  17. Steve says:

    I just save all my money and borrow it form the library. Sometimes I have to wait, but I’ve got plenty of other things to keep me busy. On the others and I have to us the latest for my son ( e.g. Rick riordan books), usually in hardcover form Costco (he’s really hard on books and it’s cheaper to buy the hardcover, plus he doesn’t want to wait.)

  18. birdieblue says:

    I would be happy if ebooks were consistently the same price as paperbacks. The fact that they are *more* expensive is what drives me nuts. I think $5-$8 is a fair price for a book. I know how little of that actually gets to the author. But when the paperback is $7.99 and the ebook is $12.99, I wonder why the hell I have an ebook reader at all.

    • dobgold says:

      You are overlooking the fact that paperbacks are not released at the same time as hard cover books. I think that e-books as originally priced at $10 when released at the same time as hard covers was fair and that when paperbacks are published, prices of e-books show be lowered commensurately.

  19. k1b8sn1 says:

    FWIW…

    1. For those who are upset at the people selling e-readers lying, take it up with them. The Publishers (sometimes self publishers) should have been required to sign a pricing agreement for e-copies to ensure the low prices.

    2. I want the market to drive the cost, not the government. If e-copies stop selling because they are too expensive, they will either lower the prices or let the e-readers die (ala 8 tracks and Beta).

    3. if we want the DOJ to investigate this pricing, we might as well have them go investigate theaters for the cost of popcorn and a drink. The fact that new released DVDs are the exact same product when released as they are 6 months later when they are 50 – 90% discounted.

    No matter what your view… your absolute last option should be to ask the government to step in.

    • Lt. Coke says:

      The government is stepping in because of suspected collusion – the above corporations were working together to force the prices in the market higher, basically because they could.

      • GadgetsAlwaysFit says:

        Exactly right. The publishers were actually making more money on the old model. Amazon paid them their price and then sell them to consumers with a very minimal mark up. Some books they took a loss on. Call it their loss leader because you might shop for other products while there. Amazon’s model is razor thin margins over a lot of items versus large margins on few items. Once Apple got involved they told the publishers what model would be good for them and Apple. The publishers agreed then went back to Amazon and Barnes & Noble and forced the choice or they wouldn’t let them sell e-books. I was really glad to see this come under real investigation because this is what government is well suited for. All government isn’t evil. I do check the prices of e-books versus dead-tree versions. If they charge more or the same, I don’t buy it. When it reads ‘price set by publisher’, I don’t buy it. Those publishers could have sold so many more e-books.

  20. Barry Bunch O'Krunch says:

    “This so-called agency model overtook Amazon.com Inc.‚Äôs tactic of buying books at a discount from publishers and then setting its own price on the Amazon the e- reader device.”

    Not sure what that’s supposed to mean–”the Amazon the e- reader device?” It seems like the author is comparing the way Amazon sold physical books to the way Apple sold eBooks, which doesn’t make sense. I’m 99.44% sure that Amazon was using the exact same publisher-set eBook pricing model when it launched the Kindle back in 2008, or whenever that was.

    • K-Bo says:

      Nope, Amazon set prices before apple got in the game. Sometimes they would pay the publisher more than what they charged the customer for it, but the agency agreement did away with all that.

    • elangomatt says:

      Amazon originally priced ebooks exactly the same way a brick and mortar store would price them. They paid the publisher a set price per ebook sold, and were allowed to charge the consumer whatever Amazon wanted. This is the wholesale model of pricing.

      In comes Apple and they want to change things up to guarantee their normal high profit margin so they go to the agency model that allows the publishers to set the price and the seller just gets a flat percentage (30% I think). That is the agency model. As a result of Apple, the publishers basically told Amazon that either they change to Agency pricing or they won’t be able to sell their ebooks. Amazon had little choice but to capitulate.

  21. MarcZero says:

    I’m sorry, but this should read “and may result in more affordable e-books TEMPORARILY for everyone.” Getting rid of the agency agreements mean that Amazon can sell the e-books at a LOSS to gain market share. Once Amazon gets total control of the e-book market, they are free to stop selling at a loss and then jack prices back up. I don’t think much of the coverage of this settlement has been looking beyond the “Ohhh…we get to have lower prices on e-books.” This is a bad precedent for the government to set.

  22. inputhike says:

    Why don’t publishers understand the problem with what I’ve been seeing lately?
    Amazon paperback $17.11 (Free super saver/prime shipping) $?? to publisher (own/lend/resale)
    Amazon Kindle $25.00 (no shipping) $?? to publisher (Amazon could yank it back on a whim)
    Amazon used $3.26 ($3.99 shipping) $0 to publisher (own/lend/resale)
    Torrent $0 (no shipping) $0 to publisher.
    If I could get the ebook for, say $9, I might buy that instead of the used (and many people would buy instead of torrenting).

  23. Blueskylaw says:

    Seriously, who didn’t see this coming. If a company is able to slash the production cost of something by 90%, do you think the price will fall by 90%? Hell no, they will create every excuse in the book as to why it now costs even MORE to produce the same thing-essentially lying.

    If people just used common sense, they would realize there is NO LOGICAL REASON why an e-book should cost more than a paper book, no matter what convoluted bullsh*t reasons the publishers give.

  24. Three Foot Roo says:

    e-books, in spite of having minimal overhead costs, are often sold for higher prices than their print counterparts

    Why do people still think ebooks are so much less expensive to produce? The bulk cost of producing a book isn’t the paper. Paper is goddamn cheap. I don’t get paid less for editing a book because you happened to buy an ebook version instead of hardback. Authors don’t get paid less. The advertising department, accounting, HR, and janitors in my building don’t get paid less. Licensing fees are more expensive for ebooks because everyone assumes their material is going to get pirated. Mostly, the same work gets done however you read your book. We’re not all taking a 90 percent pay cut because you think something is inherently less valuable on a screen than on paper.

    • Southern says:

      Paper & printing isn’t THAT cheap. The cost to print a paperback book, according to many articles on the net, as well as places that do self-publishing, range around $2.00 for a paperback, and $8.00 for a hardback.

      Then you have to pay for storage fees for a climate-controlled storage area (less the books develop mold), handling fees (someone has to physically MOVE the books from the warehouse to the shipping facility), then the cost of shipping itself – 1st class? Media Mail?

      All of these costs add up with a physical book, and in the case of a paperback – and then the publisher even gives a 40-50% discount to the reseller.. Meaning Barnes & Noble might only pay $10 for a $20 MSRP hardback book.

      But all of these costs are reduced to mere PENNIES with E-Books. There is no printing cost, there is no storage cost, there is no handling cost, there is no shipping cost. In fact, if you self-edit and publish your own EBook, the most expensive thing you’d have to buy would be the ISBN (and some self-publishing companies will even throw that in). This is why you can buy some ebooks on Amazon for as little as what, 99¬¢? You certainly couldn’t print, store and ship a physical book for THAT price.

      You can argue HR costs, Advertising Costs and all that until you’re blue in the face, but there is NO doubt that the cost of an EBook is *less* than that of a physical book. There’s no reason for it to cost MORE except that people are willing to pay it.

      Speaking of which, many ebooks are completely FREE, through sources like Project Gutenberg. Do you think that they could do that with PRINTED, PHYSICAL books?

      No, of course not.

      As for me, I’ll stick with buying the occasional new book from my local bookstore, and buying the bulk of my books (currently over 5,000 and growing) used, through places like Ebay or used bookstores like Half Price Books.

    • Alan says:

      Because Ebooks are less expensive to produce? Yes you have the hard cost such as the writter, editor, HR, etc. But once all those are done and you have the finished product, you can push a button and print off 50,000 copies, ship them, store them, etc at a cost of 3 bucks per book. Or you can push a button and send them out electronically for about 3 cents per book. (fyi, i don’t know the exact numbers so I just threw in random amounts). So to be pricing ebooks over physical books is just pure greed.

      Yes, people pirate ebooks. But people will also buy used books. Which is worst? who knows?

  25. homehome says:

    I would rather they not get involved. It’s a free market, ppl should be able to set their prices, and ppl should be able to choose whether or not they buy them. If you want to dictate the price, stop buying them to show sellers it’s too high. Stop all this unnecessary regulation. And if it’s too high ppl would stop buying them, they’re still buying them.

    • quieterhue says:

      This isn’t a form of regulation. The DOJ is investigating whether the contract that Apple has in place with the publishers violates antitrust laws.

      In a free market, consumers have a choice of where to buy goods from. The point is that the ebook market is not a free market because consumers who own e-readers can’t go elsewhere if the price of a book is too high. If you have a Kindle, you have to buy from Amazon. If you have a Nook, you have to buy from B&N, etc. And because of this contract the publishers have in place with Apple, Amazon and B&N can’t negotiate for lower prices. Apple and the publishers have essentially set up a situation where they determine the price for the entire market. That kind of behavior is ILLEGAL.

  26. neilb says:

    Question: Ebook channnels are VERY similar to Emusic channels. When will the DOJ start investigating the fact that downloaded audio prices sometime exceed physical CD prices?
    Note: A more proper way to look at ebooks: Paper book prices have been deflated for decades because they were an inconvenient format that (all of the rest of our physical stuff–like maps/music/notebooks, etc–has shrunk, but paper had not kept up). Now that this physical burden has been lifted, people have valued ebooks at their proper level.

  27. Nobody can say "Teehee" with a straight face says:

    Here’s something I don’t get… The leading belief seems to be that you can’t “sell” your digital copy of video game/movie/book. Why not? Taking Steam (A digital video game distribution platform) as an example, why don’t they add in a marketplace system where users can sell their games to other buyers? Make it so:

    1. Games are eligible to be sold one month/some time after purchase.
    2. Users set their own sale price
    3. The publishers of the game and the distribution software each take a percentage of the sale price, the rest goes to the user.

    Lets the users continue to be able to sell their games, and it brings the developer and distributor into the used market without killing it off. After you sell the game, it’s removed from your account and you aren’t able to launch it any longer.

    Steam is an easier example due to the built-in DRM. E-Books could be a little trickier, but solvable by forcing a delete/uninstall to even put it into the marketplace.

  28. floridavet says:

    I stopped buying ebooks for precisely this reason…the prices were all much too high and artificially inflated. It makes no sense to pay $13-15 for an ebook that costs only pennies to store and download. Think about it – $15 for a book that you have to read on a tiny screen. What? I still like buying pre-owned books for mere pennies and often free shipping thrown in. You can keep your ebooks.

  29. One-Eyed Jack says:

    I won a Nook at a conference in November. I was excited until I started looking for titles to buy. Even older books were overpriced. I can pick them up at the used bookstore for $3-$4, so I ain’t about to download them for full retail.

  30. Promethean Sky says:

    I nearly never pay for my ebooks. Not a pirate, there’s just lots of good free stuff if you know where to look. Between Project Gutenberg and the Baen Free Library, that makes the bulk of my ereading. Still love my paperbacks though.

  31. quieterhue says:

    I think people are missing the point of this article. This has nothing to do with the cost to produce and e-book vs. a hard copy book. The point is that the agreement publishers have in place with Apple stifles competition. That’s why this is an antitrust investigation.

    Think about it. Apple let’s the publishers set any price they want as long as Apple gets the books at prices lower than what the other sellers get. That means that if Amazon or other vendors want to sell the ebooks, they have to accept them at the price the publishers set. This means that every seller of ebooks basically has to offer ebooks at the exact same price as every other seller. Hence, the there is little to no competition within the ebook market.