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Is Macmillan’s Retail Price Maintenance Move Legal?

Please note:   I am not an expert in antitrust law.   I’m giving my own interpretation of the law.   There are a myriad of legal issues implicated by this situation, not the least of which is Amazon’s own publishing ambitions and possible anti competitive behavior.


Macmillan announced yesterday that it would be selling all of its ebooks at a minimum retail price that would disallow any discounting by a retailer.   Macmillan would set the price and the retailer gets a cut (30%).    Retail price maintenance is often used for luxury goods such as Allan Edmonds, Coach, and the like. Nine West had engaged in RPM and was slapped by the FTC until the Leegin decision came down in 2007.

For 97 years, the Supreme Court had deemed RPM as per se illegal.   This meant that if a supplier was engaged in it, they were in violation of the antitrust law.   But in a 5-4 decision with heated dissents, Leegin made RPM legal, under some circumstances. (For lawyers out there, vertical price restraints were changed from per se illegal to being judged under the rule of reason).

The argument made in the Leegin decision by the manufacturer (or supplier) was that RPM was necessary to protect a manufacturer from “free riding”.   Free riding is where a consumer would go to a high end store and learn all about the product from trained and specialized customer support individuals and then go to a discounter and buy the product.   The discounter would not have invested in the specialized customer support that the high end retailer had.

As an example of this, Nine West proffered the instance:

For example, in one instance an independent retailer with minimal floor space who provided little customer service offered Nine West styles at rock-bottom prices, taking advantage of a nearby retailer’s superior customer service, displays and advertising.

Or from the Leegin decision:

If the consumer can then buy the product from a retailer that discounts because it has not spent capital providing services or developing a quality reputation, the high-service retailer will lose sales to the discounter, forcing it to cut back its services to a level lower than consumers would otherwise prefer. Minimum resale price maintenance alleviates the problem because it prevents the discounter from undercutting the service provider.

In Amazon’s case, however, it provides more service than most retailers. It is not in the position of the deep discounter who benefits from the training and service of the high end retailer.    The danger of free riding isn’t necessarily there. Often people use Amazon’s database to provide information about upcoming books, covers, and consumer reviews without actually purchasing from Amazon.   Books are not a product that require expertise to purchase.

The majority of the Justices in Leegin, led by Justice Kennedy, felt the RPM could increase interbrand competition. Interbrand is the competition among manufacturers selling different brands of the same type of product. Interbrand competition is, generally, what the antitrust laws target.

Resale price maintenance also has the potential to give consumers more options so that they can choose among low-price, low-service brands; high-price, high-service brands; and brands that fall in between.

In terms of the book market, this would mean that Amazon, and others, would promote the low-price brands like Samhain, self published authors, authors using Amazon’s publishing service, independent publishers, and the like. The high-price products would be those of Macmillan and other publishers who would seek a price floor.

Of course, books are a unique product in that each book is its own tiny monopoly. No one else can produce and publish a Stephen King book. There are other mystery books and other horror books but there is no other Stephen King. So is Macmillan attempting to use RPM to gain monopoly profits improperly?

The Supreme Court gave little guidance as to what would be deemed improper. It said that the following factors are relevant:

  • Number of manufacturers that are engaging in RPM
  • Source of the restraint (i.e., if it came from the retailer versus the manufacturer)
  • Manufacturer’s market power

The agency model and the RPM is good for new entrants who don’t have the market power of Amazon.   Mike Tamblyn of Kobo Books and Bob Livosi of Books on Board have both said that $9.99 price point isn’t sustainable for them, as retailers, presumably because they couldn’t afford to suffer the loss that Amazon could.   In fact, one retailer of ebooks informed us that they purchased ebooks at Amazon so that Amazon would take the loss instead of their company.   New entrants into the market is a pro competitive aspect even if price increases are anticompetitive (antitrust is supposedly all about protecting the consumer).

Amazon itself could be engaged in anticompetitive behavior by refusing to allow access to 90% of the ebook market by tying the print sales to the ebook prices.

Justice Stevens noted the dangers of RPM in the dissent:

In doing so, they can prevent dealers from offering customers the lower prices that many cus-tomers prefer; they can prevent dealers from responding tochanges in demand, say falling demand, by cutting prices; they can encourage dealers to substitute service, for price,competition, thereby threatening wastefully to attract too many resources into that portion of the industry; they caninhibit expansion by more efficient dealers whose lower prices might otherwise attract more customers, stifling the development of new, more efficient modes of retailing; and so forth.

RPM has served to increase prices for consumers.   Comparing the States who had allowed for RPM versus the States that had not,  the Department of Justice argued that minimum resale price maintenance had raised prices by 19% to 27%.   There are several other sources that note that RPM results in higher prices:

The Federal Trade Commission (FTC) staff, after studying numerousprice surveys, wrote that collectively the surveys "indicate[d] that [resale price maintenance] in most cases increased the prices of products sold with [resale price maintenance]." Bureau of Economics Staff Report to the  FTC, T. Overstreet, Resale Price Maintenance: Economic Theories and Empirical Evidence, 160 (1983) (hereinafter Overstreet). Most economists today agree that, in the words of a prominent antitrust treatise, "resale pricemaintenance tends to produce higher consumer pricesthan would otherwise be the case." 8 Areeda & Hovenk-amp  ¶1604b, at 40 (finding "[t]he evidence . . . persuasive on this point"). See also Brief for William S. Comanor and Frederic M. Scherer as Amici Curiae 4 ("It is uniformly acknowledged that [resale price maintenance] and other vertical restraints lead to higher consumer prices").
However, the landscape for RPM is changing. In 2009, Maryland became the first state to pass legislation expressly contradicting the decision in Leegin.

"[A] contract, combination,  or conspiracy that establishes a minimum price below which a retailer, wholesaler, or distributor  may not sell a commodity or service is an unreasonable restraint of trade or commerce.

The question of whether State laws can override federal antitrust interpretations is still up in the air (this is called preemption).

To further complicate matters, the Fourth Circuit found that if there was a true agency relationship, this defeated any claims of improper price fixing after Leegin.   In true agency relationship, the manufacturer (publisher) holds the ownership of the book and sells it to the consumer directly.   The bookseller, like Amazon, only assists in the sale.   Amazon would not be a reseller in this circumstance.   Instead the sale is made from the publisher to the consumer.   An example of this would be real estate agents. These agents facilitate the sale between the owner of a house and the buyer of the house.   The real estate agent doesn’t buy the house and then resell it.

In a true agency relationship, one wonders whether Macmillan would have to source the digital file and provide the DRM as well because Macmillan must be in control of the book, must remain the “owner” of the digital file until the ownership transfers to the reader.

Individually, Macmillan may be able to prevail under  Leegin standards.   A supplier can refuse to deal with retailers who do not follow suggested pricing.   Further, Macmillan is only one publisher.   Should all six follow suit, however, and attempt to enforce a retail price minimum across the board, Amazon would be in a much better position to argue that the publishers have tacitly created a horizontal cartel to artificially set prices above market conditions.
I don’t think Macmillan can back down now.   To do so would seem to harm it’s negotiating power with Amazon for a long time.   Can Amazon serve its customers with just the secondary market?   I’m unsure.

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com

60 Comments

  1. Mary Winter
    Jan 31, 2010 @ 04:13:11

    What about the reverse? In the recent lawsuit that Booklocker brought against Amazon because they removed the buy links from publishers who refused to switch from LSI to Createspace, Amazon.com settled with prejudice (which I believe is like admitting wrongdoing) and agreed never to take such actions again against Booklocker books again. I am not sure the ramifications it has for the rest of the smaller publishers, though most in the community thinks it also protects them.

    This is a repeat. Different publisher, different specifics. Amazon doesn’t like the way a publisher plays. Amazon removes buy links.

    Surely the Booklocker suit sets a precedent that Amazon.com is already wrong in their arbitrary “buy button removal” actions. Basically because the Booklocker suit established that their force in the marketplace was such that to disallow publishers (granted in this suit it’s the smaller ones) access to it would cripple their business.

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  2. Cheryl
    Jan 31, 2010 @ 05:21:34

    You’ve pretty much put your finger on the questions that I had. One of the things I find so bewildering in this discussion is how many of the same people who now seem to be arguing in favor of the Macmillan stance were bemoaning Leegin in 2007 since it removed the per se illegal nature of retail price maintenance.

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  3. Bernita
    Jan 31, 2010 @ 05:30:23

    Seems to me that once Macmillan demanded that all ( or most ) of its e-books be sold at the higher price, Amazon had little choice but to remove the buttons.

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  4. stevie
    Jan 31, 2010 @ 06:17:45

    Well, G.B.H. Hornswoggler asserts that both parties are within their legal rights, and who am I to argue.

    I’m in England where Amazon has been trying to get Kindle up and running, so media coverage of Amazon once again throwing all of its toys out of the pram isn’t likely to assist their efforts. We were the bemused onlookers of Amazon’s attempt to blackmail Hachette, as well as the blacklisting of gay material.

    On the other hand they need to revamp their spiel about how many books are available; it is almost certainly illegal to try and sell the Kindle reader for $489.00 by misrepresenting the number of Kindle books…

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  5. Ella Drake
    Jan 31, 2010 @ 07:15:36

    I’m definitely not an expert on RPM, but this is similar to something that’s been a part of my life for years. The video game manufacturers, especially Nintendo, have done this since I can remember.

    Their hardware is sold for a certain price as well as Nintendo brand games (same goes for Microsoft & Sony Playstation). They set a price point and the retailers all support it… including Amazon. If you want a Wii, it’s going to cost you the same everywhere. Some retailers get around this in a way by bundling.

    This seems like a comparable model to the issue with RPM and ebooks. Especially if you consider ebooks content in the same was as brand video games.

    Of course, I have no idea of the legality of what Nintendo, Microsoft, and Sony are doing and I am so not a lawyer.

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  6. DS
    Jan 31, 2010 @ 08:13:16

    @Mary Winter: Settling with prejudice means that the same law suit cannot be brought again by the parties to the settlement. Amazon admitted no wrong doing. I’ll see if I can find a link.

    Here’s the link for the settlement document provided by Booklocker. http://antitrust.booklocker.com/amazon-booklocker-settlement-agreement.pdf

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  7. Christine M.
    Jan 31, 2010 @ 08:14:12

    @Ella Drake:

    This, and Apple. Apple items never end up on sale (at least here in Canada). Sellers are not ‘allowed’ to lower their price on Apple products or else they can lose their right to sell Apple products (or soemthing like that, but don’t quote me please *g*).

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  8. DS
    Jan 31, 2010 @ 08:19:16

    Whoops, it went into moderation, I guess because of the link.

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  9. Leah Hultenschmidt
    Jan 31, 2010 @ 08:46:23

    I had the same question as Ella: How is this different from Apple setting prices on its products? Or Nintendo with the Wii?

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  10. Ridley
    Jan 31, 2010 @ 09:01:08

    @Ella Drake:

    If you want to bring in the video game model, it’s worth noting that selling new video games is not strictly profitable for game stores. I managed a GameStop ere so many years ago and there’s a reason video game retailers push used games so aggressively. That’s the only way they can stay in business, since the margin on new games is paper thin.

    As for Apple, there’s part of why I’ve never bought a computer from them. Microsoft may be de debil, but at least they let you choose your own hardware at your own price point. You can also pick the OS up at bargain prices if you know where to look.

    Any retailer with two brain cells to rub together would resist RPM and consumers should too. It only benefits suppliers.

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  11. library addict
    Jan 31, 2010 @ 09:31:33

    @Bernita: It’s my impression part of the problem here is that Amazon didn’t just remove the BUY link from the Kindle verion. They also removed all the BUY links from the print copies of the books (which they would have already in their warehouse). The only links left to buy were the ones for the Amazon Marketplace merchants, which is a secondary sale, so the publisher and author don’t make any money from said sale. But I’ll admit my brain is rather fuzzy, so maybe I’m misunderstanding.

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  12. Stacy
    Jan 31, 2010 @ 09:36:22

    Books are not a product that require expertise to purchase.

    Well, books don’t *require* expertise, but it sure is helpful to have knowledgeable booksellers at the bookstore, or some sort of recommendation device (when it comes to Amazon).

    …artificially set prices above market conditions.

    You nailed this one. Did you see the Washington Post piece about consumer price expectations for ebooks? LESS than $9.99.
    Just like Ella, Christine and Leah, I’m curious how the pricing set-up differs from Nintendo and Apple. Perhaps games and computers don’t have the same sort of system that publishing has (selling to retailers at a steep discount and then taking back returns)? Perhaps the print book legacy, beyond just what a hardcover is worth, is informing the pricing of ebooks.

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  13. Susan
    Jan 31, 2010 @ 09:55:17

    It’s going to take me some time to digest what Jane’s said and I’ll probably have to read it a few more times.

    As a publisher, I’m usually concerned with Robinson-Patman and have been wondering how the current Azn-McMln situation is impacted by that (if it’s impacted at all).

    @library addict, you’re understanding the situation correctly, with one caveat. If the secondary seller is selling a new copy of a MacMillan book, then they would be responsible for paying the publisher/author.

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  14. Bernita
    Jan 31, 2010 @ 10:01:49

    @library addict: Thank you.

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  15. hapax
    Jan 31, 2010 @ 10:02:03

    I’m certainly no expert on publishing economics, but the publisher complaints against Amazon e-book pricing seem to me to be similar to complaints against “dumping” — i.e., that Amazon is forcing prices down below what makes a sustainable business model for the manufacturers, in order to create a monopoly.

    I’m not particularly impressed by arguments based on what consumers think is an appropriate price for e-books — it’s been well demonstrated that consumers vastly underestimate the cost of production, and would demand all products be free if they could.

    (It doesn’t help that so many e-books are essentially priced for free, either as a marketing ploy or by authors who just want people to read their books)

    Unfortunately, the more I read about the economics of publishing, the more byzantine it all seems, so I wonder if *anyone* really knows how much an e-book actually “costs” to produce.

    But Amazon’s past behavior has led me to view their pious claims of being on the customer’s side with, shall we say, skepticism.

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  16. Ridley
    Jan 31, 2010 @ 10:10:40

    @hapax:

    No company is ever on the customer’s side.

    However, Amazon’s interests, this time, line up with most customers’ – lower ebook retail prices.

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  17. Susan
    Jan 31, 2010 @ 10:17:40

    @hapax

    I know the direct costs of producing an ebook–specific cost for coversion into each format + file & metadata storage fees with our chosen vendor + distribution costs.

    We haven’t quantified the ebook marketing expenses because we tie all our marketing to our print book P&Ls.

    All indirect costs (everything that we normally call overhead) have been rolled into our print P&Ls, too.

    So no, we don’t have a true accounting for the total costs specifically related to ebooks. I’d guess that some publishers have worked this out and have an accurate ebook P&L, but not many.

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  18. Stacy
    Jan 31, 2010 @ 10:39:46

    Maybe the ebook-only publishers like Ellora’s Cave and Samhain have worked out the accurate ebook P&L since that is their main business. Samhain’s ebooks are priced anywhere from $2-$8. (I couldn’t find anything more expensive than that.) And Ellora’s Cave is between $5 and $15 for list price, and most have an additional discount. Of course these companies also have a different marketing and overhead system from print publishers.

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  19. Keishon
    Jan 31, 2010 @ 10:40:56

    @hapax:

    No company is ever on the customer's side.

    However, Amazon's interests, this time, line up with most customers' – lower ebook retail prices

    Damn straight.

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  20. Marketing Madness & The Price War of 2010 » Quacking Alone
    Jan 31, 2010 @ 10:58:36

    [...] total control is given to the publisher.  Amazon talks about anti-trust and in response, Macmillan cites a US Supreme Court decision legalizing retail price maintenance for luxury goods.  Common sense and the free market can [...]

  21. hapax
    Jan 31, 2010 @ 11:02:59

    Well, just to play devil’s advocate, if the “lower prices” are truly unsustainable (and I honestly don’t know who to believe here), I don’t think that they actually ARE in the customer’s best interests.

    I mean, books aren’t exactly like tube socks. It’s not like I will be jonesing for a Julia Spencer-Fleming, but will pick up Dara Joy instead because I can save a couple of bucks.

    Right now, publishers seem to be sustaining their business model by saving money with poorer editing, lousy binding, pushing out mid-list authors, and forcing bestselling authors to produce more “product” (to the detriment, as many have said, of quality.)

    Meanwhile, most e-only publishers rely on a very specialized market; and they also have frankly even worse editing, and (imo only) a far higher garbage-to-quality ratio in their product than the mainstream “New York” publishers.

    I certainly don’t think that the “traditional” publishing model (which is less than a century old, really)is sustainable for much longer. But I don’t think that “always low prices” model is in the best interest of readers, either.

    I’d prefer — and cheerfully pay higher prices to ensure — that my favorite authors grew fat and happy and had only to think about producing the best quality stories, that midlist authors were able to make a living and their backlists remained available, and that beginning and undiscovered received the editorial and marketing nurturing necessary to make them my NEW favorite authors.

    But, as in everything, ymmv.

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  22. MaryK
    Jan 31, 2010 @ 11:10:22

    I’m sure this matters not at all to the legal situation, and I know zero about luxury markets, but don’t luxury goods have a decent resale value? I think a price floor for something as ephemeral as DRM’d ebooks is ludicrous.

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  23. SAO
    Jan 31, 2010 @ 12:56:35

    MacMillan’s problem is that few publishers have managed to make a name for themselves as being a guarantor of a quality product. Amazon provides a service, their reviews. The author writes the book. Who cares who published it?

    Can you name the publisher of your favorite books? I can’t.

    Macmillan is only as good as the authors they sign up.

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  24. lorenet
    Jan 31, 2010 @ 12:59:15

    The traditional publishing model reminds me of the Detroit auto makers. They claim they need the higher book prices (or large SUVs) to support their business model, yet the ground is shifting beneath them.

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  25. kirsten saell
    Jan 31, 2010 @ 13:15:49

    @hapax:

    Well, just to play devil's advocate, if the “lower prices” are truly unsustainable (and I honestly don't know who to believe here), I don't think that they actually ARE in the customer's best interests.

    Print/paper/binding costs ~$2 per book, and losses from returns must be factored into any print book’s P&L as well. There will be formatting expenses for ebooks (although that one-time cost diminishes as a per-copy function as more copies are sold), and though I’ve had a couple of my ebooks “returned”, it’s nowhere near the average mmpb return rate of up to 50%, tyvm.

    So I’d guess that fiction ebooks priced at between $4 and $8 is entirely reasonable. That publishers like Samhain can do this while paying pay me 30%-40% on list price when ebooks are their main source of revenue indicates to me that a big pub paying an author print-equivalent (or only slightly higher) royalties could likely price their ebooks similarly.

    Even if the editing is higher quality and therefore more expensive, it’s shared between the print and digital versions. I’m not going to even bother about the cost of DRM, since it’s a pointless expense that pisses off consumers, and should be done away with.

    Publishers will tell you they have to charge print-equivalent prices for ebooks because they still have to pay advances–but as with editing, the cost of that advance is shared between the print and digital versions of the book. Logically, that would bring the price of both the print and digital versions down, but instead, they seem to want to apply all those one-time costs to both versions as if they had to pay them twice.

    And the fact that none of them have actually done a P&L work-up on digital is telling. Even they don’t know how much they cost to produce compared to print, because they don’t care to know.

    Further, setting aside the question of whether ebooks can be cheaper, there’s a question of whether they should be cheaper, to which I reply an emphatic “yes!” The things I can do with a print book that I am barred from doing with an ebook (sharing, regifting, reselling), mean that on a per-read basis, that ebook I purchased will be read by one or two people, while a mmpb will be read by 7 or more, and a hardback by upwards of 20. Single-use items like contact lenses, facial cleansing pads, disposable diapers, are always always priced higher per use than the versions of those items you use over and over.

    But no one is going to pay $4 for a disposable diaper because the cloth ones cost 4 bucks each. Ebooks are essentially a single-use item–and it’s illegal to treat them otherwise. Why the fuck am I paying the same (or more) for that ebook as I would for a book I could lend to 5 friends and then trade in for credit at the used books store?

    Low ebook prices are not just good for consumers–they’d be good for authors and publishers. There are literally dozens of books I’d have bought for my Sony had they been priced reasonably. Instead, I’ll either choose not to read them at all, or get them from the library. I’m willing to pay the “single-use” premium on my ebooks, but just as I’m not willing to pay $150 for a pair of contact lenses that will only last me a day because the permanent ones cost $150, I’m not willing to pay hardback prices on a goddamn digital file I’m only allowed to “use” once.

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  26. Shana
    Jan 31, 2010 @ 13:20:39

  27. Mike Briggs
    Jan 31, 2010 @ 13:27:36

    Jane: Excellent analysis of the problem, and legalities supporting retail price support. As always, you are cogent and informative. Bravo!

    As I see the situation, it’s simply about deciding where e-books fit in the publisher’s business model.

    Paper books require distribution channels: shipping, storage, etc. and ultimately a retailer to get them to the public. Ebooks (as shown by many successful e-pubs) don’t need any of this. With traditional books, about 50% of the cover price goes to the various players in the distribution channel. By default, the publishers continued that model with ebooks.

    McMillan (and possibly other publishers) are now trying to re-structure that agreement. They could easily sell ebooks directly to the public, and cut the resellers out of the picture entirely. Naturally, that would throw the distribution chain in turmoil, since it would place the publisher in direct competition with the very folks who sell their bread and butter product.

    In the current model, retailers like Amazon are taking 50% of the cover price for pushing a few electrons around. Since distribution is so inexpensive, they’re dumping the ebooks for very low prices, which MAY be cannibalizing hardcover sales and hurting the publisher.

    McMillian is trying to explore a middle road, where they sell to the reader, not directly, but through an agent. As Jane pointed out, the clssic model of an agented sale is a real-estate transaction. The price is set by the seller, and the sale is mediated by a third party for a (usually) set percentage of the price. This avoids cutting the distribution chain out entirely, and provides the publisher some additional ability to control prices.

    Amazon, of course, should be free to carry the publisher’s wares (in whatever format) or not as they see fit. They’re a business, and can pick which products (or product lines) they feel will best serve their needs.

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  28. Deb
    Jan 31, 2010 @ 14:24:54

    The biggest problem I, and I’m sure a lot of consumers/readers see, is the old business models still being followed. When your model is draining the coffers why on earth continue?

    As far as pricing, the publishers indicate one of costliest areas for them, is marketing. Of course it’s marketing, if you have to fly your “author” around the country in a damn private jet to her peddle book. The so-called author can’t even string a coherent sentence together. A book which was written in a couple of months. A book the publisher was counting on to sell well and hopefully boost up the pitiful bottom line, and then Amazon & Walmart ruined that. That cost is passed onto the consumer. Why, as the consumer, should I have to pay for the utterly ridiculous and costly marketing plan?

    Until the publishers wise up, it won’t make a damn bit of difference how much they price their books. Anything is worth what the customer will pay for. And very few will pay double the price of a mass market paperback for digital format. Not even Apple users. I suspect the Apple users will be the least likely to spend that kind of money. iTunes strategy broke down the album to buy per track. Sales went up when the drm was removed. Does anyone (beyond the publishers) think double the cost of books will fly off the virtual shelves in iBooks? In the publishers dreams.

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  29. Keishon
    Jan 31, 2010 @ 14:39:39

    Does anyone (beyond the publishers) think double the cost of books will fly off the virtual shelves in iBooks? In the publishers dreams.

    I sincerely doubt it. When he unveiled that thing, the iBook ebook store, I started frowning when I saw those prices. If I bought an iPad,I wouldn’t be using that app. It would Stanza, eReader and Kindle app.

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  30. brooksse
    Jan 31, 2010 @ 15:18:08

    @hapax: Lower ebook prices are only unsustainable in relation to hardback releases. Mainly because NY publishers have been insisting ebooks should have the same list price as the hardback version, even as ebook consumers have made it clear they don’t think ebooks are worth that much.

    IMO, NY publishers brought this on themselves by not taking the time to truly integrate ebooks into their business model. Instead, they release ebooks along with the hardback version, thinking they can rip off ebook consumers by having us pay hardback prices for ebooks. As a result of that strategy, they’ve let Amazon and Kindle owners set the price for those ebooks. Now that consumers are used to buying ebook versions of NY bestsellers at near paperback prices, publishers want to put the genie back in the bottle.

    As a consumer of ebooks, IMO ebooks have about the same value as the paperback version (and in some cases less). So, again IMO, an ebook should never cost more than the paperback version. Asking a consumer to pay more for the ebook version, especially when the paperback version is available for less, is ridiculous. Which is something Macmillan has done, e.g., $14.00 list price for Louisa Edwards’ ebook while the paperback sells for $6.99.

    And Macmillan in their infinite wisdom not only want to set ebook prices at a point somewhere between hardback and paperback prices, but they also want to prevent retailers from discounting ebooks to a reasonable price.

    To All Macmillan authors/illustrators and the literary agent community: Sorry, but as long as you choose to publish through or work with Macmillan, your books will remain on my do not buy list. If your books were available as ebooks through my local library, I might have borrowed them. But alas your brilliant publisher has decided not to make ebooks available to libraries for fear that I will rip you off by borrowing instead of buying. He would rather rip me off by having me pay jacked up retail prices which he will not allow retailers to discount.

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  31. brooksse
    Jan 31, 2010 @ 15:36:35

    @Keishon:

    Does anyone (beyond the publishers) think double the cost of books will fly off the virtual shelves in iBooks? In the publishers dreams.

    I sincerely doubt it. When he unveiled that thing, the iBook ebook store, I started frowning when I saw those prices. If I bought an iPad,I wouldn't be using that app. It would Stanza, eReader and Kindle app.

    But only as long as Apple & the publishers allow those other apps to sell cheaper ebooks.

    Also, I’ve seen comments posted online from people who have said if they can’t find a book in electronic format, they buy a paper copy and then download an electronic copy from a torrent site. They feel they are fulfilling their obligation to the author by buying a paper copy, while also getting the book in the format they prefer.

    Macmillan and other publishers may be cutting off their noses to spite their faces if they succeed in jacking up retail ebook prices. Some readers will pay the higher price, but others will not. Some will buy the cheaper paper copy then download an illegal copy. Others will simply download an illegal copy without paying for a paper copy.

    (ETA: I’m just repeating something I’ve read more than once. It’s not something I have done or would do.)

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  32. LVLM
    Jan 31, 2010 @ 15:44:03

    Does anyone (beyond the publishers) think double the cost of books will fly off the virtual shelves in iBooks? In the publishers dreams.

    See, that’s just it. The big publishers don’t seem to want to deal with ebooks to begin with. They don’t want ebooks to succeed because they really want to stick to their current model of forcing people to buy hardcovers for $30 if they want a book on release day. So really, they don’t care if people gripe about paying $15 or more for an ebook. They think that if they can charge a ridiculous price for an ebook then the consumer will buy the hardcover not wanting to pay that kind of money for an ebook.

    This is why they are currently charging ridiculous amounts for ebooks and holding them back on release days. They just don’t care about ebook readers, really.

    Many ebook readers are like me though, if I can’t get it in ebook, then I just don’t buy it. And I’m perfectly willing to wait for months for a new release to come out in ebook. No author or story is that great that I have to have it now. And there are so many books on my TBR pile that it’s not like I’m starving for something to read that I will pay any price for a book.

    The really interesting thing though, is that those of us who’ve jumped on board with reading ebooks are buying way more books than the average reader. They should be courting us, not dissing us.

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  33. roslynholcomb
    Jan 31, 2010 @ 15:52:05

    @brooksse: But see, here’s the thing, readers want the ebook available on the same day that the hardback is released, yet they want publishers to charge significantly less for it. People got all up in arms when a publisher said they’d hold the ebook version for four months. I don’t buy hardback books. I’ll wait a year for the paperback. No biggee for me. I don’t want to pay premium prices, so I wait.

    Readers want ebooks released at paperback prices, yet they want the convenience and immediacy of having it hot off the presses so to speak. You want the premium product, ie the book released at the same time as the hardback, but you don’t want to pay that price. I dunno, I think there’s a sense of WTF? here, at least for me. If you want the ebook at the same time as the hardback, then it only seems reasonable to pay hardback prices. I don’t blame publishers for not wanting to do that. It sounds crazy to me.

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  34. Keishon
    Jan 31, 2010 @ 16:01:43

    @roslynholcomb:

    If you want the ebook at the same time as the hardback, then it only seems reasonable to pay hardback prices. I don't blame publishers for not wanting to do that. It sounds crazy to me.

    The problem is that ebooks are not print books. I’ve been told that ebooks are merely licenses to read and not to own. Unless you strip off the DRM which is illegal but I digress. With ebooks, in it’s various and aggravating formats in DRM, we don’t have the right to resell it nor share it or exchange it or get refunded unlike a print book. So, yes, as ebook readers, we balk at paying hardcover prices or premium prices for books that we don’t even own.

    Edited for clarity and spelling.

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  35. LVLM
    Jan 31, 2010 @ 16:10:54

    You want the premium product, ie the book released at the same time as the hardback, but you don't want to pay that price. I dunno, I think there's a sense of WTF? here, at least for me. If you want the ebook at the same time as the hardback, then it only seems reasonable to pay hardback prices

    But this goes back to DRM and what Kirsten said above. When you buy a $20 hardcover book hot off the presses, you can then turn around and resell it, make some of that money back, or pass it around to friends. When you pay $16 + for hot off the presses book in ebook, that’s it. Only you get to read it and you cannot resell it or pass it around to friends. It’s not even YOUR BOOK in many cases; you’ve just paid that money to borrow it essentially until the vendor snatches it like Amazon can do, or the format that book came in becomes obsolete. So there is a huge difference.

    And again, it’s OK to pay more for a brand new release, but many are arguing that they are paying more for an ebook that has been out in mmp for a long time and selling for $7.

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  36. Melissa Blue
    Jan 31, 2010 @ 16:23:19

    Maybe someone has pointed this out, but doesn’t Amazon store new books? So by refusing to sell these books won’t Amazon return the titles i.e. MacMillian would have massive returns? If that’s true then that scares me more because the trickle down effect would hurt the authors sales making it harder for readers. We’re talking here a few thousands of books from hundreds of authors.

    I should say I’ve never been swayed by the argument from businesses “we’re gouging you for your own good.”

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  37. DS
    Jan 31, 2010 @ 16:28:53

    I’m not a hot off the press person and I’m not sure how many books have a value of immediacy for more than than the author’s most ardent fans. That and current event titles. Was there any one involved in the Lacey Peterson murder and trial who did not write a book?

    For some people they want to buy books, read them and resell before the used price drops.

    When I buy an ebook I am not getting the physical item. I am giving up that item for convenience. Why should the publisher get the same amount of money from me?

    Yesterday I preordered a book by P C Hodgell. She is one of my very favorite authors ever– since the early 1980′s in fact. But when it arrives late Feb, early March, chances are I won’t read it right away. Just knowing I will have it on hand soothes that restless gottahaveit feeling. I’ll also buy a Kindle version when its available. The trade paperback is for my collection. The Kindle version is to read because I’ve been spoiled by the convenience and flexibility.

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  38. has
    Jan 31, 2010 @ 16:53:02

    It looks like amazon has backed down – but I wonder if this is due the legal reasons Jane has outlined here?

    http://www.amazon.com/tag/kindle/forum/ref=cm_cd_tfp_ef_tft_tp?_encoding=UTF8&cdForum=Fx1D7SY3BVSESG&cdThread=Tx2MEGQWTNGIMHV&displayType=tagsDetail

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  39. roslynholcomb
    Jan 31, 2010 @ 17:03:29

    So, yes, as ebook readers, we balk at paying hardcover prices or premium prices for books that we don't even own.

    As I said, you don’t want to pay the premium price, but you want the premium product. Whether an ebook is a tangible item or not, you receive the same benefit from having read an ebook as you from having read a hardback. It’s not like someone comes by with some type of brain eraser and remove the memory from your head. You had the same experience as the person who paid double the price (or more). I could see your point of expecting a lower price, but not if you insist on receiving it at the same time as the hardback buyer.

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  40. Deb
    Jan 31, 2010 @ 17:05:01

    I have purchased the new released e-format of a few hard cover books @ the higher price point. If it’s a book I simply can’t wait for, I haven’t waited for it to hit the $9.99 price point. I’m happy to have been able to read the hard cover books at the cheaper price @ release, but I am willing to wait.

    I am also expected to wait 4-6 months for the e-format of mass market ppb @ double the price. That’s what I object to.

    I realize the e-readers are, for the time being, a niche market. When viewed from that perspective, a publisher would expect the customer to be willing to pay the inflated price. With some consumables, that may be true. But in the case of DRMed books, the value drops. I’m not concerned about sharing, or any other activities which may impact sales. I accepted the limitations when I bought the device. The fact that I can’t in the future, move those files to a new device is a limitation which should be reflected in the price.

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  41. roslynholcomb
    Jan 31, 2010 @ 17:09:32

    I am also expected to wait 4-6 months for the e-format of mass market ppb @ double the price. That's what I object to.

    Now I agree that’s ridiculous. If the paperback is already out, then, of course the ebook should be priced comparably to that.

    As I’ve said before, I don’t think hardbacks are going to exist much longer for all manner of reasons, and then this argument will become academic, but meanwhile, I think that those who have to have the book hot off the press then the premium price should prevail.

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  42. brooksse
    Jan 31, 2010 @ 17:15:28

    @roslynholcomb: But it is the publishers who have brought about that expectation by not doing a better job of incorporating ebooks into their business model. It’s the publishers who started releasing ebooks at the same time as the hardbacks, thereby creating the expectation that ebooks would be available at the same time.

    As I stated, I believe ebooks are more on par with paperbacks. So I personally don’t mind waiting for an ebook to be released along with the paperback release. I don’t expect publishers to release both the hardback and paperback versions at the same time and charge readers the hardback price for the paperback version. So I don’t know why the publishers started doing this the ebook version when it is clearly worth less than the hardback version. The publishers let that genie out of the bottle, now they have to deal with the backlash they created.

    As a consumer, what I don’t want is to pay jacked up prices for ebooks that are essentially stripped down versions of the paperback. If they want consumers to pay higher prices for ebooks, they could at least include the cover image in the ebook. I have never bought an epubbed book that did not include the cover image. I have never bought a Harlequin that did not include the cover image. Yet quite a few NY pubs who slap a hardback price on an ebook somehow can’t manage to get the cover image in the file.

    I don’t even mind if they set two suggested retail prices for ebooks, one for the hardback release and one for the paperback release. But only if they (1) include “extras” that would add value to the “hardback” ebook release, (2) reduce the ebook price when the paperback comes out so it sells at paperback price, and (3) have the prices remain suggested retail prices.

    Macmillan is currently not doing the second, their ebook prices are higher than the paperback version selling at the same time. And they want to move away from the third toward fixed prices. It’s the discounts offered by retailers that get me to try out new authors. If other NY publishers follow Macmillan and succeed in doing away with discounted prices for ebooks, I’ll be buying less books by fewer authors.

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  43. kirsten saell
    Jan 31, 2010 @ 17:20:25

    A contact lens maker got itself in hot water about a decade ago by selling the exact same lenses in different packaging for different prices. They sold them as “disposable daily” lenses at one price per pair, and as “reusable monthly” lenses at a much higher price per pair. When consumers discovered they were paying more for the exact same lenses, they freaked and the authorities got involved.

    What publishers are trying to do here is sell us completely different products for the same price. They argue that it’s only the packaging that’s different, because the text is the same, but if that’s the case, we should be able to use that product the same way. We should be able to own it, share it, give it away or resell it when we’re done with it. Because we’re not permitted to use the product the same way, it can’t be reasonably argued that it’s the same product.

    I’m not interested in arguing over delayed releases. People wait for mmpb, they can wait for ebooks. It’s no biggie, even though no amount of hooey blown up my ass will convince me simultaneous e and hardback releases will endanger hardback sales. If a lot of readers simply forget how badly they want those books in the months between release dates, that’s the publisher’s loss (and the author’s), but it’s no skin off readers’ noses.

    As for McMillan’s spat with Amazon, I’d remind people (especially McMillan authors), that this publisher pays on net for ebooks, and anything that increases net profits for the publisher will increase net royalties for the authors. It may also give publishers wiggle room to reduce cover prices (although I’m not holding my breath that they will). It’s hard to price a product reasonably when the middle man is taking half or more of your cover price, isn’t it?

    30% seems a more than fair cut for setting up a buy button and letting an automated shopping cart run the show. Taking 50% or more for what Mike Briggs referred to above as “pushing a few electrons around” is fucking insanity.

    ReplyReply

  44. Is Macmillan's Retail Price Maintenance Move Legal? | Dear Author … | The Web Video Company | Web Video For Business
    Jan 31, 2010 @ 19:16:44

    [...] Link: Is Macmillan's Retail Price Maintenance Move Legal? | Dear Author … [...]

  45. Cheryl
    Feb 01, 2010 @ 00:27:51

    #42, a retailer does a whole lot more than setting up a buy button and an automated shopping cart. There’s logistics, fulfillment, customer care, shipping– and even that front end is a sizable piece of work.

    ReplyReply

  46. kirsten saell
    Feb 01, 2010 @ 12:06:08

    a retailer does a whole lot more than setting up a buy button and an automated shopping cart. There's logistics, fulfillment, customer care, shipping- and even that front end is a sizable piece of work.

    We’re talking about ebooks here. What shipping? What handling? What front end? It’s a website and shopping cart. For 50-65%, that had better be some blammo awesome customer care I’m getting…

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  47. Tweets that mention Is Macmillan’s Retail Price Maintenance Move Legal? | Dear Author: Romance Novel Reviews, Industry News, and Commentary -- Topsy.com
    Feb 01, 2010 @ 22:29:59

    [...] This post was mentioned on Twitter by mfmakichen, Keira, David Winnie, Erotic Romance, Robin L. and others. Robin L. said: And will add @jane_l's Dear Author piece: http://is.gd/7rfNr [...]

  48. Kelly McClymer's Blog » Twitter Updates for 2010-02-02
    Feb 01, 2010 @ 23:38:04

  49. Sarah Collins Honenberger
    Feb 03, 2010 @ 08:29:59

    Talk, talk, talk. Everyone wants the deals on Amazon, the search inside, the author pages, the reviews, the free shipping, the affordable e-book prices, yet they don’t want the brain and muscle to be allowed to choose what it wants to eat.

    I’m an author in Virginia, with a small press, writing awards and great reviews. Sales on Amazon for me mean people in Alaska chose my books, know who I am as a writer. As long as the ‘big six’ choose to advance huge sums for ‘potential best sellers’ and spend money on lunches to bid on books and big book stores only order from one national distributor, I’ll side with Amazon, and let the ‘big six’ bemoan the state of book selling. They’re using the wrong model and eventually they’ll see the light. Amazon sells over 65 % of the books in this country, hard back, trade paper or e-books. They’ve just started Amazon Encore to vertically integrate the market, and publish their own authors. I don’t have a business degree, but I’d take 65% over 35 % of anything anywhere anytime.

    ReplyReply

  50. IReadRomance.com » Hey Amazon…
    Feb 03, 2010 @ 10:13:29

    [...] Dear Author has an excellent post about the legalities of this [...]

  51. Monday Motivation - thoughts on Amazon and MacMillan | Solelyfictional
    Feb 08, 2010 @ 14:12:08

    [...] been a bit of a  kerfluffle between Macmillan and Amazon (documented, well, everywhere: DearAuthor falls broadly on Amazon’s side, PubRants broadly on Macmillan’s, for example. Everyone has an opinion if you google for it). [...]

  52. legal high reviews
    Feb 10, 2010 @ 10:17:43

    This seems like a comparable model to the issue with RPM and ebooks. Especially if you consider ebooks content in the same was as brand video games.

    ReplyReply

  53. IReadRomance.com » Blog Archive » Hey Amazon…
    Feb 12, 2010 @ 16:55:18

    [...] Dear Author has an excellent post about the legalities of this [...]

  54. legal high reviews
    Mar 12, 2010 @ 07:59:35

    This seems like a comparable model to the issue with RPM and ebooks. Especially if you consider ebooks content in the same was as brand video games……

    ReplyReply

  55. Wednesday Midday Links: New Devices on the Horizon | Dear Author
    Jun 02, 2010 @ 11:01:39

    [...] with publishers. I would have thought this issue would be ripe for discussion in Maryland because Maryland has an anti retail price maintenance law it enacted after the Supreme Court rendered its Leegin decision. Any citizen can make a complaint [...]

  56. Spice Review
    Jun 24, 2010 @ 14:32:46

    seems a bit shady to me.

    ReplyReply

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    Mar 12, 2012 @ 07:52:27

    [...] pricing, but the term “Agency pricing” is a misnomer. What the publishers are doing is engaging in retail price maintenance, not Agency [...]

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    Mar 28, 2012 @ 14:31:58

    [...] two legal models that could apply to the publishers’ sale of e-books. One is agency; the other is retail price maintenance. In a genuine agency model, the agent doesn’t own or bear legal responsibility for the stock; the [...]

  59. Bigger Than Agency, Bigger Than E-Books: The Case Against Apple and Publishers | Mid South Web Deals
    Mar 28, 2012 @ 19:06:18

    [...] two legal models that could apply to the publishers’ sale of e-books. One is agency; the other is retail price maintenance. In a genuine agency model, the agent doesn’t own or bear legal responsibility for the stock; the [...]

  60. Bigger Than Agency, Bigger Than E-Books: The Case Against Apple and Publishers | Get A New Domain
    Mar 28, 2012 @ 20:12:06

    [...] two legal models that could apply to the publishers’ sale of e-books. One is agency; the other is retail price maintenance. In a genuine agency model, the agent doesn’t own or bear legal responsibility for the stock; the [...]

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