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# Publishers put a gun to our heads on ebook pricing, squeals Amazon

## Wanted to damp down our Kindle-ing dominance

By Brid-Aine Parnell, 6th June 2013
17

### Related stories

- Penguin chief: Apple's ebook plan 'dramatically changed' market
- Jobs' 'incredibly stupid' prattlings prove ebook price-fix plot, claim Feds
- Penguin pays $75m to settle ebook price-fixing case

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. ®

## COMMENTS

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All Reader Comments (17)
Highly Rated
Posted Thursday 6th June 2013 13:42 GMT
Squander Two

### The law.

A few posters here are implying that the DOJ's job should be to help small companies against big ones, or newcomers against monopolies, or something like that. It isn't. There is, quite simply, a law against price-fixing. If a group of companies form a price-fixing cartel, it's just as illegal regardless of whether they're bigger or smaller than the companies outside the cartel.

It is of course possible that Amazon have lobbied the DOJ to pursue this case, but, if so, they shouldn't have had to, and the DOJ (if they're doing their job) should have done it anyway.

As for the effect on consumers, compare the price of a dead-tree book in the UK, where Waterstone's broke the Net Book Agreement, to the price in Australia, where they still have something like that in place.

4 1
Posted Thursday 6th June 2013 12:44 GMT
Justicesays

### Re: Publishers brought it on themselves

Oh, and the geo restrictions are really what screwed non-US readers , and probably persuaded them to get Kindles.

I had a sony book reader before Amazon got big on ebooks, and for a year or so I could get whatever I wanted from the US ebook stores, paying in $.

Then suddenly the publisher work up to this fact and cracked down on that. So rather than me being able to pay them for content , I couldnt. Not "Buy that from a UK based ebook seller". I actually couldn't buy almost anything I wanted to read, at all, in ebook format. I could however order the books to be delivered from the US Amazon store to me by post, because that kind of idiotic self harming logic makes total sense.

I also read alot of Baen stuff because they don't do DRM, and they let me buy stuff from them direct. in a format designed for my reader.

Then , Amazon came on the ebook scene. Using their power of "Having a slight clue", I presume they persuaded the local rights holders to either publish with them, or they buy the local rights themselves? They also pressure the publisher to make stuff available in various regions.

"The publisher has not made this content available on kindle in your country , click here to register your interest"

If it wasn't for (publisher imposed) geo restrictions, I suspect the ebook market would have remained alot more fragmented

3 0
Posted Thursday 6th June 2013 12:35 GMT
Graham Marsden

### Re: Author's cut?

No comment on the article, I just wanted to say: "Wow, Charlie Stross!" :-)

3 0
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