March 12, 2012

"Steve Jobs, Price Fixer?"

"Government lawyers claim to know how much an e-book should sell for."

102 comments:

David Baker said...

I'd really like to know how they lose money at $9.99.

Patrick said...

Government knows the price of e-Books, like they know who is entitled to a "livable wage" and how much that wage should be.

Christy said...

I have been irritated recently by noticing paperback prices cheaper than Kindle prices. How can that be? Is the convenience and lack of clutter worth the premium?

traditionalguy said...

Government wants its cut of the money.

Any mega profitable business will get a knock on the door from a government prosecutor for breaking a rule, sort of maybe. The message is pay up or something will happen to that nice business you have there.

That is why mega businesses donate to both campaigns.

Scott M said...

As someone who hopes to get a book out later this year, I would love to make $9.99 per book (gross before the split). The vast majority of e-books are about half that, if not less. Aside from this, the die has been cast. The traditional publishing model is dead, dead, dead; hanging by a noose, its neck snapped. What we're seeing is just the quickly-weakening toe-kicking as the body becomes a corpse.

MadisonMan said...

Government lawyers.

Those are two words I don't care to read. In a book or on a kindle or on an iPad.

Dose of Sanity said...

How in the world do they lose money at 9.99 per book?

I call bullcrap.

Quayle said...

This administration is filled with know-it-all bossy-pants.

Dose of Sanity said...

As an aside:

Scott, you are writing a book? Do tell.

Brennan said...

It works for the Volt. Why not for books?

What will the tax credit be worth?

Pogo said...

Only the state can fix prices, Jobs.
Who do you think you are?

The gubmint only makes these occasional forays into free marketspeak as the tribute vice pays to virtue, and to keep control of whatever loose strands of the maket remain.

MadisonMan said...
This comment has been removed by the author.
MadisonMan said...

This administration is filled with know-it-all bossy-pants.

Why limit the statement to This administration when any administration in the past, oh, 50 years, is so filled?

It is a given that a Govt bureaucrat, and Govt Lawyers are the bureacrattiest of all, must find some way to justify their salary. Finding "problems" to "Fix" is what they do.

Tim said...

"Government lawyers claim to know how much an e-book should sell for."

This is surprising?

Couldn't have just as easily read:

"Government lawyers claim to know how much healthcare should sell for."

"Government lawyers claim to know how much sub-prime mortgages should sell for."

"Government lawyers claim to know how much milk should sell for."

"Government lawyers claim to know how much wheat and corn should sell for."

"Government lawyers claim to know how much gasoline should sell for."

"Government lawyers claim to know how much prescription drugs should sell for."

"Government lawyers claim to know how much sugar should sell for."

"Government lawyers claim to know how much contraceptives should sell for."

"Government lawyers claim to know how much labor should sell for."

Government lawyers claim to know how much quite a lot of things should sell for.

Maybe we should stop voting for the politicians who empower them?

edutcher said...

et them fix prices when they are required to show a profit.

And do.

Scott M said...

Scott, you are writing a book? Do tell.

Can't. Not before the first draft is complete, anyway. I have to thank my blushing bride, though. Recently she saw I was getting frustrated with my progress as life kept barging its way into writing time, so she got me a weekend away from the kids in seclusion with my laptop. Gotta love that.

Tank said...

@Tim

Which ones are those?

Please don't say Repub's, I'm drinking coffee and wearing my favorite suit. Looks bad with spit all over it.

Dose of Sanity said...

@ Scott - Too bad you can't spill, keep us updated. Nice on the weekend away!

@ Tim - At some point, someone needs to watch for price fixing? Unless you want to depend on the benevolence of the market, right? Would you prefer that instead of government lawyers, we had PRIVATE lawyers pursuing this? (Obviously, we'd have to change some laws to allow this). I can just imagine the commercials now (a la car accident ones): Have you paid too much for milk? Call pricefixfixers at....

Given their almost absolute ineffectiveness in all but the most extreme cases, I'd say the government lawyers are actually on-point on this issue...

Jay said...

At some point, someone needs to watch for price fixing? Unless you want to depend on the benevolence of the market, right?

Why?

What good has ever come from government "watching for price fixing"?

Further, you, grad student with no real world experience, pretending the market is malevolent is satire.

markbres said...

Here is how Amazon was losing money selling bestsellers at $9.99.
Pre the Apple collusion, Amazon was paying publishers approx 50% of the list price of eBooks. For an ebook that had a list price of $25, Amazon would pay $12.50. By selling the eBook at $9.99 they were losing money.

Dose of Sanity said...

@ Jay

Please review U.S. History - I'd suggest starting around 1875 and going until about 1920. Also, even though I'm frequently attacked for having "no real word" experience after acknowledgment of presently attending law school, please remember a majority of law students do not attend law school immediately following college.

Jay said...

, I'd say the government lawyers are actually on-point on this issue...


Really?

How would you know?

Note from the article:

But Jobs's proposal was not about price fixing. It was about treating book publishers like every other industry. This is the same 30% revenue share that Apple takes for selling newspapers, magazines and games on the iPad. Publishers didn't have to collude to accept it.

Also note, things you've never been engaged in:

The practice of law
Selling books
Distributing IT
Publishing

Dose of Sanity said...

Here is how Amazon was losing money selling bestsellers at $9.99.
Pre the Apple collusion, Amazon was paying publishers approx 50% of the list price of eBooks. For an ebook that had a list price of $25, Amazon would pay $12.50. By selling the eBook at $9.99 they were losing money.


Perhaps their profits were reduced, but when most people say "losing money", they meant the costs exceed the gross income.

Try again.

Jay said...

Dose of Sanity said...
@ Jay

Please review U.S. History - I'd suggest starting around 1875 and going until about 1920.


This isn't an argument or an answer.

Also, even though I'm frequently attacked for having "no real word" experience after acknowledgment of presently attending law school, please remember a majority of law students do not attend law school immediately following college.


Which is irrelevant, as you have no real, world experience.

Dose of Sanity said...

Unless amazon was still paying 12.50 for the 9.99 book? That doesn't make sense though, especially if it was contracted at 50% of the list price?

Dose of Sanity said...

Unless amazon was still paying 12.50 for the 9.99 book? That doesn't make sense though, especially if it was contracted at 50% of the list price?

bagoh20 said...

Imagine an Apple, Inc run by the government, and what the Iphone would be like then.

Something like this:

Cinco phone

Dose of Sanity said...

Which is irrelevant, as you have no real, world experience.


This is false, and your only argument against me, try again.

I'm citing history because you asked for why I assumed the market was "malevolent". (I shouldn't say its good or evil, only full of self-interested actors)

Dose of Sanity said...

Also note, things you've never been engaged in:

The practice of law
Selling books
Distributing IT
Publishing



This best part of this is only the 'practice of law' is true, haha. The publisher and printer I worked for wasn't huge, but you should realize wisconsin is one of the bigger places for printers (and to a lesser extent, publishers).

Jay said...

Dose of Sanity said...

I'm citing history because you asked for why I assumed the market was "malevolent".


I didn't "ask"

I said you assuming it is malevolent is comical.

Talking about 1820 reveals how silly you actually are.

Jay said...

Dose of Sanity said...

This is false, and your only argument against me, try again.


Except it isn't false.

Your comments reveal an ignorance that is rather staggering.

Said ignorance is due to the lack of experience.

Scott M said...

(I shouldn't say its good or evil, only full of self-interested actors)

Dose, how is this different from human dealings in general? This is one of the things I've never understood about the left's way of looking at things because that perspective seems to assume somehow humans are better than that. It simply doesn't jive with reality.

bagoh20 said...

"when most people say "losing money", they meant the costs exceed the gross income. "

Which is why "most people" can't run a business, and lawyers are notoriously bad. It has something to do with their inability to comprehend that they don't know everything.

Who is dumber: the guy who doesn't know something or the one who doesn't even realize he doesn't know it.

Dose of Sanity said...

Talking about 1820 reveals how silly you actually are

I'm not the one ignoring the weight of history.

Or, let's put this another way. Assuming companies could legally create a de facto monopoly by price fixing. Would their shareholders allow them to do anything less?
Second premise: Do you assume companies will act legally with no oversight? (no government lawyers)

Really, honestly, answer those two points. You can attack the points or the conclusion, I'd honestly love to know.

Tim said...

"@ Tim - At some point, someone needs to watch for price fixing? Unless you want to depend on the benevolence of the market, right? Would you prefer that instead of government lawyers, we had PRIVATE lawyers pursuing this? (Obviously, we'd have to change some laws to allow this). I can just imagine the commercials now (a la car accident ones): Have you paid too much for milk? Call pricefixfixers at...."

The notion that a government woefully incompetent in running its own affairs is somehow deemed competent in running someone else's affairs, including prices, seems obviously illogical. Moreover, I'd aggressively argue that anyone who believes that incompetent government can competently run someone else's affairs, including pricing, is a complete moron, and shouldn't be allowed to vote on the grounds that such a voter is a danger to the health and welfare of the Republic.

But I don't have time to make the case this morning, notwithstanding the fact for many, this is as obvious as the sun rising in the East and setting in the West.

Rusty said...

Perhaps their profits were reduced, but when most people say "losing money", they meant the costs exceed the gross income.

Try again.


Here. Let's try this.
They can charge whatever the market will bear. 9.99, 99.99, or .99.
Whether they make or lose money.
It's none of your fucking business as long as you don't have to subsidize them.

Dose of Sanity said...

@Scott: Dose, how is this different from human dealings in general? This is one of the things I've never understood about the left's way of looking at things because that perspective seems to assume somehow humans are better than that. It simply doesn't jive with reality.

I would say it doesn't differ from human dealings in general at all - except maybe that actors have more power (creating uneven transactions). However, stepping back - we police, literally, normal human dealings as well, don't we?

@Bago - You can't say you are selling something at a loss when you are making a profit, under any accounting or even everyday parlance I know of. Do you disagree?

The known unknowns vs. the unknown unknowns is an interesting point you raise though.

I don't mind admitting I know just enough to be dangerous. I'll happily cede to corrections and education, but not to attacks. Try, engage me, we both might learn something.

Jay said...

I'm not the one ignoring the weight of history.


I'm not "ignoring" anything given your response is to say "look at history" as if it is some sort of argument.

You're the worst law student ever.

Patrick said...

Bagoh, I think it's pretty optimistic to believe the government could come up with the Cincofone.

Dose of Sanity said...

Here. Let's try this.
They can charge whatever the market will bear. 9.99, 99.99, or .99.
Whether they make or lose money.
It's none of your fucking business as long as you don't have to subsidize them


That's the thing about price-fixing. It means the market's normal flow - competition - has been artificially changed. It's why monopolies are illegal.

@Tim - See my answer above - we are not saying the government is "competent to set prices" - we only ask them to intervene when the entire effective market moves to create a monopoly and fix prices. Right? We aren't saying "the government knows what price it should be", but instead saying "the government should stop this entire market from having an artificial floor". No?

Dose of Sanity said...

@ Jay - Ignorant of history?

Ad hominem, Ad hominem, Ad hominem.

Got anything else? I'm also looking for a response to my two-assumption argument.

Jay said...

Do you assume companies will act legally with no oversight? (no government lawyers)


Er, "government lawyers" don't determine legality.

So that is a pretty dumb question.

What is also revealing is you really have no concept of the market being able to re-enforce good behavior or as a tool to weed out bad behavior.

Example: when there was the last recall of tainted food, who deterimined there should be a recall, the government or the company?

Hint: the answer doesn't jive with your preconceived notions of the market.

Jay said...

Dose of Sanity said...
@ Jay - Ignorant of history?

Ad hominem, Ad hominem, Ad hominem.



Um, no.

You shouting "history" isn't a response.

And pointing out you're ignorant isn't "Ad hominem" it is fact.

An easily observable fact by your running drivel here.

I'm also looking for a response


What good has ever come from government "watching for price fixing"?

Note: saying "look at history" isn't an answer. It is a cop out.

And of course everyone reading can see why you're running away from the question.

bagoh20 said...

Even if you think the government should be sticking it's nose into such things, it's pretty hard to justify going after books for $9.99 when young people are having their lives destroyed by the unprecedented rise in the cost of higher education.

Now text books, that's some gouging right there and collusion with the school mandating them.

The fact that they are choosing to go after ebooks perfectly demonstrates whats wrong the government doing this.

Dose of Sanity said...

@ Jay:

Enforcement of the laws is certainly done by government lawyers. What in the blazes are you talking about?

Secondly, you are right, markets functionally properly DO have positive reinforcement mechanisms. Looking at your example of the food recall - do you think the company would have done so without the FDA and the potential of a government investigation? Even if you do, that's because you assume a rational self-interest.

What is the self-interest in a company in not price-fixing given the opportunity to do so? (Hint: there isn't one)

Scott M said...

Now text books, that's some gouging right there and collusion with the school mandating them.

The fact that they are choosing to go after ebooks perfectly demonstrates whats wrong the government doing this.


Excellent point and one I hope they iron out in the next five years or so before I have to start paying for them. The textbook industry will follow the rest of publishing as everything moves to electronic media. For that matter, the textbook is a textbook example of a form of reference that will benefit immensely from the interactivity and interconnectivity the new media allows.

Dose of Sanity said...

And pointing out you're ignorant isn't "Ad hominem" it is fact.

Further, you, grad student with no real world experience, pretending the market is malevolent is satire.

Also note, things you've never been engaged in:

Said ignorance is due to the lack of experience.

You're the worst law student ever.



So, my "shouting" history isn't an argument?

A: State Assumption
B: Assumption is wrong, what's the basis?
A: Historically speaking, it's been true.
B: Citing history is a cop out.
A: ???

Really Jay - you are trying really hard here.

Dose of Sanity said...

Now text books, that's some gouging right there and collusion with the school mandating them.



I agree.

Jay said...

A: Historically speaking, it's been true.


Becasuse you say so, right?

I mean, you've given all sorts of examples, correct?

*GIGGLE*

bagoh20 said...

99% of the monopolies and price fixing that affect your life by overcharging are government run or enforced monopolies. Let's get those lawyers to work on that, shall we?

Patrick said...

"Or, let's put this another way. Assuming companies could legally create a de facto monopoly by price fixing. Would their shareholders allow them to do anything less?
Second premise: Do you assume companies will act legally with no oversight? (no government lawyers)"

Dose, the shareholders of the monopoly may wish to sustain it, but the monopoly, in a free market will also have competitors. When the monopoly price is too high, capital will move to get a piece of that action. Monopolies do not last.

And no, we should not expect businesses, monopolies or otherwise to act "benevolently." We should expect them to act in their self interest. To the extent that you would want them to act in the interest of society, you need to be certain that you know what is in the interest of 300 million people. Or, 7 billion people.

Jay said...

do you think the company would have done so without the FDA and the potential of a government investigation? Even if you do, that's because you assume a rational self-interest.


Well, the FDA doesn't get involved in meat recalls, the USDA does.

But yes, the company would do so because it is better to get meat off the shelves and not sicken your customers, than to take the chance you will get 10,000 sick and have your brand tainted as unsafe.

Jay said...

@ Jay:

Enforcement of the laws is certainly done by government lawyers. What in the blazes are you talking about?



Your reading comprehension sucks.

You:
Do you assume companies will act legally with no oversight? (no government lawyers)



Me:
Er, "government lawyers" don't determine legality.



You understand now?

Jay said...

What is the self-interest in a company in not price-fixing given the opportunity to do so? (Hint: there isn't one)


You mean other than the fact that:

A. Competition can affect this
B. "Price fixing" can price out customers
C. Price fixing would often involve 3rd parties who may not want to play along
D. Public companies have shareholders

Again, your ignorance is staggering.

I knew more about this stuff than you when I was in high school.

Are you capable of shame or embarrassment?

Dose of Sanity said...

Dose, the shareholders of the monopoly may wish to sustain it, but the monopoly, in a free market will also have competitors. When the monopoly price is too high, capital will move to get a piece of that action. Monopolies do not last.

Um, you know that monopolies exist by forcing out competition, right? I mean - if the monopoly can be taken down by the market, it's not a monopoly at all in the first place, is it? See the following examples:

@ Jay:

Examples of monopolies off the top of my head:

Standard Oil
International Harvestor
U.S. Steel/Homestead
American Tabacco

Price Fixing:
Airline charges
Computer parts

Dose of Sanity said...

You:
Do you assume companies will act legally with no oversight? (no government lawyers)

Me:
Er, "government lawyers" don't determine legality.

You understand now?


No, I honestly don't.

You mean other than the fact that:

A. Competition can affect this
B. "Price fixing" can price out customers
C. Price fixing would often involve 3rd parties who may not want to play along
D. Public companies have shareholders



Absolutely true that A, B, C, and D are true. However, a successful price fix involves enough of the market to force out the rest. (Point A gone - you won't price fix if other actors won't play, Point C also gone). Point B is a good one - but if you fix it high enough, or if its for a non-avoidable cost, this still results in a larger profit (and thus interest).

Point D is part of my argument? Public companies have shareholders, whose only concern is ROI - they are the profit-crazed actors in the market. How does that HURT price-fixing?

Pogo said...

The trouble is that most people are as economically illiterate as Dose of Sanity, and that is why we are so screwed.

Invincibly ignorant.

Dose of Sanity said...

The trouble is that most people are as economically illiterate as Dose of Sanity, and that is why we are so screwed.

Yawn. Cmon Pogo, you can do better than jump on the Ad Hominem bandwagon.

Patrick said...

Dose,

You may find it interesting to note that Standard Oil's market share had declined by about one-third before anti-trust litigation started. That was due to competition. Sorry, no link, but that stat comes from a law school text book, and I'd never kid about something like free market economics.

But assuming that government interference is necessary, how do we determine price? Do we allow a "reasonable profit?" How do we define that? By the time those questions get answered, the market will have changed so dramatically as to make the questions largely irrelevant. Even if we believe that government actors are more "benevolent" than business (I do not), their limited knowledge makes "doing the right thing" impossible.

Joe said...

What bullshit reasoning in that article. The government isn't saying they know what e-books should be sold for, but that Steve Jobs sure as hell didn't.

Dose of Sanity said...

@ Patrick -

Hey, those are reasonable arguments. I'd agree with the many problems of enforcement, in fact I think I mentioned how bad they are at enforcement.

Don't you agree that we at least need the threat of enforcement to stop wanton attempts to get away with it?

mariner said...

Patrick,
Dose, the shareholders of the monopoly may wish to sustain it, but the monopoly, in a free market will also have competitors.

I suspect the meaning of "monopoly" is escaping you. (Or perhaps the meaning of "free market".)

Patrick said...

Mariner, the point is that monopoly power, in a free market, is temporary. If that doesn't comport with your understanding of "monopoly" or "free market," you are correct, one of us does not understand the terms.

Dose, I am skeptical in the extreme that threats of enforcement are useful. In part, because eventually the government would have to enforce whatever laws had been passed, and in part because those laws won't solve the problem and will likely have tangential effects that will make things worse.

Rusty said...

That's the thing about price-fixing. It means the market's normal flow - competition - has been artificially changed. It's why monopolies are illegal


Sigh.
OK.
How does one effect the the markets normal flow in a free market?


The thing about monopolies.........is, they are'nt. A least for very long. Monopolies tend to dissolve over a period of time because market forces conspire to compete with them. This, of course, does not apply to monopolies that are subsidized by the state.

This is why any attempt to fix prices by a company competing in a free market are always doomed to failure. In the end market forces always win.

Rusty said...

Sorry Patrick. I didn't see you there.

Dose of Sanity said...

@ Rusty:

You do understand that monopolies don't exist because they are illegal and have busted, right?

Citing modern day examples of lack of monopolies is silly, considering the regulations against them.

Ditto for price-fixing.

This is a case where we want market forces to win, but we don't want actors in the market artificially manipulating those forces. See what I mean?

Alex said...

Apple's business model never made money on selling 3rd paty content like eBooks, music or apps. It's all based on selling you their hardware - iPad, iPhone, iPod Touch, Mac.

Dose of Sanity said...

How does one effect the the markets normal flow in a free market?

In a free market, when a consumer feels an item is out of his price range, he may turn to a competitor and buy that product at a lower price. Failing an alternative, he may decide to produce that product at a lower a price.

In a price-fixing or monopoly situation, companies that control the market share artificially remove the 'buy from a different competitor' option. They also freeze out new competetion by scale or further price drops. (Think you can compete with amazon.com?)

Ironically, as the article notes, the 9.99$ price could have been an attempt to maintain amazon.com's de facto monopoly. That's not the point though - the point is that the publishers banded together and tried to keep prices fixed by freezing out amazon if they sold for less than they wanted.

The issues are further complicated in that all products in this market are not the same. For example, if you want to purchase game of thrones, you can only purchase it through one publisher. There is no one-for-one replacement.

Dose of Sanity said...

Apple's business model never made money on selling 3rd paty content like eBooks, music or apps. It's all based on selling you their hardware - iPad, iPhone, iPod Touch, Mac.

The interesting point here is that their competition (amazon) makes their money from content, and they sold the kindle fire at a loss (cost 201$, price 199$) in order to try and get market share.

Which model is more sustainable? I'd guess amazon's.

Bruce Hayden said...

I have been irritated recently by noticing paperback prices cheaper than Kindle prices. How can that be? Is the convenience and lack of clutter worth the premium?

And, ditto for B&N's Nook.

I am wondering though if this may tie into the 1/2 thing, that when a book is out in both hardback and paperback at the same time, the electronic version may be selling at 1/2 the hardback version, which is often higher than the paperback price.

Either that, or the $9.99 flat rate price is higher than most paperback prices (and one reason that they are making bigger paperbacks is so they can charge more for them).

In any case, I absolutely refused to pay more for electronic versions of a book than for the paperback version, and so have loaned my Nook to my kid for the duration. Made worse - the Nook only allowed me to "loan" one book at a time. You had to get it back, before you could loan it to someone else. This means that I couldn't pass on the books after I had read them. So, I could pay $9.99 for an electronic version that I couldn't pass on, or $8.99 for a paperback version that I could. Easy choice. Stupid business model.

Patrick said...

"This is a case where we want market forces to win, but we don't want actors in the market artificially manipulating those forces"

"Artificially manipulating the market?" That's not much of a standard, is it? Standard Oil bought out much of its competition, increased its market share, and increased its prices. Was that price increase due in part to its increased ability to set prices? Maybe, but not all of it, right? How much? When we let government lawyers start answering these questions, it leads to nothing good.

I haven't given it much thought, but can you think of a single example of antitrust litigation, started by the government that turned out to be unequivocally (or even close) good? They take so long that by the end, they seem to be irrelevant at best. Maybe you can correct me.

Dose of Sanity said...

I haven't given it much thought, but can you think of a single example of antitrust litigation, started by the government that turned out to be unequivocally (or even close) good? They take so long that by the end, they seem to be irrelevant at best. Maybe you can correct me.

This is an interesting point - and I don't think I can. I wonder what the threat of litigation does though - which is what I expect is the major mover.

I also expect the Government made a big, big mistake with AT&T/Bell and have been a bit gunshy since then.

Was that price increase due in part to its increased ability to set prices? Maybe, but not all of it, right? How much? When we let government lawyers start answering these questions, it leads to nothing good. Any price change in that scenario would be the result of no competition, no? Someone has to answer those questions - it's pretty clear that before those laws and regulations, there were market manipulations as to price, labor, and costs.

But, when looking for specific examples, I can only think of the headline cases that I cited above. Without further research, that's about as deep as I go.

Eugene said...

This situation seems a replay of the 1950s, when television and antitrust action (United States v. Paramount Pictures) nearly drove the venerable Hollywood studios into the ditch. They were saved by the realization that they weren't in the theater and celluloid business, but in the entertainment content provider business. As Seth Godin puts it, publishers still think they're in the paper products business.

Joe Schmoe said...

Alex, Apple does make the lion's share of its money from iOS products, but it also gets 10% of its revenue from iTunes, software and apps. 10% of $108 billion in revenue for 2011 is around 11 billion dollars. It is making money from its iTunes content deals. Probably really profitable earnings compared to the resource-intensive hardware ventures.

Another reason why Mac laptops and computers have risen in sales over the last few years is that since Apple moved to Intel CPUs and UNIX-based Mac OS X, you can install Windows on your Mac computer. Mac hardware is doing well thanks in part to a good decision to play nicely with Windows software.

Dose of Sanity said...

@ Eugene - Nice, haha.

@ Joe - making hardware isn't that costly when you pay your workers about 300$/month.

Peter said...

Surely the issue here is not that government knows what an e-book should sell for but that Apple's contract with the publishers forbad the publishers from selling to anyone else at a lower price?

And that, combined with the fixed 30% markup, effectively ends price competition in the marketplace?

Patrick said...

Dose, I wouldn't expect you, or anyone else to go further in detail, this is a blog after all.

I would, however want to know that the US Attorney filing any of these cases has gone much further into detail prior to bringing or threatening one of these cases, and answer a boatload of other questions besides. Once you introduce the government into this, you end up with so many other considerations, not the least of which is the motive of the US Attorney bringing the case. Is it truly for "fairness?" Maybe he's favoring one company (Martin Guitars) that happens to be a large contributor, while going after another (Gibson Guitars). It's pretty inevitable, which is why these are pretty much bound to fail.

Have a good day.

Dose of Sanity said...

Fair points on the multivariate problems in this analysis Peter.

Cheers on a decent discussion.

Joe Schmoe said...

Dose, you have no clue about costs. Labor in any computer assembly is minor compared to the hardware costs. And just because a labor charge seems cheap compared to American standards doesn't mean it's cheap compared to another country's standards. Lastly, please show me the breakdown of costs for an Apple device. I mean all costs, including component costs, assembly, testing, packaging, shipping, etc. Bonus points for soft cost factors including R&D, marketing, plant overhead, etc.

And I'm not going to get into a running commentary with you. One, you really don't know what you're talking about, and two, you pollute posts with way too many comments. Give a hoot; don't post-pollute. Help Woodsy spread the word.

Jay said...

Dose of Sanity said...

Point D is part of my argument? Public companies have shareholders, whose only concern is ROI - they are the profit-crazed actors in the market


Hysterical.

yes, because you say so, right?

Jay said...

I enjoyed this:

Dose of Sanity said...

Citing modern day examples of lack of monopolies is silly, considering the regulations against them.

Ditto for price-fixing.


10 minutes earlier:

Dose of Sanity said...
Dose, the shareholders of the monopoly may wish to sustain it, but the monopoly, in a free market will also have competitors. When the monopoly price is too high, capital will move to get a piece of that action. Monopolies do not last.

Um, you know that monopolies exist by forcing out competition, right? I mean - if the monopoly can be taken down by the market, it's not a monopoly at all in the first place, is it? See the following examples:

@ Jay:

Examples of monopolies off the top of my head:

Price Fixing:
Airline charges
Computer parts




Why, it is almost as if you're incoherent or something.

Dose of Sanity said...

@ Joe - just a joke.

http://articles.businessinsider.com/2011-03-14/tech/30012225_1_ipad-apple-stores-pa-semi

There's your real answer. So, ya, they have significant costs. It's also why they rely heavily on cheap labor. Relax man, it's just the comments section.

Alex said...

What the hell happened to my comment?

Dose of Sanity said...

I enjoyed this:

Dose of Sanity said...

Citing modern day examples of lack of monopolies is silly, considering the regulations against them.

Ditto for price-fixing. look at the context Jay

10 minutes earlier:

Dose of Sanity said...
Dose, the shareholders of the monopoly may wish to sustain it, but the monopoly, in a free market will also have competitors. When the monopoly price is too high, capital will move to get a piece of that action. Monopolies do not last.

Um, you know that monopolies exist by forcing out competition, right? I mean - if the monopoly can be taken down by the market, it's not a monopoly at all in the first place, is it? See the following examples:

@ Jay:

Examples of monopolies off the top of my head:
missing text of monopolies
Price Fixing:
Airline charges
Computer parts

these are price fixing examples, not monopolies



The conversation on the side where I mentioned citing modern day examples was in response to the comment that "price-fixing/monopolies FAIL ON THEIR OWN, independent of litigation to break them".

Does that make more sense to you? The way you spliced historical references and responses to a different argument was indeed incoherent, but that's not what I'm saying.

I can go over it again if you are still confused.

Also, re: point D: Yes, I say so. Prove me wrong?

Dose of Sanity said...

@ Alex

I only see the one comment from you, re: apple's business model.

Did you have another?

Scott M said...

Everyone realizes that our ep33ns never look as good as we think they do, right?

Dose of Sanity said...

Everyone realizes that our ep33ns never look as good as we think they do, right?



Mine is giant though. Haven't you seen it? I've been waving it about the whole time.

Jay said...

The conversation on the side where I mentioned citing modern day examples was in response to the comment that "price-fixing/monopolies FAIL ON THEIR OWN, independent of litigation to break them".

Does that make more sense to you? The way you spliced historical references and responses to a different argument was indeed incoherent, but that's not what I'm saying.


Hysterical.

So you said there is a lack of examples of modern day monopolies & price fixing due to (benevolent) government, right after you gave modern day examples of price fixing.

Now you're pretending there is "context"

You know who wines about "context"?

Liars.

Jay said...

Also, re: point D: Yes, I say so. Prove me wrong?


Laugh out loud funny.

Really, you've done enough.

Dose of Sanity said...

@ Jine

I'd wine about context, sounds like a pleasant afternoon. I wouldn't whine though.

Context matters my friend.

So you said there is a lack of examples of modern day monopolies & price fixing due to (benevolent) government,

This isn't what I was saying. I was saying there are no modern day examples of monopolies and price fixing failing on their own weight.

Notice the difference?

Rusty said...

This is a case where we want market forces to win, but we don't want actors in the market artificially manipulating those forces. See what I mean?


No. I understand. Let me first state- All actors in the market place either want to monopolize their market share of corner the market. It's human nature. In a free market monopolies are like dust devils. They blow hard for awhile then peter out.
The other point is that successful monopolies depend on forces outside the market place to keep them on top.
Have more than two companies providing e-books colluded to fix prices? This would be an example of going outside the market place.

The projectionist union used to have a lock on showing movies. The only way you could become a member of the projectionist union was to have a member of the family already in the union. The union lobbied hard with states and the fed to keep their monopoly on showing movies.
Then some wise ass invented a way to put a 70mm movie on a cassette that any pimply faced teenager could feed into a projector.

Dose of Sanity said...

No. I understand. Let me first state- All actors in the market place either want to monopolize their market share of corner the market. It's human nature. In a free market monopolies are like dust devils. They blow hard for awhile then peter out.
The other point is that successful monopolies depend on forces outside the market place to keep them on top.
Have more than two companies providing e-books colluded to fix prices? This would be an example of going outside the market place


Interesting - I just disagree they run themselves out. They do indeed rely on outside forces though. In this case, it's not the two distributors providing the ebooks, but instead the PUBLISHERS who are providing the content (6 of them) they banded together to force the two distributors to raise prices. I'd say that's a problem.

As an aside, as I mentioned, this is a more difficult area given that the content isn't one to one. Each book is unique. It makes saying what a "fair" price is much more difficult.

Kirk Parker said...

Dose of Sanity, er, I mean Innumeracy: I missed where you acknowledged that buying a title for $12.50 and selling it for $9.99 is indeed a loss.

Carnifex said...

I can understand Dose's point. I used to be naive too(decades ago). Here is a real world example of how the government actually works.

The hurricanes that came through a few years ago in Florida. Wiped out power to millions of people. An enterprising man rented a semi, went to his local Wal-mart, and loaded up with generators. He headed south with a much desperately needed commodity. Arriving, he proceeded to sell the generators for (and I don't remember the price, old age) enough to make a good profit, and get more. The US government swooped in, confiscated all the generators, and charged him with "price gouging". So the people who could afford their own generators lost out, this guy lost out, Wal-mart lost out, the truckstops lost out, the gas stations lost out... etc. The only ones that profited where the ones who confiscated the generators, because I can guarantee they wound up with one.

veni vidi vici said...

This will not end well.

Dose of Sanity said...

@ Kirk: Easy.

Dose of Sanity said...
Unless amazon was still paying 12.50 for the 9.99 book? That doesn't make sense though, especially if it was contracted at 50% of the list price?

3/12/12 10:25 AM

D.D. Driver said...

"Surely the issue here is not that government knows what an e-book should sell for but that Apple's contract with the publishers forbad the publishers from selling to anyone else at a lower price?

And that, combined with the fixed 30% markup, effectively ends price competition in the marketplace?"


Exactly. Amazon was actually forced to raise prices. Not being an antitrust lawyer this seems like an open an shut case. Apple engaged in anti-competitive conduct that unquestionably cause consumers to pay more.

Steven said...

Government lawyers are not claiming they know how much a book should cost. Government lawyers are saying under current law, it's blatantly illegal for the maker of the product to dictate the price retailers charge, and that Apple and the publishers conspired to bypass that law.

And they did. Prior to the "agency model", Amazon paid the booksellers a wholesale price, then independently set a retail price (fairly often as a loss in order to help promote the Kindle).

Then Apple came along to the publishers, and suggested a different deal. Apple would sell the books for whatever price the publishers liked, as long as Apple got a 30% cut and the publishers didn't let anybody else sell at retail for less than Apple.

Now, it might well be that anti-price-fixing laws and other parts of antitrust laws that stop manufacturers from setting minimum retail prices are a bad idea. But they are on the books, and this was an amazingly blatant and brazen attempt at getting around them, simply by relabeling retailers as "agents".

Roger Zimmerman said...

@D.D.Driver

"Apple engaged in anti-competitive conduct that unquestionably cause consumers to pay more."

Did Apple hold a gun to the consumers head to pay that price? If not, then Apple did not "cause the consumer to pay more". The "consumer" caused the consumer to pay "more" (than they would have, I suppose), when they decided to buy the book. But, apparently, the consumer thought they were still getting a good deal.

In other words, to hypothesize that the lower price was the "just price" assumes your conclusion that the government has a right to interfere with voluntary transactions among consenting adults. If you assume that anti-trust laws are justified, then you will certainly come to the conclusion that, well, companies should not be allowed to agree to set prices. Big surprise.

Kirk Parker said...

Dose,

No, you immediately take it back by saying "That doesn't make sense though".

Too bad for you, that's exactly what they were doing.

Ken said...

At some point, someone needs to watch for price fixing? Unless you want to depend on the benevolence of the market, right? Would you prefer that instead of government lawyers, we had PRIVATE lawyers pursuing this? (Obviously, we'd have to change some laws to allow this).

Absolutely. PRIVATE lawyers are far less scary than government lawyers. If private lawyers decide on a price most people won't pay, companies lose money. If government lawyers do that fewer companies provide said services and we all lose.

Additionally, it's a given that markets don't depend on "benevolence", rather prices depend on innovation, which drives prices DOWN. Only when government determines prices do we need to worry whether someone feels "benevolent" towards us.

Ken said...

It's why monopolies are illegal.

Except government monopolies and all the monopolies government created right? Those are good, as everything government does is good. Also, please tell me about the existence of monopolies that are not explicitly granted by government and see if you can square the fact that all those "illegal" monopolies were created through government "benevolence".