Nabisco Has a Monopoly On Oreos

Amazon recently stopped selling titles from Macmillan and its subsidiaries because the publisher refuses to abide by a $9.99 cap on prices for ebooks. Today, Amazon grand poobah Jeff Bezos released a statement  on the matter saying that he'd eventually have to capitulate because:

"…Macmillan has a monopoly over their own titles, and we will want to offer them to you even at prices we believe are needlessly high for e-books."

Say What!?

That's like chastizing Ford for having a "monopoly" on Mustangs, or Nabisco for having a "monopoly" on Oreos, or Amazon for having a "monopoly" on the Kindle. It's a bizarre and idiotic attempt to make Macmillan into a villain for charging what they want to for their product…the same way that Amazon charges what they want to for their Kindle.  

If Bezos truly feels Macmillan is wrong, and it's a matter of principle that's important to him, than he can sell Macmillan books for whatever he wants and take a loss…or stop selling any Macmillan books that he thinks are over-priced. But stop trying to cast Macmillan as the bad guy here. They aren't.

16 thoughts on “Nabisco Has a Monopoly On Oreos”

  1. I actually ranted to my roommates about that sentence as well. I couldn’t believe how stupid it was. The nature of the book business is that publishers can set prices for their books.
    I’m shaking my head at the entire thing and really can’t believe how stupid Amazon has been over it. Talk about acting like a baby.

  2. “If Bezos truly feels Macmillan is wrong, and it’s a matter of principle that’s important to him, than he can sell Macmillan books for whatever he wants and take a loss…or stop selling any Macmillan books that he thinks are over-priced. But stop trying to cast Macmillan as the bad guy here. They aren’t. ”
    Actually, that’s the point. Macmillan’s new “agency” model is that Amazon can =only= sell Macmillan e-books for the price that Macmillan sets, and get 30% of that price when an e-book sells.
    Amazon will no longer be able to drop prices to the $9.99 level they prefer, and =that= is what all the hoo-hah is about.

  3. Actually, paying the publisher and selling the books at a loss is precisely what Amazon has been doing with most Kindle titles — the publisher charges half the price of the hardcover for both printed and e-books, and Amazon has (mostly) been charging $9.99.
    What happened was, going forward, Macmillan offered Amazon two options:
    1. An agency model like iPad will have – Publishers set eBook prices and get 70% of revenues. This would mean Publishers set prices for new books at $15 and get $10.50.
    2. A wholesale model like Kindle currently has – Amazon sticks with $9.99 and pays publishers 50% of hardcover list price (varies between $10 to $14.50). EXCEPT there would be a 7 month delay.
    That’s what Amazon was fighting back against. Your facts are incorrect.

  4. Sal,
    So Amazon can stop selling Macmillan e-books if it bothers them so much. What makes Amazon think that they can set a blanket price for ebooks and impose it on publishers? Why should publishers — and authors — take a major hit so Amazon can prop up the Kindle?
    I’m a Kindle user, and I don’t like paying more than $9.99 for an ebook, but I can certainly understand why a publisher wouldn’t want to set such an artificially low price.
    Maybe the solution is not to release the low-priced ebook version until the paperback edition comes out.
    But that should be the publisher’s decision, not Amazon’s.

  5. Liz,
    The same point stands…if Bezos doesn’t like the options that Macmillan is offering him he can stop selling their ebooks. Or if he wants their books so bad, and he’s dead-set on the $9.99 price point to bolster his Kindle, he can stop whining and take the financial hit himself. Why should the publishers, or the authors, undercut their own hardcover sales, and lose money, just so Bezos can profit?
    I still don’t see how Macmillan is the bad guy in this situation.

  6. Your suggestion of waiting until the paperback release of the ebook is already being used after a fashion. Douglas Preston’s Impact, ebook version, is being delayed a month and Mr. Preston seems to be drawing most of the ire from Kindle users. Like he made the decision.

  7. That’s like chastizing Ford for having a “monopoly” on Mustangs, or Nabisco for having a “monopoly” on Oreos
    Only if you believe that books are an interchangeable commodity like cars or cookies.
    Do you really think that books are an interchangeable commodity? That one book is so much like another that I can switch them out like Oreos and Hydrox? That a consumer would look at a book by an author and say “you know, I really want to read this latest Stephen King novel, but it’s just too expensive. Say that Dean Koontz novel is a better deal – I’ll just get that instead it’ll be just as adequate.”
    The entire freaking model of book distribution is based on the idea of “monopolistic pricing”. You price the hardcover at a high price and wait until everyone who is willing to pay that price has purchased it. Then you release a cheaper version to snap up a larger market of readers who weren’t willing to buy it at the higher price. The thing about monopolistic pricing is that it doesn’t work unless you actually have a monopoly. This is what the whole argument between Amazon and MacMillan is all about – that model doesn’t work as well for eBooks and both of them think they know what model of monopolistic pricing WILL work. And their fighting over which one of them is going to have the ability to exert their monopoly over the public.
    Companies have worked their asses off at branding to differentiate things like Prius’s from Accords and make people think there’s enough of a difference between an Oreo and a Hydrox to make you pay a premium. That’s advertising. Books are intrinsically different – if I want to read Umberto Eco there’s only one place I can go to get Umberto Eco. I can’t pick up Dan Brown because he’s cheaper and get the same reading experience.
    Copyright IS a government granted and government enforced monopoly and McMillan DID use their monopoly status as a publisher to force Amazon to accept their terms. There’s nothing intrinsically wrong with that – that’s how the game is played. We have granted authors monopoly status over their works for a period of time because the benefits to society outweigh the costs of giving them that monopoly. That’s what the whole legal purpose of copyright is for. But to suggest that books are an interchangeable commodity like a cookie or a car is an insult to any intelligent reader out there. People who are making these kind of analogies are pissing me off more than the actual dispute between Amazon and McMillan did. At least with Amazon and MacMillan I know that they’re just companies doing what companies are doing. Reading authors devaluing books by comparing them to commodities is like reading about artists taking turns pissing on the Mona Lisa.

  8. Lee, you are right- If people are willing to pay more than 10 bucks, why not?
    —and I have an off-topic question: is one of your spec scripts you are working on for the new Spenser TV show?
    I read every Spenser novel by RBP (RIP) and loved the tv show in the eighties. I also enjoyed the episodes you wrote and thats the reason why I ended up reading your blog.

  9. Jer, you’re totally missing it — he’s arguing your point.
    The place where you’re getting tripped up is in thinking that all cars and cookies are fungible, and that he’s trying to imply that books are the same.
    They’re not.
    He’s arguing that people who make things — whether they’re books, cars or cookies — should be able to charge what they please for them, and that the market should be able to decide.

  10. Its no different then the fact that Amazon can’t get Wii’s from anyone but Nintendo or iPod’s from anyone but Apple. Just like a book those specific devices are different than other devices in the same category, but that doesn’t change the fact that Apple, Nintendo, or in this case McMillan has those unique items and gets to decide what terms are involved. Nothing monopolistic about that unless McMillan was the soul provider of the vast majority of books.

  11. Think of each individual book released as a different model of car, and it’s the same argument. Throwing the word ‘monopoly’ at the publishing model doesn’t make a manufacturer’s right to set the price of their product any different. It’s the supply and demand model that does that. The price reflects what the market will bear, and if people don’t want to pay $15 for an ebook, prices will probably drop.

  12. Lee,
    Your analogy to Oreos is actually quite good. It is a commodity that is the same in every store, with the only distinguishing mark being the price charged. You can’t use cars, unless you stick with only Fords and have multiple dealerships within driving distance. Adding in Chevys is like trying to compare the Oreos to Twinkies. Sure, they are both snack food and in the same aisle, but there are too many differences, including ownership of the brands.
    With Oreos, Nabisco sets a suggested retail price (conveniently printed on the packaging, so it can’t be tampered with by unscrupulous grocers), then sells it to it’s distributors at a set discount. Perhaps they charge some distributors different amounts, depending on their volume or due to a temporary sales campaign. The distributors mark up the product and sell it to retailers. Finally, they place it on their shelves, so that you, the consumer, may purchase it. Once that package has left the factory, however, Nabisco has no say over the actual price charged. The distributor can charge any amount the retailer is willing to pay or dump the entire load at Big Lots, at a loss, if it doesn’t sell or has a quality control issue. The retailer can charge the MSRP price or any other price they wish (although few consumers will pay over the MSRP, we had a “natural foods” store here that tried that all the time; notice I use past tense when speaking of it…). So, the retailer is free to hold a sale, advertising it widely, in order to draw you into the store. The sale price may or may not be high enough to break even – they lose money on some customers, but others pick up enough other items for it to be worthwhile. Some stores may always discount the Oreos, in order to get your repeat business, as they know you’ll be into buy milk all the time anyway.
    So far, leaving out the distributor, this is the model that Amazon (and all other ebookstores) have used to sell books. What Steve Jobs agreed to (or instigated) is another model entirely. Apple and Amazon would no longer be retail stores, but “agents” of Macmillan. They would have no control over the price of the book, so no sales would be possible, and every store would be “equal” in selling you that box of Oreos. Never again would you get them discounted with the gallon of milk or sold at a loss to attract you to the store.
    I also wonder how this will affect author commissions. MM has a much lower rate (starting at 10%, rather than the 20% for retail sales) for “direct to consumer” sales. Since they want to insist that Amazon and Apple are “agents”, these sales are, in essence, direct to the consumer, as agents are (legally speaking), simply an extension of the company they represent.
    I don’t know about you, but I prefer that my stores be allowed to attempt to lure me in with sales (sure, a few will go broke, but there is enough competition that the rest will settle into various weekly sales; shopping those will benefit me in the long run).
    As for that box of Oreos – yes, Nabisco can set any price they want and I can decide to buy or not based upon that price. I can also decide never to buy unless it is on sale, because retailers have the right to charge anything they want. Letting Nabisco dictate that a sale price can never be used, especially after convincing my taste buds that there is no other way to drink my milk, is illegal. Just as OPEC doesn’t entirely dictate the cost of the fuel I buy (although they greatly influence it and keep artificial shortages to maintain it’s high price, since they pretty much monopolize the market).

  13. I can agree with you, to a point. If Oreos were available from only one grocery store, though, you might be a little more anxious if you were Nabisco and that grocery store was setting a price far below your MSRP. To take that further, let’s say that there only a dozen or so stores around the country that sell Oreos; if the largest of these grocery stores sells at below MSRP, it won’t be long before the other grocers follow suit, and then eventually all these grocers tell Nabisco to lower the MSRP on Oreos, thereby dictating to Nabisco what the MSRP should be.


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