walkitout (walkitout) wrote,
walkitout
walkitout

Unfortunately, still more about coop money

http://publishing.about.com/od/BookPublishingGlossary/g/Cooperative-Advertising-Funds.htm

and

http://www.answers.com/topic/cooperative-advertising

The first is specifically about coop money in book publishing. I would describe that as "paying the bookseller for prominent placement of my book(s)" but would also agree to "booksellers getting a deeper discount from the publisher in exchange for better placement".

The second entry quotes Barron's Marketing Dictionary, and along the way says, "It enables the manufacturer to advertise at the local rate for media, since all advertising is placed by the local retailer." and "It is estimated that 75% of all cooperative money is spent on newspaper advertising, while 12% is spent on broadcast (8% on radio and 4% on television)."

About a decade ago there was an accounting change in the way cooperative advertising funds were handled (specifically, were they to be treated as a reduction in the cost of advertising or the cost of inventory).

http://www.revenuerecognition.com/content/experts/9007.asp

My recollection of that event is dim, and primarily limited to me sniggering at some coverage on CNBC (I think).

I'm now having a little trouble remembering where I was going with this. Oh, right! I mentioned that you can see the balance of power has shifted, when Amazon stops begging for content for the kindle and starts hitting the publishers up for higher conversion fees and coop dollars for ebooks. I'm sure there are people saying, see, we were right! Amazon is going to soak the publishers once this thing is established.

Which raises some interesting questions. If coop money is what I think it is, obviously Amazon should be getting some for ebooks. If coop money is what everyone else seems to think it is (any definition in the links above), what's a plausible structure for coop dollars? And if Prime is mostly a customer acquisition tool, isn't that marketing?

Can Amazon use coop money for Prime? Okay, probably not. But I'm sure they can use it for the recommendations engine. And aren't they getting into the ad business in a big way, too?

ETA: Stumbled across this:

http://www.ftc.gov/speeches/other/boastmollys.shtm

Bunch of stuff in it about the music industry using minimum advertised price rules in conjunction with coop candy to preserve their margins and how they got slapped with a consent decree over the practice eventually.

ETAYA: Not exactly coop money, but the related "slotting fee" from the grocery business:

http://www.ftc.gov/opp/global/slott.shtm

I found this bit particularly interesting:

"One thing is clear - there is a legal obligation for the manufacturer that pays a slotting fee to one retailer to then pay the same fee to other retailers. By law, the manufacturer must offer that same "discount" to the retailer's competitor. The same problem exists for the retailer who requires payment from certain manufacturers for premium shelf space and does not offer the same or comparable deal to competing vendors in the same product category."

And while I'm wandering far, far afield, here's what the FTC has to say about predatory pricing (remember, that's the rationale for the Agency Model and the deal with Apple and all the rest of it: if we _don't_, Amazon will wipe everyone out and then raise prices):

http://www.ftc.gov/bc/antitrust/predatory_pricing.shtm

"Pricing below a competitor's costs occurs in many competitive markets and generally does not violate the antitrust laws. Sometimes the low-pricing firm is simply more efficient. Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses."

If there's a net gain to the consumer (that is, if the discounting firm never recovers to the point where it does as well or better than if it hadn't done the discounting in the first place), it's not predatory -- even if it wipes out the competition. At least, that's what I'm getting from this.

I think the people who are deploying cultural value arguments to protect bookstores/publishers from Amazon's pricing strategy have figured out that they aren't going to win with the anti-competitive argument.

Here's what the FTC has to say about single-firm monopoly:

http://www.ftc.gov/bc/antitrust/monopolization_defined.shtm

So, market dominance and exclusionary/predatory behavior only make you a monopolist if there _isn't_ a business reason for that behavior. Yikes.

There's a tricky balance to find between convincing regulators your scary competitor is a monopolist and making your scary competitor look less dominant to customers (we're picking up market share! They only have 60% now, not 80%+!), whether it's entirely true or not. This is especially the case if consumers are reluctant to buy into a larger system when they don't know if it will survive and/or have available all the things that the more popular system has (think Wintel vs. the world, back in the day). If you _are_ the scary competitor, there's a lot of really good reasons to keep your numbers to yourself; they can only get you into trouble.
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