5 ms·
Sadly, Apple is largely to blame for this mess. Well, if you ignore the publishers. Ebooks started as a wholesale pricing model. The publishers would sell them
by cletus 16y ago
Sadly, Apple is largely to blame for this mess. Well, if you ignore the publishers.
Ebooks started as a wholesale pricing model. The publishers would sell them to the likes of Amazon at some fixed price. Amazon would then set their own price. This is very similar to the brick-and-mortar pricing model. In some cases Amazon would sell those books at a loss in an effort to grow the Kindle platform.
Publishers didn't like this system because they saw cheap prices as devaluing their content. Publishers are also caught in a backwards mindset where they think if the physical book costs $25 then the ebook should cost $25 even though the latter has no printing or distribution costs.
What's more, even if those costs were the same, ebooks should still cost less because there is no resale market, a fact that digital content publishers seem to ignore.
But Apple's iBooks came along and not only gave the publishers what they want, they required it. And that is the agency model, which allows the publishers to set the price, a move I argue is anticompetitive.
This put Amazon under pressure and the publishers got their way so the pricing is now largely out of Amazon's hands (sadly).
Review bombing is an interesting tactic, one I actually support if done for the right reasons. It was done on the PC game Spore for its ridiculous DRM (initially a limit of 2 (?) activations before EA relented).
What publishers--and in fact all digital content producers--are doing with pricing and DRM is beyond a joke. Sadly the Obama administration (the DoJ in particular) is filling with ex-RIAA lawyers so you know which way the wind is blowing there.
At the same time we have the RIAA/MPAA behind closed doors (with the government as willing accomplices) trying to equate downloading a song with terrorism (eg ACTA) in terms of enforcement priorities.
- tptacek 16y agoThis economic analysis is interesting (seriously!). But it is also facile. Yes, ebooks are worth "less" because they can't be resold. but they may be worth more, and maybe significantly more, because they are much more convenient. Durability, resellability, and convenience are benefits. If you need the first two, you can buy paper. You are not entitled to dictate that convenience can't cost 2x (durability + resellability). That's the market's job. And, like it or not, "bombing" review sites isn't a market action. The market works by price discovery, not application of force.
- hotlikearobot 16y agoTo be fair, "bombing" review sites is entirely a market action. The market works through information. The most common way that information is disseminated is through prices, but that doesn't mean it is the only way. Reviews, etc, allow one to more accurately decide how to value something.
- originalgeek 16y agoI'm not sure whether reviews qualify as a market action; what action comes as a result of a review? It could go either way as the interpretation of the review is up to the reader of the review. It seems that ebooks sales are causing more action than the reviews. And I'll add my anecdote: my view is the negative reviewers don't understand the concept of premium cost for premium access.
- orangecat 16y agoI'm not sure whether reviews qualify as a market action Sure they do. Markets need informed buyers to function well.
- tptacek 16y agoI agree completely, so, artificially pumping review sites full of reviews by people who haven't actually read the book as a protest movement doesn't seem like a market-improving action to me.
- orangecat 16y agoFirst, the reviews inform people that the books are available cheaper in other formats, which they might not have known. Second, if the reviews do cause the publisher to lower the price, that will presumably result in more sales, and there will be more consumer surplus gained than producer surplus lost. Boom, market improvement.
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- originalgeek 16y agoI characterize the view that this is "largely Apple's fault" to be somewhat myopic. Apple responded to a condition in the market, namely, publishers were plenty upset that Amazon used their position as the only viable ebook venue at the time to handcuff publishers to a $9.99 price point.
- kbutler 16y agoAmazon had the market power to force a $9.99 price point in spite of publishers' preferences. Apple lacked that power and followed publishers' preferences. This entrance of Apple as a competitor reduced Amazon's market power, allowing the publishers to dictate pricing.
- tptacek 16y agoAm I missing something or is it indeed possible to put an ebook on an Apple device or an Amazon device at a price point lower than $9.99?
- bhousel 16y agoHere's a good article from a few months ago about the economics of ebook pricing. It supports your comments about the publishers having too much control over the pricing. http://dearauthor.com/wordpress/2011/01/16/why-do-ebooks-cost-so-much/ http://dearauthor.com/wordpress/2011/01/16/why-do-ebooks-cos...
- tptacek 16y agoFor the publisher to have any effective control over the price of a book, they have to control the distribution channel for books. But they manifestly do not. If you want to sell a book for $0.99, you can do so today. Three of the elephants in the room are: * That the $9.99 price point comes in a package deal that includes promotional advantages authors want * That the $9.99 price point is calculated by publishers to maximize return on the ebook product offering, not to maximize the number of people who buy the ebook (but this is obviously how market pricing is supposed to work) * That the $9.99 price point comes with access to the publisher's brick and mortar distribution system, which is much more powerful than the indie distribution system (but is also dying).
- KentBeck 16y agoWe are in the very early days for finding the profit-maximizing prices for ebooks. If publishers stand in the way of experimentation, someone else will find the sweet spots (I don't expect there to be just one). I read of a mystery author recently whose sales went up 20x by dropping the price from $3 to $1. The additional profits of finding the optimal price could be enough to offset the publisher's advantages. It's an interesting dog fight, if you don't have a dog in it. As an author, though, it looks mighty risky.
- tptacek 16y agoThis is the great thing about readership moving from paper books to ebooks: the only thing close to a controlled distribution channel we have is Amazon, and it's in Amazon's best interests to let indies expiriment with the channel.
- riffraff 16y ago> And that is the agency model, which allows the publishers to set the price, a move I argue is anticompetitive. would you care to expand on this? I am not sure I understand what you mean by this, nor why.
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