Well, what d'you know: Raising e-book prices doesn't raise sales One of the things those within economics think that the subject gets generally correct is microeonomics, which itself is generally a discussion of the price system. There are those who insist that this is all well, true, insisting that since we're not all rational agents, don't have perfect knowledge, then that standard …
This post has been deleted by its author
... but are they likely to sell twice as many books? Selling the same number of books at half the price is a kind of business suicide.
Well, thats kind of the whole point the article was making, isn't it? I know it's not fashionable to actually read the article before commenting, but the point is the big publishers raised their prices and they are making less money. Not less money per book, less money overall. So it's pretty clear where they are on that curve.
"but are they likely to sell twice as many books?"
That's the $64,000 question; as you point out, selling 1.99 times as many books for 0.5 of the price is actually a money loser. So the aim has to be to dynamically match the price to the demand; in the old paper-based model they would issue the book at £12 as a hardback, getting a small number of sales to die-hard fans who had to read it first, then after a few months it would go out in "trade" (large) paperback format at about £8 and eventually as time went on as a normal paperback at around £6.
A similar thing can be done on eBooks, but with even greater flexibility as the price can vary much more quickly and in a more granular fashion in response to demand. But only the retailer has the data to do this, which is presumably why Amazon wanted price control.
One aspect of the paper book market, missing from eBooks, is that retailers have a limit on shelf space, so eventually they want to remove stock that isn't selling and return it to the publisher. The publisher also has limited storage space so they may then either destroy the books, which costs money, or sell the books off cheap to budget book stores, thereby making a little money in the process.
As a frequent traveller and book reader I find that the Kindle makes the process a lot simpler than trying to plan how many bulky books to pack; and as a cheapskate Yorkshireman I keep an eye on the "Kindle Daily Deals" and stock up on titles that interest me for a bargain 99p (top skinflint trick here is to use Prime with non-next-day delivery to earn a pound credit for eBooks with every order with Amazon).
I think you missed his point.
Yes its a question of the old supply and demand curve pricing model.
You raise your prices too high and then you will find that demand for the product drops.
However, assume that there's a finite demand for a book. That is to say that the book only appeals to 100,000 people so then setting the price to capture the optimum market share is a bit harder than just setting the price.
The issue is how to capture the attention of the marketplace so that they will want to buy the book.
Amazon could have easily just not recommended the publisher's book during this period. Or as some have pointed out... I'm willing to pay $5.00 for that, but not $10.00
The only place you don't see book prices falling is in the classroom. Here you have a captured market.
@Pete H
... but are they likely to sell twice as many books? Selling the same number of books at half the price is a kind of business suicide.
It can be, but lets look at the alternatives, if ebook prices go higher than I'm happy to pay.
I could buy the dead tree version which will compress their profit margin somewhat more than the leccy one.
I could buy a used copy of the dead tree version from Amazon, thus eliminating all of their profit. Sure, other retailers are available; I use them only because having the "new & used" best price immediately below whatever you're looking at is facilitating zero effort alternatives to the publishers ebook price.
They seem to think the sale is a conclusion and all they're doing is making the ebook more profitable than it already is. In reality, they're just increasing the size of the used treebook market.
.. but are they likely to sell twice as many books? Selling the same number of books at half the price is a kind of business suicide.
This doesn't apply to e-books for 3 reasons:
1) Twice as many ebooks sold doesn't cost a significant amount more.
2) Having more than twice as many people recommend your book (which they bought at 1/2 price-assuming the original valuation was fair) to others will take sales even higher
3) Having more than twice as many read your book means more people likely to read your next
Yup. I might shell out more for an author I really like (Christopher Fowler being one, Ian M Banks was another, CJ Cherryh when she isn't churning out another in the Foreigner soap opera series) but generally speaking books are swappable as Tim says. Last year when I was spending two hours a day on a train commuting I got through 1.5 eBooks a week. When you're buying that many £10 a book is silly - it nearly doubles the cost of commuting! No, I bought detective novels for £1 to £5 and the only books I paid £5 for were those by Peter Lovesey.
One thing I did notice on the really cheap books though was the poor editing. Quite a few typos and grammar mistakes so obvious they jarred with the story at times.
All I wanted was something vaguely interesting I could lose myself in for the hour it took the train to go between Banbury and Birmingham.
The problem is that books (and movies and games, and most other leisure activities) are only partly fungible. In other words, they can't always be easily exchanged for something else.
If you want a Dan Brown potboiler, you may pick up a Clive Cussler, but are unlikely to be satisfied by a Harlequin romance or a technical manual on .NET 3. Which means that the prices of the harlequin romances are irrelevant in your purchasing decision.
Equally if you wanted to watch Blade, then Twilight may not be a suitable replacement, yet both are vampire movies. Twilight is even half the price!
How about wanting to watch the football and being taken to a test cricket match, or expecting to see England play Germany and getting tickets for Togo vs Ghana.
£10 ebooks may sell fewer than £5 ebooks, but to someone who wants a particular author, it isn't like they have a choice.
Also, and more importantly, the key demand from the publishers was to be able to continue to set a minimum wholesale price for a book to be sold at - which set a floor for their income. The Retailer could always sell the book for whatever price they liked, as a loss leader if desired, but the trick Amazon wanted to pull was to say "We sold this for £5 so you only get 40% of that £5" instead of "this book cost us £10 at wholesale rates, and we sold it for £5 and lost money, but here's your £10." It is wrapped up in the fact that Amazon is both Retailer and Wholesaler, but works the system to take advantage of both buyer and seller. See also Supermarkets and other monopoly industries and how they screw the producers.
"The problem is that books (and movies and games, and most other leisure activities) are only partly fungible."
Demonstrated most clearly by my childhood where adults/parents thought "television" was entirely fungible. For instance, I only ever got to watch The WIzard Of Oz the whole way through when I was about 25, as every Christmas it was on as a child, parents would drag us off partway through for meals or something, with comments such as "you can watch television later". Yeah, but I can't watch *this* *programme* later.
"Yeah, but I can't watch *this* *programme* later."
This reminded me of one of my best Christmases ever. I was relieved of my normal obligation to spend Christmas Day with my parents due to them being invited elsewhere, and this coincided with some friends getting a similar reprieve.
We organised our day entirely around the telly schedules. Christmas dinner got split into courses to suit, and It worked brilliantly.
Mayhem,
Before the advent of the ebook, the pupblishers themselves thought that books were pretty much interchangeable. Whenever I read stuff about marketing books, they mostly seemed to say that hardback books sold very few copies, except of the really big authors of course, and that a lot of paperback sales were pretty much down to the cover. Obviously you can't over-stress this. People have favourite authors. But I almost never bought any hardback, unless I was truly motivated to read their latest, and even then, only if it was around a tenner. I'd never pay £20 for a hardback. Most of my books were bought around the £5.99-£7.99 bracket.
Even in the days when I commuted, and got through 2 books a week, there were more good books than I had time to read. And I'm quite choosy. A lot of people apparently do just buy an interesting looking paperback, based on the cover.
But the mistake you make, and the seemingly the publishers too, is to assume that substitution can't happen, because people love a certain author. Firstly people can wait. There might be a sale on, the book isn't going to go away, just because they don't get round to reading it until next year. Secondly people can buy other books. Thirdly, people could spend their commute reading The Economist, or the paper, or playing silly games on their tablets, or listening to music/podcasts. Or as the article suggests, the cheapest leisure activities of all talking to each other or shagging, or even just playing the five knuckle shuffle. Hopefully not on the train though...
This is where you introduce price elasticity. Petrol is quite price inelastic. People regard it as a necesity. If the price goes up, they'll cut other things out of their life in order to keep on using it. Demand will drop a bit, but if there's no easy substitute to driving your car, you'll keep on driving your car. In the long term alternatives may appear, if prices remain consistently high it's true. Water is another one. If the price of your tap water doubled overnight, you'd grumble like hell, but you'd keep on paying it. And you'd use about the same amount. But probably buy fewer books, or cut your Sky sub or something.
Books are part of the leisure market. Not part of the book market - which is only a small sub-set. And leisure spending is very price elastic. Double the price of a cinema ticket and people will buy DVDs, or go the pub or restuarants more. Or buy more books or whatever floats their collective boats. Double the price of your books, and your readers will get cheaper books, or spend more time doing other things.
Seeing as we're talking economics, a monopoly buyer is called a monopsony. So Amazon is getting dangerously close to a monopsony position, and so the publishers are rightly worried. Even resorting to an illegal cartel themselves at one point. The thing is though - they're actually getting less money now, than when the nasty people at Amazon were responsible for pricing. I suspect they're trying to maintain their previous wholesale price, but without printing and distribution costs that amounts to having a quite chunky price rise. Whereas Amazon are presumably trying to maximise their revenues, so want the ebook price below the paper price, so they have to do less expensive stock/shipping stuff. Depending on price elasticity, they may actually make more profit if they sell ebooks for less than paper books. i.e. they should sell more units, for less profits - but costs are the same whether they sell 100 or 100 million.
@Spartacus
Agreed, to a certain extent.
I disagree somewhat in the total leisure market figure, since leisure spending is not only price elastic, but also time elastic. A book may be valued more or less depending on how long it takes you to read it. £10 for an hour seems expensive. £10 for 5 hours seems a bargain, yet that could simply be a factor of reading comprehension.
Hardcovers however are valued for two main reasons. One is initial access - they come out first in the traditional publishing chain, and people WANT IT NOW. The second is durability - they physically last a lot longer, so are better value for libraries etc. Even when the book has been out long enough to be reprinted in paperback, there is a small quantity reprinted in hardcover for the rental market.
Not that I particularly like artificial scarcity - I only buy paperbacks as that's the size of my shelves - but that's how the system works across all industries.
Ebooks should be priced higher than paperbacks initially - that's the access part of the quote. They should then reduce in value over time, that's the long tail kicking in.
The problem is who controls the pricing of the book - and whether the manufacturer (the publishers in this case) has the right to set a price or if they have to follow the price set by their retailers.
At the end of the day, the manufacturer of the work should be able to set any price they like. It might not sell very well, but they should have the right to bankrupt themselves. Amazon, or any other monopsony middleman (I knew there was a word for it!) should not have the ability to dictate the price at which a good is sold to them, only a price at which they are prepared to buy. It's a fine distinction, but quite an important one, especially when a lot of smaller suppliers are being squeezed out of business by such practices.
Amazon is frequently trying to use books (and music, and other leisure goods) as a loss leader in order to keep control of the ecosystem and ensure people buy the goods with a better profit margin (such as fridges) through Amazon as well. The problem is they also try and force those losses back up the chain, which is where I have a problem. If they sell it for too little, that is their problem, not the supplier.
Tesco is very similar. The big supermarkets have been in a price war over milk for the past few years. Which is fine - milk is a good way to lure in customers. Yet they have used this to bludgeon down the price paid to their suppliers, which means only the larger suppliers can economically stay in the trade, and quality has dropped. That should be looked at, since security of the food supply is a national importance. Inefficiency should be punished, I agree, but the race to the bottom has few winners.
I'd observe that the much publicized spat between the publishers and Amazon was really a contest between an organization that understood the digital market (i.e. Amazon) and organizations that didn't (Hachette et al). We saw/see the same thing with the music publishers, the video producers, etc.
Yes, Amazon was trying it on. But the solution that they've adopted is counter-productive (as the data seems to show). A better solution would be to do what the physical retailers have done for years, which is come up with complex special arrangements (e.g. flat fee plus percentage, limited edition works, and so on ) so the retailer (WH Smiths, Amazon, whoever) can tinker with the formula without passing (all) of the risk upwards, but also with passing some of the profit that way.
If e-books are priced lower than paper ones that is as it should be, as with many e-books it is difficult or impossible to sell them on or give them away so that other readers may benefit from them as is true of books on paper. They simply are worth less unless provided in an open format like text or PDF.
I have bought very few books in the last decade or two at retail, yet have accumulated a couple of thousand, all printed on paper, at prices ranging from half the retail price at Half Price Books and similar stores down to $0.25 for paperbacks and $0.50 for hardbacks at library sales. The books mostly were not new and often showed some wear, but fully met the commute and idle time recreational need.
Mostly I just want something to read.
I'll see a book I like the look of and if it's maybe £5 or less I'll just buy it without thinking. If it's £7 or £10 I'll think hmm, I wonder what else I can get.
So doubling the price doesn't halve sales from me, they drop off a cliff at a certain price.
There are a few books/authors I'd buy whatever the price within reason, but they are a very small number of the ones I buy.
Who reads just one author anyway?
With films; if it is far too expensive to go to the cinema, wait for the DVD, blue-ray DVD too expensive, get the non-blue ray, that too expensive just wait and get it out of the remainered bin / cheap bin - then theres Amazon Prime / Netflix. all you have to do is wait for an acceptable price point.
In books you got your Hardback/paperback/ebook - choose the cheapest or wait until remainded. Or go to the Library.
That said who would buy an ebook that costs as much as a paperback?
You can borrow it from a library. You can also get it from used bookstores. I have few authors I feel I need to buy and those I have mostly already done so.
Since moving to an apartment, I have cut back on buying dead trees because I don't want the clutter. Ebooks are great, but are very fungible, even in a limited field like scifi. New authors are always a risk but less so at $2-3 on discount, something Amazon does frequently, than at $12+. And established authors' output often declines as time goes on.
Kinda the reason my Kobo is way emptier than my Kindle - those guys rarely do deep discounts.
I got through 1.5 eBooks a week
Who sells .5 of an eBook? :)
I do the same, and as I consider this entertainment I'm not spending much on it. Even better, as I joined BookBub (.com), I get offers every day that in some instances are actually free or cost something like $0.99. Typically, they're volume 1 of a series, but these offers also contain the occasionally interesting book such as "The Elements of Expression" by Arthur Plotnik which is educational, yet lots of fun to read.
The only annoying bit is that I had to set my preferences to "US" or it wouldn't work, but that merely returns me to the early years of IT where you'd had to import books and magazines such as Byte to get good information (and modems, because the ones "approved" by the local telcos were invariably scandalously overpriced)...
Amazon knows me all too well. Books and collections of (classical mostly) music at $0.99. Anything they know I love, right out the gate in front of me. This is one area ceding privacy is acceptable, at least to me. A computer rather than the people in the specialty book and music sellers. [I still connect to them, via the 'net.]
"(btw what is the opposite of an oxymoron ?...) "
I don't think there is one. Or rather, an oxymoron (a self-opposing phrase) is its own opposite (even its etymology is based on two opposing words). Much like a palindrome is a word that is its own mirror.
"If you're selling a book priced at $5, I'm much, much more likely to buy it than the same book priced at $10."
Alfred Harmsworth made a fortune on the premise "Where one man will risk a shilling, a thousand will risk a halfpenny".
Me, I'm a tight Yorkshireman; I'd far rather amuse myself seeking out scanned versions of books *I already own* on the web; in extreme cases (e.g. some old and very fragile books) I'll scan, OCR, and proof them myself.
@AC
"I wonder how many people buy the dead tree version so that it can sit on the shelf, and then find a dodgy russian site for an epub copy of the book, with their morals satisfied that they'd "already paid for it"."
Sounds a good idea. Paid for access to the text just change the format to make it easier to use. Personally I dont do ebooks but thats because I like the paper versions too much. Easier to focus on and physically real
"I wonder how many people buy the dead tree version so that it can sit on the shelf, and then find a dodgy russian site for an epub copy of the book, with their morals satisfied that they'd "already paid for it"."
I do, as written above. But I have taken to trouble to solicit the views of authors on the subject; on the whole, they didn't have a problem with it - though they'd rather the illicit scans weren't available in the first place, they are also book purchasers and understand fully that people see no sense in paying twice for the same content.
I haven't spoken to many professional authors (OK, 2) but they'd firstly much rather that what they write is read, and secondly that if somebody owns at least one copy of it they don't really care beyond that. The mentality of authors doesn't always equate with money, or getting much of it in, which possibly explains why most authors really don't have a lot.
>l'll take the paper one
Why?
Honest question. I've moved far distances a number of times and have left behind some books each time. I've bought Jack Vance's Cugel several times because of that, ditto others. Even if I get fed up with Amazon, I can always rip all my kindle books with Calibre.
Ebooks are searchable and are great on trips. No clutter. No wear and tear. Read anything from your collection at any time, especially if you use your phone. Camping.
Just loss of loanability, could be fixed with Calibre. Oh, and loss of am I-not-clever shelf displays.
Granted, at $10 for both I might feel miffed that I don't get a cut of ebook distribution efficiencies and buy neither. Is that your reason?
Not to say you need to hold my opinion, but valueing the paper one more highly is not a foregone conclusion for me.
The apparent correlation between searches for efficient/inefficient cars and the price of petrol is interesting ... and very different from the correlation between eBook sales and prices.
When you buy a car, the price of the car is fixed at the time of purchase (as with an eBook) but the price of fuel it requires remains variable for the lifetime of the vehicle (and beyond). I can understand that a perceived long term downward trend in fuel prices might trigger a reduction in interest in efficient vehicles, but it's interesting that people apparently make that sort of decision on spot prices.
The car comparison would be more apposite if the article were suggesting that people were put off buying eBooks by a rise in the cost of the electricity needed to power their eReaders -- which is obviously daft when you consider how much less that electricity costs than the reader itself or the books that are read on it.
[Beer -- there are times when you just don't look at the price.]
The apparent correlation between searches for efficient/inefficient cars and the price of petrol is interesting ... [...]
When you buy a car, the price of the car is fixed at the time of purchase (as with an eBook) but the price of fuel it requires remains variable for the lifetime of the vehicle (and beyond). I can understand that a perceived long term downward trend in fuel prices might trigger a reduction in interest in efficient vehicles, but it's interesting that people apparently make that sort of decision on spot prices.
There are people "out there" who change their cars every year, or every two years. Is it possible that they are simply gambling that fuel prices will stay low for the time they own the car, during which they can (presumably) have more "fun" with a less economical car? When they buy a new car, 12 or 24 months later they can re-visit that decision and the next car might be different.
Can't say I've ever been in that camp myself - the two cars we run as a family at the moment are 9 years and 4 years old with no plans to replace either in the foreseeable.
M.
If you are doing a high-ish mileage commuting, as I am, you face a choice in car ownership. You can either buy a reliable-looking vehicle and keep it until it looks like it is becoming a money-pit, or you can buy a vehicle on a lease contract, keep it a few years paying the wear and depreciation costs plus a small premium, then trade it in for another one.
In the former case, you are looking for reliability and economy from the word go.
In the latter case, you are only looking three years ahead, instead of six or seven. Thus in the lease-hire case the person does indeed have a shorter outlook and can afford to make shorter term choices. Of course, if they happen to be skinflint Yorkshiremen like myself, they simply choose an ultra-economical diesel for the money saving.
"It's almost as if people don't plan past the end of the current paycheck. It says something about attitudes towards climate change and the policies we need to mitigate it."
Sigh ... When in all history has the climate ever been static? Furthermore, who decided what climate was optimal? Since apparently the optimal climate has been defined, what is it? Be specific. Why is every bad weather event "climate change" even if such event occurred in the past?
This post has been deleted by its author
>Furthermore, who decided what climate was optimal?
Errr, I would say that most plants and animals species, having had evolution optimize them for the climate in their particular habitat, would consider the current climatic conditions optimal.
>When in all history has the climate ever been static?
Aside from transient phenomena like the Little Ice Age in the 14th c? Probably all the time. Unless you really meant to talk about longer timeframes than say the last 10000 years? Then the term is pre-history.
But how has the non-ebook revenues of these publishers been affected by their raising of ebook prices? Probably most of them have significant investments in the dead-tree publishing sector and are willing to accept reduced ebook revenues to bolster their non-ebook sales.
Can you tell us the rest of the story Mr Worstall?
When I look at ebooks and there's nothing I want at a price I want to pay I just go to the library and dip into their catalogue. Might have have the latest and greatest but there's usually something I wanted to read and it's free*.
*I know we pay for it in taxes but it's free at point of use.
When I go on Amazon, I would rather have the ebook most of the time as I have shelves of books I read once 20 years ago.
However, it is quite common to find the physical book available - printed, put in an envelope and mailed - for less than the ebook.
In that circumstance, I buy the physical book on principle. Also the same if it's only slightly more expensive.
Okay so a couple of hundred is an exaggeration, but I have gotten through as many as five or six on a "do nothing beach holiday" before and that would have been a serious amount of luggage space taken up with books. Plus being able to pick any title from your library at a whim is quite nice :-)
"What's the point of _going away_ on holiday if all you are going to do is read books that you could have read on the train?"
Sunshine and not having to cook or make any beds, plus bear in mind no-one spends *all* their time reading books so I'm sure you can see some of the local area too...
@Scrubber
If you buy the book second-hand neither the author not the publisher receives a penny
Yes...
you might as well pirate the ebook.
..and no.
Residual value factors at some level in peoples purchasing decisions - If I buy this Ford Focus for £xx,000 and use it for five years, how much can I sell if for? People don't buy it assuming the resale value is zero. All those treebook's were bought new by someone. Residual value is still a feature of any equation modelling that spending.
Piracy has no residual value - it simply takes away the value of the lost sale, much like but not quite the same as theft.
I suppose the problem there is that a good chunk of the Amazon book market (I don't know what %) is second-hand or other non-publisher sales. Also, especially for older books, there are huge numbers of titles without extant digital versions - and, with very few exceptions, text is much more costly and difficult to digitise than film or music.
For new titles, though, sold by the publisher or someone else with the license to sell the ebook, I agree that this should be standard. I've seen a few titles where such a deal is offered, and I also heard of one UK publisher (Harper Collins, I think) who would send you the ebook of any of their physical books if you sent them a photo of the copyright page with your name written on it in ink. I'm pretty sure this will happen once the publishers begin to stir themselves.
> ."...text is much more costly and difficult to digitise than film or music."
But it's still a tiny part of the cost of publishing a book - If the original isn't available in a word processor document and you don't trust OCR to reliably read older texts, a copy-typist + a proofreader could probably convert a novel a day easily. Let's say $500-$1000 per book.
So a standard rule of thumb for professional copy editing and proofreading is 10 pages per hour, @£22-24 per hour.
Which makes the average potboiler of 350 pages around £1700 for both.
Pay an intern minimum wage to OCR the book and feed it into the process, and you're probably talking about £3000-4000 per book at the end of the day. Add cover design from a freelancer, which is another £500 minimum, unless you negotiate reuse of the dead tree version, which could be significantly more for a named artist.
And those are sunk costs, ignoring any royalties etc.
Which explains why Amazon has done a quick and dirty job on a bunch of popular books from the past, and is only now working with publishers to do the less popular or out of print runs.
It also explains the profusion of OCR artifacts in many of the initial works.
Nearly 40-years ago I edited/published technical books about computers. We sold them for $29.95 - unheard off price at the time. Even Radio Shack ordered 10,000 at 50% discount.
There was nothing else on the market - so people paid the price for the quality/information. Bit like the iWatch?
I once bought a £55 book for one line alone.
It was an immensely complex instruction whose purpose was to set up a printer attached to a parallel port on a SUN Sparc station.
Since I had already wasted two days of time valued at at least £500 a day trying to get this to happen, £55 tax deductible was cheap at the price.
And yes, it worked!
Why did I have to buy an eBook? OK, I want to own my technical and reference books. But the vast majority of my reading is fiction for pleasure, and the vast majority of those books, I read only once. I need a 'Readify' with an all-you-can-read monthly sub. And, yes, I know there are attempts at such a service, but they are full of crap, and empty of the good stuff. Publishers need to wrap their heads around subscription models and pay-per-read revenue streams - before somebody else does and wipes them out of existence.
Is Amazon's Kindle Unlimited not available in the UK? Readers seem to be all for it but authors in Kindle Unlimited recognize that they are getting screwed now that they are paid by the page read. It also requires the books be exclusive to Amazon. In the Romance genre at least, Kindle Unlimited authors are making about 50% compared to even modestly priced ebooks. And if you don't put your books in Kindle Unlimited then you will find your sales dropping since your books no longer show up in the "If you liked that you'll like this" results.
I have a feeling that the publishers have mistaken the book world for the film world. With films it seems if you can cram the name of a one or two A-list stars on to the cover you can charge an extra 50 to 100% over the same film with a no-name on the cover. This is despite the fact that the no-name film is probably just as good. Books don't seem to work quite like that though, we all have our favourite authors but I don't know anyone that is that desperate to read their latest book they will pay 50% over the odds for it.
I don't think cost is a particularly big deciding factor for me except in one situation I refuse to pay hardback prices for e-books especially as I know a few months later it'll come down in price. With a hardback book you actually get something extra for your money. With a ebook you just pay more.
>Higher prices reduces sales.
Unless you're Apple. Or IBM. Or Oracle. Or Microsoft. Or the UK's train companies. Or the UK's utilities.
Or anyone who's ever doubled prices and discovered that sales go up, not down.
You, Sir, are the Matt Asay of economics - an irresistible combination of being patronising, shallow, and face-gurningly wrong about almost everything, all in one easy-to-afford bundle.
> Unless you're Apple. Or IBM. Or Oracle. Or Microsoft. Or the UK's train companies. Or the UK's utilities.
I think Apple's high prices are something of an anomaly so I won't go into those. With IBM you pay for support. With Oracle you're basically paying an idiot tax - you were dumb enough to take the sales rep's cocaine and hookers, now buy the product or your wife gets the pictures. Microsoft were originally far, far cheaper than any business alternative. In a lot of cases - SQL Server, Surface Hub etc - they still are. The UK's train companies are a series of government protected monopolies. You don't have a choice about those prices and the law prevents anyone from entering the market at a lower rate. Compare and contrast to the long-distance bus/coach carriers where prices seemingly fall by the hour.
I think you picked a whole bunch of really stupid examples.
I think they're pretty good examples that price is not the only factor that matters to people if you're not on an especialy constrained budget.
Why people make the decision to purchase certain products or from certain companies may not be immediately clear, or may not even make much sense if you don't share those views/values/whatever.
"Higher prices reduces sales. Who knew that demand curves slope downwards? Except, obviously, everyone who has ever cracked open page one of the Econ 101 course."
I sussed that out when I had to open my wallet for something. Not a tough concept since 'price is no object' applies to few people.
Correct analysis. The marginal cost of 1 ebook is near zero. I have an nice ereader and had a phase of reading on it. Now I'm back to lending libraries, hand me downs and even occasional charity shop purchases.
Were ebooks of my choice £3 I'd buy 6 per year and not feel cheated by the fact I can't hand them on or donate them to charity after use, or the fact that I might only read half of them fully.
The epublishers have earned £0 where they could have earned £18.
I buy tech manuals and books about systems and languages and design patterns and low-level stuff as ebooks. I prefer to buy fiction and fun-reading as paper.
Why? Well, I have a Kindle. When I run into an issue I need a book-refresher on, the kindle carries hundreds of books full of knowledge and paper is heavy in that kind of quantity. Also, there's Amazon's "Kindle Reader" web app, which means my entire library is available at work.
Tech books become worthless pretty quickly - how much is a manual about (at random) .NET 3 worth these days? There's no point in handing on or reselling tech books. They're the ideal use case for ebooks.
And I have to say, I've been buying less of them since the prices rose. So I guess that correlates with the article.
"I have yet to find a paper book with a really comprehensive replacement for CTRL+F."
I was very disappointed that my Kindle Paperwhite search facility couldn't find the text I wanted in a Kindle book. I had lost my place due to some clumsy swipes - but could remember some of the relevant page's text. After trawling through the e-book manually - there was the text in the expected place.
I still find paper books easier to trawl through - I can do a skim far quicker than in an e-book. Pictures and diagrams have proved a nightmare on the Kindle as they are always initially too small and it is tedious having to zoom them.
The sneaky last few para comments. Earlier talking about ebooks (for which, as you rightly said, there are alternative leisure activities available) and then throw in some things where there are not alternatives...
e.g. Rent Control does not fit in with those earlier ebook arguments.
Unlike a book, where if price rises too much there are other leisure time options, most people need a home, with ability to securely store possessions, cook, wash etc. (i.e. "cheap" living rough options in a tent / back of car etc.are short term emergency options but not really long term sustainable for most folks) If rents are ruinously expensive (currently in many areas of UK, lots of people paying massive proportion of their income on rent) then being homeless is not really a viable alternative option, people have to pay: Or they give up their job & current accommodation & rely on state support, an alternative but not a desired one so does not really count & doubtless not a thing Tim Worstall wishes to encourage!
And, to cover another area mentioned, without some rent controls, minimum wage increases likely to be hoovered up by landlords jacking up their prices.
And that's where classical economics doesn't hold sway.
If the government nationalised the air we breathe and taxed us for breathing till the pips squeaked, the higher the tax the more the income until people start to commit suicide. It is somewhat that way with road fuel. There is an irreducible minimum of it that we need to get around and have a life at all. Below that high taxation will struggle to push us.
People need a house and will pay whatever they have to to obtain one.
These markets are characterised by the lack of discretionary choice.
In terms of consumer products we have HUGE discretionary choice.
One could also argue that addicts are undeterred by pricing and taxation - keep putting up the cigarette prices until smokers contribute five times more to the economy than they take out (even if you don't account for less pension costs and old-age services) and they will still buy fags because they have to.
And you can keep on raising the taxes (while claiming it's because you don't want them to smoke and pay you money) and suckers believe it. At the same time, of course, it's really important to ban e-cigarettes because they don't raise tax revenue and are therefore evil on the basis of no evidence.
I think you are right. Addicts are if not undeterred, certainly unable to abandon habits.
After oil and legal pharmaceuticals, aided by anti-drug legislation, illicit drugs are the worlds third biggest industry, I believe.
Employing millions and generating huge (largely untaxed) profits.
Rent control is substitutable. If there is rent control in one town/area, then people wil go elsewhere to find the property they can rent. Only if rent control was implemented nationally so that there was no choice would the argument fail.
The problem with rent control is that it tends to do the opposite of what those in charge think it does. They think it makes rents lower, when it actually makes the number of houses available for rent smaller. The rent might be low for those lucky enought to get a rental, but more people are unable to rent.
This post has been deleted by its author
"Rent Control does not fit in with those earlier ebook arguments."
Yes it does. People are living at home longer, house sharing, moving to places they can actually afford (especially when the gov reduces welfare for living in over expensive places like london). There is an entire group who have decided to abandon our way of life, go to a woodland and build their own homes free (scrounging).
"And, to cover another area mentioned, without some rent controls, minimum wage increases likely to be hoovered up by landlords jacking up their prices."
With rent controls the one certainty is rental property falling into dire standards far below the horror stories we now hear of. If the rent fails to meet the costs the property will suffer. Just as the govs latest genius of living wage which will impact jobs and make more people totally dependent on welfare.
Someone has these homes and if nobody is willing to buy them/rent them at their current price the price falls. The prices reflect people willing to pay. Having enough supply to meet demand would help lower prices but people dont want that when they took out 30yrs of debt to pay a much higher price. Reducing the population would help but immigration nuts struggle with that. Reducing government welfare on properties would reduce prices but then only people who can afford them could buy/rent (instead of being priced out by welfare).
Artificially fixing prices assumes better knowledge than the market. And every time (to my knowledge) it is tried it fails spectacularly and expensively.
With rent control and minimum wages, I think you'll find that Tim is making the opposite point.
If the price of labour goes up (higher minimum wage), employers will demand less of it. They'll either not do stuff, as it's no longer profitable, or they'll buy machinery to do it instead.
If the price of rents goes down, due to government regulations, then fewer landlords will offer property for rental. In the long term at least. And they'll do less repair work, as they'll be getting less cash. Also, in the case of rent controls, becuase price has dropped, demand will rise. More people will seek to live in a previously expensive (now price controlled) area. After all, it was expensive for a reason.
Of course rents are complex, because one of the biggest problems with the housing market is contrstrained planning, setting limits on what and where we can build. We force price rises by not allowing the market to satsify housing demand. In some cases for good reasons, but in others not so much.
" It's also instructive that the average price of an e-book from the big publishers is $10.81, while the average price of all non-big publisher e-books is $4.95"
Hypothesis - perhaps a 'big' publisher just can't survive and still be a big publisher on the rational economics of eBooks? When it's all ones and zeroes and a startup publisher could theoretically compete with you from a garden shed with minimal costs, how do you support all your bureaucracy and cruft? This might explain (as others have posted) why they are keeping prices higher than appear to make sense to increase the appeal of physical books.
"Demand curves slope downwards"
Interestingly, and *not* contradicting your broader point, there are some social psychology experiments that demonstrate that the curve slopes upwards in some cases. IIRC, it is when the buyers have poor information about the quality of the available products, and so assume that a higher price means higher quality and thus a more desirable product. I recall reading somewhere that the cheapest bottle of wine sold restaurants is not the best seller, but the *second* cheapest sells best.
Yup. You also get Giffen goods and Veblen goods.
I think the big example of the Giffen good was potatoes in the Irish famine of the 1840s. As the price rose, so did demand. People could now afford fewer luxurie foods, as everything had to go on the staple. So demand goes up as price does, and then down with price, as more people can substitute to nicer things.
You've also got Veblen goods, luxuries like Rolexes, where the high price and exclusivity generate some of the demand. Drop the price and you may lose sales.
The one actual proof of Giffen Goods we've got is of rice noodles in North China, rice in south China. We generally then extend that to the staple carbohydrate in subsistence level economies. So, yes, potatoes: but that's by extension from our proof, not something directly proven.
/pendantry
"Interestingly, and *not* contradicting your broader point, there are some social psychology experiments that demonstrate that the curve slopes upwards in some cases. IIRC, it is when the buyers have poor information about the quality of the available products, and so assume that a higher price means higher quality and thus a more desirable product. I recall reading somewhere that the cheapest bottle of wine sold restaurants is not the best seller, but the *second* cheapest sells best."
Maybe it's not so much poor information but stigma that does for the wine market. The cheapest wines are often derided as the "bum wine," the wine only drunk by desperate homeless individuals who beg on the streets just for that sweet (actually, incredibly nasty) nectar to take their pains away. In America, this is why people of any decent standing stay away from the Mogen David, the Wild Irish Rose, and the Thunderbird (well, that and the latter turns your mouth black).
One high-level publishing executive disputed that the Amazon pacts are behind the e-book sales decline. “This is a title-driven business,” he said. “If you have a good book, price isn’t an issue.”
This just goes to show you how out of touch with reality these idiots are.
Amazon is screwing us right into the ground by moving to a 'we pay you for every page that the reader turns' even though the hapless reader had paid Amazon for the whole book. If they don't like it and stop reading after 20 pages that all we will get paid for.
I'm seriously considering taking my books off Amazon.
That's what we get for not using a big publisher if we could get one to take our works.
I bought a ebook yesterday. Normally my ebooks are copyright expired or come through humblebundle.
On this occasion the paperback was £15 and the Kindle (no epub version available) £3. Because it was a small publisher (one man band really) not intent on making money for this title. And at the cost of a magazine it was a viable punt given that I am reading it my phone via the Kindle app not my e-reader.
Amazon makes it easier for these small operators to put out low cost, not necessarily high production value books, but at the cost of tying the readers to Amazon's chosen delivery method.
"... import tariffs to artificially raise prices..."
If the policy outcome wanted from putting import tariffs on something is to reduce the amount of it pruchased via the higher prices, then that's a success. I thought throughout history most import tariffs were just that - trying to reduce people's purchasing, the revenue raised being a side effect.
Historically, import tarrifs were about both. Many governments got most of their revenues from customs duties. Income taxes are relatively new. When governments were controlled by the rich, they didn't tend to want progressive taxation.
On the other hand it's also always been a tool of protectionism. England taxed imports of cloth, to protect the woollen industry, for centuries. I seem to remember it was Thatcher who repealed the law that you were only allowed to wear a cotton shirt if you had an income of more than £100 a year. Although I doubt that got enforced much past the early 18th Century.
Using tarrifs mainly as a tool of trade policy is quite modern.
For a really good author I'll buy the e-book when its first published. Especially for a series I've been following. However most of my ebook reading recently has been books from independent authors who basically self publish through amazon. These guys really understand about setting costs as often the first book in a series gets discounted to zero for a period to pull in new authors. However many of them are also really good authors and I find myself coming back time and time again because their per-book cost is well below my impulse buy threshold. Hard part is finding the good authors among the dross but once you find one their website often points you at others.
I'll point you at:
"The Utterly Uninteresting and Unadventurous Tales of Fred, the Vampire Accountant"
by Drew Hayes as an example of this.
This seems to assume that the market for a eBook is only limited by price. For a mass-market novel, that may be so, but it's not always like that.
I once worked for an academic publisher and their marketing strategy was to get colleges running courses to make one of that publisher's books the set text, and wrap their course around the book. As well as selling books to students, the publisher provided support material to the colleges such as online tutorials. In effect, they marketed an information package to colleges, often for free. Making money by selling books to students was just the useful side-effect that paid for all that marketing effort.
Once a publisher has persuaded a course leader to adopt a book as the set text, they can charge a high price for it, limited only by what the market can stand. Some students won't buy the book at all, and will attempt to share someone else's copy, some will buy it second-hand, maybe not the current edition, but some will buy it new. The number of new books sold will be some value less than the total number of students studying the courses that have adopted the book. As the publisher, if you reduce the price, a few more of those students might be willing to buy a new copy, but that's about the only control you have.
I remember this from lectures long ago.
The problem is, what is the ratio and sometimes in which direction.
If you drop your prices 10% and get a 5% rise in sales, you are in trouble. If you drop your prices 10% and get an 11% rise, you are doing well.
Some things however, if you drop your prices, your sales will fall. For example, Rolls Royces and Ferraris could have this counterintuitive property. If the Rolls is seen to become cheaper, it may be perceived as moving down market and some people may get Aston Martins instead.
There will always be a market for "nice" books. Big beautiful things to put on your coffee table or present as prizes and mementoes. eBooks are not this. There is zero marginal cost to the maker and there is generally zero emotional attachment to the file.
So the latest SpyNovel by X has gone up? I'll get the one by Y for 15p less. Maybe, I'll get Xs book next week when they have dropped the price again. If they don't, there is always Z.
Which Mr Worstall's sources suggest is $4.95.
I've paid more for PDF textbooks and willingly (my pdf library numbers around 60 bought and paid for volumes, about half of which cost in excess of $25), but that's because there's no DMA lockdown with a pdf and because the editorial whitespace gets preserved in a pdf and typically does NOT in an e-book format, obviously because the publisher can't be arsed to re-proofread the results of e-markup on existing body of type (reading the combat scenes in an Honor Harrington e-book which has stripped out the whitespace the author put in to delineate who is saying what while retaining the sense of breakneck pacing is a tedious act of mental re-editing that breaks immersion in the story and is definitely not worth 5 bucks to experience).
Eventually the prices of E-books will fall again to what people will pay without mentally saying "Wait, what?" first - about $4.95.
Because that's what they are worth, and because that is the price at which secondhand paperbacks in good condition can be had for the asking, a format which the author can sign when you meet him/her to prove you did and give you an additional fond (or not) memory.
No e-book is worth more than five bucks.
To you, perhaps. I've paid more than this on occasion.
That goes double for any book by an author who has been dead for a quarter century Mr Heinlein.
Actually, I'd say it applies more for books now than for those published decades ago. Books published now are likely already available in computerised formats and so can be published as ebooks fairly easily (and thus cheaply). Books that were written decades ago have an initial cost associated in getting it into a digital format, so initially at least may have a higher cost.
As the great man himself said: There ain't no such thing as a free lunch.
...is my comment whenever someone mentions the low price of gasoline on social media. Not that I care particularly (and doubt that he had much to do with the price variations) - I just find it appropriate as they are usually the same people who blamed him when the price went up.
See this interview with Gabe Newel.
In the sphere of digital leisure delivery (seems to me that games and books should probably work in about the same way) you get perfectly elastic pricing until you REALLY drop the price, then something a bit weird happens.
Valve were in the perfect position to work this out seeing as they owned both the original product and the delivery channel so they could experiment to their hearts content.
Personally, I will not pay much for an ebook. There's no resale value, they are often tied to various readers that fail with regularity, and they're cheaper to provide than dead tree versions. It's entertainment, and so gets funded only after everything else is paid for. If it's a series I'm following or an author I like, I can still wait for a sale, get a used book or read a copy from the library.
Since I discovered the Gutenberg website, I'm never without good books I haven't read yet. If you run out of good books from there, your interests have to be very narrow indeed. And you can't beat the price!
its the value thing that gets me, I won't pay for an ebook what I would pay for a paper book. If they don't want to undercut hardback sales (yes I've seen $35+ fiction ebooks) then don't issue them.
Interesting since the apple deal and the reappearance of deals on ebooks I have bought a lot more, in fact I looked back at my purchase history and have spent 20% more on ebooks the last year or so than the previous 3 years as there is much more available at my impulse buy points. This is generally effective for series, any series where first book is cheap vs one where 1st book is same price as latest book it's a no brainier as to which to try.
Many things affect saleability beyond mere price and performance, especially in the consumer arena. Or lets put it another way, that arena has a radically different and emotional approach to what constitutes performance, or value.
It was summed up years ago by a man who almost made a living out of selling electric guitars.
"we aren't selling guitars, we are selling dreams: whether it plays well or not is irrelevant. If its what he Starts play, it sells."
Apple epitomises that.
As does any 'fashion' brand.
The model gets more realistic once you factor elasticity of demand into the equation.
As in, the propensity for people to buy goods at any price. And this is what the book pushers were banking on. That the book worms would keep on feeding even when the price edged up.
It probably isn't a recognised term in the way I refer to it, but profit maximisation, in my mind hinges on just that phenomena. Limit supply and market it as an essential accoutrement to the modern sophisticate. You sell less, but you also put in less effort into shifting the vastly reduced stock, but still make the same revenue and thus greater profit. I suppose Giffin deserves a mention here, and so I shall. He came up with the quite unusual concept of demand rising as the price rises, because people like the idea of owning something unique and nothing screams unique like a hefty price tag.
I think the publicists have basically misjudged demand, thinking it was more inelastic than it proved to be, but the next Harry Potter or suchlike may prove them right and with the price already set to fleece mode they can't be lambasted for taking advantage of the latest fad. In which case, they've made a very shrewd move and all our analysis is irrelevant.
You've got Giffin there and you mean Veblen. Conspicuous consumption: people want it because it shows that they're rich enough to be able to have it. Social signalling and all that. Hipsters are doing exactly the same thing but with subculture tastes and fashions rather than money.
Giffen is, as above, more about subsistence carbohydrates.
/pendantry
Just one point:
While the sales volume will always go down if you increase prices, sales revenue might not.
For example, if you offer the book for free, lots of people will download it, but you won't make any money at all from.
Charge 1p, and demand will go down considerably - you are asking people to decide whether or not the benefits they personally receive from the book are worth at least the 1p they are being asked to hand over, and worth more to them than the next best thing they could do with that money. However, you will probably still make some sales, and you will make some money.
Double the price to 2p, demand will go down a bit, there will be people who are prepared to pay 1p for it, but 2p is too expensive, however it will probably be less than half of them, so overall you will make more money.
At some point, you will reach the optimum selling price. It looks like Amazon, with their highly sophisticated pricing algorithms, already had the optimum selling price, so that's why revenue went down when publishers increased the prices.
"If you're selling a book priced at $5, I'm much, much more likely to buy it than the same book priced at $10."
And these aren't even books, they're E-Books. $10 is enough where I'd decide "Damn what a ripoff" and not even think of buying it.
"but are they likely to sell twice as many books? Selling the same number of books at half the price is a kind of business suicide."
Per TFA, total money coming into these sellers did drop, so when they doubled prices sales did cut more than half. (And conversely, yes, they would sell more than twice as many books at half price.)
As for cars.. yes, US'ians are actually dumb enough to IMMEDIATELY go out an buy up gas-guzzling SUVs and crap as soon as prices drop. A month later, the news will have a fluff piece with these same purchasers whining about how they didn't think gas prices would go up and they suddenly can't afford the gas, and when they went to dump their gas guzzlers onto somebody else they find out nobody else wants it either.
Of course the joke is that Americans think 2l is a small engine, I've had dealers apologises about 1.6l engines when looking for a small cheap runaround second car. Even the fiat 500 they are now selling here has a 1.6l engine as standard
As for overpriced books I saw the last pratchett at over $35 for the ebook, though I guess in that instance they didn't want to cannibalise hard back sales.
I am somewhat annoyed that Tim lists a $15 hourly wage as an economic downer, but has no objection to million-dollar pay raises for Corporate Executives and Board Members. I am sure that executive salaries are amortized across unit prices, but we never see any out-sourcing to replace these high-priced individuals, either. Can't we get some H-2 visas to import low-priced foreign CxO's, because there is such a shortage of qualified U.S. CxO's at our chosen price point.
While the author acknowledges different audiences "gas (petrol)", he then goes on to list several vehicles which may be sold only to the 'home' market. OK, I am not a car driver, but I still question the ability of the man in the (UK) street, off the top of his head, to know the individual MPG stats for the Volt or Leaf, or the others, so the example falls apart, in my view.
Yes, each of hundreds of "in the dark" readers could go find the MPG figures, but I doubt (m)any would.
15, (perhaps fewer) minutes, of the author's time, could have added clarity for all readers.
Please, guys and gals, when writing, remember you may have years of knowledge and access to popular resources, but not everyone outside your area may know of things like "Consumer Reports" (I have only heard of it from mentions on radio {WGN, Steve and Johnny show a while back} and podcasts, so don't actually know if it would have the MPG info).
Thanks.
> One high-level publishing executive disputed that the Amazon pacts are behind the e-book sales decline. “This is a title-driven business,” he said. “If you have a good book, price isn’t an issue.”
Only IF you have unlimited funds to spend. As soon as you start having limits on spending, then price *does* become an issue. Granted, it comes down to the relationship of price vs funds, and also gets affected by what *else* needs to be bought with those funds as well. And it also comes down to factors of price-point and perceived value. That blockbuster novel may be worth buying at $10, but if it goes up to $20, you may not consider it worth the price. It's true of plenty of other products as well.
But we're likely dealing with MBAs here, the people most in control of marketing, while being the least capable of understanding real-world economics. There used to be a saying that an MBA could run *any* company; I modify that by saying they can run any company *into the ground*.
> Apparently, as gas (petrol) prices have fallen people are worrying less about the MPG of cars they might buy.
Because people are generally stupid, and don't remember that prices will skyrocket again. Then they're stuck with those blunder-tanks that no one will buy off of them. Besides, part of the reason the prices will skyrocket again is *because* those dimwits bought the monster cars.
The Register 
Biting the hand that feeds IT
Copyright. All rights reserved © 1998–2024
