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Old 03-24-2011, 09:47 AM   #452
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Originally Posted by HansTWN View Post
Then I am asking you, what would happen to their pbook business? They would also have to sell those for extremely low amounts (or nobody would buy them) -- and they would all go out of business. Sounds great for users, but publishers and book sellers could not operate this way.
Why couldn't they?

Let's say a company makes a profit of $1 when they sell a pbook for $10, and also makes a profit of $1 when they sell an ebook for $5. How is there a difference, from their bottom line's point of view, if they're making that money selling ebooks or pbooks?

The only reason it would be necessary to sell pbooks as cheaply as ebooks is if they were in competition, but they're not. They're two different market segments, just like the different formats of pbooks. Hardcovers don't sell for the same price as trade paperbacks, and trade paperbacks don't sell for the same price as mass-market paperbacks, either.

And so what if they sell more cheap ebooks (earning, remember, the same profit per unit) than they do more expensive pbooks? Why is it necessary for that company to sell pbooks when their customers clearly want to buy ebooks? If ebook sales are cannibalizing pbook sales, then the customers are there for ebooks, and a smart business knows that they should be selling what their customers want to buy. Let's say that every one of their customers decides to buy only ebooks ... if the company is earning the same profit per unit, it makes absolutely no difference in terms of their accounting.

The costs incurred to make one additional unit is totally irrelevant for the pricing of digital goods.
Why would this be? There seem to be a lot of companies that disagree with you. They price their digital goods much like they price their physical goods. You're saying they shouldn't?

Besides, why should we care about costs, what matters is how much are we willing to pay and is anyone willing to sell at that price.
Because, not being utter schmucks, we don't want to destroy the book industry (despite what some shills claim) and we don't want to demand books cheaper than they can be produced. But, being normal, ordinary customers, we also look at something and say "hey, this is just some fizzy water and some flavoring, why are you charging me so much for it?"

For the publisher the point is, total sales volume has to be high enough to cover development, production, distribution costs AND to make a reasonable profit. Even for ebooks there are distribution costs such as advertising.
Advertising isn't a distribution cost; it's a marketing cost. It's in the same category as little cardboard racks to display books in, not trucks to deliver them to stores.

For a pbook, costs include editing, printing, warehousing, shipping, advertising, distributor discounts, retailer discounts, and returns.

For an ebook sold through Amazon, costs include editing, advertising, and "agent" commission.

Printing, warehousing, shipping, two (at least) layers of discounts, and especially returns, are not trivial expenses.

Just starting with the discounts, for instance, in a related industry I was lucky to get 40% of my retail price on items sold to distributors; I've heard that book publishers get less, around 30%. But let's say it's 40%. So right there, if a publisher sells a box of pbooks to Ingram for $100, they make $40. If that same publisher sells the same value (at whatever price) of ebooks through Amazon, they make $70.

Then there are printing, warehousing, and shipping (often shipping twice, when the returns come back). There are two issues with these: First, of course, is the actual expense. You have to buy paper, buy ink, buy equipment, pay employees, to make all those paper books. Then you have to pay truck drivers and boat crews (and all the people who drive forklifts, etc.) to haul them from place to place. You have to rent a space to store the ones that aren't in the stores right now, and you have to pay taxes on those cartons of books that are in your warehouse. But what may be even more important to publishers is guessing how many books they will need, and printing accordingly. Guess too low, and you've got a runaway bestseller that nobody can buy until you print more books ... and by then (there's a fair bit of lag time involved, especially if you're printing overseas) a lot of prospective buyers have found something else to do with their money, probably involving your competitors. Guess too high, and you've printed a million copies of a book that nobody wants. And not only do you have those million books that ate your capital in manufacturing, you still have to pay for lugging them around, storing them, and finally packing them all in boxes and sending them to the paper recycler for pennies on your printing dollar.

Ebooks have none of those expenses. They don't cost anything to print. They don't cost anything to stock. They don't cost anything to deliver. And you have exactly as many of them as you need -- no more to be remaindered, no fewer to leave your customers bookless. The only expenses they do have are those of editing (which, from the quality we've seen lately, doesn't seem to be very much), resale (30%, we know what that one is), and advertising (again, highly variable, and seemingly decreasing on the part of publishers for any format; aside from listings in trade publications, it seems to this reader that few except selected "big names" are advertised at all). And in exchange, they don't have returns. The impact of returns can be staggering -- a publisher has to pay, once again, for half of the books they sent out to come back. They've paid all the production and distribution costs for books that are going to the recycler, not the buyer. That's not an issue with ebooks.

We can go on and on about "ebooks cost virtually nothing to make", what does it matter if nobody is willing to sell them for next to nothing?
Well, we could roll over and be docile little consumers, saying "thank you sir, may I have another?" when they do things that are bad for us, but that's not the kind of people the folks here are. For one thing, it's a matter of educating our fellow readers. Nothing personal here, but you're an example: you think the cost to a publisher of an ebook and a pbook are very similar. The more people who understand, the better educated the customers are, the more likely the publishers are to do things which are in our own best interests. It matters because producers sell items for prices consumers are willing to pay, so if we explain things to counter the publishers' misinformation, those consumers will say "hey, sell us cheap ebooks" and the publishers might, potentially, think "damn, they're just not going for this line we've been feeding them, and we can't make 10x the profit on an ebook we do on a pbook; I guess we'll just have to settle for the same profits we've been getting, and sell them cheaper books" ... and then we can afford to buy more books!

Last edited by Worldwalker; 03-24-2011 at 09:53 AM. Reason: because I can't type my tags right
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