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Old 01-22-2013, 12:37 AM   #121
ereadingdotcom
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Originally Posted by silasgreenback View Post
I don't see why giving ebooks away wouldn't bolster Baen's bottom line and that of authors' far into the future.

Baen's gimmick strategy has been working for Amazon for some time now. I've bought several books by authors I'd likely have never heard of because one of their titles were free.
Oh, and I forgot to add: I've said elsewhere that free books will continue to be used as loss-leaders by retailers and publishers. So I agree with you there. I've done the same thing. I'm an avid reader myself and the free preview titles have been a great introduction to me for people I would not have ordinarily read right off the bat.
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Old 01-22-2013, 12:46 AM   #122
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You're overlooking the fact that this "strategy" is meant to create a dominate position in the marketplace, not to create a consumer-friendly, sustainable model.
Umm, no. Amazon has a loss leader strategy (why the scare quotes?) which is traditionally both consumer friendly and sustainable. Giving away the first book in a 15 volume series in the hopes that consumers will like the book and buy the rest of the series is both consumer-friendly (a free book! No risk!) and sustainable.

Baen's plan (buy the latest hardback in the series and get the 14 preceding volumes in e-book format for free...or you can get them at 5th Imperium for free without buying the hardback) was *extremely* consumer friendly...but turned out to be non-sustainable once e-books became popular enough to actually cut into paper book sales.
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Old 01-22-2013, 01:04 AM   #123
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Originally Posted by Andrew H. View Post
Umm, no. Amazon has a loss leader strategy (why the scare quotes?) which is traditionally both consumer friendly and sustainable. Giving away the first book in a 15 volume series in the hopes that consumers will like the book and buy the rest of the series is both consumer-friendly (a free book! No risk!) and sustainable.

Baen's plan (buy the latest hardback in the series and get the 14 preceding volumes in e-book format for free...or you can get them at 5th Imperium for free without buying the hardback) was *extremely* consumer friendly...but turned out to be non-sustainable once e-books became popular enough to actually cut into paper book sales.
Well, you're making my point for me. I agree with a loss-leader strategy. That is not the same as gutting a writer's core inventory for free in order to drive sales in a steadily-declining format. For a long time Baen gave away ebooks they shouldn't have because they felt that ebooks were a fad at best. Now they know better.

Never heard the term "scare quotes" before. They're not scary to me; I deal in the real world of this industry as both a consumer and a site-builder, and I understand very clearly the difference between what is marketed to consumers as a strategy and what is a power grab for market share. They can be both, but in the case of Amazon's massive gross losses, I'm seeing less strategy and more power-grab. If someone comes along and offers something better, Amazon will take a major hit.
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Old 01-22-2013, 07:11 AM   #124
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Originally Posted by ereadingdotcom View Post
Never heard the term "scare quotes" before. They're not scary to me; I deal in the real world of this industry as both a consumer and a site-builder, and I understand very clearly the difference between what is marketed to consumers as a strategy and what is a power grab for market share. They can be both, but in the case of Amazon's massive gross losses, I'm seeing less strategy and more power-grab. If someone comes along and offers something better, Amazon will take a major hit.
What "gross losses" are you talking about? Are you saying that Amazon loses massive amounts of money on ebooks? Even in the days before the price fix 6 I don't believe that was the case.

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Old 01-22-2013, 08:09 AM   #125
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Originally Posted by shalym View Post
What "gross losses" are you talking about? Are you saying that Amazon loses massive amounts of money on ebooks? Even in the days before the price fix 6 I don't believe that was the case.

Shari
It wasn't and it isn't.

The DOJ has made it abundantly clear that Amazon does *not* lose money on ebooks. They merely use modern grocery-store basket-pricing so that while they have from time to time sold *specific titles* at a loss, on paper, that paper loss comes from other ebook profits and their net ebook revenue has always been positive. Strongly positive by most indications. They *aren't* buying market share in search of market power, they merely accrue market poiwer through market effects and industry leader advantage. Both nice and legal and a whole lot cheaper than bleeding for profitless market share.

What they do isn't even a traditional loss-leader because loss-leaders are products that always sell at a loss (like the Baen library titles) while Amazon discount losses are temporary; they don't always discount the same titles but rather rotate the discounts as a *promotional* tool.

"Amazon loses money on ebooks" is an urban legend meant to scare some and comfort others but like most legends it is far from truth.

(Even B&N, with higher costs and less internal eficiency--to say nothing of lower market share/sales volume--has made it clear they make money off ebooks. It is everywhere else that they lose money.)

Last edited by fjtorres; 01-22-2013 at 08:13 AM.
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Old 01-23-2013, 10:57 AM   #126
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It might derive from tales that Amazon loses money on ebook readers-which I believe is true. As with many tales, it gets twisted-but losing money on hardware to make it up on supplies is a proven market strategy.
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Old 01-23-2013, 01:07 PM   #127
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It might derive from tales that Amazon loses money on ebook readers-which I believe is true. As with many tales, it gets twisted-but losing money on hardware to make it up on supplies is a proven market strategy.
Could be.
But even the iSupply breakdowns estimate the eink Kindles sell for around breakeven. And that is without factoring in any ad revenue from the SO versions. All we know for a fact is that Bezos said they make their money on the content instead of the hardware. Doesn't automatically mean they *lose* money on the hardware.

The "Amazon loses money on ebooks" meme predates the four hour price war, though. So it probably didn't start with the cheap readers.

It goes back to the days of the K1 and K2 and started with a report that Amazon was selling a specific bestseller for less than they paid the publisher. From there it ballooned: "Amazon loses money on one bestseller" became "Amazon loses money on all bestsellers", neither of which is particularly important even if true, to "Amazon loses money on *all* ebooks" which would be important if it weren't false.

The main problem that people have with Amazon pricing is that:

1- They are happy to live off 5% or lower margins if they have to
2- They don't incur the same level of costs as their competitors (for example they don't pay Adobe for DRM and authentication on ebooks, their warehouses are heavily automated and eventually they bought out the supplier of their robots, etc)
3- They are very efficient and they, ahem, "encourage" their suppliers to be similarly efficient. This last one raises hackles all over because it implicitly tells suppliers that "if you can't make a good profit at that price you aren't running your business right".

Add it all up and you get that Amazon is on ocassion able to make a profit at prices lower than some competitors' costs. Which doesn't endear them to competitors who can't invest in robotic warehouses and a zillion fullfilment centers all over the planet.

A good example to study to appreciate the road Amazon is treading is the impact Sears, Roebuck had on the 19th Century US standard of living. And how Sears evolved over its first fifty years. What Sear achieved with printed catalogs and train, Amazon is achieving with the internet and modern logistics. There is nothing magical or diabolical about it; just enough vision to see where consumer interest lies and where technology is going a willingness to make big bets based on that vision.

Last edited by fjtorres; 01-23-2013 at 01:10 PM.
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