It's IMPOSSIBLE to price ebooks too high

[leebase]

In a free market, it is impossible to price any product too high. I could end with that statment, but let me explain.

Publishers put out new hard back books at high prices. In a relatively short amount of time, the publishers end up competing with the 2nd hand market of those same hard back books. Don't want to buy the latest Harry Potter, John Grisham legal thriller, or Nicholas Sparks romance at high prices? Just wait a bit and the millions of books sold to those willing to pay the price will hit the secondary market (borrowed from a friend, sold in used book stores, etc.) This is more true in the internet age than ever before.

But wait -- there's more. There are OTHER books for sale. Readers have a VAST array of reading choices. Go into any book store and see the variety of choices -- even within the genres.

Hold on -- cuz there are PRIOR books that can still be bought. A new book not only competes for sales against other new books, but against all the other books ever written (well, within reason). Not only NEW books at NEW prices from competitors, but old books at resale prices.

Libraries lend out books for free. The very same hard back book the publisher wants to sell to you, libraries buy such books and then lend them out to multiple people.

Then there are the cheaper paper back versions that people know will be coming. Anyone who desires to sell a high priced hard back book will find themself in competition with the paper back book they will be offing next year. Knowledge that said paperback is coming out defers today's book buyer's decision.

Oh, but the story gets more dire for those wishing to sell a new hard back book. Folks have choices BESIDES reading. They may watch TV, go to the movies, play video games, surf the net, chat on facebook, text friends on their cell phones, listen to music.

Why this talk of hard back books in a thread titled "It's IMPOSSIBLE to price ebooks too high"? Because you can replace "ebook" for "hard back" and EVERYTHING will still be true.

Price an ebook too high and a customer may choose to buy the hard back book instead. Or choose to buy the paper back version of the book next year instead. Or choose to buy another ebook instead. Or choose to watch Tv instead. Or choose to buy a music download instead. Or choose to go to the movies instead. Or choose to check the book out from the library instead. Or choose to buy a used copy of the book instead.

There is simply no way to charge too much for an ebook in this market. All those who think the new ebook pricing is too high need merely wait to be validated. The publishers will fail if they set the prices too high. Or, you might just be surprised that the publishers just MIGHT have a clue about pricing.

One thing is for sure, though. No one need raise a stink or a complaint or a 1-star campaign to change the pricing of ebooks because IT IS IMPOSSIBLE for ebooks to be priced TOO high.

Lee

[abookreader]

that is simply not true.
Even if you accept the fact that the only or primary goal of a Publisher is to maximize profits - a completely free market economy will still always have a level of inefficiency. Publishers might think their prices are maximized at the $14.99 price point, but they might be wrong. Data modeling over time will give them a better idea, but even still they might be wrong. Products get priced at the wrong levels all the time.

Then feed in all the other variables that will tell you the goal isn't always to maximize profits for that one product at that one point in time. Large successful corporations (like the Evil Amazon) often operate for YEARS at inefficient prices in order to maximize their profits years from now.

In the case of Publishers, it could very well be the optimal price of novels #1 thru #3 is quite a bit lower even though it doesn't maximize their profit - in order to build the customer base required to make novels #4 thru #10 blockbusters.

Besides which, if customers don't communicate to Publishers why they aren't buying the eBook ... price, lousy cover art, not interested in the topic, bad formatting ... then how will the Publishers know why a book isn't successful? There might be better ways to communicate that information, but if one star reviews is what customers choose then maybe the Publisher/Author need to work on developing better and more efficient ways for their customers to make themselves heard.

[kovidgoyal]

@leebase: I really hope publishers listen to you, it will be the end of those publishers

[Penforhire]

Because of typical DRM you can't buy a used copy of any given e-book. So that comparison fails. The rest of your argument is a reasonable free market commentary. However, while e-books may be a free market item (and I might debate that now), as Borders closes while Amazon and iTunes ascend, they are not likely to remain a free market item.

They are, or will be, sole source items. Buy from vendor "A" or you will never get that e-book. They may drop their price over time or they may not. You may argue I don't have to read that particular book. True. But that is not an argument that supports a high e-book price. Look at it this way, if the price is really too high then piracy will increase. So there is such as thing as "too high" in that regard.

In the far future, but within our lifetimes, I expect e-books to dominate sales. So used p-books may not be as much an option then.

[OtterBooks]

They can certainly price it too high for me to buy it, which is all I care about.

But wait -- there's more. There are OTHER books for sale. Readers have a VAST array of reading choices.

That I agree with. There are still the same old options; not just for a book, but any given book. I will not choose a title itself based on price. I'll choose the format or seller, but I'm not gonna read a book I'm less interested in because it's cheaper. My brain is not the bargain bin at a flea market, though occasionally it feels like it.

[leebase]

Originally Posted by kovidgoyal

@leebase: I really hope publishers listen to you, it will be the end of those publishers

We agree. Perhaps you misunderstood. A publisher could put out an ebook at a $1,000,000 price. But no one has to buy said ebook.

Without saying a word, said publisher would find out rather quickly that no one is buying his million dollar ebook.

What about $14.99? No one need say a thing. Either the ebook will sell at that price, or it won't. It does not matter the cost to produce the ebook. It does not matter what effecencies ebook distribution brings. DRM does not change anything.

There are simply too many competitors for the $14.99 ebook (or ebooks of any price) for any company to set "too high a price".

We don't need to lecture the publishers because the publishers have all the incentive they need to "price right". They also have all the information that the rest of us guess over.

You predict that publishers who listen to me would fail. But would they? If someone acted on my words -- and somehow thought that meant "I could price my ebook for a million dollars" -- would they need YOU to tell them how wrong headed that was?

No, they'd have their own sales numbers to tell them if they are pricing right. Publishers simply can't succeed in price gouging in this market as no one has to buy their product -- at ANY price. There is VAST competition. They even have to compete with their OWN products -- the hard back book, the used hard back book the library copy of the hard back book, the coming trade version paper back book and the coming mass market paer back book, and the used copies of those paper back books.

Lee

[leebase]

Originally Posted by OtterBooks

They can certainly price it too high for me to buy it, which is all I care about.

I can see your point. I, for one, almost never buy hard back books. New release hard back books cost more (for the most part) than I am willing to pay.

And YET, they manage to sell millions of such books at those prices because other folks are willing to pay the price.

It is the same with ebook pricing. Just wait and see.

Lee

[leebase]

Originally Posted by Penforhire

Because of typical DRM you can't buy a used copy of any given e-book. So that comparison fails.

You can buy a used copy of the HARD BACK book (or paper back, or get the book from the library). There is no law that says once a person buys an ebook reader that they can no longer buy paper books.

Originally Posted by Penforhire

The rest of your argument is a reasonable free market commentary. However, while e-books may be a free market item (and I might debate that now), as Borders closes while Amazon and iTunes ascend, they are not likely to remain a free market item.

It wouldn't matter to this reality if Amazon attained a sole monopoly over all ebooks and ebook pricing. The paper version of a book competes against the electronic version of the book. OTHER books compete against the purchase of an ebook. OLD books compete against the purchase of an ebook. All other forms of entertainment compete against the purchase of an ebook.

This is not milk or bread or gas for your car. No one has to buy an ebook, and there is a LOT of competition for that money.

Originally Posted by Penforhire

They are, or will be, sole source items. Buy from vendor "A" or you will never get that e-book. They may drop their price over time or they may not. You may argue I don't have to read that particular book. True. But that is not an argument that supports a high e-book price. Look at it this way, if the price is really too high then piracy will increase. So there is such as thing as "too high" in that regard.

Piracy and the used book are the same thing with regard to a publisher's inability to set too high of a price. I left it out intentionally as the usual side debate about piracy has been well covered and no need to muddy the waters.

The argument that goes along the lines of "but I want to read THAT ebook, and I want to read it NOW, and I want to read it in electronic form" -- all lead to DEMAND pricing. It all goes to why discussion of the cost to produce or the efficencies of digital distribution have NOTHING to do with ebook pricing. All that matters is that enough folks want to read THAT book, want to read it RIGHT NOW and want to read it in electronic format.

Originally Posted by Penforhire

In the far future, but within our lifetimes, I expect e-books to dominate sales. So used p-books may not be as much an option then.

By then the market will have spoken for so long, there will be no controversy. The time when ebooks are so dominant that paper versions, used versions, and library versions are no longer competitors -- is far away. But let's fast forward, shall we.

An ebook comes out and there is no paper version. It STILL cannot be overpriced. It STILL has to compete against all other books (ebooks or not). It still has to compete with every book that's out of copyright and being offered for free. It still has to compete with every self published new author giving their books away or selling them for $1. And it still has to compete for every other form of entertainment.

Which leads us back to the point you so wisely bring up. "I want to read THAT book, right NOW, in electronic form". Welcome to the world of demand pricing.

Lee

[leebase]

Originally Posted by abookreader

Even if you accept the fact that the only or primary goal of a Publisher is to maximize profits

Immaterial. A book priced too high won't sell in a competitive environment. Doesn't matter how smart the publisher is or how stupid. People buy or do not buy an ebook completely independant of how much the publisher makes.

How much the publisher makes -- well that means a lot to the publisher. So their ability to price in such a way so as to make money is well within their power. But SHOULD a publisher put too high a price on an ebook, they cannot possibly force people to pay that price.

Originally Posted by abookreader

a completely free market economy will still always have a level of inefficiency.

True, but that doesn't lead to a publisher being able to SUCCESSFULLY price a book higher than the market is willing to pay.

Originally Posted by abookreader

Publishers might think their prices are maximized at the $14.99 price point, but they might be wrong.

Exactly. That's my point. I have not said $14.99 is the proper price for a mass market ebook. Only that we need not fret so much. It is impossible for any company to successfully sell a product at a price TOO HIGH. Of course "TOO HIGH" is not what you individually, or I individually think.

We need not say one word. We need merely carry on as we always do, buying books we find desirable at the prices we find acceptable and pass on those books we MIGHT have though desirable, but are CURRENTLY priced higher than we wish.

Originally Posted by abookreader

In the case of Publishers, it could very well be the optimal price of novels #1 thru #3 is quite a bit lower even though it doesn't maximize their profit - in order to build the customer base required to make novels #4 thru #10 blockbusters.

If they succeed, then they haven't priced too high.

Originally Posted by abookreader

Besides which, if customers don't communicate to Publishers why they aren't buying the eBook ... price, lousy cover art, not interested in the topic, bad formatting ... then how will the Publishers know why a book isn't successful?

Ranting and raving on this forum is hardly "communicating to the publishers".

Originally Posted by abookreader

There might be better ways to communicate that information, but if one star reviews is what customers choose then maybe the Publisher/Author need to work on developing better and more efficient ways for their customers to make themselves heard.

It's just silly actions by folks with little appreciation for how markets work.

Lee

[hal2814]

"Too high" is a relative term. Cannot be priced too high for what exactly?

[Maggie Leung]

When something is out of my price range, I just don't buy it. I figure any business has to figure out its own price points to stay afloat. They might not get my business, but that doesn't matter to them as long as enough others are buying. If I can't afford a product, I'm simply not part of that business's equation. If any business or industry can't figure out how to stay afloat, too bad for them. That's how the marketplace works.

[leebase]

Originally Posted by Maggie Leung

When something is out of my price range, I just don't buy it. I figure any business has to figure out its own price points to stay afloat. They might not get my business, but that doesn't matter to them as long as enough others are buying. If I can't afford a product, I'm simply not part of that business's equation. If any business or industry can't figure out how to stay afloat, too bad for them. That's how the marketplace works.

You are too reasonable

Lee

[meme]

I think I misread the title of the thread based on your comments (but then it does get attention ) It seems that what you meant by 'It's IMPOSSIBLE to price ebooks too high' isn't that publishers can set high prices and get away with it, its that if publishers do set too high a price then the market will act to make it a bad strategy, so in the end they'll lower them until they make an acceptable profit.

For ebooks, I hope they know the reason they aren't being bought is because of price and not because there isn't a market for them...

[abookreader]

Exactly. That's my point. I have not said $14.99 is the proper price for a mass market ebook. Only that we need not fret so much. It is impossible for any company to successfully sell a product at a price TOO HIGH. Of course "TOO HIGH" is not what you individually, or I individually think.

It sure is kind of you to make that determination for every other member of this board. Hey everybody - Leebase demands an end to the "fret." Nevermind that discussion boards are designed for interested parties to discuss topics which they find interesting, he still doesn't like it.

And of course a successful company can price a product too high. Acceptable profits and optimal profits are not the same thing. If they price wrongly, it simply makes them less successful than they would have been if they had gotten it right.

[leebase]

Originally Posted by meme

I think I misread the title of the thread based on your comments (but then it does get attention ) It seems that what you meant by 'It's IMPOSSIBLE to price ebooks too high' isn't that publishers can set high prices and get away with it, its that if publishers do set too high a price then the market will act to make it a bad strategy, so in the end they'll lower them until they make an acceptable profit.

Right on both counts. There is so much anger and passion on this forum due to ebook pricing -- and it's so out of disproportion to the situation. If an ebook is priced higher than you want to pay, then don't buy it. There is no reason for all the huffing and puffing. The publishers CAN NOT POSSIBLY get away with pricing the books TOO HIGH.

Originally Posted by meme

For ebooks, I hope they know the reason they aren't being bought is because of price and not because there isn't a market for them...

I still hold to my opinion that most of the issue here is really about folks who were never before part of the "new release book" market before. (reference my "You don't matter and you never did" thread).

Amazon was trying to buy up market share and give folks reason to buy their $400 ereader by SUBSIDIZING the price of ebooks. Folks were spoiled by getting "new release books" at the "paper back book price". So when the publishers, acting in their own self interest, put a stop to that -- Oh the SOUND and the FURY.

There needn't be. Either there is a market for $14.99 new release ebooks or therer is not. All of our debates on how much cost savings there is with ebooks, or the horrors of DRM don't matter a whit. All that matters is whether or not folks will BUY books at those prices. If they don't, the publishers will lower the price. Not because WE think they should, but in their own self interest, they will do what makes sense for them.

Lee