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Originally Posted by fjtorres
Sometimes I wonder if the people in the publishing business ever took economics 101.
Maybe they slept their way through it?
Do they not understand such a simple concept as price elasticity?
They clearly haven't a clue how to maximize back catalog value.
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This assumption that publishers are idiots is getting old. And it is *not* based on economics 101.
Do you know how much they paid for the rights to DeKamp's works? How much they paid to convert them? How many sales they will have? What sort of elasticity there is.
Economics *does not mean* that you make the most money by selling the highest volume...that is not always the case. Sometimes you make more money by charging more and selling less. I think the publishers know this.
And of course they can lower the price later, which makes sure that they get full price...and full profit... from people willing to pay it...but still make some profit from people who are willing to wait and pay less later.
Let's say it cost the publishers $5,000 (but you can use any number) to buy the rights to and prepare a book to be sold as an e-book. If you sell the book at $10 and sell 1,000 copies, you've made $10,000. Subtracting your $5,000 fixed cost, you have a gross profit of $5,000.
Let's say you charge instead $3, and as a result, sales are triple. You sell 3,000 books at $3 each, for a total of $9,000. Subtract your costs and you have a gross profit of $4,000. Economics 101 suggests that you are better off pricing the book higher.
But of course to find the optimum price, you need to know how much sales will increase when you drop the price. If they increase by 4 times, you are better off selling at a lower price. If they don't increase at all, or increase by less than ~70%, you will *lose* money. 1500 sales x $3 = $4500, less $5,000 cost means a loss of $500.
So how can a publisher maximize total profits without being omniscient? It's not that hard to figure out. (I'll use the original number from the example, but any will do).
First, the publisher offers the book for sale at $10, and sells 1,000. This nets $10,000.
Later, the publisher drops the price to $6. Let's say he sells another 1,000 copies. This nets an additional $6,000.
Finally, the publisher drops the price to $3, selling another 1,000 copies and netting an additional $3,000.
This leaves a total net of $19,000. Subtract the $5,000 cost and you have a gross profit of $14,000.
This approach is *far better* than simply pricing the book at $3 to begin with, since some of the people who would pay $3 for the book would also pay much more. This approach is also better than just charging $10 for the book, since that leaves on the table the sales that could be made to people who would pay less than $10 for the book.
Not only is this approach the best approach economically; it is *also* the approach that the publishers seem to be taking. I think they did, in fact, pay attention in Econ. 101.
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L. Sprague DeCamp? Very good writer. Very prolific. His catalog has quite a few excellent works. It also has its share of potboilers. Which just about screams: "Bundle!"
Instead of pricing each book as if it were some precious jewel or collectible, they should be bundling, omnibusing, and grab-bagging the heck out of his catalog, trying to maximize the return from the full catalog. As is, his top 5 or 6 works will sell decently among folks who already know of him, the rest might sell to afluent completists, and none will get much traction among those that aren't already familiar with his place in SF history.
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This is probably right. I think it also suggests that you may not be able to make many additional sales by lowering prices from $10 to $3, since the overall market for LSDK is probably pretty low.
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Contrast that with how BAEN handles the works of Laumer, Schmitz, Anderson, Pournelle, Heinlein, Anvil etc. Pournelle's back catalog, for example, was intro'ed as a limited-time bundle at a modest but reasonable price, then sold unbundled at their normal reasonable pricing. The others are being slowly added to the Webscription store, get added to the monthly bundles where possibly unfamilar readers can be exposed to their works, and they even slip in a volume or two into the Free Library. Building awareness of the author and his works takes precedence over squeezing every last drop of blood from each buyer; setting the stage for followup sales over time matters more than "preserving perceived value".
It's still (relatively) early in the ebook evolution but you would think that by now more publishers would understand that midlist and (especially) backlist ebooks are long-term full-catalog plays. There is more money to be made by "selling" the L. Sprague DeCamp "brand" as a source of books that range from amusing to brilliant that there is from milking LEST DARKNESS FALL for every last penny. Short-term, quarter-by-quarter thinking *might* be vaguely justifiable in the world of batch-printed pbooks, but in the world of ebooks it is just a surefire way to send customers looking elsewhere.
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I propose MobileReads law #1 - If the only evidence you have for what a publisher should do is what Baen does, the argument fails.
Baen is not the Apple, Google, or MS of the publishing world; it is a tiny niche publisher that puts out around 80 titles or so per year. (Random House puts out 80,000 titles per year in the US). There's no reason to assume that Baen is significantly more profitable than other publishers - or more profitable at all. The fact that other publishers don't copy Baen doesn't suggest that they are stupid; it suggests that what Baen does can't really be copied. Which is probably true - Baen set up a website very early and accustomed people to going there to buy certain books. This is not really scalable to other publishers since it would result in 1000's of separate websites. Plus, having their own website also means that Baen doesn't have to pay Amazon/Apple/B&N etc. 30% from each sale.