Quote:
Originally Posted by sirbruce
I'm afraid this view of business is limited to commodites. It does not apply to books, because it's not possible to make the books "significantly cheaper". The cost of physical production of each book is not large. The skilled labor involved (editing, etc.) cannot be undercut by cheap foreign workers, so it remains relatively fixed. The cost of an ebook is far from zero. The *marginal* cost of an ebook is almost zero, much less than a physical book, but you still have to pay for the up-front overhead.
What makes matters worse is that books traditionally have a tiered pricing structure: more expensive hardbacks come out first, with cheaper paperback and other editions later. This allows one to recoup costs with higher margins on the hardbacks. Making money only via paperback editions can be done, but it's more difficult unless the demand for hardbacks is very low.
With ebooks, people expect paperback prices for new hardback releases. And that's a problem. I personally would be happy if new ebooks came out at $10 - $13 along with the $25 hardback, then reducing to $5 - $8 when the paperback comes out. And I think this sort of structure allows for more profits all parties: publishers, retailer, and author.
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Sirbruce, all business is commodity business. The only time there are exceptions are when: 1. there are legal restrictions creating monopolies, - patents, copyrights, legally protected guilds, ect. and 2. there is such a high economic barrier of entry that there are few producers controlling a oligopoly.
As to e-books. All the costs you described are design costs, not production costs. They have to be spent before you produce unit one, and therefore are fixed for that particular product. The goal is to sell enough units of the product to pay for those fixed cost of design at a price low enough to attract many customers, assuming there are many customers interested in your product at all.
Yes, books are protected by copyright. But copyright is no longer self enforcing (and there have been many posts at various times explaining why, I don't want to repeat), which is converting a monopoly-like business to a commodity business.
In the digital world, the marginal cost of producing another unit of product approaches zero. Therefore, the whole mass production paradigm fails.
Let me describe a relevant example. Robert A. Heinlein write a juvenile book
Red Planet. The editors requires modifications, disliked by the author, before printing. The book sell a lot of copies, starting in 1949. OK, how much editing does an e-book of
Red Planet require today? Answer - none! It will need OCR proofing, just like a new set of plates would need galley proofing, but editing? None. Why? Because the expense was incurred in 1948, before the book was ever produced. It's not an ongoing production expense.
Now I have a new manuscript from modern author XYZ. Does it need editing? Answer - yes. Same author beef. But all of this is done before copy one is either printed or released as an e-book. Once the editing is done, it becomes a fixed cost to be amortized. But in the digital world, amortization of fixed costs is dying because the marginal cost of production is about zero.
Now as long as you can get people to pay a non-zero price for a product that has a marginal cost of zero, you have a profit margin to work with. And that margin can be used for fixed costs as well. But the limit of what you can charge for product is set by the commodity price limitations. In other words, does it cost more or less that other similar products. People seem to be willing to pay $4 to $6 dollars for an e-book. So that sets the marketplace price, which you as a publisher must meet. You have to adjust your cost to meet the marketplace price, not the other way around. This is a hard reality for the publishing industry to accept...