Yet another thumb of the nose from publishers

[FF2]

Originally Posted by DMcCunney

The risk from what you propose is what happens once Amazon thinks it has the market share. Do they suddenly jack up prices all around to make money? Low ball pricing is a good way to gain market share, but having gained it, you must keep it. Amazon is customer-centric. I don't see them being enthusiastic about pissing off customers by getting them accustomed to a low price then raising it on them. That's not the way you retain customers.
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Dennis

Homed in on your last paragraph. I was thinking about buying a Makita power driver. Amazon had it for a price. I followed it for a number of weeks trying to decide if it was a necessary purchase. It was in my cart/wishlist. Suddenly, it went up about $20 in price. This was one very irritated customer. I removed it from cart and wish list along with everything else. I'm sure they could not care a bit.

Two weeks later is was back to the old, lower price. I purchased it a week later. It was almost a 10 percent price increase. No idea why it went up and then down. So, yes, they might corner the market and then inflate prices. They CAN do it - just remains if they will do it.

[murraypaul]

Originally Posted by DMcCunney

As mentioned, if I'm a producer, there will be a minimum amount I have to charge, simply to remain in business.

Here we differ.
There is essentially no unit production cost for an eBook, and almost no floor at which an eBook could not be profitable if you sold enough of them.
There seems to be a mindset that we know how many of this book we want to sell, and as long as we hit that number we have succeeded, so we'll set the price that we think will let us hit that sales number. That is almost dismissing the possibility of any real success, just being happy enough to trundle along with your current customer base.

[tompe]

Originally Posted by murraypaul

There seems to be a mindset that we know how many of this book we want to sell, and as long as we hit that number we have succeeded, so we'll set the price that we think will let us hit that sales number. That is almost dismissing the possibility of any real success, just being happy enough to trundle along with your current customer base.

But you usually know how many you will sell and the runaway successes will occur anyway since they are not price sensitive.

You seem to reason that the demand is infinite just given the right price. Which seems a strange assumption since the available time for reading books is very limited for most people.

[murraypaul]

Originally Posted by DMcCunney

I concur. But it's precisely that "high price when the book is new" that has caused a lot of adverse comment when it's applied to ebooks.

Well I think hardback prices are unreasonable, so I don't buy them, to me a book is released when it is available in paperback, so it doesn't exercise me personally.
Plus each publisher has a monopoly on their authors' works, the fact that something is a sensible business practice for a monopoly doesn't make it particularly palatable to customers. Of course that only really hold true of the major name authors, in genre fiction books might be considered more interchangeable.
I do think they are going to struggle to maintain eBook prices at the same level as pBook prices, I simply don't think most people will think that is reasonable.

[murraypaul]

Originally Posted by tompe

You seem to reason that the demand is infinite just given the right price. Which seems a strange assumption since the available time for reading books is very limited for most people.

I think demand is elastic.
I bought the three Larsson books because they were less than $5 each and I might want to read them at some point. If they had been $10 I wouldn't have bought them, I'd have either got a library copy or waited until I actually wanted to read them and just bought the first.
In another thread someone mentioned a different translation of a book I like. It was $10, so I passed. I'm $5 interested, but not $10 interested.
Are there people who won't pay $25 for a hardback, but wait and pay $10 for a paperback? Yes, there are, so demand is clearly elastic there.
Do people read library books, or borrow books from friends? Yes, they do, so there are clearly more people who want to read the book than pay the current price for it.
I don't see any reason for believing that somehow books are special and don't react like other products.

[DMcCunney]

Originally Posted by FF2

Two weeks later is was back to the old, lower price. I purchased it a week later. It was almost a 10 percent price increase. No idea why it went up and then down. So, yes, they might corner the market and then inflate prices. They CAN do it - just remains if they will do it.

I have no idea what was going on in the price gyrations you saw. And I agree, Amazon could raise prices across the board. I just think it's unlikely they will. They want to keep the customers. For most things you buy from Amazon, there are other places you can get them, so Amazon doesn't have you locked in. For ebooks it's thornier. The Kindle eco-system and Amazon DRM does try to lock you in to Amazon as your sole source of ebooks. They could get away with an across the board price increase more easily with ebooks in terms of retaining existing customers, but the negative publicity they'd get from the move might make it harder to gain new customers.
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Dennis

[starrigger]

Originally Posted by DMcCunney

There's an awful lot of wishful thinking on the publisher's side about how much they can successfully charge for an ebook, and even more wishful thinking on the buyer's side about how cheap an ebook can be.

The truth is somewhere in the middle, and everyone is trying to find out just where that middle is.
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Dennis

And that is the most succinct summary I have yet seen of this seemingly infinite topic of debate.

[DMcCunney]

Originally Posted by murraypaul

Here we differ.
There is essentially no unit production cost for an eBook, and almost no floor at which an eBook could not be profitable if you sold enough of them.
There seems to be a mindset that we know how many of this book we want to sell, and as long as we hit that number we have succeeded, so we'll set the price that we think will let us hit that sales number. That is almost dismissing the possibility of any real success, just being happy enough to trundle along with your current customer base.

Nope.

There is a unit cost for ebooks.

As mentioned previously, 80% or more of the costs of producing a book are incurred before it ever reaches the stage of actual publication. For a printed book, the other 20% of the costs are in printing, binding, warehousing, and distribution. You drop those costs with an ebook, but you don't drop all the other costs that are incurred up to that point.

And for printed books, the unit cost varies. The biggest costs in printing/binding are setting up to do it in the first place. The incremental cost of printing/binding more copies is far less, so higher press runs equate to lower unit costs.

Ebooks don't tag along free when there is a print version and an electronic version, with an assumption that the print version absorbs the costs and the ebook is gravy. The accounting doesn't work that way. The ebook will be expected to make a contribution to revenue, and be allocated a share of the cost.

And what happens if the ebook version is the only version?

So there will be a unit cost, in the form of an allocated share of the costs of producing the book, that will decline as more copies are sold but won't simply go away.

And any particular book will have a maximum number it can sell.

No book will be bought by all readers. How many it will sell will depend upon the book and the author. We can assume a new book by an internationally best selling author will be another best seller, (and the publisher will offer a far higher advance) to get it. We cannot make that assumption for a first book by a new author or another title from a midlist author. The publisher will make their best guess based on prior history on the total market for a particular title, and offer and advance and allocate production costs accordingly. There will be a limit to how much a lower price will spur sales. For most folks, the scarce resource is time to read the book, not money to buy it, and while a lower price might gain some additional sales, there will be a limit on how many.

Yes, a title may be a surprise breakout success and go on to become a best seller. That's what the publisher and the author hope for, and if it happens the champagne is broken out and there are smiles all around, but nobody normally makes any bets it will happen. (Publishers do decide a title has best seller potential and make that bet, but it's the exception, not the rule, and there's a hefty downside if they lose the bet.)
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Dennis

[MovieBird]

Originally Posted by DMcCunney

You are assuming all textbooks are like your mother's comp sci/math texts. They aren't. There are plenty of texts that must include illustrations, perhaps even in color (medical textbooks, anyone?), and multi-column layouts, footnotes, and sidebars are largely the norm.

Simply adding math to ePub doesn't help you. (And you can include equations now as embedded illustrations.)

You mean there are areas of study that don't use math (I'm kidding)?

As far as color diagrams, so insert a color picture. I'm willing to wager the majority of eReading is done on devices that can show color. And eInk devices will get color at some point. My only point is that we should go back to linear textbook formatting, as opposed to having busy pages with an example in one corner, a second picture somewhere else, and margin notes. What's wrong with a paragraph and then an equation/picture/table? Margin notes can simply be hyperlinked endnotes.

I guess I just fail to see what is so hard about making a textbook enjoyable to use in a flowable format, other than having to do it differently from the firehose approach of putting as much glitz onto a page as possible in the printed world.

[DMcCunney]

Originally Posted by murraypaul

I think demand is elastic.
I bought the three Larsson books because they were less than $5 each and I might want to read them at some point. If they had been $10 I wouldn't have bought them, I'd have either got a library copy or waited until I actually wanted to read them and just bought the first.
In another thread someone mentioned a different translation of a book I like. It was $10, so I passed. I'm $5 interested, but not $10 interested.
Are there people who won't pay $25 for a hardback, but wait and pay $10 for a paperback? Yes, there are, so demand is clearly elastic there.
Do people read library books, or borrow books from friends? Yes, they do, so there are clearly more people who want to read the book than pay the current price for it.
I don't see any reason for believing that somehow books are special and don't react like other products.

There is elasticity in demand, but there are limits to elasticity. Any product has a maximum total market. No product will be something everyone will buy. Pricing will affect sales, but there will be limits depending upon product and market to how great the effect will be.

As a somewhat extreme example, an old friend is a dance historian. She writes on the topic, holds workshops where she teaches historical dances, and serves as dance caller at historic dance events. She estimates there are perhaps 25 people in the world qualified to discuss the subject at her level. If she writes a book on the topic, how large a market do you think it might have? We can assume people interested in the topic but not at her level might buy the book, because they want to learn more and get to her level, but we are still talking about a total market measured in hundreds of copies, and an arch typical example of a "niche" market. How much do you think pricing will affect sales?

As another example, a late friend was a railroad fan, and a lifetime subscriber to Trains magazine. He commented that the market for books on that topic was largely not price sensitive. If a book was published on a particular topic, people with an interest in that topic would buy it. (Like, say, a volume on the motive power used by the Nickle Plate Road. Nickle Plate fans would consider that book a must have, and the only question would be when it would fit in the budget.)

How elastic the demand is depends on book, author, and subject, and may not be as elastic as you'd like to believe.
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Dennis

[Fbone]

Originally Posted by DMcCunney

The risk from what you propose is what happens once Amazon thinks it has the market share. Do they suddenly jack up prices all around to make money? Low ball pricing is a good way to gain market share, but having gained it, you must keep it. Amazon is customer-centric. I don't see them being enthusiastic about pissing off customers by getting them accustomed to a low price then raising it on them. That's not the way you retain customers.
______
Dennis

In the UK ereaders are more expensive than US. Are they more willing to purchase two devices if unhappy with an ebook store?

Once someone there buys a kindle, Amazon has them probably for a long time especially if their library doesnt have Overdrive. Are Waterstones and WH Smith unhappy with the higher costs of Sony and PB products?

I wonder if the epub retailers should subsidize the Sonys and PBs by a special promotion somehow to gain future customers.

[DMcCunney]

Originally Posted by MovieBird

As far as color diagrams, so insert a color picture. I'm willing to wager the majority of eReading is done on devices that can show color.

I'm not. But the question is how much is done on dedicated readers vs multi-purpose devices. I honestly don't know.

My usual reading device does color because it's a multi-function device, but I don't assume I'm representative.

And eInk devices will get color at some point.

Not holding my breath, and recommending you don't either. eInk talked about having a 12 bit color prototype in the lab in 2006 that they expected to be in volume production in 2007. Didn't happen.

There are several promising low-power consumption color technologies out there, but they aren't eInk.

My only point is that we should go back to linear textbook formatting, as opposed to having busy pages with an example in one corner, a second picture somewhere else, and margin notes. What's wrong with a paragraph and then an equation/picture/table? Margin notes can simply be hyperlinked endnotes.

I guess I just fail to see what is so hard about making a textbook enjoyable to use in a flowable format, other than having to do it differently from the firehose approach of putting as much glitz onto a page as possible in the printed world.

Speaking as someone who was once a print designer/production guy, I wouldn't call it "glitz". The point is to convey information, and the best design is the one that does the best job of it. There are reasons for textbook design that aren't related to glitz.

But the fundamental issue is making best use of the capabilities of an electronic device. This requires a different format from the one used to produce the printed book. Even if you simplify the design of the printed book to be single column with in line illustrations and the like, it will still be different, and there will be additional costs involved in maintaining both formats.

The trick is reducing the additional costs to a reasonable level, which is where I think XML can help.
______
Dennis

[murraypaul]

Originally Posted by DMcCunney

There is a unit cost for ebooks.

As mentioned previously, 80% or more of the costs of producing a book are incurred before it ever reaches the stage of actual publication. For a printed book, the other 20% of the costs are in printing, binding, warehousing, and distribution. You drop those costs with an ebook, but you don't drop all the other costs that are incurred up to that point.

No, those are fixed costs, not variable.
'Printing' an extra 1000 eBooks does not cost you a measureable amount of money.

So there will be a unit cost, in the form of an allocated share of the costs of producing the book, that will decline as more copies are sold but won't simply go away.

The fixed costs are fixed. Everything else is accountancy.
The amount allocated to each copy will change, but the overall amount will not. It does not cost you more money to sell more copies, unlike with physical objects. Therefore there is not the measureable minimum price that there is with a physical object where it can be sold to break even.

[DMcCunney]

Originally Posted by murraypaul

No, those are fixed costs, not variable.
'Printing' an extra 1000 eBooks does not cost you a measureable amount of money.

No, it doesn't. But fixed costs are allocated across the production run, and become unit costs. There is more to unit costs than the simple incremental cost of making one more of whatever it is.

Consider the devices we use to read ebooks. Semi-conductor electronics is a prime example of a capital intensive business. The biggest cost involved is the cost of building the factory to make the devices, and an allocated share of that cost becomes the biggest part of the unit cost of any device.

This is where economies of scale come in. The more devices you make, the wider a base over which you can spread that fixed cost, and the cheaper you can price each one.

That cost will never drop to zero - there will be a bill of materials for each device with the costs of the components that go into the device, and labor costs for the construction, among others. But the biggest single portion of the cost is setting up to make the things in the first place, and the more you make of a device, the lower the percentage of the cost it becomes, and the cheaper you can make the device.

The fixed costs are fixed. Everything else is accountancy.
The amount allocated to each copy will change, but the overall amount will not. It does not cost you more money to sell more copies, unlike with physical objects. Therefore there is not the measureable minimum price that there is with a physical object where it can be sold to break even.

Have you actually read my previous posts on the subject? Was I not clear?

There is certainly a measurable minimum cost. It will be what you must charge to cover your costs and make enough to remain in business. How large that number is depends upon what your total cost is and how many of whatever you are making that you expect to sell. If your total cost is $100,000, and you expect to sell 1,000 of whatever it is, you must charge $100 per copy simply to cover your costs, and will probably have to charge twice that to make enough money to remain in business. If you expect to sell 10,000, your minimum cost drops proportionately. But you will have an ultimate limitation on how far your price can drop based on the total number of copies you can sell.

All books don't have equal sales potential. A few will become bestsellers. Somewhat more will sell enough to justify publishing more books by that author. Most won't sell enough to make back their costs. This will be true regardless of whether the book is a paper book or an electronic one.
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Dennis

[DMcCunney]

Originally Posted by Fbone

In the UK ereaders are more expensive than US. Are they more willing to purchase two devices if unhappy with an ebook store?

I don't have a feel for comparative prices. I suspect they are more expensive, but that will probably have more to do with the local market, like the level of taxes applied to the purchase.

Once someone there buys a kindle, Amazon has them probably for a long time especially if their library doesnt have Overdrive.

Once someone has a Kindle here, Amazon is betting that it has them for a long time. The whole Kindle system is about vendor lock in, and "You can have any ebook you want, as long as you buy it from Amazon."

There are certainly folks with more than one reader (and I suspect the majority hang out on MobileRead), but for them it's a hobby thing, and they simply enjoy having and playing with more than one device.

Are Waterstones and WH Smith unhappy with the higher costs of Sony and PB products?

They may be.

I wonder if the epub retailers should subsidize the Sonys and PBs by a special promotion somehow to gain future customers.

How? Price below cost and take a loss on every sale to build market share? There's a limit to how much any retailer can afford to do that and stay in business. And the dedicated book chains are under heavy pressure as it is, and many are showing losses. Lots of folks are placing bets on how long Borders will survive, for example. (And there were rumors Barnes and Noble might buy them that foundered on the question of where B&N would get the money. It would be a case of betting two sick companies would make a healthy one, which is not a bet lenders are enthusiastic about making.)
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Dennis