Amazon vs. Hachette Update - It's About Price

[pwalker8]

Originally Posted by Hrafn

As do you. You are inferring, without any apparent basis, that:

• Amazon could not infer from your browsing and buying habits that you are relatively price indifferent. Or that they even care about the price elasticity of single customers, as opposed to large demographic groups.
• That every single mistaken click will in some way totally invalidate Amazon's data. I am quite sure that Amazon fully expects individual browsing data to be very 'noisy' from a statistical point of view, and therefore only interesting and useful in large sample sets.
• That asking buyers questions will reveal more about their buying habits than about the buying habits they think they should have. Finding out what actually makes them put down their money is almost certainly more useful.

And now your assuming that I'm assuming.

It's no assumption at all. We have enough history to show that pure stats isn't the end all/be all that some make out it is. Sure, it's a useful tool, but once again, it's not generic widgets that we are talking about. People have been trying to use pure statistics to predict since the 60's and before, with little success.

This reminds me of the sabermetrics debates which rage through the baseball fan community. Sabermetrics has gone from a useful tool that some people have had success using (but not very many) to the end all, be all way to evaluate baseball players without having ever seen them play. Stats are a useful tool that can point you in a direction. It's not the end all/be all that replaces all other tools.

The fundamental problem is that there is a host of factors that people evaluate when they choose a book. Price is just one. Without a model that takes those factors into account, it's very unlikely that you can reliably predict what will happen, just using that model.

[eschwartz]

Originally Posted by pwalker8

And now your assuming that I'm assuming.

It's no assumption at all. We have enough history to show that pure stats isn't the end all/be all that some make out it is. Sure, it's a useful tool, but once again, it's not generic widgets that we are talking about. People have been trying to use pure statistics to predict since the 60's and before, with little success.

This reminds me of the sabermetrics debates which rage through the baseball fan community. Sabermetrics has gone from a useful tool that some people have had success using (but not very many) to the end all, be all way to evaluate baseball players without having ever seen them play. Stats are a useful tool that can point you in a direction. It's not the end all/be all that replaces all other tools.

The fundamental problem is that there is a host of factors that people evaluate when they choose a book. Price is just one. Without a model that takes those factors into account, it's very unlikely that you can reliably predict what will happen, just using that model.

In other words,

That every single mistaken click will in some way totally invalidate Amazon's data. I am quite sure that Amazon fully expects individual browsing data to be very 'noisy' from a statistical point of view, and therefore only interesting and useful in large sample sets.

[ApK]

Originally Posted by pwalker8

When Amazon sells an ebook for less than they pay the publisher, then they sell it at a loss.

Time out:
When you said:

Originally Posted by pwalker8

What is going on between Amazon and Hatchette is that Amazon is trying the leverage their dominate market position to force Hatchette to chose between two losing propositions, sale their books at a loss to Amazon, or be locked out of the ebook market.

you were referring to AMAZON taking a loss? You really did mean "at a loss to Amazon."
Because that reads like you meant it would be a losing proposition for them to "sell their books to Amazon at a loss."
You consider Amazon paying Hachette, and then choosing to take a loss themselves, if they actually chose to do so, to be a losing proposition for Hachette?
Despite the fact that Hachette would get paid no matter what, and also that Amazon's previous loss-leader efforts had resulted in the biggest growth the industry has every seen?

You've lost me.

[eschwartz]

Originally Posted by ApK

Time out:
When you said:

you were referring to AMAZON taking a loss? You really did mean "at a loss to Amazon."
Because that reads like you meant it would be a losing proposition for them to "sell their books to Amazon at loss."
You consider Amazon paying Hachette, and then choosing to take a loss themselves, if they actually chose to do so, to be a losing proposition for Hachette?
Despite the fact that Amazon's previous loss-leader efforts had resulted in the biggest growth the industry has every seen?

You've lost me.

No, you understood him correctly the first time.

Now he's just spreading FUD to cover his own confusion (about how he can possibly reconcile his Amazon Belief System with reality).

[Barcey]

Originally Posted by pwalker8

I'm pretty sure that Amazon doesn't have that information either. At least not 2, 3,5,6 or 7. You also have a lot of inference there. For example, price rarely comes into play when I chose to buy a book. So trying to mine my browsing habits for price data will give you a lot of bogus information. I might have clicked on a book, looked at it and decided I didn't want it for all sorts of different reasons, or I might have clicked on the book by mistake when my cat bumped my arm or I might have misremembered the title of the book that I was looking for. You can't know just by mining the server logs.

True market research involves a lot of talking to the end customers to understand what they like and don't like and what is important to them. Publishers do a lot more market research than you think. They do research into things like book covers, book titles and price points.

I don't have any inside knowledge of what data analytics that Amazon is actually performing but what I have outlined are pretty basic and I'd be shocked if they don't have this data. I do know that Amazon is considered one of the leaders in big data analytics and they've been at it for a long time.

www.bigdata-startups.com/BigData-startup/amazon-leveraging-big-data/

Amazon has an unrivalled bank of data on online consumer purchasing behaviour that it can mine from its 152 million customer accounts. Since many years, Amazon uses that data to built a recommender systems that suggest products to people who visit Amazon.com. Already in 2003 they used item-item similarity methods from collaborative filtering, which was at that time state-of-the-art. Since then Amazon has evolved and improved its recommender engine and today they master this to perfection. They use customer click-stream data and historical purchase data of all those 152 million customers and each user is shown customized results on customized web pages.

Amazon uses big data also to offer a superb service to its customers. This could be the effect of the purchase of Zapos in 2009, but it clearly helps that it ensures that customer representatives have all the information they need the moment a customer needs support. They can do this because they use all the data they have collected from their customers to build and constantly improve the relationship with its customers. This is something many e-tailers can learn from.

There is a lot of noise in data analytics if you look at small samples but when you look at large samples it can be filtered out.

I'm sure that the big publishers know that Amazon has better data then they do (and I'm sure they're negotiating for access to it). I don't think they question that it's accurate either. I've never seen them claim it's wrong but I've seen them claim that Amazon has educated the consumer that $9.99 is the correct price and the BPH have to educate the consumer that the price needs to be higher. They don't like the answer and they are arrogant enough to think they can change the customer's mind rather then adjust their business plan to meet it.

I believe that Amazon has given them four years to try to "educate the consumer" and learn they were wrong (four years is a long time in the ecommerce world). Now Amazon is frustrated because the answer is still $9.99 (or lower) and the publishers are too stubborn to admit they were wrong.

[fjtorres]

Originally Posted by Barcey

I don't have any inside knowledge of what data analytics that Amazon is actually performing but what I have outlined are pretty basic and I'd be shocked if they don't have this data. I do know that Amazon is considered one of the leaders in big data analytics and they've been at it for a long time.

www.bigdata-startups.com/BigData-startup/amazon-leveraging-big-data/

Very good article, that one.
As is this, referenced there:
http://www.technologyreview.com/news...out-consumers/

They're relatively old (18 months) so by now Amazon has even more data--if nothing else, because they're up to 250M accounts and over 50M Kindle accounts, from which they collect *reading* data. Which not only puts them ahead of where the publishers are, but ahead on anywhere they can hope to get, even if epub3 phone-home were implemented and not blocked by readers.

First mover advantage is powerful mojo.

[SteveEisenberg]

Originally Posted by Barcey

I'm sure that the big publishers know that Amazon has better data then they do (and I'm sure they're negotiating for access to it).

It's not a matter of better or worse, but different.

Hachette knows what happened to total sales of The Silkworm when Amazon lowered the eBook price from $14.99 to $8.99. Amazon only knows what happened to sales at Amazon.com.

Amazon certainly has better data on how big is the negative effect on indie mystery sales the day they dramatically lower the prices of a few bestselling big publisher whodunits. Now there's a statistic you won't see them putting in a press release!

[Barcey]

Originally Posted by SteveEisenberg

It's not a matter of better or worse, but different.

Hachette knows what happened to total sales of The Silkworm when Amazon lowered the eBook price from $14.99 to $8.99. Amazon only knows what happened to sales at Amazon.com.

Amazon certainly has better data on how big is the negative effect on indie mystery sales the day they dramatically lower the prices of a few bestselling big publisher whodunits. Now there's a statistic you won't see them putting in a press release!

The publishers probably have indicative samples of what happened but they probably don't know what really happened for a couple of months. All the outlets have to go through their month ends and report up through the channels. Ask them why they don't report sales numbers to their authors as fast as Amazon does.

Amazon probably knows what happened the next day. It's across 60% of the US market and is a large enough sample to predict what's happening in the rest.

You're correct they aren't going to release the data or they will selectively release the data. It's a competitive advantage for them.

[John F]

Originally Posted by SteveEisenberg

It's not a matter of better or worse, but different.

Hachette knows what happened to total sales of The Silkworm when Amazon lowered the eBook price from $14.99 to $8.99. Amazon only knows what happened to sales at Amazon.com.

Amazon certainly has better data on how big is the negative effect on indie mystery sales the day they dramatically lower the prices of a few bestselling big publisher whodunits. Now there's a statistic you won't see them putting in a press release!

Or maybe Amazon wants to keep the "negative day" sales secret for other reasons? The previous year, with the 14.99 BPH price, customers have been gobbling up the cheap indie titles, getting exposed to new authors, eroding the BPHs appeal...

Who knows?

[SteveEisenberg]

Originally Posted by darryl

Sorry Steve. I was a bit lazy in describing the posters apparent category as non-fiction.

And I was lazy in using the word subsidy. More on that later.

Originally Posted by darryl

I think the actual category the poster seems to prefer is obscure non-fiction which few others want to read and which has few prospects of even breaking even.

My category example was Chinese history. To state the obvious, there are a lot of Chinese, and tens of millions of them live in countries where there is freedom to read. That's just one reason why this category repeatedly generates international bestsellers.

Originally Posted by darryl

In fact, I don't agree with the subsidy argument.

Subsidy was the wrong word.

What do we call the benefit Toyota customers get from Lexus? I don't know that Lexus subsidizes Toyota. But Toyota buyers -- including used Toyota buyers -- benefit from getting, some years later, patented features first offered to Lexus buyers.

It seems to me that something similar happens when those who can't wait a few years for the price of the latest bestseller to go down pay a much higher price, and those who can wait pay a lower price.

It also leaves room for new entrants into publishing, including indie authors, to compete by price.

Seems fair to me. And it's a lot better than Amazon decreeing an end to Lexus-type books.

[ottdmk]

A question: is $14.99 really that common a price point? I freely admit that I only usually look buying ebooks when the mass-market paperbound comes out. At that point the publishers I buy from are usually pricing the ebooks at a little less then the paperback.

[fjtorres]

Originally Posted by ottdmk

A question: is $14.99 really that common a price point? I freely admit that I only usually look buying ebooks when the mass-market paperbound comes out. At that point the publishers I buy from are usually pricing the ebooks at a little less then the paperback.

It was the baseline price during the conspiracy.

The way the court documents put it, the BPHs wanted a flat $14.99 price for everything--short or long, Patterson or Joe Newcomer--and Apple insisted on $12.99. iBooks launched at a nominal $14.99 with NYT bestsellers at $12.99 but the scheme didn't last long and eventually Apple got it their way, with most Agency titles running around $12.99 give or take a buck. (The problem was that at $12.99, the publishers made less per book under agency than under pre-agency wholesale and at $14.99 they made roughly as much.)

http://www.businessinsider.com/how-s...es-2013-7?op=1

Penguin actually tried $16.99 for the first month but quickly retreated to the "safety" of the pack when they saw the first sales reports.

Obviously, Hachette is still pining for agency at $14.99 and Amazon's answer is they can have 30% agency at $9.99 but not at the higher price/lower volume. Going by the early rumors, apparently they asked for a bigger cut at the higher price. (Probably closer to 50% than 30%.)

For the record, those are Amazon's terms to indies: 70-30 at $2.99-9.99 and 50-50 otherwise. Pretty consistent.

[ApK]

Originally Posted by fjtorres

the BPHs wanted a flat $14.99 price for everything--short or long, Patterson or Joe Newcomer
[...]
http://www.businessinsider.com/how-s...es-2013-7?op=1

Whaa? But that's IMPOSSIBLE. BPHs know the value of each specific author and book. They are the experts in that subject, and would never STAND to let someone, like some big mean ol' retailer, set one price for everything, as if they were interchangeable cogs in a machine!

Look, it says so right here!

[Hrafn]

Originally Posted by pwalker8

And now your assuming that I'm assuming.

Ummm ... NO!

I was simply summarising some of the unsubstantiated claims YOU made in YOUR post #115. If you think that I either (i) misrepresented your positions or (ii) that you have in fact presented substantiation, then say so (and provide evidence to back up your claim) -- don't just play the 'I know you are but what am I' card and grin inanely as though that is a winning argument.

As for the rest of your rant, if hard data, and rigorous quantitative analysis gives you a sad , then I suggest you stick to discussing warm and fuzzy topics like puppies, lolcats or art appreciation, because business and economics are, at their heart, cold and empirical subjects -- where the best hard data, backed by the most careful and rigorous analysis, will inevitably yield the winning argument.

[ApK]

Originally Posted by fjtorres

For the record, those are Amazon's terms to indies: 70-30 at $2.99-9.99 and 50-50 otherwise. Pretty consistent.

Note KDP royalties are only 35% to the author/publisher if the price is below a certain point.