Amazon vs. Hachette Update - It's About Price

[darryl]

Originally Posted by pwalker8

I never said that Amazon selling ebooks at a loss was a losing proposition for Hachette. That's just your misrepresentation of what I said. However, Amazon setting a price point in the public's mind that devalues ebooks is a big issue for all the major publishers and what they have been fighting against for several years. Of course, Amazon's new demand that publishers foot the bill for Amazon selling ebooks at a loss is a pretty big issue as well.

So now we get back to this ridiculous idea that selling ebooks at a reasonable price devalues them. So if en ebook is $14.99 I value it (but don't buy it), but if it is $9.99 I don't? Who decides what price constitutes a devaluation? What this disingenuos argument seeks to do is conditon readers to paying old print book prices for ebooks. EBooks came into a well established market of Paper Books. Hard Covers, better quality, first released, and much more expensive. Mass Market Paperbacks, much cheaper but a delayed release and much more fragile than a hardcover, and sometimes an in-between edition. All of a sudden EBooks appear. More durable than a Hard Cover and much more so than a paperback. Orders of magnitude cheaper to produce. Hence the "devaluation" argument. It does not address costs of production or any other valid consideration. It simply says "If we sell at a lower price they won't value it". What a load of garbage.

[darryl]

Originally Posted by DuckieTigger

Devalues ebooks? Ebooks devalue themselves automatically once the mmpb enters. How come the exact same ebook is now worth less money? If it isn't dirty price fixing. The mistake enters when you actually believe that an ebook is the exact same thing as a hardcover book. It is the same, but only until the paperback comes out. Then it is the same as a paperback. The true value is the exact same as a hardcover, but then after a while the true value changes to the paperback? That does not make any sense. The true value of an ebook is somewhere inbetween. It is durable like a hardcover, but it is portable like a paperback. Most ereaders or phones take up less space and weight than a paperback. When you buy a hardcover you pay for two things - the better quality of the book itself compared to paperback and early access. With an ebook you only get the early access, thus it is only one benefit over the paperback. If all is fair, than the ebook should be exactly cheaper by the amount of the per unit price of the hardcover book (printing and storing). More than likely the ebook still won't be quite $9.99 suggested retail price if the hardcover suggested retail is $14.99. But then it should be at the retailers discretion to discount.

No. It is a mistake to value EBooks by comparison with PBooks. I personally will probably never buy another PBook. In fact, I think the day is coming when most Print Books are printed on demand, particularly if print technology becomes cheaper. The print book analogy is all about trying to justify charging print book prices for EBooks. I find it hard to take your suggestion seriously that ebooks be priced by reference to "per unit price of a hardcover book, including printing and storage".

And finally, since you agree that it should be at the retailer's discretion to discount, logically you must oppose Agency Pricing, since this takes such a decision outside of the hands of the retailer and places it into the hands of the publisher.

[rhadin]

Originally Posted by fjtorres

We seem to have different definitions of baseline: to me, baseline is the expected price for the category. Anybody wanting to go higher would need a very good excuse.

Basically, you want a centralized system of pricing (publishing world communism economy): The price shall be $9.99 or less unless you fill in triplicate these forms and receive special permission to sell your book for $10. And here I thought you were an advocate for the free market.

In a free market, I can set my pricing at whatever I want and either you buy or you don't buy. I don't need your permission to set my price nor do I need to give a reason/excuse.

On the one hand you oppose agency pricing imposed by the maker of the goods for sale, but on the other hand support agency pricing by the retailer of the goods. (The legal definition of agency pricing is simply that the seller of a product receives a fixed percentage of the sales price. It is not tied to a specific pricing structure, which means that price caps can be agency pricing as much as price minimums.)

After all, what is, when you get right down to it, the difference between Hachette saying I want my books sold for nothing less than $15 and Amazon saying I want your books sold for nothing more than $10 (excluding, of course, the $5 in cutoff price)?

Other than that you as a consumer would pay less with Amazon's cap, I see no difference between Hachette's agency pricing that Mobile Readers have consistently railed against and Amazon's agency pricing that the same Mobile Readers support -- that is, aside from one being proposed by the hated BPH and the other by the beloved best friend Amazon.

[rhadin]

Originally Posted by ApK

I don't see it that way.
1. If Amazon's assessment of the situation proves correct, BPH's revenue will increase and they can pay all the big advances they want. I don't see how it's connected. My alternate funding thoughts were purely an aside to further the idea that BPHs should prepare to adapt to paradigm shifts in the industry.

2. You're saying Amazon will kill research-oriented books by forcing one price on most stuff. But, if fjorres's summary of the agency price fixing case is accurate, then BPHs wanted the exact same thing, just at a price $5 higher, and all Amazon is claiming is that they will all make more at the lower price.

Will you concede that those are very big IFs?

1. What if, instead, Amazon's assessment is wrong? Or what if Amazon's assessment is correct but only for Amazon and not for the BPHs? Or what if the BPHs' assessment is, in fact, the correct assessment?

2. What if Amazon decides that it isn't in Amazon's best interest to let the BPH charge $5 higher for that research-oriented book? That is, using fjTorres' "excuse" rationale, Amazon decides Amazon's sales of the book would decline thus hurt Amazon's bottom line so that even if the BPH's excuse would otherwise be sufficient, Amazon won't accept it because it favors the BPH and not Amazon? The big IF here being Amazon's altruism, something not previously displayed or able to be relied upon.

Will you concede that none of us have enough real facts, as opposed to speculation, interpretation, and preference for one party or the other, to draw the conclusion that Amazon is the angel and Hachette the devil in this dispute?

[Hrafn]

I think all this talk about "devaluing" goods is a red herring. What we are in fact dealing with is cross elasticity of demand between goods. Yes, the price of ebooks affects the profit-maximising price of hardcovers -- but the price of MMPBs also affects this (as the lower the price of the MMPB, the more people who are willing to wait for the MMPB to buy and read the book).

The degree to which prices of one good act as a constraint on the (promit maximising) price of the other is dependent on how close they are to being perfect substitutes for each other. Given that few people seem to be indifferent between ebooks and pbooks (most either tend to move towards using their eReader exclusively, or abandoning it altogether), I would suspect that the imperfection of substitutability would be relatively high (far higher between HCs & MMPBs) -- allowing for considerable leeway for a comparatively large price gap between the two.

Either way, it is a matter for data-driven mathematical calculation of the profit-maximising combination of HC, MMPB & ebook prices, not for some panicked, sky-is-falling misconception that setting ebook prices below HC prices will "devalue" and destroy the market for HC. The latter viewpoint only makes any sense if either (i) you don't understand economics (some commenters here?) or (ii) if you lack good elasticity data and are incredibly risk-averse (publishers?).

[darryl]

Originally Posted by rhadin

Basically, you want a centralized system of pricing (publishing world communism economy): The price shall be $9.99 or less unless you fill in triplicate these forms and receive special permission to sell your book for $10. And here I thought you were an advocate for the free market.

In a free market, I can set my pricing at whatever I want and either you buy or you don't buy. I don't need your permission to set my price nor do I need to give a reason/excuse.

On the one hand you oppose agency pricing imposed by the maker of the goods for sale, but on the other hand support agency pricing by the retailer of the goods. (The legal definition of agency pricing is simply that the seller of a product receives a fixed percentage of the sales price. It is not tied to a specific pricing structure, which means that price caps can be agency pricing as much as price minimums.)

After all, what is, when you get right down to it, the difference between Hachette saying I want my books sold for nothing less than $15 and Amazon saying I want your books sold for nothing more than $10 (excluding, of course, the $5 in cutoff price)?

Other than that you as a consumer would pay less with Amazon's cap, I see no difference between Hachette's agency pricing that Mobile Readers have consistently railed against and Amazon's agency pricing that the same Mobile Readers support -- that is, aside from one being proposed by the hated BPH and the other by the beloved best friend Amazon.

I think there are very few supporters of an untramelled free market these days. Most recognise that for a market to work properly some regulation is needed. A free market is based on competition. So when an intending new entrant to that market enters into a conspiracy with the exising oligopolists which eliminates most competition the free market needs saving. Which the DOJ did.

You seem to overlook the loss in Court by Apple and the settlements by the other BPH conspiracists. What happened was simply a greedy cartel seeking to price fix. They bargained on the US DOJ doing nothing and lost.

Your legal definition of agency pricing seems to have been plucked out of the air. Such pricing is based on the fiction that a retailer is simply acting as an agent for the seller, with the further fiction that the end buyer is buying the product directly from, in this case, the Publisher. The retailer loses the ability to set a price, and the publisher sets a single price over the whole market. Classic price fixing.

And the difference between Amazon's position and Hachette's? Hachette entered into a conspiracy with some of its fellow oligopolists and Apple and the conspiracy actually imposed its plan on Amazon and other retailers. Amazon's statement is that it believes that $9.99 is the best price point, and that it is happy to accept 30%. Amazon has told Hachette and the other BPH what it wants. It has not forced its price upon them nor do I believe it has the power to do so.

[pwalker8]

Originally Posted by DuckieTigger

Devalues ebooks? Ebooks devalue themselves automatically once the mmpb enters. How come the exact same ebook is now worth less money? If it isn't dirty price fixing. The mistake enters when you actually believe that an ebook is the exact same thing as a hardcover book. It is the same, but only until the paperback comes out. Then it is the same as a paperback. The true value is the exact same as a hardcover, but then after a while the true value changes to the paperback? That does not make any sense. The true value of an ebook is somewhere inbetween. It is durable like a hardcover, but it is portable like a paperback. Most ereaders or phones take up less space and weight than a paperback. When you buy a hardcover you pay for two things - the better quality of the book itself compared to paperback and early access. With an ebook you only get the early access, thus it is only one benefit over the paperback. If all is fair, than the ebook should be exactly cheaper by the amount of the per unit price of the hardcover book (printing and storing). More than likely the ebook still won't be quite $9.99 suggested retail price if the hardcover suggested retail is $14.99. But then it should be at the retailers discretion to discount.

Devalues as in setting a price point in the public's mind that is less than the publishers want to sell it at. You confuse the manufacturer's cost of an item with the value of an item. The two are not the same. Value is how much someone is willing to pay for an item. At the moment, ebook price is tied to the price point of whatever the price of the current dead tree book at a particular point in time.

It might help if you think of it this way. X number of people are willing to pay $17 for a book, for whatever reason. Y number of people aren't willing to pay that much, but they are willing to pay $8 for the book. Rather than come out at $8 and get 8* (X+Y), book publishers publish the paper back a year after the hard back, which gets them (17*X) + (8*Y). The actual price point has little to do with the manufacturing cost of a specific book.

[Josieb1]

The baseline for the genre I read, which is NOT represented by the main Trade Publishers is $6.99, this is for ebooks. Authors have stated that when books are higher than this they sell markedly fewer books. I read romance.

[Josieb1]

I have just bought a new edition of a favorite book of mine, its had a new chapter added to bring the story up to date as the original book was released 25 years ago. I had the choice of £6.64 for ebook or £6.99 for paperback, so for the first time in 4 years I bought the paperback.

http://www.amazon.co.uk/Lady-Hay-Bar...ds=lady+of+hay

[pwalker8]

Originally Posted by rhadin

Basically, you want a centralized system of pricing (publishing world communism economy): The price shall be $9.99 or less unless you fill in triplicate these forms and receive special permission to sell your book for $10. And here I thought you were an advocate for the free market.

In a free market, I can set my pricing at whatever I want and either you buy or you don't buy. I don't need your permission to set my price nor do I need to give a reason/excuse.

On the one hand you oppose agency pricing imposed by the maker of the goods for sale, but on the other hand support agency pricing by the retailer of the goods. (The legal definition of agency pricing is simply that the seller of a product receives a fixed percentage of the sales price. It is not tied to a specific pricing structure, which means that price caps can be agency pricing as much as price minimums.)

After all, what is, when you get right down to it, the difference between Hachette saying I want my books sold for nothing less than $15 and Amazon saying I want your books sold for nothing more than $10 (excluding, of course, the $5 in cutoff price)?

Other than that you as a consumer would pay less with Amazon's cap, I see no difference between Hachette's agency pricing that Mobile Readers have consistently railed against and Amazon's agency pricing that the same Mobile Readers support -- that is, aside from one being proposed by the hated BPH and the other by the beloved best friend Amazon.

Of course. In a nutshell, for many here it's my side verses your side. They are simply looking for talking points that support their side. One sees this in many internet discussions. The quicker a poster resorts to insults and rhetoric, the more likely that is what is going on.

[tubemonkey]

Dear Amazon

Tell Hachette to take a hike. Tell them to peddle their wares elsewhere.

Signed; someone who only reads free ebooks

[fjtorres]

Originally Posted by rhadin

Basically, you want a centralized system of pricing (publishing world communism economy): The price shall be $9.99 or less unless you fill in triplicate these forms and receive special permission to sell your book for $10. And here I thought you were an advocate for the free market.

.

Heh.
Very interesting smokescreen, bringing in politics and stuff I never mentioned.
Central authority? Paperwork? Permission? Communism? Seriously? Are we headed into Godwin territory already?

In the example I mentioned, it is consumers who decide if a higher price (or even the baseline) is justified. And the publishers know it so they tread carefully. The actual sale price is determined by market forces and consumer demand. And nobody whines that games (which cost tens of millions to develop) are devalued when sold at a discount.

As I said, to *me*, a proper ebook baseline price is $4.99. The publisher wanting more can try to convince me their special snowflake is somehow worth more and I might bite (I have bought the occasional BAEN eARC to read a story six months early) but I see no rational reason why an ebook license, with limited property rights, should cost more than a paperback (not just mmpb but also trade) when it offers less real world value.

It is that simple.

Amazon says they think that, absent special conditions it makes more sense to them to sell ebooks at $9.99 instead of $14.99. It's their business and they want to maximize their revenue. Good for them.

But I'm a reader and what I want to maximize is my reads per buck. So *my* baseline is $4.99 and I actually pay $4.50 for the vast majority of my tradpub buys, 48 books a year. A few I'll go to $6.99 (once a year or so). No higher.

That is me exercising *my* market power.
And, given that the same data that backs up Amazon's statement points out that $4.99 generates even sales and revenue than $9.99 I'm pretty sure I speak with the free market's blessing.

As to centralized authority, how come all BPH mmpbs went to $7.99 at the same time? Was that the free market at work? Or when all BPHs adopted the same 25% of net for ebook author royalties? Or when 5 BPHs all adopted the same $14.99 retail price on all titles on the exact same day? Was that a free market or a centralized "authority"?

Simple test: explain *why* I should pay *more* for a rights-limited ebook than a paperback edition.

The only reason I hear--from Scalzi, from Shatzkin, from the Publishers Guild--is to protect sales of pbooks. Which is something I care not one whit about.

That is my position: Amazon is factually correct that $9.99 generates more revenue (takes in more money from buyers) than $14.99. That does *not* mean I frakking *endorse* either price point.

Is that clear enough?

[SteveEisenberg]

Originally Posted by fjtorres

The actual sale price is determined by market forces and consumer demand. And nobody whines that games (which cost tens of millions to develop) are devalued when sold at a discount.

Not the best example, because video games are commonly sold under minimum price arrangements:

http://papers.ssrn.com/sol3/papers.c...act_id=1532998

It's closer to the opposite of what you are saying: Few people here whine about price maintenance except for books (although I do read the occasional anti-Apple yowl).

[SteveEisenberg]

Originally Posted by tubemonkey

Dear Amazon

Tell Hachette to take a hike. Tell them to peddle their wares elsewhere.

That's what Amazon said to Apple.

My guess is that they won't say it to the big publishers because many affluent Amazon customers buy big publisher eBooks right after release, when the prices are highest, and then go on to buy the general merchandise which is where Amazon is trying to make money.

[fjtorres]

Originally Posted by SteveEisenberg

Not the best example, because video games are commonly sold under minimum price arrangements:

http://papers.ssrn.com/sol3/papers.c...act_id=1532998
.

Really, then those launch date rebates I get when I pre-order are figments of my imagination?
And those 66% off sales cluttering the game marketplace on XBL are imaginary?
I guess I didn't really buy INJUSTICE for $7.99 two weeks ago...

Are you a gamer, perchance?

There are entire web sites dedicated to tracking and reporting on game sales because discounting is so prevalent, from launch day on.

http://shoryuken.com/2014/07/22/inju...and-xbox-live/