Um...does it make sense that the prices are near Amazon or more?

[coleman]

Originally Posted by jasonkchapman

What does that have to do with the price of potato chips in Peoria? Price is only closely related to variations in cost when there is competition.

Nothing, but the cost of production of potatoes has EVERYTHING to do with the price of potato chips in Peoria. Just like the cost of production has everything to do with the cost of product. The problem here is that the producer is not passing on cost savings to the consumer due to lack of competition in the market space. That doesn't change the fact the cost of production is significantly reduced. Also, your example is flawed because the model is not identical because it's not a physical good.

[jasonkchapman]

Originally Posted by coleman

Nothing, but the cost of production of potatoes has EVERYTHING to do with the price of potato chips in Peoria. Just like the cost of production has everything to do with the cost of product.

No, actually. In this case it doesn't. If consumers just bought books to use as bricks, and really didn't care about who the author was, or what the subject matter was, or whether it was written above a third grade level, then yes. I would agree. One book would be as good as another.

But they don't.

To continue the potato chip example: If you want Joe's CrispyFat Gutbusters, you'll pay Joe's price or you won't get them. It really doesn't matter what happens to potato production. You might choose to change brands, but that's your only recourse. No one else produces Joe's CrispyFat Gutbusters. Period.

Originally Posted by coleman

The problem here is that the producer is not passing on cost savings to the consumer due to lack of competition in the market space. That doesn't change the fact the cost of production is significantly reduced.

You are correct. In fact, that's precisely what I said in the post with which you're disagreeing. The end result is that there is little market incentive to lower prices when production costs drop.

Originally Posted by coleman

Also, your example is flawed because the model is not identical because it's not a physical good.

The tangibility of the product has no impact on this particular economic mechanism. Each title, under a standard contract, is a little monopoly. Under monopolies, the indirect linkage between production cost and price is nearly severed, because the price is no longer subject to competitive market pressure.

The good news is that authors are getting smart, and are less likely to give away long-term e-rights for no compensation (those that have any kind of clout, that is).

The bad news is that publishers are actually having to pay more to secure e-rights for big name authors. That actually results in upward pressure on e-book prices.

[europas_ice]

The cost to produce a product is, of course, not the SOLE factor in determining the final price of the product. But it is an IMPORTANT factor.

[JSWolf]

What I am really interested in is how the prices of ebooks will be effected once Amazon has their ebooks all set and running maybe next month sometime. I mean we see ebooks these days with a higher price then some of Amazon's discounted price. But since they will be selling both, I would expect the ebook price to be lower then the paper editions. We'll just have to wait and see.

[Ravenflight]

Originally Posted by flumbo

Don't forget Baen books. Cheaper prices and none of that nasty DRM aftertaste.

And don't forget Baen's Free Library!!!
Here is a publisher that makes the argument that you can make more money by giving away ebooks for free than by trying to punish people who 'steal' them. Yes, while all those nasty DRM folk are out trying to burn down libraries (all that lost revenue!) and lobbying for laws that prohibit people from even thinking about giving away something they already bought, busily creating 'solutions' to problems that don't exist so they can charge you even more for something you can't own- here is a beacon of hope.

[nekokami]

I agree that there is no inherent result that forces the publisher to lower the costs on ebooks even if, as we suspect, the cost to produce them is lower than the cost to produce the same book would be in paper. Perhaps prices between publishers don't matter, as they can't offer the same content. However, there is still an overall market pressure to buy vs. borrow (from a library or a friend, for example) or to forgo reading a book at all, due to price. This is certainly a factor in my purchasing decisions, and I love books and spend quite a bit on them. So I think publishers will still need to consider the market and look for the "sweet spot" where they make their money but prices are low enough that people are willing to buy lots of ebooks.

And let's not forget the market pressure of the darknet, either. Arguably, this is a force holding the price of digital music down-- if it's too expensive to buy content, people will start looking for other options, which are usually more of a nuisance (as well as being illegal). If the price is low enough and the usability of acquiring the content is high enough, people will pay rather than pirate.

Finally, though content publishers may resist admitting it or may argue that it shouldn't be their concern, customers are likely to factor in the cost of a device used to access the content. The least expensive dedicated ebook reader I know of is the eBookwise 1150, at US$140 new, with most dedicated readers costing at least twice that amount. Most people are going to consider the cost of the reader when deciding what seems like a good price for content, even though revenue from the reader didn't go to the publisher. (People who read on multipurpose devices may consider this less of a factor.)