Amazon vs. Hachette Update - It's About Price

[Kumabjorn]

I recently bought an e-book on Amazon for $120, I'm fairly sure that makes me the most price elastic customer they have.

[darryl]

Originally Posted by pwalker8

That's their assertion, but I don't see any data. How do you measure that? The book either sales for $14.99 or it sales for $9.99. This assumption of book elasticity might be true for generic books, but may not be true when it comes to the big name authors.

But hey, nice attempt at trying to cut off any discussion. Anyone who disagrees with you is sputtering. The standard "No Real Scotsman" fallacy argument in action.

If you are asserting that price elasticity cannot be measured, I strongly disagree. Such measurement could not of its nature be entirely accurate, but business decisions are based on similar measurements all the time. Perhaps the crudest methodology is the old trusted sample group who are asked a series of relevant questions. I'm sure Amazon's analysis is far more sophisticated that this and relies no doubt on its own extensive data collection. Amazon is in a very good position to quantify price elasticity. Are they misleading us? How can we know? But it is certainly in line with my own behaviour. I am happy to pay $9.99 for a new release by, say, Stephen King or John Sandford or some other really prominent authors. I will not buy such books at $14.99, nor apparently will many others. And it is also in line with Amazon's behaviour. It is imho fairly safe to presume they did not choose that $9.99 price point by accident. For what it is worth, I think Amazon is telling the truth on this. There is no example of the "no true Scotsman fallacy" here.

[HarryT]

Originally Posted by pwalker8

Perhaps so, but when my favorite author comes out with a new book, that's the book I buy, not some random author whose book just happens to be a specific price point. Given that name authors might sell millions of copies and generic authors are lucky to sell 10-20 K, I'm thinking that there is more than just price at work.

It's your choice, though, to buy it at $15 when it first comes out, or wait a year until the book comes out in MMPB and then buy it at half the price. That's always been the way that ebook prices work.

[darryl]

Originally Posted by SteveEisenberg

They are telling me that when eBook prices rise above $9.99, less money is spent on eBooks of the average title. But they don't say what happens to Amazon's total revenue for a title, eBook and paper, when eBook prices rise. That data was just as easily available, and is more relevant to their argument. Maybe it would even support their argument, but, if so, it would show a much more modest effect.

They had a choice as to whether to give the more relevant figure, or to try to slip something past us, and choose the latter.

Pringles my foot

Steve. Thanks for the original post and your quoted post. I think extracting data of the type you refer to from Amazon or virtually any other business is like pulling teeth. I'm actually quite surprised at the release of as much information as they did. But I don't think the value of the information provided as opposed to information on the effect on Amazon's total revenue is much different here. In a traditional distribution of physical goods where there is a large cost of the direct production of the goods and significant other overheads, it is possible but not inevitable that what you seek would be significantly more relevant. However, I doubt this is true in the case of ebooks.

[fjtorres]

Originally Posted by ST-One

Because a lot of people shop through Amazon.

And why is that?

Amazon knows what sells and how much at what price.
All that data that everybody whines about Amazon keeping secret is their "secret formula".

They know what titles people put on wishlists and how long they wait to order and what prices they buy them at. They know when somebody puts items into a cart and save them for later, until the price drops. They know what sales are like for a book before, during, and after a Kindle Daily sale.

None of that is claiming authority, that is owning data and knowing how to exploit it to price stuff at the right price to maximize sales and customer satisfaction. Every well-run business wants that; Amazon gets closer to it than most. So they'll keep on selling lots of stuff until somebody figures out how to do it better.

[darryl]

Originally Posted by pwalker8

Perhaps so, but when my favorite author comes out with a new book, that's the book I buy, not some random author whose book just happens to be a specific price point. Given that name authors might sell millions of copies and generic authors are lucky to sell 10-20 K, I'm thinking that there is more than just price at work.

Of course there is. At this time these name authors have established a following with the help of the traditional publishers. This will later change. I will usually wait for the price to come down, or borrow it from the library. Some people no doubt simply pirate it. The traditional model was that Publishers would be inundated with manuscripts and would pick a few of them to publish, not of course on the basis of quality but on the basis of how many they thought they could sell. Anecdotes abound of publishers rejecting books which later proved to be very succesful, even household names. Publishers acted as "gatekeepers", sometimes not very good ones. That model is dying, and there is a cost to it. Instead of being force fed a diet of publisher selected content, we float on a veritable ocean of essentially self-published authors. There is much rubbish to sort through, but also many gems. And new means of discovering those gems are emerging all the time. And many of these new authors will become the new name authors. I would have thought that the BPH would have sought to hang on to this gatekeeper role, but I can't see them doing it at $14.99 for a MMPB.

To me, a new release by a name author is worth $9.99. If I see a book by a new author with a similar theme or which I might like, I am not prepared to pay $9.99. I might only be prepared to pay $1.99, or $3.99 or $6.99, depending on the circumstances. Sometimes, if I like the theme, I may even be tempted by a giveaway. If I really like the book and the author's future work I may reach the point where I will pay $9.99.

[Barcey]

Originally Posted by fjtorres

That is the whole point Amazon is making: they know more about retailing than Hachette ever will and it is going to be a cold day in the Amazon jungle when they let Hachette tell them how to run their business. They can have no-discount Agency on Amazon's terms or not at all. (And they'd be wisest to choose "not at all".

That release looks fairly mild but there's several implied threats in there that need to be taken seriously. Bringing in the subject of author royalties is a big escalation. If Hachette's royalty accounting is anything less than pristine Amazon can mess them up big with just one PR release.

The questions that I have are why go public with it and why now?

This statement is clearly to get the public on Amazon's side but it is surely going to get Hachette's back up (not to mention the other big publishers). I don't think the statement was intended to help close off the negotiations, I think it's a final recognition that Hachette has no desire to close off the negotiations so Amazon is finally fighting back. Joe Consumer is going to agree with everything that Amazon said and consider the author's anti Amazon rants as greed. The PR campaign will try to spin it but it's hard to get the public on your side that you need higher prices.

[Shane R]

Originally Posted by tubemonkey

If that's the case, then why does Hachette even bother selling their books through Amazon? Why don't they pull their catalog and let other retailers sell them? If Hachette had a set, they'd tell Amazon to take a hike.

They could and would if they owned the consumer.

Amazon is a known quantity that just works for my family. I have relationships with other online (and offline) stores, but we continually circle back to Amazon. Hatchette and others need to fit into that framework to reach us.

[JoHunt]

The customer is paying 33% less

[tubemonkey]

Originally Posted by Barcey

The PR campaign will try to spin it but it's hard to get the public on your side that you need higher prices.

I wish Walmart would charge higher prices for everything they sell

[tubemonkey]

Originally Posted by Shane R

Amazon is a known quantity that just works for my family. I have relationships with other online (and offline) stores, but we continually circle back to Amazon. Hatchette and others need to fit into that framework to reach us.

I'd love to see figures as to what percentage of readers shop for what's available at a store versus those who only shop for a particular book and will go elsewhere if it's not there.

[Shane R]

Originally Posted by tubemonkey

I'd love to see figures as to what percentage of readers shop for what's available at a store versus those who only shop for a particular book and will go elsewhere if it's not there.

Reading books is seldom time constrained for me.

[pwalker8]

Originally Posted by tubemonkey

If I want to read a book by a best selling author, I check it out from the library.

Which makes you not a target customer. Why would they try to price books at a level where someone who brags about not buying books would buy it?

[pwalker8]

Originally Posted by Kumabjorn

I recently bought an e-book on Amazon for $120, I'm fairly sure that makes me the most price elastic customer they have.

I've got you beat, though it was a few years ago. Unfortunately, not all knowledge is available for free via wiki.

[Kumabjorn]

Originally Posted by pwalker8

I've got you beat, though it was a few years ago. Unfortunately, not all knowledge is available for free via wiki.

My sincere congratulations. The worst thing was that the scholarship offered was at best mediocre.