Further Amazon Thoughts

Five days in and the war is still going strong. People are starting digging trenches and laying in supplies for a long siege. Meanwhile the chattering classes (which of course includes me) are offering punditry, and the blogosphere is outraged as only the blogosphere can be.

Economics bloggers have started to take an interest in the issue. Lynne Kiesling has a useful round-up of links. I’m pleased to see that other people agree with my intuition that this dispute is largely a problem of perceived value. Explaining the economics of the publishing industry isn’t going to get you very far with people who just look at the finished product.

We monkeys are funny creatures. At times of celebration we buy food in hampers and presentation boxes. The food inside tastes the same, and the fancy wrapping doesn’t cost very much. It generally has little value and gets thrown away after we have eaten. But we are willing pay a lot more for that fancily wrapped food because it looks special.

Heck, we’ll sometimes pay a lot more for a book because it is signed by the author, even though the making of it so was the work of mere seconds.

Like it or not, an ebook appears to many people to be of intrinsically less value than a nice, solid hardcover. In their eyes, the former should cost much less than the latter.

Having said that, there have been some great posts out there, and real attempts to communicate on the part of authors. I guess this is coming as something of a shock to some of them. Obviously authors have fans tell them that their latest book is crap on a fairly regular basis, because no book pleases everyone. But unless they are poor George RR Martin they don’t normally get a whole pile of people telling them that they are greedy, selfish bastards who ought to be getting on with the important job of providing customers with what they want for as low a price as possible (preferably free). I really feel for Jay Lake, who has more reason than most to worry about his finances, and is brave enough to actually try to engage people. Here’s the sort of stuff he gets back from some folks.

Mind you, I have seen this sort of behavior before, and while getting called greedy when your livelihood is at stake must be painful, it is particularly galling when you have given your time and effort for free and people just assume you are making a fortune. Thankfully most fans, and most professionals, are well aware of how much volunteer labor goes into running a convention, but members of the World Fantasy Board and their hangers-on were still accusing us of ripping off members and stuffing our own pockets over the San José convention at-con when most of the attendees were going round saying what a wonderful time they were having, and even though they knew the money was all going through a non-profit that could only spend any surplus on other conventions and good causes like Clarion. (For the record, our surplus looks like being very low compared to past World Fantasy Cons, and even lower as a percentage of revenue due to the large size of the event.)

Anyway, back with Amazonfail, many people are starting to wonder where these sorts of attitudes came from. Jeff VanderMeer has some thoughts here. Some of what he says is undoubtedly right, but it is all too easy to point the finger at things like freebies. I don’t think this is the fault of people like Cory Doctorow, and I don’t think Jeff does either. The notion that consumers should only have to pay what they think a product is worth, not the economic cost of production (plus a reasonable profit margin if you are a Capitalist) has been around a long time. The current UK government regularly uses it as a stick to beat companies like utilities and grocery chains. Mandy is currently using a very similar tactic on universities. The idea that economics is some sort of dishonest voodoo, wheeled out like evolution to try to kid people into believing something other than what common sense tells them, gets used all the time. And the media always takes the side of the consumer, because it is mostly the consumers who buy their newspapers.

As an economist I am rather heartened to see so many people espousing the idea that discriminatory pricing is useful, and can be of benefit to all concerned in the long run, even though it might seem predatory in the short run. But I hope that all of the people currently so happy with the idea remember what they have said next time they are tempted to complain about similar practices employed by hotels, airlines, railways and so on.

Oh, and people, do stop calling it “discriminatory pricing”. Everyone knows that “discrimination” is a bad thing. Find some other term for it (“demand-based pricing,” perhaps), or you’ll keep losing the PR battle.

Meanwhile some people are trumpeting Apple, and possibly the rumored Google Tablet, as potential saviors. Anyone who thinks that Apple (and Google) are not in this game for a profit should read this.

And finally, if the whole thing has got too confusing, I recommend checking out the latest BSC Review column from everyone’s favorite Sodomite, Hal Duncan. Using brilliant historical research, and some linguistic skills he must have picked up at Åcon, Hal reveals that the whole sorry dispute is actually about kitten hair rugs.

10 thoughts on “Further Amazon Thoughts

  1. Great post. No, I don’t actually blame anyone. I just am interested in looking at possible factors that either contribute to an atmosphere of thinking everything should be free or that *allow people to justify that thinking by ignoring the nuances of the various points of view*. I’m importing a para of this to the booklifenow discussion because it’s useful.

  2. Yes, I agree that Apple is in this for profit. However, pointing to the change they asked for in Stanza is misleading. Apple has been telling developers not to use private APIs to do USB syncing since last November. More importantly, they’ve been telling all developers this. e.g., Noise.io, a synthesizer app, just released a new version eliminating similar functionality for exactly the same reason. No one claims that Apple must somehow to ready to enter the music synthesizer market.

    Moreover, those who have seen the latest version of iPhone OS say that a publicly available way to do USB syncing is on the way. (i.e., a common documents directory that all apps can access and can be mounted on another computer.) If so, it’s not unreasonable to think that Apple is getting developers to remove those private API calls so that their apps don’t break with the next version of the OS.

    for details.

    To point to the recent change in Stanza is to imply a motive that there simply isn’t any evidence for. What they asked for in Stanza has nothing to do with their upcoming iBook store. Actually, given that there are so many ebooks already in the AppStore that Apple had to give ebooks their own category, I’d say Apple is already in the ebook business and has been competing with Stanza etc. for months, if not years.

  3. I think you’re a lot closer than Mr. VanderMeer. Even the average Kindle user, above-average in technical savvy as they may be, knows little if anything about the Google settlement, DRM issues, or the debates over the purpose of copyright. But they do know that e-books cost $9.99.

    Alternate terms, hmm: “Time-sensitive pricing”? “Freshness pricing”? If a publisher could somehow convince people that waiting for the paperback is like buying stale produce, they could probably bump up their hardcover sales some…

  4. I am very sympathetic to all the authors caught in the crossfire of this war, as these two corporate entities battle it out in what is fast becoming a no-win debacle. And I certainly understand that in actuality, printing costs are not as great as might be expected in terms of percentage of cost of a book. But one thing I have not seen mentioned anywhere is that the reason readers so readily assume that ebooks have to be much cheaper than hardbacks is that publishers have always priced according to format. That is, a new book that came out in hardback would most likely have a cover price of $20-$30. A new book that came out in mass market paperback would always be under $10, usually $7 or $8. Presumably, the author of the paperback got a much smaller advance, and the artists got paid less for the cover. But the reader is unlikely to ever have thought about that. They only know they have to pay a lot more for a hardback than they do for a mass market, and that a trade paperback will be somewhere in the middle. Publishers– all publishers– have built in an expectation that price is based on format. I think it’s disingenuous of them to blame the reader for being shocked at high ebook prices.

    1. Interesting point, Karen, but actually there’s a lot more going on than that. Many of the costs of producing a book are what we economists call “fixed”, which means they don’t vary with the quantity of the product produced. For a publisher it costs roughly the same amount of money to edit a mass market paperback as it does to edit a hardcover. But because you tend to sell a lot more paperback than hardcovers that cost gets spread between many more books.

      For example, if the pre-production cost of a book is $30,000 and you sell 10,000 hardback copies then each book has to contribute $3 towards paying those costs. But if you produce it as a paperback and sell 30,000 copies then each book only has to contribute $1 to the pre-production cost.

  5. That makes perfect sense. But I don’t think the average reader ever thinks about it that way. In a way it’s as if sudden rise of ebooks has exposed the inner workings of the publishing industry to the world.

    1. It most certainly has, and despite the earnest efforts of people to explain, many of them find it contrary to what “common sense” tells them should be the case.

  6. Heck, we’ll sometimes pay a lot more for a book because it is signed by the author, even though the making of it so was the work of mere seconds.

    Yes, it’s value-based. And the perceived value diminishes when you don’t get a hardcover to put on your shelf, loan to a friend, or resell. (or autograph!) The problem for publishers isn’t the $9.99 e-book price per se; it’s all the places where you can buy that hardcover for $14-16. That kind of implies Amazon’s prices are in line with what consumers are willing to pay for a newly released e-book.

    Taking the kind of day-to-day price control a retailer has away is, in my mind, going to cause all sorts of problems for authors and their books. Worse, pricing artificially high will lead readers to other authors.

  7. I’m hardly a rabid e-book reader out for blood, but I can understand their thoughts pretty easily. E-books may cost just as much as regular books to make, but they come with a hefty set of negatives for the consumer. Yes, I can carry hundreds of books around with me in one tablet, but most of the reading that I do is either at home (where I have thousands of books) or on the way to/from work (when I only need one book). The benefit would be negligible.

    So, the negatives:
    *DRM, which more people understand and dislike than I think a lot of publishers/bookstores understand. Consumers have learned allllll about DRM from the music industry. One of the main arguments against DRM is that it turns buying something into renting something, which leads to the issue of

    *platform-boundedness. Some people have mentioned that the books are being used to sell the Kindle. Well, the flip side of that is that once you’ve bought the DRM’d book, you can only read it on your Kindle or whatever (Mac) devices Mac chooses to let you read it on. If you break your Kindle, you lose the functionality that you already paid for, for all of your books, and you’ll have to buy another Kindle to get it back. Which brings up

    *new editions. The computer industry has shown us, time and again, that Windows 95 will be replaced by Windows XP, Vista… Likewise laptops die and computers are considered amazing if they last a decade. Between the computer industry’s past and the DRM, people expect that the Kindle is only temporary. There will be a new version, and – unlike the rest of the bookselling industry – when it comes out, you will probably be charged more for the older version than the new one. So replacing your broken, seven year-old Kindle will either entail learning a new system just to access things you’ve already “bought”, or paying a ton for someone’s slightly used version.

    I know just how strapped an authorial lifestyle can get, but the value to consumers does change with the medium beyond pretty hardcovers and simple paperbacks. These issues are precisely why I haven’t bought a Kindle and am not planning to. Being able to loan books to friends and hold onto my books as long as I have space in my room is important to me, and the Kindle takes that away.

    Some of the commentary I’ve seen on this suggests that the problem is consumers not knowing how much the books are really worth. That strikes me as a bit off. Yes, the valuation given by consumers is lower than what it costs to make and sell these books with any level of profit. On the other hand, consumers are the ones being asked to spend the money. If you’re talking about a non-necessary product (i.e. not food, water, etc.) and the people you want to buy the thing think that it is not worth the price being asked, then all the arguments in the world about the amount of money necessary to make it aren’t going to convince them to buy it. You have to show what the value is. For e-books, that would be highlighting portability, weight, the ability to zoom in on books made for those not vision-impaired. When that’s not enough to convince people to buy (which it wasn’t, that’s why prices were so low initially, as an incentive), then you have to find new incentives. The ability to re-download books you bought if you accidentally delete them, perhaps, a way to “loan” books by e-mailing them to friends, maybe. No DRM. All of those would make e-readers/books more convincing sells, and worth more money. Then people might buy a price increase.

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