Monday, February 01, 2010

eBook facedown

McMillan forces failed business model upon Amazon.

McMillan wants to force e-book prices to be the same as paper book prices. The only problem is, that's a business model which makes no (zero) economic sense. The only price that makes sense from the consumer’s point of view is the marginal price compared to the currently-available paper copy: I can get 25% of the cover price back when I resell a paper book to a used book store, thus from my perspective, since ebooks do not allow reselling my copy to a used book store, they must have a marginal price that is 25% less than the currently available paper copy, or I simply will not buy the eBook because it does not make financial sense. Yes, there are the issues of book storage and such, but I resell most of the books I buy, I don’t keep them, for exactly that reason — most books are being bought as simple mindless entertainment, not something all serious and stuff. I do like having the *option* of keeping a book — but I don’t keep most of them. Sorry, writers. I know you love your prose and hope we have placed it upon the mantelpiece above the fireplace to bow to your genius every time we enter the living room, but the majority of us are buying them for simple entertainment, not because we are Serious Collectors Of Your Great Literature.

Now, from the publishing end of things, McMillan whines they can't make money on ebooks if they price them at their economic utility price. But I am utterly disinterested in hearing publishers whine about how their business model can’t survive contact with actual real-life capitalism. I am not on this planet to be a charity for publishers who can’t figure out how to operate in a capitalist environment. The market is what the market is. You can’t sell people an eBook for the same $7.95 as the paperback when the consumer’s marginal price for a paperback copy of the book is $5.96 (after they resell the paperback to the used book store). It simply doesn’t work, and can’t work in a capitalist economy because it makes no financial sense from the consumer’s point of view. That’s capitalism. Thus the low uptake of ebooks outside of maybe a couple of million early adopters who flunked high school consumer math and, of course, readers of Baen Books, who have had access to reasonably priced DRM-free ebooks for years.

So does that mean that I agree with Amazon’s actions? Well, not really. The prices they want to impose make no sense either. If the hardback is the only version of the book currently out and is currently $19.95, that implies the ebook should be $14.95 if you wish to actually sell large numbers of ebooks. But Amazon is trying to force that to $9.99. From a standpoint of maximizing income that’s ridiculous. And don’t assume it’s to make a profit selling Kindles — I’ve been involved in the computer manufacturing business for over ten years now, and my estimate is that Amazon is basically at break-even (no profit at all) on the Kindle. Clearly they’re trying for the brute force method of “grab market dominance, and *then* worry about profit” that they used when starting out in order to drive most of the competing book e-tailers out of business. Also clearly, this is not in the best interests of authors attempting to maximize their own income.

-- Badtux the Writer Penguin


  1. Amazon is the electronic version of Wal-Mart; I won't do business with either of them.

  2. I love my public library.

  3. Unless you are a fanatic about the latest books, has more excellent ebooks than you can ever read in your lifetime.


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