[IgorPartola]

While I believe they saw these numbers, specifically that lowering the price from $15 to $10 lead to a 74% increase in purchases, I don't believe that this is a good general rule of thumb. Here's the problem: there are only so many potential ebook readers out in the world, and they only have so much time. This means there will be market saturation at some point, or at least market movement. This elasticity is there, for sure, but the relationship between price and purchases is not going to stay the same, especially as everyone follows this advice. Basically, everyone will price their books at $10 and the playing field will be level. Then the advice will be to price your book at $7. Then at $5. Then at $2. Then at $0.99 cents. This is the problem we currently see with Apple's App store and the Google Play Store: too many apps, all priced similarly. For most apps, and probably for most ebooks it would almost be better to go in the exact opposite direction: one sale at $1000 is better than 10 sales at $1.

Also, why would Amazon care so much about how others market their content, to the point of trying to interfere? If your content is not worth $15, then nobody will buy it. If you suck at marketing, nobody will know to buy your (possibly great content). Why does Amazon get its hands dirty instead of simply giving you analytics-backed suggestions? Oh, that's right, because controlling the publishers is more profitable for them, and using their market position as leverage against publishers is a great way to do so.

[JulianMorrison]

I suspect that books are way undersaturated.

The reason is: paper. Dead tree books weigh a lot and waste space. Therefore owning a library is a cost. Costs to move, costs storage space, costs effort to collate and maintain and protect.

E-books do not have that cost. Having a hundred e-books in your purse is a normal thing. Having a thousand? Well, it might make sorting through your personal equivalent of a branch library a little more fussy, but it won't weigh more or waste space.

People may not have more time, but they can divert time to books, and they can divert re-reading time to new-book reading time.

[romaniv]

Therefore owning a library is a cost.

Owning a library has a higher value than owning a library of ebooks: social, decorative, nostalgic, works without power, easy share, can resell, etc. It more than evens out. But there is Steam effect - people will stockpile ebooks they don't read.

[moistgorilla]

> social, decorative, nostalgic

This is subjective and not monetary value. The only people that care about social, decorative, and nostalgic value of books are also the people who probably wont resell books.

> works without power

finding a place to charge your device is easy and ereaders last months without recharging

> easy to share, resell

Sure but the money you save by reselling a book is probably less than what you save by buying the ebook

Space and weight are real, expensive costs. Owning a library has negative monetary value. Owning a library of ebooks doesn't. It's stored on the internet and you can access it from anywhere.

Basically, if your books aren't furniture and you aren't sharing your books multiple times a month ebooks provide more value.

[kamakazizuru]

"Sure but the money you save by reselling a book is probably less than what you save by buying the ebook"

This is what I had hoped for when Kindle came around and Amazon started pushing Ebooks - but unfortunately it just isnt true. The difference between ebook and paperback is currently low enough that if you maintain your paperbacks well - you'll still end up spending less (net) on the book - in quite a few cases. (Heck you can even resell the paperbacks using Amazon ;))

[mcguire]

"Sure but the money you save by reselling a book is probably less than what you save by buying the ebook"

Not under the publisher's model.

[terrywilcox]

“Nowadays people know the price of everything and the value of nothing.” - Oscar Wilde

[XorNot]

Yet oddly enough Amazon seem to have gotten stingier with the flash memory on a Kindle. 2 GB? Just give me a damn microSD slot so I can bump that up to a level I'm happy with. A few biggish PDFs (e-Textbooks come to mind) will obliterate that space.

[DanBC]

Other ereader devices exist.

Kobo devices have microSD cards. You have to unscrew the case to get at it, but still, you'd probably only have to do it once.

[XorNot]

True. But the screen on the Paperwhite is really, really nice.

[chatmasta]

I don't know exactly what you mean by market saturation in this case, as your logic seems to imply that each book has a finite market of N customers, and enough of a subset of them, M, are willing to pay $1000 (or whatever), such that M(1000) > N(5).

The error in your logic is that the size of the market for a given book actually depends on the price of that book. There's millions of books out there. Why would I pay $1000 for one when I can get so many others for $5? By lowering the price of books, Amazon increases the market size of each one.

There's also some behavioral economics involved, as I would assume people are far more likely to make a $5 impulse purchase (and look at that, Amazon has "one click send to Kindle!") than a $15 one.

[IgorPartola]

> Why would I pay $1000 for one when I can get so many others for $5?

Let me ask you this: would you rather buy one of the first 100 prints of Djikstra's "A Discipline of Programming" for $1000 or would you rather buy 200 Nancy Drew novels at $5/book? Books are not, to some extent, able to be substituted. Yes, if you are looking for a good vampire erotic fiction novel and are choosing between two unknown authors and one is priced at $15 and the other at $10, sure you would get the one priced at $10. But if both are priced at $10?

The point is that books are not bought as a simple commodity. Nobody says "I am low on books, let me go grab a random handful, based solely on price." No, people buy books with good reviews and by recommendation. When you are viewing volume book sales from Amazon's point of view, sure they all look the same. However, taking a closer look, a publisher might be able to price books more efficiently. If Amazon has helpful data to add to this, why don't they open it up and let everyone, publishers included, see it to help price the books better? Presenting a single data point in the huge possibility space of book prices is not a valid argument. Even if you let go of all the economics involved and stop thinking about how people buy books, don't you think that that ratio of 1.74 would be different for books priced at $12 and $17? Does this vary by month? Do certain genres have different price elasticity? Amazon is not trying to be helpful here. They are trying to squash publishers, gain control of the market and dictate prices, which they cannot currently do.

[mcguire]

Many factors are involved here. On one hand, you're right about Dijkstra (Is $1000 an option? I never actually got my copy signed (sigh), but....) and Nancy Drew, but on the other I think it's likely that most of the money involved involves "mass market" books: thrillers, Oprah's picks, the stuff on the New York Times list. At some point it does boil down to the marginal situation of "two unknown authors" (or two approximately equivalent ones) that really are semi-commodities. Think of a reader who has read everything that has been suggested or is from their favorite authors, and is looking for something new.

Also keep in mind that the "mass" entertainment market is not competing with speciality books, but is competing with other entertainment options: Netflix, movies, drunken debauchery, etc.

Then there is the price levels we're talking about. Everyone (probably) has some price X below which they will have no problem impulse-buying. Then there's a price Y below which they're willing to take chances, with information, and then there are prices above that, which require actual consideration. And for most people, at least those buying ebooks, we are definitely arguing in this range. For my inner economist, publishers want ebook prices up in the high segment, above Y, while Amazon wants them roughly between X and Y.

"If Amazon has helpful data to add to this, why don't they open it up and let everyone, publishers included, see it to help price the books better?"

The specifics are very likely competitive trade secrets. Don't forget Amazon gets to deal with Apple, B&N, and a host of other retailers. I'm surprised they released the one number they did. On the other hand, judging by negotiations I've been in, I would not find it unplausible that Hachette is aware of those numbers.

"They are trying to squash publishers, gain control of the market and dictate prices, which they cannot currently do."

Yes, just like the publishers are trying to squash Amazon, gain control of the market, and dictate prices. Heck, this isn't even a particularly new situation: I'm sure the negotiations between publishers and distributors that led to the lovely "stripping" practice were just as entertaining.

[bsder]

> Why would I pay $1000 for one when I can get so many others for $5?

Because market data suggests that most people won't switch. They will buy book from "the new, hip writer X" or they won't buy at all.

Someone who intends to buy something by Malcolm Gladwell is unlikely to buy something from somebody else just because it's a little cheaper.

Amazon wants to maximize sales volume whereas the distributors and authors want to maximize profit. The two are often correlated, but not always.

[mseebach]

Anecdote, not data and all, but for me at least, if I hear about a book that might be interesting, I look it up and if it's below some cutoff price point (I'm not sure exactly what it is, probably around $10-$15), I just click buy and be done with it. I don't put it on a wish list or bookmark it, just get it. As a consequence, the (metaphorical, they're on my kindle) pile of books that I own but probably won't ever get around to read is bigger than ever, and my total spending on books is probably a lot higher than it would be if I carefully considered each more expensive purchase.

[fpgeek]

> Because market data suggests that most people won't switch. They will buy book from "the new, hip writer X" or they won't buy at all.

Which is why publishers don't care whether or not stores like Amazon discount their physical books. </sarcasm>

[kamakazizuru]

Yes - but a person looking to buy the Malcolm Gladwell book - willing to buy it at 10$ - but who can only buy it at 15$ or more - will probably end up then either borrowing it from a friend or in the worst case downloading it as a PDF illegally. Both of which are a lost sale for the publisher and author.

[simias]

Do you have any numbers to back that up though?

I mean, I know that with e-readers book piracy is now potentially practical but is it really a concern for publisher? I'm really curious to know how mainstream it is.

I wouldn't be surprised if the main cause of piracy for ebooks was not the price but rather that the book is not available on a particular platform or only in paperback. Besides the demographics for book readers owning an e-reader is probably older and more wealthy than the average movie pirate.

The only numbers we have are those given by amazon, but we don't know exactly which books they used to make their statistics. We also don't know what the people who didn't buy the 15$ ebooks ended up doing, maybe they didn't buy anything at all, maybe they just bought the paperback...

[kamakazizuru]

A kindle costs <50$ - load it up with free PDFs downloaded via Torrents or other means and the notion : "book readers owning an e-reader is probably older and more wealthy than the average movie pirate" falls flat.

I dont have numbers to back it up - but plenty of anecdotal evidence and just common sense too. I myself have borrowed that malcolm gladwell book or the other - because the cheapest I could buy it was 20$ - and while I was interested in reading it - not enough to spend that much. Had it been 10$ - it would be worth it for me to just buy it rather than ask around friends if someone had a copy I could borrow. (You can also "borrow" books from friends on Kindle)

[WalterBright]

Bestsellers are the books that normally wind up in the thrift store for a buck. Ironically, it's the obscure books that wind up being pricey.

[chatmasta]

Yes, but someone who is looking for a non-fiction book, with no author preference, is more likely to buy a $5 Michael Lewis book than a $15 Malcom Gladwell book.

[cafard]

There is no book I can think of at the moment that I'd buy for $1000. There are plenty I'd buy at $20 to $50 in preference to a comparable dollar value in $5 ebooks (or other inexpensive editions).

Some books have only so much market. Amazon could declare an August special, The Critique of Pure Reason, leather cover, sewn binding, acid-free paper, yours for $5 and free shipping. Do you think that this would rocket it up on the charts?

[mkal_tsr]

> The error in your logic is that the size of the market for a given book actually depends on the price of that book.

This is only part of the picture. You're missing genre / topic which is a huge component.

[mcguire]

For the genre/topic/market in question, I'm not sure about that.

[jamesaguilar]

> Also, why would Amazon care so much about how others market their content, to the point of trying to interfere?

They make $3 on every sale, so obviously it is in their interest to set the price to maximize revenue.

Your whole bit about "everyone doing it" and "race to the bottom" is an instance of the zero-sum fallacy.

[bsder]

And your evidence that this isn't a zero-sum game, is, exactly, what?

All of the evidence points to the fact that people have more than sufficient entertainment options and have set their budgets at a fixed point.

It wasn't piracy that killed music. It was the fact that the prime purchasers of music had a fixed entertainment budget and switched to buying video games aka. zero-sum market.

[cstross]

My take: the zero-sum game is not solely about people having a fixed entertainment budget in purely financial terms -- incomes go up and down and it depends in the aggregate on the economic cycle. Rather, people have a fixed entertainment budget in terms of leisure hours per week that want filling. You can get a pay rise, but you can't get 5% more hours in the week than the 168 that your clock gives you.

Another issue is that some recreational products are rivalrous of time; you can't read a book and play a computer game simultaneously, or combine one of those with doing the ironing or cooking dinner. You can watch a video or listen to music while you're doing something else. Oh, and some products are use-once, while others are use-many-times (and in some cases this varies from individual to individual: do you re-read books, or read them once and discard?).

TL:DR; There's a zero-sum game in the picture but nailing it down is a whole lot more complicated than it looks at first sight.

[jamesaguilar]

At a minimum, books can compete against other forms of entertainment. Books can also compete against other types of consumption, like cars, food and houses. Until I see some compelling evidence that the book market writ large is of a fixed volume, regardless of price, I assume that the size is dynamic, like almost every other market.

[lotsofmangos]

And your evidence that this isn't a zero-sum game, is, exactly, what?

Me probably. And all the folk I know with reading habits like mine who have not bothered getting an ebook reader yet, despite having problems seeing the floor for books sometimes.

edit - I think Amazon are complete and utter [redacted] over DRM, the 1984 debacle, their general attitude, etc. That said, I think they are probably right that everyone would make more money if the price dropped on ebooks. They are going about it in a very [redacted] way, of course. And even if they are right, their tactics seem pretty [redacted]. But that's Amazon being Amazon. Just because they are behaving like [redacted] doesn't mean that their economics isn't accurate.

[mseebach]

>1984

Isn't the fact that we're still discussing a single screw up that was immediately rectified from 5 years ago evidence that Amazon is actually going about this DRM business in a pretty sensible way? Also, Amazons complete lack of interest in "fixing" the very easy DRM removal process seems to provide further evidence to the same end.

Sure, it'd be better if there was no DRM, but there's the perfect world and then there's the world we actually live in.

[riffraff]

FWIW, I just bought a book (sequel to "a fire upon the deep" by vernon vinge) on kindle yesterday and it came with a "this book has no DRM at the request of the publisher" disclaimer.

So maybe we should complain about publishers rather than amazon at this point?

[mseebach]

We can complain all we want, but I struggle to see how we can place meaningful pressure on publishers.

I wanted to say that it's like iTunes and the switch to non-DRM, but I think the dynamic is different with Amazon as there isn't any meaningful competition on the e-reader device market as there was (and is) on the MP3 player market, where DRM was a major pain and thus a driver for DRM-free.

Short of Amazon pressuring publishers to drop DRM (which could well happen, but there's not a lot of business upside to it, although do downside either), I guess it will take a viable competitor to the Kindle that Amazon can't or won't provide an app for for DRM to get pressured out by end user market force.

[jamesaguilar]

FYI, the book publishers compelled amazon to use drm. Where the publishers allow it, they distribute books free of drm.

[freehunter]

>[redacted]

Either you can say the word or you can't. Luckily our language has ways of working around saying certain words, so you don't have to put in [redacted].

[lotsofmangos]

No [redacted], Sherlock. Was clumsily intended as some sort of badly construed comedic effect, to be honest. It didn't really work though.

[bowlofpetunias]

Maybe Amazon cares so much for the same reason Apple/Jobs cared about the pricing of music: too high a price point encourages piracy.

Once piracy becomes an easily accessible and socially acceptable mainstream habit, it's going to be very hard to claw back market share.

Right now, ebook piracy is by far not as easy and convenient as video or music. That could change as long as ebooks remain overpriced compared to physical books, and DRM impaired to boot. (Sooner or latter the general public is going to find out the hard way how much DRM devalues their "property".)

I dunno about the US, where Amazon is king, but in most countries ebook adaption is stagnating and price is quoted as the #1 reason.

[x0x0]

I initially thought as you do: cheaper ebooks cannibalize the more expensive. But remember books are competing with social networking, tv, radio, iphone games, console games, computer games, the outdoors, friends, pot, bars, etc. While a controlled study would be interesting, I bet books can steal some time share.

[lotsofmangos]

for most ebooks it would almost be better to go in the exact opposite direction: one sale at $1000 is better than 10 sales at $1

You seem to have not understood what books are for.

[ashr]

All I see in your argument is preconceived opinions with speculative statements and nothing to back them up. Sorry but you did not add anything to this discussion, not even in the form of new questions or pointing out flaws in the post's arguments using evidence.

[bambax]

There is also the problem of cannibalization which is not mentioned in Amazon's post; it's obvious that some of the people who buy eBooks when they're <$10 would have bought the paper book instead if it were cheaper, or even the same price.

So the "total revenue" figure is pretty abstract; publishers (or authors, or distributors, or anyone, really) don't need to consider media as completely separate; what matter is total sales, including paper, on-demand, and ebooks.

[walterbell]

Yes, many are forgetting that one of the primary purposes of markets is ... price discovery. Not price floor&ceiling fixing and restraining.

[bsder]

> specifically that lowering the price from $15 to $10 lead to a 74% increase in purchases

So, if Amazon takes $5, then whoever provided the book lost money on that deal. (Profit went from $10 to $5 while sales did not double). In fact, if Amazon takes more than about $4, it's a wash (which is actually a loss because some of those 75% more customers would likely have bought the book later at a different price point). If, Amazon takes $3, profit goes up by about 2% maybe 3%, if and only if that 74% increase occurs. If that increase doesn't happen, sucks to be the publisher, but Amazon's profit went up.

If Amazon wants to move more Ebooks, why doesn't Amazon reduce the amount they take? Simple, because it doesn't pay in profit. So, Amazon wants somebody else to eat the price drop. Not exactly altruistic.

All of the arguments about Ebook (less distribution cost, marginal volume cost, etc.) apply MORE to Amazon than the publishers. The publishers at least have to find authors. Amazon does, what, exactly, to justify taking $3 an Ebook? Um, right, it provides the market domination that is effectively a monopoly to the point that it thinks it can dictate pricing to publishers.

[mendort]

You also assume that amazon is free to price ebooks however they want provided that they pay the publisher the right amount. They are not. This is one of the reasons that this conflict has developed. Amazon has traditionally been happy to sell many physical books at a loss. They are not permitted to do this with ebooks.

[nnutter]

Your math/model doesn't make sense. Business is never altruistic. Amazon justifies 30% because they are the gatekeeper to millions of Kindle users.

[2arrs2ells]

Your math assumes Amazon has a fixed fee. Amazon takes a percentage fee.