'Economics In One Lesson' Apparently Doesn't Include Pricing; Kindle Version Most Expensive
from the let's-try-that-again dept
Copycense, who has done a really bangup job in pointing out some ironic ebook pricing decisions, has another one. The book "Economics in One Lesson," by Henry Hazilitt is available new from Amazon in paperback for $7.95... or at $9.99 for the Kindle. Apparently, "Economics In One Lesson" either doesn't include a section on pricing... or whoever did the pricing on the book didn't read that section...
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Re:
Books still need to be written, edited, copyedited including fact and continuity checking, proofread, and, for eBooks, they need GOOD formatting control to keep from driving readers crazy, just as pBooks need good typesetting for the same reason.
And if you're talking about reprints of older books, those books still need to be either scanned, OCRd and proofread, or typed-up and proofread. Even for a reasonably short piece of fiction, say a 350-page paperback, it takes me between 10-15 hours to do a good job, and I do scan-and-OCR to get source texts.
The above endeavors require people, and people like to eat hot food and sleep indoors. This is why I never quarrel with paperback-level pricing for eBooks.
However, I do agree that anything over about $8 for an eBook, particularly fiction, is ridiculous. I've never forgiven the idiots who insisted on $20 prices for eBooks years after the paperbacks had come out at $7.99.
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It's the same way at Barnes and Noble.
Obviously the publisher didn't read it.
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Response to: Thanatos on Apr 22nd, 2011 @ 6:54pm
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Re: Response to: Thanatos on Apr 22nd, 2011 @ 6:54pm
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Even free
Economics in One Lesson is an excellent book. Read it for free here:
http://liten.be//hbtde
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Hardcover $9.89
Paperback $7.99
Kindle $9.99
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Re: Response to: Thanatos on Apr 22nd, 2011 @ 6:54pm
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Come on TechDirt...
First, the book is freaking free: http://www.fee.org/pdf/books/Economics_in_one_lesson.pdf. The digital copy is actually infinitely cheaper than the paperback if you know where to look.
Second, why wouldn't a consumer potentially be interested in paying more for a book that is delivered instantly, is as light as a feather, and can be read in the dark, had the font changed, etc? I'm not saying I agree with their pricing but I am saying that it's a reasonable hypothesis that a certain group of people would pay more for a digital copy than a physical one. Since the audience for this book as of late has been more technical people, it becomes even more reasonable.
Third, this is a really old book that's been printed a lot. I'm sure they have paper copies lying around all over the place. Unlike a new book, where you have a text file on a computer somewhere, with an old book, you might have to pay someone to type it up, proofread it, etc. And 50 years after the book's release, you're towards the end of its sales life anyway. So the paper copies you printed in 1999 can be amortized over a higher number of customers than the ebook you formatted in 2011. Smaller market means higher price.
Fourth, why should the price of a good be pegged to its production cost? Mike is joking that the book's publisher doesn't understand pricing, but in reality it's Mike who doesn't get it. Pricing is always tied to what people are willing to pay. Oil is almost free to produce, just pump it out of the ground, but people are willing to pay a lot more for it. Cell phones cost much MORE than consumers want to pay, and hence the evil carrier subsidy. I spent a long time digging this ditch. Will you pay me for it? No? Because price is independent of effort.
Or, how about just read the book! (Do you take refunds on insults?)
> This process is the origin of the belief that prices are determined by costs of production. The doctrine, stated in this form, is not true. Prices are determined by supply and demand, and demand is determined by how intensely people want a commodity and what they have to offer in exchange for it. (p.111)
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Re: Even free
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Worse, as long as Borders remains in business (how long this lasts is debatable) paperbacks will be cheaper than $8. Borders 30% off coupons are common as dirt if you are a rewards club member (free to join) so if you have a local Borders still in business your paper cost is closer to $5.60 + tax. So I can buy a paperback for $6 then resell it or share it with friends or buy an ebook for $8 or more and be stuck with it. Pretty bad choice IMO. From my point of view ebooks of fiction paperbacks need to be in the $3 range to justify me buying a reader.
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Is an ebook edition really less valuable than a paperback?
cute article though, Mike
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http://www.fee.org/library/books/economics-in-one-lesson/
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"You Save: $4.01 (29%)" from the price we're NOT EVEN CHARGING.
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Right, but it's those marginal costs that drive price.
Books still need to be written, edited, copyedited including fact and continuity checking, proofread, and, for eBooks, they need GOOD formatting control to keep from driving readers crazy, just as pBooks need good typesetting for the same reason.
Those are fixed costs. They do not drive pricing. This is the kind of lesson one expects in "economics in one lesson."
And if you're talking about reprints of older books, those books still need to be either scanned, OCRd and proofread, or typed-up and proofread. Even for a reasonably short piece of fiction, say a 350-page paperback, it takes me between 10-15 hours to do a good job, and I do scan-and-OCR to get source texts.
Again, those are fixed costs, not marginal costs.
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Re: Even free
Economically speaking, this is incorrect. You buy something if you value it *more* than the price. Price is driven by marginal cost, and is the intersection of supply and demand. These are two sides of the same coin...
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Re: Come on TechDirt...
Hmm. I don't think so, but okay...
First, the book is freaking free: http://www.fee.org/pdf/books/Economics_in_one_lesson.pdf. The digital copy is actually infinitely cheaper than the paperback if you know where to look.
Indeed. Doesn't change the pricing shown for the Kindle edition.
Second, why wouldn't a consumer potentially be interested in paying more for a book that is delivered instantly, is as light as a feather, and can be read in the dark, had the font changed, etc? I'm not saying I agree with their pricing but I am saying that it's a reasonable hypothesis that a certain group of people would pay more for a digital copy than a physical one. Since the audience for this book as of late has been more technical people, it becomes even more reasonable.
Yes, a certain group of people may pay more, but basic economics will tell you that you probably won't do very well in such situations. This is a competitive market, and price gets driven towards marginal cost. The people in the market are much more savvy than you would imagine and recognize this.
Third, this is a really old book that's been printed a lot. I'm sure they have paper copies lying around all over the place. Unlike a new book, where you have a text file on a computer somewhere, with an old book, you might have to pay someone to type it up, proofread it, etc.
Those are fixed costs. Meaningless in pricing.
And 50 years after the book's release, you're towards the end of its sales life anyway. So the paper copies you printed in 1999 can be amortized over a higher number of customers than the ebook you formatted in 2011. Smaller market means higher price.
No. Not necessarily. It may mean low demand, which would mean lower price... Remember, price is intersection of supply and demand.
Fourth, why should the price of a good be pegged to its production cost?
It's not *should*. This is basic economics: price gets driven to marginal cost. A recipe for failure is if you ignore this basic tenet, because it means competitors will eat your lunch.
but in reality it's Mike who doesn't get it.
I know my economics.
Pricing is always tied to what people are willing to pay.
In a competitive market, pricing is driven by marginal cost, or you fail. That's the point.
Oil is almost free to produce, just pump it out of the ground, but people are willing to pay a lot more for it.
Oil is not a competitive market. Oil is the very definition of a cartelized market.
Cell phones cost much MORE than consumers want to pay, and hence the evil carrier subsidy. I spent a long time digging this ditch. Will you pay me for it? No? Because price is independent of effort.
I never said price is the same as *EFFORT*. I said in a competitive market, price is driven to marginal cost. I mean, that's fundamental economics 101.
>This process is the origin of the belief that prices are determined by costs of production.
I never said price is "driven by" the cost of production. Price is driven by the market, but in a competitive market it's driven *TO* the *marginal cost* and if you don't price it there, the competition will beat you.
Yes, the intersection of supply and demand is what determines the price, but if you understand what that intersection means, you'd realize it's the same thing as the marginal cost. Do the math. The intersection of your supply and demand curve *always* matches the marginal cost in a competitive market.
The problem is you think I'm saying that marginal cost drives the price. I'm not. I'm saying that the market drives the price *to* marginal cost.
My argument is that this pricing is a mistake, and basic economics (the kind found in a book like this) should point that out.
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Re: Is an ebook edition really less valuable than a paperback?
Not about value, it's about price. Don't confuse the two.
Value may help describe the demand curve, but price is set by the intersection of the supply curve with the demand curve.
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Re: Re: Come on TechDirt...
First, the book is freaking free.
Indeed !
Wrong. A pretty poor raw scan of a dead tree book is free.
It's not like a PDF I could reformat and put on my eReader.
It's not *should*. This is basic economics: price gets driven to marginal cost. A recipe for failure is if you ignore this basic tenet, because it means competitors will eat your lunch.
You think Amazon are stupid ?
Yeah, they're clearly going out of business.
In a competitive market, pricing is driven by marginal cost, or you fail. That's the point.
This is not a competitive market. Who else sells a Kindle edition ? To a person with a Kindle, who wants a full featured experience, this is the only deal in town.
My argument is that this pricing is a mistake, and basic economics (the kind found in a book like this) should point that out.
1. If people buy it, the pricing is not a mistake.
And as their pricing is easily changeable, they can rectify such a mistake easily. I wouldn't be surprised if that happens in an almost automated fashion when they assess sales periodically.
2. The price you should compare this with is that of a kindle edition elsewhere (or an other format that can be read on a Kindle) not a paper book. Comparing the price with that of a paper book is irrelevant. The Kindle owner didn't come here looking for a paper book.
3. Maybe (just maybe) Amazon has been reading Techdirt and realises that the content alone has a marginal cost of zero, so they are finding ways (ie Kindle) to add value over and above the raw content, so they can charge more for it.
I'd have thought the Mike Masnick reaction to this pricing would have been "go Amazon, finding a way to break free of the curse of downward price pressure".
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Economics knowledge
Worse, however, is that Griff believes that Amazon sets the price of the books. I had to read his comment three times to make sure it wasn't sarcasm. He really believes it.
Amazon is not the one publishing that book. News at eleven.
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Re: Re: Is an ebook edition really less valuable than a paperback?
If the value remains high, there is no reason for the price to come down (regardless of production cost) unless they can buy THE SAME THING cheaper elsewhere.
You seem to be suggesting that even though Amazon can clearly sell stuff at this price, they should actually drop the price because of a theory about price eventually tending to marginal cost.
Or are you in fact suggesting they won't manage to sell at that price because
- the paper book is cheaper
- there is some comparable digital alternative (such as ?)
- some other reason
Or are you saying they won't sell any ?
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Re: Re: Re: Is an ebook edition really less valuable than a paperback?
[1] First, the book is freaking free.
Indeed !
[2] If the value remains high, there is no reason for the price to come down (regardless of production cost) unless they can buy THE SAME THING cheaper elsewhere.
I rest my case.
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Re: Re: Is an ebook edition really less valuable than a paperback?
If we were talking about a good that is only produced in the digital form like software yet delivered in different formats such as DVD or download I could understand the DVD version costing more because the cost of production is more for a hard copy, plus you have a backup. When you compare a digital book vs a paperback other than the words on they aren't the same thing, the purchase truly is apples to oranges. The same could be said for when music CDs were first introduced. their cost for hypothetically the same thing, "the music" was and continued to be more expensive than a cassette. The eBook market is a young market that is still growing and as such it will continue to have these hiccups where people will scratch their head and say "that doesn't make sense" eventually however the market will find it's equilibrium.
I understand that the basic premise of this article is that it seems inherently backwards that a digital version is more expensive than a physical edition.
BTW I do not and do not plan on owning an eReader in the foreseeable future. The higher charged price might also have something to do with the fact that once someone purchases a device like this they will want to get the most bang for their buck from it and feel they are locked in to that format. I personally love having bookcases that I've filled over the years.
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Re: Re: Re: Is an ebook edition really less valuable than a paperback?
Um. Or they could make a lot more money because at a lower price point, it goes below a lot more people's definition of value. Check the chapter on price elasticity...
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Economics in one lesson?
"Economics is extremely useful as a form of employment for economists." John Kenneth Galbraith (1908 - 2006)
"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." Laurence J. Peter (1919 - 1988)
"When the IMF and the World Bank force a country to cut wages, lay off workers, produce for export instead of their own people, and sell off public property to cronies for less than its value, that's called "economic reform” "
And, of course, the reason the Republicans especially are so hot to nuke the US economy and are doing their best to destroy it:
“True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made.” - Franklin D. Roosevelt
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ebook pricing
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Re: Re: Re: Re: Is an ebook edition really less valuable than a paperback?
Do you think it is ?
I'm a huge fan of free ebooks - I get them from the Gutenberg site, in a format to go on my PDA for when I want to read while travelling or when forced to sit somewhere for hours unexpectedly. But the "free" PDF at the link given is no use for that whatsoever.
For time rich / money poor people, this may seem like a free eBook.
A friend of mine told me he could get a Napster streaming subscription and then record albums to MP3. Of course, track lengths were never exactly right so automatic track naming via internet webservice wasn't possible. And even after he manually renamed the tracks, the MP3 file properties were not as you'd like them so certain players (ie a Sonos) would not group tracks by author.
After he described the palaver he'd go through to get an album properly onto his Sonos, I compared this with buying the MP3 album from Amazon, and you know what ? The Napster route (probably violating TOS, maybe even illegal) simply wasn't cost effective for me.
I value my time more.
So for me there is NOT a meaningful free copy online (unless someone has a better link).
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Stuff For Phonies.
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Re: Economics knowledge
What they can't always set is the cost, and so they have even chosen to sell them at a loss in the past.
It is in Amazon's interest to find the correct price point for optimal sales (even if it below the cost they are forced to pay) so they can go back to the idiot publishers and show them the figures. Semi-Emotional arguments ("eBooks should be priced at less than paper") won't make the publishers change their minds. But hard data might.
Thus they start high, watch sales, and reduce the price if required. And if they sell a ton with the price high, then that proves the Kindle adds value and the publishers might stop seeing it as an afterthought in their strategy.
If they start low, they can't put the price up later and so they have incomplete data.
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Re: Re: Come on TechDirt...
I think that the reason people object so strongly to the original article is this: Price is set by the intersection of supply and demand. True. But demand is the measure of the utility of the product to the purchaser. While it isn't obvious, it's certainly possible that the added conveniences of the Kindle edition make it sufficiently more valuable than the paperback. I will admit that, as much as I am staying away from ebooks due to DRM, I have all but stopped buying paperbacks because I don't want to invest the space in my apartment to keep them and I hate throwing out books. (Yes, the reseale market is the way to go but I haven't sat down to do that yet.)
I don't think it's helpful on either side to say that some just "doesn't get it". It's clear Mike grasps economics but his highly dismissive attitude was incorrect in this way. You can only a priori compare the paperback to Kindle if they're the same product and they are not, because the Kindle version has features the paperback lacks.
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middleman rip again
1. as a new book is created today is is in digital form from it's inception. in this form,it can be formatted,proofread,font set,etc. this is done by or for the author.
2. older books are converted to this digital format when reprinted.
this is done by the holder of the reprint rights.
3. hardback books are the most expensive to produce as cost are relatively high but the selling price and collect-ability is also very high..for this reason it also may have a high resale price,as in first editions...
4. paperback book are much cheaper to mass produce and sell for less than the hardback and in turn have less "value" as a collectable item,and a small resale or lending "value".
5.ebooks cost almost nothing to produce as the "work"has been done for the tree books above.. and has no "value" as a collectable and no value as a resale item.
6. the publisher of the books may "force" the selling price through contracts (as was done to Amazon)to maximize profit
(to the publisher NOT to the author)
all of the above is done with "old school" thinking and we the readers and the author both suffer as the middleman rakes in the profits.
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Re: Re: Re: Re: Is an ebook edition really less valuable than a paperback?
However
1. This economic theory generally applies to price sensitive markets. People who pay $200 for a device to read a book with no realistic expectation of the eBook ever being significantly cheaper than the paper version don't strike me as a price sensitive crowd of people.
Starbucks sell coffee at up to $5 when a plain filter coffee might be $2 elsewhere in the same street. But they are not catering to the same people as those who buy the cheap stuff elsewhere.
2. If (as widely suggested) Amazon's costs for eBooks are ridiculously high, then a 10% drop in Amazon sale price might halve their margin. It would have to double sales to be worth it. I think Amazon probably know what they are doing. Kindle owners will bitch about it then keep buying the books either way.
The only place where there is real competition in this arena is where Amazon try and get you to buy a Kindle over a Nook. After that, you're locked in.
Of course, the publishers might be idiots for demanding that price from Amazon/B&N. But while the eBooks sell, they'll keep doing it.
Same as MS will keep charging silly money for Office.
When you're competing with "free and not quite as good" (as some would perceive OpenOffice) dropping MS Office prices by 25% wouldn't win over many OpenOffice users. They've already learnt to live with the shortcomings of OO and it's FREE.
So if there's someone out there happy with a shitty crooked scan of a paper book for free, they don't suddenly buy the Kindle edition because the price comes down 25%, do they ?
Or maybe you are thinking of a load of Kindle users with only $50 per month to spend. They could buy more ebooks if the price was lower. But that's just the same revenue at lower margin, isn't it ?
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WOW Another little mikee moment
That meaningless number you talk about and claim noone should look at when pricing something for resale is usally the dominate part of long term cost, and if you don't take it into account when pricing you might as well file for bankruptcy right now.
But then your business model has none of those costs, you just puke on the keyboard and surround it with advertising and your cornies do all the work.
Retail pricing may TREND towards the "marginal" cost, but you cannot price an initial release AT the Marginal cost or your going out of business pretty fast.
But then in your little world, if it's not free, and it's digital your being ripped off... maybe they should go sell coffee mugs and t-shirts and give the e-book away for free, but then you would be bitching that they didn't fill the mug with free coffee and help you put the shirt on too.
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Re: Economics in one lesson?
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here we go again....
the discussion IS about the price of a kindle ebook being HIGHER than a printed book.. which has almost no cost to produce and no residual "value".
no said to give it away free..
as i said before this is NOT a money grab by the author (usually) but by the publisher to maximize HIS profit!!!
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Re: WOW Another little mikee moment
1) uses your where you're belongs
2) misspells distribution as distrobution
3) misspells no one as noone
4) uses dominate where dominant belongs
5) cornies - wtf?
No one is perfect, but when belittling others it behooves you to reduce your own shortcomings.
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> Land by Robert Heinlein selling for over $7.
Why does he need to explain it? He didn't claim that retailers aren't overpricing ebooks. Quite opposite, actually. He criticized retailers for doing just that in many cases.
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Re: Re: Economics knowledge
Where are you getting that Amazon sets the price of the eBooks?
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Good points all.
A free market does allow people to make dumb decisions -- that is, decisions not in their best interest. I am sure there are many cases where selling an ebook at a lower price would result in greater net profit.
And in the final analysis, neither the production cost nor the marginal cost determines price. In a marketplace, price is determined by what people are willing to pay.
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Re: Re: Re: Economics knowledge
You get
Publisher: Crown Business (August 11, 2010)
Sold by: Amazon Digital Services
And no mention of who sets pricing
Now, that may be because I'm in the UK (though I still see dollar pricing, and I'm not rerouted to amazon.co.uk).
Are you saying that the pricing worldwide is set by Random House ?
Because the price disparity still exists in my link.
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The Economist
A yearly subscription is A$190 if I am in Australia (which I am) or $110 (A$105) if I am in the US.
Of course it is not the Economists fault as there are middlemen involved but it is funny (unless you have to pay the $190).
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Lower price incentives for less desirable products are a good thing. At least, it is much better than an increased price per unit to make the less desirable product more profitable with fewer sales.
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Re: Re: Re: Re: Re: Is an ebook edition really less valuable than a paperback?
No, it is a genuinely free ebook. The fact that you don't think that it's very cool doesn't change that fact.
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That has a very negative effect on the customer's willingness to give them ANY money for eBooks, since it encourages an attitude of "They don't respect me, why should I respect them?"
It would be really bad for books and book publishers to be seen with the same contemptuous derision the MAFIAA have earned.
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I personally prefer to see the lower "incentive" cost.
Print is falling behind in terms of demand, some publishers leaving print behind entirely. If it's going to remain, we will see more and more instances of it's cost going way up or way down with little concern for what digital customers believe is fair.
Really, this is just a glass is half empty or full scenario. As easy as it is to point and say that whoever priced this is thinking backwards, you could also say that whoever priced this is thinking forwards. By attempting to increase the demand so that the overall costs of print (remember, cheaper by voucher to produce) can be met, a larger base of readers can be reached. Which is a reasonable goal of any publisher.
But we're not in the heads for whoever made these price decisions and we don't have the data they used to make said decisions. Any assumption is speculation.
However, I will say that I fail to see why publishers should be overly concerned with digital customers while pricing their physical copies. (In most cases) Digital customers are not going to buy the physical copy anyway, and those that will pirate will pirate. A fraction might be pushed either way by pricing decisions (and I do favor cheaper ebooks), but I'm not sure I see that fraction being mathematically substantial enough to cause concern.
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"And if you're talking about reprints of older books, those books still need to be either scanned, OCRd and proofread, or typed-up and proofread."
...and that needs to happen exactly once. While, again, Thanatos was overstating things a bit, once you have the master there's virtually no costs involved beyond bandwidth and storage - and those are costs not usually borne by the publisher, and fairly trivial for a single title on a large retailer's servers.
"The above endeavors require people, and people like to eat hot food and sleep indoors."
...and they won't get to do that on my dime if the eBook is overpriced. I'll stick with a second hand paperback (new paperback are usually way too expensive for me to bother), or just not buy the book at all. I need to eat hot food as well, I don't need to buy overpriced books.
However, I agree with you last paragraph. Lump in those idiots who insist on DRM as well.
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Both arguments are right, both are wrong
eBooks should be cheaper than the print version, there is no requirement to print and distribute a physical object and of you are not buying in person, there are no packing and shipping costs. There are no costs associated with operating a store i.e. heating, lighting, delivery costs, property taxes, and staff costs which typically add 30% to 40% to the cost of a product, if not more.
Pick up an magazine and a card will fall out offering a subscription at 40% or more discount, where do you think that 40% goes, it goes to the store.
The argument that books still have to be written and the author compensated is true and we are not debating that.
The scale of the compensation doesn't change whether it is an eBook or physical product. the fact is the work to author a book is the same, it all starts on pen and paper and MS Word. The final version is delivered to the publisher in the same format, an editable Word document. After it has arrived at the publisher editing and preparation for market is basically the same.
If a physical book is to be produced the files go to the presses, if it is an eBook, the files are PDFd and uploaded to the eCommerce engine.
I hate to say it but so long as people are prepared to buy into the argument that cheap eBook prices some how degrade the value of the author and how they are compensated they will remain more than the paper and publishers will take a bigger slice of the pie than they do with a paper book... eBooks priced they way this one is nothing more than a quick win for the publisher and lack of attention by the shopper.
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Re: Re: Come on TechDirt...
Since there aren't any practical competitors for ebooks on Kindle at the moment, perhaps Amazon has the advantage of a much longer run before having to respond to a change in demand which would serve to drive the price down. Even if the book is available in other electronic forms, those of us with Kindles are in a bit of a walled garden. Right now it's generally a nice walled garden, but the walls are there, nonetheless.
It seems to me that the basic law of supply and demand trumps any other observations, such as pricing being generally driven toward marginal cost of production. If the demand is right, you can stave off that trend for a long time.
And value is a huge part of the pricing of a product, as you yourself point out a lot. You laud performers who do things like sell autographs (or whatever - being simplistic here) to make their art more valuable in the face other, cheaper (whether or not legitimate) sources for their content. That is entirely based on the "value" of the add-on, not the artist's cost in producing it. Who argues that it only took the artist three seconds and a negligible volume of ink to scrawl his/her name on the album cover as a rejection of the extra ten (or fifty or hundred) bucks for the special personalized edition of the album?
HM
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I think he's trying to say that 15 hours of scanning/OCRing/proofing doesn't equate to >$7 per negligible incremental cost for digital distribution in his mind. I tend to agree with the thought.
I think the AC was trying to ask the OP how 15 hours of additional work on an existing older piece justifies the >$7 retail on all-but-free-to-distribute copies.
I don't think he was comparing SiaSL to the OP's example of $20 e-books after paperpacks are available, I think he was asking why such older works aren't, say, $3 if the additional production cost to transform an older book to an e-bokk is 15 hours of labor.
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we do, it's called working from home :P
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It's available for free!
You can download it an put it on your kindle...
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