There Is No 'True' Price For Anything
from the markets-adjust dept
There's an odd little NY Times article that reader Jake Rome pointed out to us, which seems like a totally random attack on Amazon based on the fact that some publishers don't like the fact that Amazon prices things based on this silly concept known as "what the data suggests will be the most appropriate price," rather than what these publishers insist is the only way to price things: "what publishers say a book's 'true price'" is and "how amazingly special and valuable books are." One of those ways of pricing is based on reality and economics, the other is based on fantasy and ignorance. Guess which one is which.One consequence of this shift is that soon no one will know what a book’s “real” price is.No one ever knew what a book's "real price" was, because there's no such thing as a "real price." There's whatever price a willing buyer and a willing seller agree on, and that's the "real price" for that book.
Price will be determined by demand and perhaps by whim.Supply and demand have always been the key setters of price, so why is that so surprising or troubling here? And I'm not sure where the "whim" comes in, because that's actually much more how book pricing was done before. Amazon appears to be doing the exact opposite of that: it prices things based on data, rather than on a whim.
“And I don’t like the inconsistency of the pricing, either — the raising, the lowering — because it sends a confusing message that good books are worth less, and because it encourages buying based on something other than the quality of the book. It’s just an unhealthy business if people are buying a thing mostly because of its price, not its quality. That’s how you sell widgets, not books.”Someone doesn't seem to understand the difference between price and value -- nor do they understand price elasticity. But, perhaps that's because they don't understand basic economics, as evidenced by their dismissive concept that books are not "widgets." Price and value are not the same thing. Just because a price is low, it does not mean the value is low. In fact, very cheap things can be incredibly valuable. And, the fact that more people buy stuff when it's cheaper, well, until you change basic human nature, that's never going to change. Pretending otherwise is like pretending you can stop the tide from coming in.
“Discounting, and especially inconsistent or shifting discounting, really messes with a publisher’s ability to price a book fairly and accurately to its cost,” he added. “You have to consider the fact that whatever price you put on the cover, Amazon is going to reduce it by as much as half — unless they don’t — or they may, but only for a while. But in short they’re going to make your book look like a thing with a cost lower than the one you placed on it."Fairly" is what the market will bear, and it appears that Amazon knows a lot more about that than this publisher. "Accurately"? What does that even mean? The book is always priced "accurately" because whatever price is put on it is "accurate." The publisher sets the basic cost, and what the retailer sells it at is a separate issue.
“So do you raise the price, knowing they’re going to lower it, so that the price will then appear closer to what you need it to be? But if you do that then you’re screwing the more honest retailers who can’t discount. And we’ve gotten a long way from recognition of the fact that publishers have costs in making books, and that should have something to do with the price.”This whole discussion seems to suggest this publisher, Dennis Loy Johnson, of Melville House, doesn't seem to recognize the fundamentals of the situation here. He's the publisher: he prices the books at what's the best price for his publishing house to maximize its revenue overall, and what retailers then price the book at is not a huge concern, because he's already set his own price. If Amazon wants to sell the books as a loss leader, so be it. What difference does that make unless you have some faulty notion in your head that books are so stupendously valuable that they "must" be priced higher than most people want to pay?
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Filed Under: amazon, books, economics, true price
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Amazon is a Monster. But..
The only market where prices seem to reflect some reality is actually computer games. Take a look at steam or gog.com, and you'll see how much the market is working. And the prices are NOT what every publisher think they should be. But so is the amount of goods sold -- higher than anyone would expect.
And I'm a typical "victim" of that market -- I've got more games than I ever might play. Still, they were cheap... The same could be true for the book or movie market IF they would price them right. I simply would buy more than I could ever read or watch.
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This one sentence tells you everything you need to know. If you're focusing purely on Amazon to set your prices by definition you are ignoring the consumer. It's hardly shocking you don't know what he's willing to pay.
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Value is completely different and is next to impossible to measure with any degree of accuracy as it is a personal thing. I have bought many e-books priced at 99p (and even free on Amazon) but the value I place on my enjoyment I got from these books is...well I cannot really put a figure on that.
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Tide goes in. Tide goes out. C'mon, Masnick, you can't explain that.
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The publisher's marginal cost for publishing an ebook is far, far less than the publisher's marginal cost for publishing a hardcover book. Ebook sales are going up, so the publisher's total costs for a print run should be going proportionately down. If book pricing had anything to do with the publisher's costs, we should see either hardcover books getting cheaper, or ebooks being priced considerably less than hardcover books. We have not seen either of these things happen, which is why the big publishers are currently in trouble with the DOJ.
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First sale price
That's something Microsoft could have done to sell the controlled used game problem on the original XBox One design. A disk sale could have been $60 - trade it all you want. Or buy it digitally for $25 and then, like current digital goods, no returns or exchanges.
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Why does he care?
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Re: Why does he care?
So this dude isn't worried about not getting his cut on books he's selling today, he's worried that he won't be able to sell books for as much next year because the brainless sheeple consumers will have been trained to only "value" the "worth" of a book at Amazon's bargain basement prices.
Clearly there's just an abundance of problems with that train of thought, I'm not here to defend it, just explain it a bit. But the most glaring problem is that the publishers have used their monopoly position to jack the prices up way more than supply/demand would allow, and now that Amazon is providing competition, ye olde guard are fighting tooth and nail to keep their cushy margins.
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Used to Cartels
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I VALUE air a LOT. Infinitely so. I would pay everything I had for air on per minute basis if I had to, because what good is my nest egg if I suffocate from not paying the air bill?
Air, however, is in (nearly) infinite supply. Therefore air COSTS nothing. Therefore I do not have to pay to breathe. This doesn't mean air is worthless, or that I don't fully appreciate it. It means that the infinite supply vastly overwhelms the rather limited amount I need to pass through my lungs on a day to day basis.
VALUE has no bearing on COST, supply and demand do. I wish people would get it.
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Re: Why put a price on the cover?
Publishers want to keep that illusion on anything they put out. Combined with the quality illusion and their fake monopoly they are of the belief that commodity pricing is completely wrong.
Unfortunately for them, most users will see entertainment as somewhat interchangeable. Unless you give the customer an incredibly good other reason to buy, price will still be an important determining power in what product the user chooses and therefore the monopoly and "value-based" pricing is no longer gonna cut it.
This guy is living in a time long before the internet, when pricing was fixed at $ x for any new publication and the only determining factor for success was the number of books sold. Since prices are now free, that is obviously no longer the case and since some publishers (mostly self-) have aggressively pursued a competition on prices, even the golddust from good publishers is not worth as much as it used to. Today entertainment is cheap and a very competitive market. That goes against every rule in every economic model the big 3 in music, big 6 in movies and big 4 in book publishing (Wolters Kluwer, Thomson Reuters, Reed Elsevier and Pearson) have ever used! Therefore Amazon is a huge enemy, along with youtube and to a lesser degree iTunes. All of these work with prices no publisher in the old world understands since they are used to their standard pricing and then "quality" - in this case quality is mostly cover-art and title/summary - was what differentiated the number of sales.
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What the?
Perhaps add: Suggested Retail Price
Like that pricing hogwash concept is not subject to the same price pressures as the rest of reality. They should be doing whatever it takes to make reading popular. No?
All of the products of entertainment and publishing are subject to what the market will support. The asses that need kicking are their own.
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Perspective on price versus value
Now to the minor. I stopped buying, ha, at the stupid title: "There Is No 'True' Price For Anything". -- Of course there is. Doesn't even need argued. -- Monetizing Mike is YET AGAIN attempting to over-generalize, but costs of physical objects and labor are fairly well defined over any reasonable period. -- It's only intangibles such as how much someone will pay for entertainments that are arbitrary.
Books are NOT widgets, Mike. As physical objects, they cost paper and ink: if lofty, they may require much time devoted, besides actual expenses.
But to Mike everything is a "widget" because he doesn't ever pay for it! His notions totally focus on grifting -- such as by pirate mega-site Megaupload -- where someone else pays all the costs, then Mike and his grifter pals use the value produced to skim money, diverting rewards away from the creators.
One of my taglines links to Mike attempting to equate physical goods with non-physical because that false premise is key to his "core concepts":
Ya say ya can't compete with free, Binky? -- It's easy! Just forget about "sunk (or fixed) costs"!!!
http://www.techdirt.com/articles/20070215/002923/saying-you-cant-compete-with-free-is-saying-you-can t-compete-period.shtml
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Given the frequent use of "widgets" as a metasyntactic variable in economics, this sounds an awful lot more like willful ignorance of basic economics than mere non-understanding of it.
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Basic publishing economics
The accepted method is this:
1. Determine your costs to publish. That's payment to the author (as minimal as possible), printing costs (or bandwidth), graft, waste, lobbyists... etc. Divide by number of books to get cost to publish one book.
2. Decide arbitrarily on the amount of profit you want to make for each book. Pick any number you want here. Price clearly doesn't affect demand for books, because books contain knowledge, which is priceless.
3. Decide how many books you'd like to sell.
4. Blame any failure to sell the number of books decided at step 3, for an amount as decided in step 2, on any of the following: Google, Amazon, piracy, the kids these days and their new-fangled video games, etc.
5. Hire more lobbyists to complain about the factors identified at step 4. Naturally, this increases the costs in step 1.
6. Ride this "success spiral" all the way to the end.
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First, the producers of the merchandise set the prices for the merchandise they produce. While most prices are not set in stone, some companies keep strict cost controls on the retail prices of their merchandise, such as Apple, Microsoft and the software industry.
Second, most merchandise is tagged as "Suggested Retail Price", which means that retailers can either sell at that price or lower.
There are some companies like Apple, Microsoft and Disney that take a hardnosed approach to the selling of their merchandise and most retailers are restricted from selling the merchandise they sell that is produced from those companies or they face very stiff repercussions.
For example, Apple will not allow retailers to sell its line of hardware (iPod, iPhone, iMac, iPads) below a certain price because they don't want their products to become devalued, which is why you never see any of Apple's products priced too low. The only time that Apple products are priced too move fast is when Apple is rolling out a new model for any particular item. New iPods and iPhones are generally marked down by as much as $100 when a new model is about to be released, otherwise, you never see more than $5 off the actual price of an iPod or iPhone.
Disney also maintains strict price controls on its products. Disney has a nasty habit of not allowing retailers like Best Buy and Target to sell Disney DVD's and/or Blu-rays below the $29.99 SRP and especially on their animated releases, they tend to retaliate against retailers by refusing to ship them any product. They are especially harsh when a retailer breaks a street date on their home videos.
Microsoft is the same way.
Most other companies who product merchandise are much more lenient on their merchandise pricing. But to say that there is no true pricing is disingenuous.
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Re: Widgets
In other words, take a course in basic economics. You'll be a much better person for it, and less likely to make an argument about someone else's use of a term you don't understand.
P.S. As a simple homework exercise, estimate the cost of the "physical object" of a book. Compare that to the publisher's desired sale price. Explain the relationship, or lack thereof.
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it's about demand,, not supply
IF the supply of books becomes an issue you print more (if you are allowed to under copyright), to meet the demand.
What the market will bare is what people will be willing to pay for it.
People don't buy gooks for more if they make less of them, when they know they can simply make more if demand requires it.
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Pricing Power
That's where we are now. The single most important thing corporations look for, in any sector, is "pricing power" which means they can fix prices. This replaces the normal relationship between buyer and seller and trivializes their transaction.
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Re: Perspective on price versus value
OOTB was being praised the other day for actually having a point (and a coherent one at that). He seems to have reverted a few weeks, maybe they changed his meds again?
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Re: Basic publishing economics
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What's amazing is that these people seem to have deluded themselves into thinking everybody bought new books and at full retail price until Amazon and ebooks came along. It's hard to deal with people who are addressing a fantasy.
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The Dragon Scroll, Kung Fu Panda.
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A book is worth what the buyer is willing to pay, you can think that a books true price is £10,000, and maybe you can even force a retailer to have to sell it at that price but unless some one buys it then the price is totally meaningless.
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Of course they'd have to ignore the legacy industry power whining.
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Printing Costs, (Re: Widgets, Khaim, #29, Aug 6th, 2013 @ 7:25pm)
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The price on the book 'sticker' is the list price (just like the car sticker). This may come as a shock but people frequently buy things at less than list price. It even happens to books, several bookstores in my area have a bargain bin. I haven't heard a single publisher make this level of fuss about bargain bins in bookstores.
So what is the issue? The issue appears (at least to me) to be that publishers dislike Amazon putting books in the bargain bin on the day they come out. They REALLY dislike Amazon putting best sellers in the bargain bin. However, they do not seem to have an issue if a physical bookstore like Barnes & Noble puts the same book in a bargain bin a year or two after it comes out. Why? In either case the vendor (Amazon or B&N) paid the wholesale price for the book and the publisher collected their 'designed' profit margin, the company taking the beating on the price reduction is the vendor not the publisher.
Best answer I've got/seen is that this is an emotional issue with the publishers and not a business issue. I've seen deals cut with clearinghouses/publishers where books are bought at wholesale and given away (effectively sold for $0). The seller thought that was a GREAT idea, they got paid and the book went in circulation providing 'marketing'. So I guess selling it for $0 is a good idea but selling it for $5 is a horrible idea. Huh?
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publishers' defense
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Re: publishers' defense
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Hey, Warner Bros. want their trademark back. (Though they'll have to fight me for it! :D)
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Re: Re: Perspective on price versus value
No, OotB making a coherent comment on here is one of those anomalies he loves to spout off about. ;)
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Re: publishers' defense
Complaining that they have some kind of moral high ground on this issue makes them sound immoral. Trying to back the claim up with some kind of weirdo notion that the manufacturer or retailer sets the "true price" makes them sound like liars.
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