Ebook Publishers Never Learned: DRM & Ridiculous Prices

from the history-repeats-itself dept

One of the reasons we talk so much about the recording industry is that, in some ways, it's an "early warning system," for a ton of other industries. I had hoped that, in calling attention to things done poorly and the things done well in the music industry, some of those other industries starting to face the same issues would be able to avoid the same mistakes. However, as we've watched the movie industry, the newspaper industry and the publishing industry start down those same rapids, a part of me is wondering if they're simply destined to make the same mistakes anyway (and just wait until other industries, such as healthcare, energy and finance go through this process as well...).

In fact, watching the ebook market in action is like watching a slow motion train wreck that parallels the music industry. Here are two examples. First, some publishers have apparently decided to price ebooks higher than hardcover books. Customer are protesting (and giving the books one-star reviews on Amazon), but the publishers don't seem concerned. Meanwhile, publishers are still insisting on ineffective and annoying DRM which only serves to harm legitimate buyers, without doing anything to prevent unauthorized copies from proliferating. We've seen this story before... How is it that folks at these publishers haven't been paying attention? Or do they really think "but, with us, it's different"?

Filed Under: drm, ebooks, pricing

Hollywood Got The FCC To Break Your TV Because It Thought You'd Pay $30 For A PPV Movie?

from the say-what-now? dept

You may remember that earlier this year the FCC gave Hollywood the right to break your TV, by enabling "selectable output control" on your television, to keep you from actually recording certain movies or shows (um, unless, of course HDCP DRM is broken... oops). Months later, people realized that despite these urgent pleas from Hollywood, no studios had actually moved forward to offer such films in this "new window" closer to the theatrical release, but before the DVD was released.

Reader cc points out that some studios are finally interested in moving forward with such offerings, but they somehow think that people will pay $20 to $30 to view such movies. Yes, you read that right. I'm half wondering if this is really Hollywood's way of introducing this concept while trying not to piss off the theaters. They can basically say "hey, look, the only people willing to do this wouldn't pay cheaper prices to go to the flick in the theater, so they're not cannibalizing theater sales." Of course, you have to wonder if they're cannibalizing anything at such ridiculous prices.

Filed Under: ppv, pricing, soc, vod

Drug Rep Accidentally Admits There's No Justification For Massive Markup Over Generics

from the truth-in-emailing dept

Ever wondered why brand name drugs are so much more expensive than generics? Well, so did one Reddit user, who asked what magical qualities made a branded pill worth $500 when the generic was available for $10, and got back a response he wasn't expecting (found via Consumerist), as the rep accidentally emailed him the question that the rep meant to email a superior: In other words, there's simply no good reason. Of course, the monopoly rents afforded to the branded drug maker through patents probably helps. Combine that with the amount of money dumped into highly questionable and dangerous advertising, and you get a bit closer to the answer...

Filed Under: drugs, generics, pricing

Marvel Pricing Digital Comics Three Times Higher Than Paper Copies [Updated]

from the economics-failure dept

Adam sends over a link to Scott Kurtz's discussion concerning Marvel's decision to price its digital comics for the iPad higher than paper copies. (Update: as is noted in the comments, it looks like it's not actually 3x the cost, but it still priced higher than the paper copy). As Kurtz notes, this serves no good consumer purpose whatsoever, and only serves to keep retailers happy:

I wish this made sense to me. The only reason to price the digital copy at 6 dollars is to keep retailers happy. It's not in service of Marvel readers and it's certainly not in service of expanding Marvel's audience. I have a lot of friends discovering Marvel comics for the first time through the iPad app. Paying for 1/3 of a comic for the same price they normally pay for a whole comic is not something they'll appreciate or understand. I get Marvel's desire to make a move like this without spooking retailers or Diamond. It's like a scuba-diver pacing his rise to the surface to avoid getting the bends. But what does Marvel risk by scaring off potential new digital customers by pricing a virtual copy of a comic higher than the physical copy you get to keep? And for what? To keep retailers happy?

Of course, we've seen this before. Incumbent businesses have legacy relationships. And one of the reasons why they're often so slow to shift to smart new business models is because it will upset those legacy relationships. But if your upstart competitors don't have those relationships and can route around them entirely to offer a better product for less, you're going to get hung up by your legacy relationships. Kurtz suggests that Marvel stop worrying about retailers and focus on consumers for once:

The only problem with that thinking is that Marvel Comics isn't in the business of keeping retailers solvent. Marvel Comics is in the business of producing and distributing comic books to as many readers as possible. At least it SHOULD be. And if digital distribution has a chance of being more profitable than brick-and-mortar store distribution then Marvel owes it to its readers, creators and stock holders to pursue that business without having to worry about someone else's business for nostalgia's sake.

Marvel should take a page out of Steve Job's notebook on this one. Be visionary and push ahead no matter who it pisses off. Especially if it's good for the company, readers and the industry itself.

It's easier said than done, but not doing it can be a lot more costly in the long run.

Filed Under: comics, digital, pricing
Companies: marvel

Texas AG Looks Into Price Fixing Antitrust Questions Surrounding Ebooks

from the had-to-happen dept

As many of you surely know, earlier this year, there was a bit of a fight between publishers and Amazon over ebook pricing, which resulted in Amazon backing down from its "all ebooks at $9.99" policy, and publishers getting the ability to raise the price on ebooks. The whole thing seemed a bit odd, and smacked of price fixing and antitrust (potentially collusion). Apparently I wasn't the only one who thought so. Nastybutler77 points us to the news that the Attorney General in Texas is now investigating the issue. The theory is that it's an investigation into Apple's practices -- which could fit with the Justice Department's own investigation into potentially anti-competitive practices by Apple. But, I'm wondering why the focus isn't more on the book publishers. It used to be that retailers got to set their own pricing, and vendors requiring retailers to set a certain price violated price fixing laws. Recent case law has backed away from that concept, though I'm still not sure I understand why.

Filed Under: antitrust, ebooks, price fixing, pricing, texas
Companies: amazon, apple

Even More Evidence Of How Free Ebooks Can Increase Sales Of Physical Books

from the but-free-doesn't-work!!!! dept

We've noted in the past the various stories of individual authors like Paulo Coelho and David Pogue, who showed that free (non-DRM'd) versions of their ebooks helped increase physical book sales. Then, in February, we wrote about some actual research that showed that when unauthorized ebooks get out into the wild, there is a "significant jump in sales" of the physical book. And, now there's even more evidence to support this. A recent paper by a PhD. candidate noticed that free ebooks tend to increase sales of physical books. In this case, rather than looking at "unauthorized" ebooks, it looks like they focused on authorized free ebook versions. Not all of the books increased in sales, but you can see that there are lots of variables that impact this (how are the ebooks offered, how are the physical books offered, what types of books are they, etc.). Either way, though, it seems like there's increasing evidence that when done right free ebooks can certainly increase the sales of physical books -- despite claims from companies like Attributor that unauthorized ebooks are costing publishers money.

Filed Under: business models, ebooks, pricing, sales

Dear Macmillan, You Don't Embrace The New By Trying To Protect The Old

from the that's-not-how-it-works dept

Lots of people have been sending over the blog post by the CEO of book publisher Macmillian, John Sargent, trying to explain the company's ebook plans, following all the hubbub over its fight with Amazon. I was going to write up a long blog post about how backwards-facing Sargent's viewpoint is, but frankly, Mathew Ingram, over at GigaOm, already wrote up the post I would have written (eerily, almost word for word). Go read that post.

In addition to Mathew's points, however, I'd add that Sargent seems to think that pricing is done by producers, rather than the market -- and historically when companies in competitive markets think that way, they end up being in line for a very rude awakening. Economic forces don't work the way they do because someone wants them to work one way -- they work because that's how markets function. And if you price something too high, the market lets you know. But Sargent doesn't seem to get that. Instead, he's trying to set up totally artificial and made up pricing -- which becomes really evident in his idea that "hardcover" ebooks will get one price, while "paperback" ebooks will get another. It's not difficult to understand Sargent's thinking here. He's still thinking in terms of protecting the traditional windows and the traditional profit margins, and that means high-priced hardcover books for a year or so, then lower cost paperbacks later, in an attempt to segment the market. But with ebooks, that's going to lead to frustration and confusion. As someone named CM Harrington noted in a comment on Sargent's own blog post:

So how much more expensive is hardcover e-ink over paperback e-ink?

Your model is doomed.

One of the reasons why economic forces work the way that they do, and the reason why infinite goods with zero marginal cost get pushed in price towards zero, is that buyers implicitly understand the difference between scarce goods and abundant goods. They implicitly recognize the marginal cost of making another good, and they mentally price products accordingly. Pretending that consumers don't do that is assuming that consumers are stupid. And that's an even bigger mistake than looking backwards instead of forward.

Filed Under: ebooks, economics, john sargent, pricing, publishing
Companies: macmillan

NY Times Execs Think People Will Pay $20 To $30 Per Month For The iPad Edition Of The NY Times

from the let-me-introduce-you-to-newsday dept

Wow. Doesn't the NY Times have some of the world's most famous and accomplished economists writing for them at times? You would think that, at some point, as they tried to figure out business model ideas, they would think to actually run some of these ideas by an economist. We've already explained why the NYT's decision to put up a paywall makes little sense from an economic standpoint, but now it's getting even worse. You see, there are still some folks who bizarrely believe that tablet computers -- or, really, just Apple's iPad -- represent the savior for journalism because suddenly people will pay for apps. Already, this suggests a rather tragic misunderstanding of the economics of apps, but apparently it's even worse than that.

Rumors are flying that there's a battle within the NY Times on how to price their app for the iPad. Those on the newspaper side of the house apparently believe that it should be priced at $20 to $30/month to avoid cannibalizing the print product. By the way, if you want a simple tip for how to fail at business, it's to make a decision to avoid cannibalizing your own business. When you do, you've just made it clear that a competitor is going to cannibalize your business for you. The folks on the interactive side of the house think that $10/month makes a lot more sense and believe that pricing it at the $20 to $30 range is suicidal. Of course, if you thought that the management at the NYT's was really crafty, you might believe that this whole story was floated to reset the anchor price, though I have trouble believing that's true.

The problem, of course, is that the NY Times is pricing based not just on trying not to cannibalize the physical product, but without regards to basic economics, and the fact that everyone knows that without a physical product, the costs of the paper actually go down. Yes, of course the costs of all the reporting and editing remain -- no one is denying that. But you no longer have the printing and delivery costs, which are substantial. And reasonable people would expect that, at the very least, the cost of the app will reflect that. Either that, or (more likely), they'll realize that other, more well managed news providers will step in and offer up news for free in order to get the market share that the NY Times once had.

Oh, and one final word for the NY Times. I recognize that you're a better paper, with a much better reputation, than your neighboring competitor, Newsday, but remember what happened when Newsday tried to charge $20+ per month for access to its digital version? It got a grand total of 35 people to sign up. I'm sure more would sign up for a NY Times' app, but how many more?

Filed Under: ipad, paid content, paywalls, pricing, subscirptions
Companies: ny times