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Amazon/Hachette Business Interruption

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Re: Amazon/Hachette Business Interruption

#51

Post by bsder »

jamesaguilar wrote: post #36
IgorPartola wrote: post #31

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,…

> 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.

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.

Re: Amazon/Hachette Business Interruption

#52

Post by lotsofmangos »

IgorPartola wrote: post #31

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 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.

Re: Amazon/Hachette Business Interruption

#53

Post by bsder »

chatmasta wrote: post #45
IgorPartola wrote: post #31

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,…

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 p…

> 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.

Re: Amazon/Hachette Business Interruption

#54

Post by lotsofmangos »

bsder wrote: post #51
jamesaguilar wrote: post #36

Earlier quoted context omitted.

> 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.

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.

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.

Re: Amazon/Hachette Business Interruption

#55

Post by bowlofpetunias »

IgorPartola wrote: post #31

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,…

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.

Re: Amazon/Hachette Business Interruption

#56

Post by chatmasta »

bsder wrote: post #53
chatmasta wrote: post #45

Earlier quoted context omitted.

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 p…

> 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…

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.

Re: Amazon/Hachette Business Interruption

#57

Post by bsder »

IgorPartola wrote: post #31

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,…

> 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.

Re: Amazon/Hachette Business Interruption

#58

Post by mkal_tsr »

chatmasta wrote: post #45
IgorPartola wrote: post #31

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,…

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 p…

> 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.

Re: Amazon/Hachette Business Interruption

#59

Post by credo »

Amazon has mastered the art of saying nothing with a lot of self-serving words :)

Their post is titled "Update re: Amazon/Hachette Business Interruption". However, they don't state what their specific demands are and why the business was (in their words) interrupted.

Amazon's proclaimed objectives aren't as important as knowing what their specific demands (from Hachette) are. I'm not a book-author, but as a developer, I set the prices of the software products I develop (Apple and Google let me do that, Amazon doesn't). So my sympathies are with the book publishers, but even if they weren't, I'd still like Amazon to explicitly spell out their demands instead of using self-serving pricing elasticity theories to sway public opinion.

Re: Amazon/Hachette Business Interruption

#60

Post by 2arrs2ells »

bsder wrote: post #57
IgorPartola wrote: post #31

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,…

> 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)…

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