The Rationality of One-Star Reviews
When publisher Hachette Book Group set its price for Michael Connelly’s latest suspense thriller, The Fifth Witness, it decided to charge $14.99 for the Kindle version and $14.28 for the hardback version, a difference of $0.71.
From a utility point of view, charging more for the Kindle version seems quite reasonable considering that Kindle books are delivered instantly and for free, that they take up no additional space or weight, that they can be read on any computer, and that they come with handy bookmarks and highlights of what other readers find interesting.
But how did customers respond to this pricing decision? They were outraged! As you can see on the product page, the book has been overwhelmed with one-star reviews based not on the quality of the book itself but instead on the perception of greed and unfairness on behalf of the publisher. “junk,” writes Amazon reviewer Juan M. “It’s ridiculous that the E-BOOK is as much as the physical copy. Greed indeed.”
Talia S. puts it this way: “I went and check the reviews and notice the many 1 star grading. I read some of them and changed my mind. I did not buy the book. We should not let the publishers hold us hostage because we prefer to read the electronic format.”
While standard rational economics tells us that consumers will be willing to pay more for items they derive more utility (pleasure and usefulness) from — in practice, other factors such as perceived fairness and perceived manufacturing costs play a very large role into our decisions of what to buy and how much we are willing to pay.
As someone who has published two books, and purchased a lot of them over the years, I find books to be one of the most puzzling categories in terms of how much attention people pay to their price. Think about it this way — if you were going to spend 10 hours with a book, do you really care if it costs $3 more? Shouldn’t you happily pay $0.30 more per hour of reading if the quality of the book was slightly higher or the experience was slightly better? Personally my more pressing problem is time, and if someone could assure me a better, even slightly better experience, I would pay a substantial amount more. And for some books, those I really treasure and that have changed my view on life – if I were just thinking about the utility of my experience I would pay hundreds of dollars.
The problem is that it is really hard to think this way. It is not easy to focus on what we really care about (the quality of the time we spend) rather than the salient attribute of price. And on top of that the unfairness of the differences in price can make us mad ….
I don’t know how the book industry will deal with this problem, and I am looking forward to seeing how this story develops. But, I do know that as readers we should pay a little less attention to minor differences in price and more attention to the quality of the way we spend our time.
Irrationally yours
Dan
My latest book, The Upside of Irrationality, explores some positive and some negative ways that irrationality plays out in our lives.
Amazon has demonstrated in the past that they can go into your Kindle via the internet connectivity and take back books that people have purchased, demonstrating that you don’t actually own what’s on your Kindle as far as their concerned. That makes it worth much less than a book I own, IMO. Also, once I own the physical copy of the book, I am free to lend or give it to someone else and no one can stop me. DRM, laws and end-user agreements prohibit me from passing on or lending the titles on my Kindle. That also makes them worth much less to me. And then there’s the fact that I know the electronic version is far cheaper to produce than the physical version, and I believe those savings should be passed on.
I think readers’ anger reflects how they view e books. There’s less pleasure to be gained (no physical feel or look of the book and so on) from an e book so people then expect the price to reflect that even if it’s only in cents.
It is not just a question of how much pleasure I derive from the book, the correct question is : How much pleasure can I derive reading that book for 10 hours, minus the cost of the book, minus the pleasure I can derive doing my next favorite activity (plus the cost of doing the next favorite activity, if applicable).
One of the reasons book reading has fallen so much is because there is a lot of pleasure to derived from doing other activities. As an example, I might read a book for 10 hours, if it gives me $50 amount of pleasure, costs $20, and I only get $25 amount of pleasure reading your blog for free for 10 hours.
However, raise the cost of book to $30 and now it doesn’t make any sense for me to purchase the book.
*I hope I am clear, English is not my first language.*
Well I think this post is bit backwards. Readers derive much more utility from a physical book, the resean people buy e-books is because they are cheap and instant which makes up for the lost enjoyment of a physical book.
e-books being more expensive defeats their purpose and is indeed a rip off as the cost of production is zero.
I disagree with you conclusion entirely. The difference in price is not the issue. The quality of time is not the issue. The issue is fairness and it’s entirely rational to fight against an organisation that abuses power, in this case market share.
The price difference in this case is minimal but principals have to count for something. Being ripped off by Amazon is no different from being ripped off by Wall street bankers.
Amen!
“Being ripped off by Amazon is no different from being ripped off by Wall street bankers.”
Or being ripped off by a con salesman, for that matter.
The author of this article *completely* missed the point, which is ironic considering he claims he’s authored two books.
Actually, rptizzle, it looks like you didn’t read the article, and therefore you missed the point. The author’s point is that “fairness” is not an economically rational decision-making criterion; since the author studies all the ways in which human beings make decisions irrationally, this is a logical topic on which to focus for him. I agree with Lisa B, that a physical copy is actually worth more to me, because I can lend it or even resell it (used copies are currently for sale on Amazon for $12.25!), but, as one of the people who thinks the publisher’s pricing is unfair, I also agree with Professor Ariely that using that as a factor in my decision-making is irrational.
I suspect that in addition to the enjoyment of the book they are buying, people tend to regard book buying as the purchase of a physical asset. I’m guessing here that it adds more to the sense of total net worth, as compared to owning a digital copy of a book.
When buying a book, I might pause to consider the print quality, the design of the cover and the effort taken to publish the book – (again, guesswork here) this adds on to the sense that “I’m giving money for something worthwhile.. “. A digital book, on the other hand, requires no effort on the part of the publisher/seller, no additional effort to store/manage inventory, no logistics cost to send the book and the book can be replicated without effort, and of course, the costs to sell the book is probably a fixed, one time cost. Of course, these online sellers had to spend time in digitizing the book, license management, sales-software, etc, but these factors would seldom considered by consumers. Thus the sentiments of “unfair”, “robbery”..
Amazon has always had an utterly whacked rating system. I love when I go to check out an infomercial product – only to find that the overall reviews are skewed because a number of people are complaining about the marketing tactics (not the product itself). Or a book review that is actually lowered because someone bought it from an independent seller and that seller was slow.
We consider much of the dollar value of physical books to be material cost. A tree had to die, someone had to cut & process it.
We don’t place a similar value to the challenges involved in hosting digital content servers & duplicating formatted text files.
I believe that in the minds of most, eBooks, as electronic copies and not tangible, it is much harder to understand why it should cost so much. People are used to getting things online for free, and think that digital content should be much cheaper than anything they can buy physically. What publishers need to do is drop the price dramatically. It’s not costing them as much to print the book, and they will see an increase in purchases.
Here’s what I would do if I was a budding author:
Start the book’s price at 99 cents for the first day, to boost it up in sales and get people interested. Next to the book description, I’d put the full schedule of pricing: First month: 99 cents, after that $2.01.
Here’s a great article about pricing: http://www.boingboing.net/2011/03/08/will-all-digital-boo.html
Dan, I think it’s about respect.
The reader feels manipulated and disrespected, and some of the joy of the purchase goes away.
One thing we buy when we buy is the joy of buying!
This also happened with “All The Devils Are Here” by Joe Nocera — a shame, as it is an excellent book on its topic. I had to sift through the reviews carefully to determine that nearly every poor review was about price, not about the book.
A couple of thoughts:
1) Is it not an over-generalization to say that Kindle books are “worth” more than paper books? It depends. You can’t sell a Kindle book when you’re done. You can’t loan it to someone who doesn’t also have a Kindle. You can’t loan it to a Kindle user for more than 2 weeks. A kindle book is not in color, and sometimes makes it difficult to view large tables or figures. You can’t quickly flip through a kindle book to get an overall sense of the content. You can’t put a Kindle book on your shelf as a display of your reading habits. Kindle books don’t serve to help strike up conversations between like-minded passengers on a plane (as they cannot see what book one is reading). I know a devoted speed reader who complains that the kindle doesn’t ‘turn’ pages fast enough for him (no kidding, speed reading techniques actually often teach one to begin to turn to the next page well before one is finished with the current page).
So, depending on how and why one values books, Kindle books may very well be worth less than paper books — perhaps very rationally so.
2) As noted in one (both?) of Dan’s books, people also don’t like the perception of being ripped off. It “seems” like it’s a lot cheaper for the publisher to create and distribute Kindle books than it is for physical books, so we “feel” like they’re being greedy, and we don’t want to do business with them.
It costs them only a little server space and bandwidth (for a file that’s usually very small, around 200KB), without them having to account for physical manufacturing, distribution, etc. I believe this “feeling” is, in fact, true — but I don’t claim to concretely know the costs associated with selling e-books.
While I love my Kindle, and while I much prefer Kindle books to paper books for all the reasons Dan cited and more, I still feel a pang of frustration when a book I want to read is cheaper on paper. Worse yet, this situation /frequently/ happens after a book has been out for a few years, and the laws of supply and demand take hold of the price of the physical book (especially if you buy it used), but the Kindle price never drops.
Currently, for example, Predictably Irrational (Revised and Expanded) is $9.99 on the Kindle, and $9.12 in paperback.
With a good book you want to share it with everyone. e-books remove that avenue of utility.
A large part of the utility that we get from all art is in the social aspect. In an attempt to retain profit margins both the book and recorded music industry have tried to obliterate the sharing option.
This post reminded me that I had not been able to buy the kindle version of The Upside of Irrationality for love or money because Amazon objected to my being in France. I am guessing due to some rights negotiation blah, blah. This is no longer the case!
Anyone who has had to rely on imported books or magazines is MORE than willing to pay a premium. That said I would be much less dubious of the premium if I knew which part of the process was charging it. Nobody is holding their hands up and saying it’s them pocketing the difference, not that it should matter who
It is not only a superior product to say, the paperback, it is MUCH superior to not having access to it at all. Oh yes, even as recently as ten years ago begging someone to bring a book or going overseas yourself was the only option. Those of us who lived through the dark ages appreciate things differently and that’s a fact.
Anyway, I am a happy ebook consumer if I can actually download them without being told I am in the wrong country.
It is interesting to note that as I type this, “The Fifth Witness” is now $12.99 on Kindle, and still $14.28 in hardcover.
However, to the best of my knowledge about Amazon’s review policies, those bad reviews are now there forever, and will undoubtedly hurt overall sales.
Perhaps the publishers will learn from there mistakes in the future.
There is also another reason why, from a “traditional” economic point of view, it would make sense to charge Kindle users more. There are a lot of fixed costs associated with publishing (costs that don’t vary with the number of users) – and from an economic point of view, it may make sense to recover more of the fixed costs from consumers that are less price-sensitive. Doing this means that consumers who are more price-sensitive can be charged less, and the book can reach a wider audience.
I would hazard a guess that many Kindle users tend to have more disposable income, and are keen on reading – and should – theoretically – be less price-sensitive.
I suspect that the pricing scheme adopted for the Fifth Witness is exactly the sort of thing that a traditional economist would recommend – but as you say Dan, once you take into account people’s perceptions about fairness, the scheme breaks down.
People know enough about economics to know that in a competitive marketplace that if the manufacturing cost drops, the price should drop. People don’t realize that because of copyright, publishers have a monopoly on individual books and in a monopoly manufacturing cost isn’t a factor in pricing. It’s all based on how much people are willing to pay.
Dan, I really enjoyed Predictably Irrational!
To clarify on the pricing:
Hachette set the paper list price for this book at $27.99.
Amazon is discounting the paper price to $14.28…that’s something Hachette can’t control.
Hachette is setting the digital list price at $12.99 (fifteen dollars less than their paper list price) at time of writing in the USA.
Amazon can not discount that, due to what is called the Agency Model.
That situation (Amazon can discount paper/can’t discount e-books on Agency Model books) often leads to the situation of the p-books and e-books being very close in price (with the p-books sometimes even less expensive).
To own a physical book is different than “owning” a non-transferable, perpetual license to the content of a book.
Whatever you think of a physical book, it still has value after you’ve read it.
The collective market value of all my kindle books is $0.00.
Once I am done with a kindle book I can’t sell it. I can’t give it away. I can’t save it for future generations. I can’t write a love note in it. I can’t it signed. I can’t keep it on the coffee table. It doesn’t fill my bookshelf. No one sees it. No one knows I read it. No one asks me about it.
I love kindle. But to me, these are $10 library books. I am willing to pay $10 because it is fast and easy and I know the people responsible for the content are remunerated. But unless and until I want to read the Kindle book again it doesn’t even have a sentimental value. (Just like a returned library book.)
When the library charges more than the bookstore is /outrage/ not the rational reaction?
I disagree with most of the reader comments offered thus far.
It’s not about the packaging regardless the form it takes. It’s about the content. Specifically, it’s about the writer’s talent, experience and expertise captured in every sentence. It’s about the value we get out of reading the results of their effort…call it our enjoyment, enlightenment, indulgence, nirvana or whatever else we derive from reading their works.
I am convinced that consumers engage in mental gymnastics to rationalize why they “deserve” to pay less for books, music and other works based solely on real/perceived differences in the packaging. We conveniently ignore the “real value” — the content itself — possibly because it’s so difficult to quantify.
It’s a bit like the locksmith post a while back. Consumers choose to see only the “packaging” – the 15 seconds it took for the experienced locksmith to open their lock – not the many years of training and expertise it took to become an expert locksmith, nor the value of having their lock opened in 15 seconds versus, 5 minutes or an hour where every second may count.
To understand the foolishness of such reasoning we need only look at our own work/efforts, and the compensation we receive for it. Should our employers be able to pay us less for the information/insight/expertise we share based on the number of recipients who read it and/or the form in which we provide it (e.g. print, email, text message, verbally, etc)?
Obviously consumers would be in an uproar if their compensation was changed to reflect the “packaging” and distribution of their work.
Seth, it’s not about respect, it’s about hypocrisy.
You are quite wrong here.
Maybe if the entire amount of money was going to the artist people would feel differently.
But the extra money is going to price gouging retailers and publishers.
This is why publishers are record studios are in a blind panic over digital distribution. They realise they are now entirely redundant and artists can self publish self record and self distribute.
This price gouging will only quicken their demise and I’m looking forward to it.
This is an interesting point. I agree, the publishers and record companies are becoming redundant, and their actions are only serving to further alienate them from their customers. But, why is a retailer or publisher always a ‘price gouger’ ? These roles exist because they were needed at one time. The people filling them, also need to make a living.
Saturnine_Zero,
I see absolutely nothing wrong with my statements. In fact, I provided an example in which ALL of the money goes to “the artist” yet consumers clearly do not feel any differently (read Ariely’s locksmith thread) even when there’s no middleman. I stand by my comments…and the question that I posed.
I think you’re right in a sense. The core issue is that people are not blind to the fact that electronic media cost less to deliver, and so they expect it to cost less as a result. They don’t see it purely in terms of the benefit the goods provide. I suspect the media stories over Napster, etc, has only made people more wary of the feeling that anyone selling electronic media, may be out to over charge. Even if all the money goes to the author, they are still charging *more*, in a world where people are, via the internet, more and more used to IP being close to free.
I’m sorry Mr Martins, but according to the publisher, the content of that book is worth less than a dollar no matter what format it is sold in. That’s how much they pay the author. The rest of the price of the book is profit (for the publisher, distributor, and retailer), production costs (which are one off and not per-copy), manufacturing costs, and distribution costs. Manufacturing costs and distribution costs for e-books are essentially 0 and make up about a third of the cost of a paper book. If you buy an e-book at the same price as a paper book, the author doesn’t get a cent more, the publisher just doubles their profit.
Bryan, see my response to Saturnine_Zero above. The same applies here. Even if an author self-published and set the same retail price the results would remain the same thanks to our warped consumer perception of value.
Except, again, if you self published, and you used a print-on-demand service, then you would get about 30% of the retail price. For the E-book, you get 70%. For them to earn the same (it’s the same content, so the same value, right?) for the paper and the e-book, the e-book price must be 30-50% or so less than the paper book.
Just because they’re self-publishing does not miraculously make the inherent added costs (and advantages) of a physical book go away.
Bryan, rather than continue to trade volleys I’ll close with this…
Forget about the publishers for a moment. Focus on the authors who create the content. I am certain we both agree that their content has standalone value. We’re not buying books for the cover art. When we purchase literature, in any format, it’s because we wish to read what the authors have written. And we anticipate some level of entertainment or enlightenment from reading their work.
Consequently, I value content completely independent of any packaging.
For example, when I purchased Justice Breyer’s book “Making Our Democracy Work: A Judge’s View” for less than $16 I thought it was quite a bargain to read 47 years’ worth of career insight and opinion from a man who has been a Supreme Court Justice for the past 17 years (and earns over $111 for just one hour of his time).
While I enjoy reading both print and digital, frankly, the format and underlying costs are never part of my value equation. I sincerely hope authors find a model that enables them to maximize the income from their work, but I’m not looking at the cover prices wondering whether X% goes to the authors and Y% goes to publishers and distributors. I’m not asking if they’ve sold one hundred copies or one million in an attempt to justify how much/little they charge per copy.
I simply ask myself if I am willing to pay $X to read the work of that author. In my example, I find it extremely difficult to argue that more than 250 pages of insight as a result of Justice Breyer’s 47 year career isn’t worth a mere $16 (It’s worth a lot more than that. We’re lucky to have access to it for so little.) I may not agree with his perspectives, but that doesn’t mean I’m not willing to pay to read his opinion even if it differs from my own.
At the end of the day you have to ask yourself if you are willing to pay $X for the insight (I read mostly non-fiction). The packaging should, in my opinion, play a very minor role in the purchase decision.
You have confused value with cost. You can argue that seatbelts are ‘worth’ a million dollars, but no one would use them if they cost that much. I accept the cost of a book (reluctantly) at $15 for a physical printed copy, but I expect the electronic copy to be much less. Because, up until the cost of typesetting, the electronic version is essentially done, whereas the physical copy still has to be printed, bound, and shipped. Extra features for the electronic copy are expected, not a bonus. I would expect the kindle wersion of the books to be similar or less than the cost of a paperback.
You seem to be implying that placing value on “fairness” is irrational. You also ignore the second-order effects of one’s decisions. If I refuse to buy a book at an inflated price, I may miss out this time, but also future books may be priced more reasonably. “Fairness” is perhaps a cognitive shortcut for this type of calculation. Why don’t you consider the rationality of the publishers who set the prices far above their production costs. Or perhaps I would feel differently if I knew the excess profit was going to the author rather than the publisher–oops, there’s that irrational obsession with “fairness” again.
Dear Dan, As a writer and a publisher, and an avid reader, I beg to differ with your opinion on the costs of e-books versus hard copy. As a publisher I love e-books, because they cost so little to produce, and percentage wise, the profits are far better. Not to mention that I’m saving trees, and all of the other pollution that goes into the manufacture of a book. As an author, the royalties are also much better. As a reader I am delighted at the opportunity to be able to gain knowledge, have fun, and all the other benefits of a good book. AND, Dear Dan, not all of us are able to afford hundreds of dollars for a book, even if it is a life changing one. So yeah, I disagree with the publisher…they are gouging the public…but I also see their point. If they sell the book cheap on e-books they who’s going to buy the hard copy? I wonder how many scribes, and book binders, and artists were totally unhappy when that damn Gutenberg came up with that stupid printing press thing.
Lovely, Ginnie! Lol on the Gutenberg reference – which also points up the complexity of rationalization that most human beings actually go through in the simplest of decisions… not to mention the veiled reference to how peoples’ decision-making tends to be strongly influenced by change, good or bad.
It’s my belief that many people purchase electronic books because it makes them feel as if they are doing their share to protect the environment. Protecting the environment in many other areas is substantially more cost in some cases. I myself have not embraced the electronic book. I find it something of a comfort to hold my book in my hand and turn the pages with my fingers for whatever illogical reason that is. Since the advent of Kindle (et al) I’ve been willing to pay extra for that hard copy experience because I realize that my passion for books – reading them, re-reading them, collecting them to fill up my book case, costs the environment. That’s my contribution to my rebellion. If those buyers are put out by the pricing because they feel their contribution has been minimized and they have been gouged at the same time I can understand that. However, at the end of the day – when I want something badly enough, I’ll pay whatever is required if I can manage. It seems rather odd however that consumers would penalize the author (obviously if they bought his book(s) they like to read him). He’s merely a pawn in the world of business. When taking a shot at someone or something, people should really take care that they are aiming at the right target. I’m just sayin’.
I would say that the vast majority of people purchasing e-readers do so for the physical space they save and the social cachet of being a user of a “hot” new technology. I’m no Luddite, but I’m forever cynical about man’s efforts to build a better mouse trap and think that e-readers are just another gesture of minimization in a world obsessed with fitting things into tighter and tighter spaces.
Dan–
I’m surprised that you chose to start this discussion with books, and not pharmaceuticals. Particularly with the example of pricing for KV Pharmaceuticals’ Makena so fresh in people’s minds….
You’ve been trying to paint the issue as being one of recognizing that convenience justifies a premium, but convenience is largely a subjective assessment, and people are not so dense as to fail to recognize a money grab when it nearly slaps them in the face. More on that later.
Changing an item’s physical properties is often a tit-for-tat process where compromises are made in areas deemed less critical to gain improvements in areas that will make the most people happy. E-books don’t take up space, but they cannot be easily transferred to another person or device. E-books are portable, but their readability is limited by the device they are being read on. Books are universally readable as long as there is a minimum level of direct or ambient light. E-books embrace the modern allure of instant gratification, but there are plenty of people who would happily drive across town or place an order and wait for the goods to arrive.
The elephant in the room (for only one side, apparently) is production and logistics costs. Producing an item, warehousing it, shipping it to distributors and retailers, maintaining inventory levels, disposing of excess stock — these things are non-trivial issues that consume precious revenue. Remove most of these from the equation, and you have more money to work with. Changing a format means taking on different expenses, such as the cost of doing business with an E-tailer such as Amazon, but most people will not entertain the notion that this balances the equation. Indeed, given the information available, they should not.
So, in the end we have people who would argue that a product in a format that is more economical to the producer(s) should also be sold at a premium based on the subjective concept known as “convenience”. Then there are those who see through the ruse.
Isn’t this a real-life example of the ultimatum game. That’s the game where the experimenter puts up some money for two players (Alice and Bob) to split, under the following rules. Alice gets to split, but if Bob refuses, neither of them get anything.
You would think that Bob would accept any split that gave him something, but that’s not what happens. The exact number varies with conditions, but at some point Bob says, “Never mind, that’s too one-sided.”
In the case of E-books, there’s a bunch of surplus utility created out of the fact that books don’t have to be printed or shipped. A pricing model that prices an E-Book the same as a printed book is very similar to Alice making a 95-5 split in her favor. It isn’t at all surprising, knowing about the ultimatum game, that all of us Bobs refuse that split.
For the past year I’ve only bought eBooks. I sold boxes of books rather than move them cross-country a few years back and never want to deal with moving them up again. So for me the main value is reducing physical clutter and being much greener is a bonus. I’ve found I like the convenience of using an eReader, it’s easy to take along when I know I’m going to be waiting somewhere for a while.
However, I won’t pay more for an eBook than the hardcover price, ever. Trying to charge more for a product which has much lower production and distribution costs is foolish. From a purely economic point of view the “right” price for an eBook should actually be less than a paperback copy. In the long term competition will push eBook prices in this direction.
As for the publishing industry, the magic word is disintermediation, cutting out the middleman. How valuable are the pre- and post-publication services that a publishing company offers to writers and their audience? The publishers who focus on a service culture will prosper. Those who focus on being a gate-keeper and maintaining value will fail.
Convenience and added value are only relevant as long as you will need them. Would I pay more for instant delivery of an ebook on stain removal if I just spilled some red wine on the carpet in contrast to going to the local book store the next day? Sure. Would it be a true value to have a library of repair manuals perfectly searchable through my iPad when going to a customer to repair his havoc? Of course. But there is little added value to have the newest thriller delivered electronically. Being able to store hundreds on a device electronically only adds value if I’m addicted to books and travel a lot (and the device is charged).
As others have mentioned, the perceived value of electronic, non-tangible goods is lower than physical goods most of the time. There ARE situations and reasons where instant electronic delivery offers additional value, but (at least right now) customers buying ebooks often paid upfront for the reading device: its perfectly understandable if they are p*ssed off if they should pay higher prices on top of that. (For delivering a Kindle book to Germany Amazon asked for an even higher price [in case the ebook is available overseas at all], even if I only download through WIFI to my Kindle for iPad app.)
Its simple: Give your customers true additional value they honor and benefit from … and they will accept higher prices. Give them the feeling to disrespect them and rip them off or charge for features they don’t see a value in … and you end up in customers avoiding your products.
As I wrote earlier, step back for a minute and ask yourself a different question.
Should your employer (whether you’re a W-2 or a 1099) expect to be able to pay you less for the information/insight/expertise you provide at work based on the number of recipients who benefit from your expertise/skill, or the ease with which you disseminate your insight (e.g. print, email, text, presentation, etc)?
How might you respond if your employer informed you that it believed your insight — distributed by wiki, forum, blog or email now or perhaps verbally in meetings — was no longer “worth as much” as when it was laid out and distributed in print? After all, it reasons, the level of effort and cost to capture your insight and make it available to others is lower than in the past.
Are you willing to lower your wage or your fees in the “digital world” now that your knowledge is more easily and cost effectively shared with others? Probably not.
Just because authors can now cut publishers and much of the costly print publishing process should they be expected to charge less for their work? I would argue that they should charge whatever they like. After all, we’re paying for the content/talent/expertise/insight not the packaging.
In essence, the employers have said that the workers’ expertise, etc., is worth less, since they have outsourced tens of millions of jobs. We know the workers are not worth less, but having been roundly told that they are, the workers forthwith view everything around them as worth less. We know that knowledge gained is priceless, and the authors’ skills are not worth less, but we have been inundated with Walmarts and layoffs – so everything is worth less. Society has set its sights and priorities lower, hence trying to convince anyone of the intrinsic value of a thing is decidedly more difficult. I realize it’s not rationale… which, I believe, is the point.
Irrational indeed. I’ve noticed that participants in this thread have avoided responding to what is a very difficult question…are they willing to apply the same perspective (they have as consumers) to the value of their own jobs? Clearly not.
If I were an independent contractor, instead of a direct employee, I would, in fact, expect to have the very conversation you are discussing. “I can drop my price considerably if you don’t require me to go to Staples and print and bind my report for you but allow me to email you a PDF and YOU incur the costs of printing it out, if you require paper copies.” Furthermore, when my customer accepts my lower price, both my customer and I will expect that I will walk away with a slightly higher profit for myself than if I had delivered paper copies. We both benefit from not wasting resources unnecessarily.
A direct employee has a different situation. If a direct employee can show their employer that they have found a way to reduce the use of the photocopier on a large scale and therefore saved the company thousands of dollars in paper, toner and maintenance contracts per year, that employee can expect to be rewarded with a “good job, we don’t have to lay you off this year.” Or possibly, if you’re lucky in today’s economy, a tiny bit of a raise, which might partially offset the increase in what you have to pay toward your health insurance.
By the supposedly rational economist logic presented here today, each email you send should cost a full dollar, because the utility of being able to instantly send email is much higher than the utility we get from slow paper letters. Online bill pay should cost a premium instead of saving the user the cost of a stamp. And I should expect to pay really well for the ability to put a comment on a blog belonging to a real live university researcher.
Amazon benefits financially from not having to warehouse and deliver that book. Get enough books delivered electronically and you don’t need so many employees. The publisher benefits financially from not having to print enough copies to meet the demand and then figure out what to do with all the leftover copies. Printing costs are a lot more than e-publishing costs. Everybody is pretty sure Amazon is going to make a slightly higher profit on books delivered electronically than books delivered in print. The customer expects to be in the same position as the employer in my first example – we don’t mind Amazon making a little more money if we get to save some in the process.
If Amazon showed me that it cost them more to publish an e-book (and the reason wasn’t sheer stupidity on their part), I’d be willing to pay a premium. Until then – no.
Thank you for your response Carol, but I believe you’ve missed my point. Perhaps because of the manner in which I framed it. Scroll up a bit and read my response to Bryan. I’ll leave it at that.
Ok, I might see why you aren’t getting the relevance my point has to yours. You seem to be saying the packaging shouldn’t change the objective value to the end user of the item.
Consumers know the packaging, warehousing, distribution, advertising and profit play a larger part in what the consumer is asked to pay for any given item than the actual item itself. I think most consumers know the price they pay for any item has very little relation to what the author, farmer, or sweat-shop worker is actually paid.
This is why it’s so insulting to be asked to pay as much or more for an item you know costs less to produce. The consumer is being treated as if he thinks the author is getting most of the price of the book. We know better. We’re not only insulted for ourselves, we’re also insulted for the author.
I’m staring to think authors should consider putting out tip jars at book signings. Make a joke about it: “I take plot suggestions, cold hard cash and advice. I do already know not to run with scissors, thanks.” I think authors could do well, and get people to stop offering plot suggestions all the time.
“The consumer is being treated as if he thinks the author is getting most of the price of the book. We know better. We’re not only insulted for ourselves, we’re also insulted for the author.”
I understood your point Carol, however I saw your response as similar to others in this thread. Correct me if I am wrong, but you seem to be under the impression that consumers might feel differently if they knew most of the profit was going to the author/musician/artist. They might be willing to pay more. That is simply untrue. See the Radiohead links elsewhere in this thread that detail how the band’s direct-to-consumer model was not more profitable for the band because a large majority of consumers chose to pay as little as possible or nothing at all. they chose to return to their old model.
You also seem to be reasoning upward from the author and publisher’s estimated profits toward what you feel is a fair market price…rather than simply asking yourself if the book you wish to buy is worth its cover price to you.
It’s not complicated. If you don’t want to buy it at the retail cover price, then wait for it to hit the secondary market. And if the used price is still to high for your taste, well then, don’t buy the book.
We can go in circles with this all day long and we’re simply not going to get anywhere. It’s quite clear that several of the people here wish to become arbiters of profitability and fairness. I wish them luck with that.
In my opinion consumers will make any excuse, and raise any issue they possibly can to justify giving as little as possible to a vendor regardless if the it is a publisher, a distributor or an author.
In this free market we vote with our wallets. If you have a problem with the way some books are priced, don’t buy them.
Dan,
Honestly, I’m a little disappointed that you can even think this way. For example, the electronic books don’t come with a bookmark. It is the reader that comes with bookmarks. I paid for that utility when I bought the ebook reader, so the analogous situation would be if I were a bookstore, to charge people more for the books if I knew they had a bookmark at home, because the “utility” of my book just went up. It’s absurd.
People get all of your “utility” that you mentioned with the Kindle, not with the ebooks, and you can see how much they value that utility in how much they paid… for the Kindle! This is obvious to everybody here.
Are you intentionally trying to troll us, Dan, or has your judgement been clouded by your conflict of interests as an author of books?
But it IS greed. Writers seem to forget that reading is a LUXURY. The question is, do you want to lower your price, or do you want to sell NO BOOKS AT ALL.
While books are edifying and invigorating and important, they are not as important as food and shelter. Writers are most generally people who are terrified of physical labor and interacting with John Q. Public. How writers will figure out how to survive is ultimately up to them, but it’s not like the rest of us are out here getting rich while writers suffer. It takes some real balls to sit around and whinge while your hands are soft and your ass gets wide. The working class of America suffers more and more, yet we’re supposed to SPEND SPEND SPEND. No one living on an unemployment check and searching for work in this anti-union anti-human climate can even afford to buy new books anyway. It IS greed. Lower your dang prices, and you’ll sell some books. The End.
Reminds me of asking which is more valuable, Diamonds or Water?
I can get a great book to read for free almost any day of the year from the library. So I never pay anything for a book and don’t care at all what prices the publisher asks. Why did the one-star reviewers refuse to take that approach?
In an irrational environment, the services from the library go a long way to improving the quality of time issue is. It’s hard to know if a book is good or bad until I have it in my hands (or on a Kindle). But if I don’t pay any money for it and it’s no good, it will be much easier to skip spending 10 hours reading a low quality book
1- What are the books that changed your view on life?
2 $3 difference makes 1 more book for every 10 books we buy and this is not a small difference. Considering that only a small fraction of the books we buy and read turn out to be really good – we need to buy and read a lot of books to find those.
3- ” Think about it this way — if you were going to spend 10 hours with a book, do you really care if it costs $3 more? Shouldn’t you happily pay $0.30 more per hour of reading if the quality of the book was slightly higher or the experience was slightly better?” I would do that too – but how am I going to know that I am willing to spend 10 hours for a book before buying and reading it? If publishers followed Radiohead and offer the books online and then ask us to pay whatever our valuation of the book is than it would be fine. But with fixed book prices – if one very valuable book costs $3 more it means all the other crap books also cost $3 more and I have to pay that amount before knowing that they are crap and then regret my decision.
Merve,
Radiohead’s decision to allow consumers to “pay what they want” was short-lived. The band killed that promotion later in the year amid speculation that 60+% of the downloaders chose to pay nothing at all. They returned to a traditional model and never looked back. I don’t know of a single individual or business that has created and maintained a “pay what you want model”. They quickly learn that, when given a choice, most consumers will choose to pay the least amount possible even if it means paying nothing at all.
The wrong question is being asked here. Did Radiohead ‘sell’ about an average number of copies of this album, or did a lot of people read it was ‘pay what you like’ and got it for free ? The real questions are ‘what was the average price paid’ and ‘how did their return compare to the return they got from a more traditional model’ ?
Christian, the band claims to have made “much more than on the previous album” but there’s no data available to determine the “pay what you want” campaign’s contribution to the album’s success.
http://www.techdirt.com/articles/20081015/1640202552.shtml
Take their publicly released information with a grain of salt. If the experiment was truly successful on any level, the band would not have returned to the traditional model as it did.
I agree, if they did not stick with it, it seems unlikely that it was successful. However, just like the person who downloads 10,000,000 mp3s was never going to buy all those songs, plenty of people who downloaded the Radiohead, had no intention of paying. I never steal music, but I considered downloading it for free, and buying the CD if I liked it ( but I never got around to it ).
This is simply not true – while many of course did download the album for free, the number of people that paid for it, and paid the same or more than an album from a record store was significant enough that while –
“According to reports most fans chose to pay nothing to download the album. However, it still generated more money before it was physically released (on December 31) than the total money generated by sales of the band’s previous album, 2003′s ‘Hail To The Thief’.
100% (or close) of this money went to the band, not intermediaries.
Also there are many successful artists, bands, businesses, even restaurants that successfully use a “pay what you want” model.
Chris,
“The real question, Castle said, is whether Radiohead can equal the same kind of money it made when it was still making records for music company EMI.
Castle offered an educated guess about what the British band was earning at the label. He figures that in every year a Radiohead album was released, it was EMI’s top-selling record. The band likely negotiated a larger royalty rate than most performers earn.
He guessed that when royalties were combined with money earned from publishing, Radiohead saw between $3 and $5 for every album sale.
Castle also estimates that the band typically sold between 3 and 4 million units worldwide. That would mean Radiohead hauled in between $9 million and $20 million per album. An EMI spokeswoman declined to comment for this story.
If Castle is right about the band’s cut, then the money it received from letting fans pay may not have been a huge drop. According to ComScore, the average amount spent for all downloads came to $2.26.”
So 100% may have gone directly to the band, but it didn’t seem to make a difference in the band’s profitability since consumers clearly paid less in the direct model. Again, if Radiohead’s experiment was such a success it is reasonable to assume the band would have stuck with the new model. It did not.
You wrote, “Also there are many successful artists, bands, businesses, even restaurants that successfully use a ‘pay what you want’ model.” I’d love to see the data supporting your claim if you have any.
I know Panera Bread currently claims “pay what you wish” success through its not-for-profit Panera Cares organization. In fact, the organization has expanded the program to 3 locations. Only time will reveal if the model is self-sustaining without continued subsidization from Panera. Lots of claims with very little evidence to support them.
Personally my more pressing problem is time, and if someone could assure me a better, even slightly better experience, I would pay a substantial amount more. [...] The problem is that it is really hard to think this way.
I don’t think you’re seeing the whole field, as far as questions of utility are concerned. Try lending somebody an e-book, for example.
Dan, do you teach in a business school?
Ah yes, getting my MBA, learning how to “value price” by making sure to figure out exactly how much value your product offered to the consumer and then pricing it at that point so as never to leave any money on the table.
So Disneyland figured out that their competition to a 1 day trip to Disneyland was a 3 day vacation elsewhere and then repriced their tickets accordingly.
And Komatsu priced their tractors at the cost of all the labor it displaced, not at their costs of production.
Yeah, it really pisses consumers off, but fuck it, NEVER LEAVE MONEY ON THE TABLE.
Great strategy. I like Michael Connelly, though my view of Harry Bosch is more William Holden in stature and voice than I think Connelly does — regardless I hope he enjoys his one star review, I’m going to add another.
Plenty of other people have noted that there are real differences between an e book and a physical one. The other question is simply, if I buy an e-book, what other costs, apart from the author, are there ? I know my physical book had to be printed, which involved labor and materials. It had to be shipped. If I bought it in a store, the staff had to be paid. The same thought process applies to mp3s, another place where digital media is grossly overpriced. I would never buy an mp3 anyhow, I like to own CDs. I buy Kindle books for convenience, as I travel a lot, otherwise I’d be paper all the way. However, when buying an album via mp3 costs the same or more as buying a CD delivered from Amazon, I have to ask myself, with those other costs removed, why am I paying the record company so much more for the same content ? Does the artist even see any extra ? When I am doing the right thing, when I know I could have downloaded this album illegally before it was even released, why am I being overcharged for my honesty ?
Hi Christian,
I know we covered this in bits and pieces elsewhere in this comment thread, but I thought I’d make a brief comment here as well (in a past career I was a software developer too). As a software developer you should know that the software you work so hard to create delivers value regardless how you choose to distribute it. That is to say, the value derived from the use of your software is totally separate from the value of the individual delivery/packaging options.
If I purchase your $999.00 application and it saves my company even just a couple thousand dollars per year in OPEX or CAPEX, then it has more than paid for itself. The fact that it available on a CD, DVD or as a download is practically irrelevant and more or less a question of personal preference. The same holds regardless the price of the app.
I would argue that the developers who choose to sell their apps for $0.99 and even $4.99 have set a ridiculous precedent for themselves and their peers. They’re hoping to survive on volume sales because they read some article about the rare app that sells a million copies or relies on ad revenue. Consequently most of them barely break even on their development investments. Worse, the message they send to consumers is that their apps are only worth a couple dollars when, in fact, the apps may deliver enormous value to individual users. They’ve turned consumers into entitlement monsters who want a great deal of value but aren’t willing to pay for it. But I digress.
Given your occupation, I would not expect the attitude you currently have toward music and books. Rather than suggest that you’re being overcharged for the same content just because the packaging costs less (e.g. electronic download versus CD), or that the publisher/author/musician/artist should adjust the price downward for “cheaper” packaging, simply consider whether the sticker price of their product is worth it to you. Period.
Will that $16 CD of your favorite band, or $0.99 download of their latest single be worth it for your entertainment? After you’ve listened to that song for the 100th time, at your convenience, will it have been worth the penny per listen that you paid to enjoy it?
Will the $24.99 you paid for that new software development book help you do your job more effectively and efficiently regardless if it was an ebook or printed? To say that the ebook version *should* be *just* $9.99 is to say that you don’t believe you’re getting a lousy $24.99 worth or insight from the authors of the book. You and I know that’s a load of BS. A single class at a local university, covering a single topic, would cost more than that.
Certainly everyone wants a great deal. Another couple bucks off is always welcome (heck, more than 75% of my book purchases are second hand). But to argue that a publisher’s lower production/distribution costs somehow entitles us to a lower retail price is just plain ridiculous when we know the value of the content typically far outweighs and exceeds the value of the packaging.
Consumers want maximum value at the expense of others, and they don’t care who they need to stomp on to get it. If they can get you to sell an application that took you 2000 hours to develop for just $0.99, they’ll do/say whatever it takes to make it happen. Mind you, they’d never want it to happen to them, but they’re prepared to do it to you. Don’t be that type of consumer.
Hi Joseph
I have a friend who sells his apps on the app store at the $2 odd mark, and he’s made enough money to justify the time they took to write. The app store DOES create a much easier market, and Apple pushes for the lower price points ( and takes a third ). Apple have a monopoly that people only tolerate because it’s more trendy to hate Bill Gates ( despite the fact that Gates gives his money to charity and Jobs buys cars with his ). I agree about entitlement, but the same thing happens when people ask me to quote on a job and their expected price is that Office costs $500. They don’t consider how many copies get sold.
I’m not sure what you think my attitude is. My attitude is that mp3s should be cheaper than the CD, but either way, I would always buy the CD, so my music is not a hard drive crash away from disappearing. I buy a lot of books, and honestly use my kindle only when I travel, and then I don’t really compare prices, I buy for the format that suits me at the time. I own about 3000 CDs and I play guitar. I buy CDs constantly without any consideration of a value proposition above that I love music.
I don’t think ebooks are worth anything. I have three monitors, but if I wanted to read on a screen, I’d read a web page. If people want to buy them, then fine. I have tons of paper books on development, although it’s a long time since I bought one, I can find info I need online if I don’t know how to do something nowadays. If, on the other hand, I knew it was the authors getting paid more if I paid for an ebook, I’d buy it on principle. I used to use safari, the online tech book service, and I stopped when I found out they don’t pay authors, they sell it to authors as a way to drive paper sales ( it, of course, does the opposite ).
To say that the middle man shouldn’t make more to sell me a product that costs less to deliver is not unreasonable. If the extra I pay makes it to the author, then I would not argue, I would pay it. It’s about the difference between feeling that the person who is helping me, got rewarded, and feeling like the middle man gouged me.
Good evening Christian,
Your friend is one of the lucky developers if he feels that he made enough money to justify his investment. Most developers of such apps are not so lucky and there is plenty of evidence to support it.
http://communities-dominate.blogs.com/brands/2010/06/full-analysis-of-iphone-economics-its-bad-news-and-then-it-gets-worse.html
http://adtmag.com/articles/2010/08/23/the-myth-of-write-a-mobile-app-make-a-mint.aspx
http://www.informationweek.com/news/personal_tech/iphone/showArticle.jhtml?articleID=217801029
On a different note, you’re using the extremely weak middleman argument (IMHO) to justify a lower price. I disagree. Virtually every product in every retail store you enter has not just one or two, but several middlemen–from raw material to retail–and each earns a small profit from their contribution in the supply chain. As they increase efficiencies in their supply chains the cost savings aren’t always passed along to consumers. That’s how they afford raises, bonuses, dividends and reinvestment in development and infrastructure.
I don’t recall a consumer uproar after the deodorant industry eliminated cardboard packaging, increased the number of units shipped per case, the number of cases shipped per truck, and the number of units stocked per foot of retail space, yet continued to raise the per unit retail cost for consumers.
You write that you’d feel differently if more of the cost went to the writer/artist. Perhaps you would, but clearly the majority of consumers do not share your opinion–middleman or not. Consumers want the absolute lowest possible price at the expense of anyone and everyone involved. Radiohead and other artists have experimented with the direct to consumer “name your own price” (NYOP) model unsuccessfully as I pointed out elsewhere in this thread. They return to traditional pricing models to preserve value.
In an ideal world I’d be inclined to agree with you. Ours is far from ideal.
Hi, Joseph. You’re right, middle men make their money by increasing their cut. The fact is that in this case, it’s very evident to the consumer what is going on. If I notice that my deoderant is in a cheaper packaging, I still know something physical has been delivered to me, and I am not asked to choose between the cheaper and the more expensive packaging at the same price. I think that’s the clear difference here – until all books are electronic, I have a cost comparison to be given exactly the same benefit at a clearly much lower price. Both those things ( the fact that I have something equal to compare to, and that it’s clear that I’m paying the same for something that’s cheaper to deliver ), make your analogy inexact. I do agree, most people want to pay as little as possible, and hence they steal IP whenever they can. Educating people to realise that the Rolling Stones won’t go broke if you steal their new CD, but the guy in the record store, the guy who delivers the CDs, and everyone else in between, does get hit, or even that it doesn’t matter how rich Mick Jagger is, if you want the content he creates, you should pay for it, is a tough sell, sadly.
My friend built niche products that were very simple, I suspect most people writing complex apps such as games do not come out ahead of the game. Of course, Apple does, and that’s all they care about.
Good morning Christian,
Please indulge me as I apply a few numbers to illustrate and simplify your points as well as mine.
Let’s start with the popular consumer worldview of digital goods which, IMO, you seem to share:
Print copy cover price = (Publisher costs + profit) + author royalty. Let’s say $10 = ($8 + $1) + $1
eBook price = (Publisher costs + profit) + author royalty
$10 = ($4 + $5) + $1
Consumers say they are upset because clearly some of the publisher’s costs have decreased yet they’re being charged the same (or nearly the same) price for the e-product as for the physical. They feel the publishers are “gouging them” by not passing along e-distribution efficiencies as lower prices. Further, some claim that if more profit went to the creator of the content rather than the “middlemen”, they’d feel differently. So, let’s mess with the equations a bit and remove the middleman. Let’s say the market is more content creator-centric:
Print copy cover price = (authors costs + profit). Let’s say $10 = ($8 + $2)
eBook price = (authors costs + profit)
$10 = ($4 + $6)
The middleman is out. A larger percentage of the profit now goes to the content creator. Still, consumers are unhappy. They cry “how dare the author charge the same for a less costly to distribute version of the same material.” Apparently some consumers now see themselves as arbiters of profitability and fairness. They imagine a world that looks more like this:
Print copy cover price = (authors costs + profit). Let’s say $10 = ($8 + $2)
eBook price = (authors costs + profit)
$6 = ($4 + $2)
In contrast, here is my value-based worldview of digital goods:
Print copy cover price = $whatever
eBook price = $whatever
Welcome to the free market where an author/musician/artist/publisher is free to ask whatever price for whatever format no matter how outrageous/nonsensical their prices might seem to the rest of us. As consumers we will ask “Is the album/movie/book worth that much to me?” If it isn’t, we won’t buy it. And if enough consumers are unwilling to pay the current price, the business will either resign itself to selling fewer books/CDs/DVDs at the current price, or lower its price to reach a broader audience.
Market forces work well without the need for consumers to dissect and analyze underlying costs.
Name one other class of products on this planet where consumers are in a similar uproar because savings from supply chain and production efficiencies have not been wholly passed on to them in the form of lower prices rather than returned to the individual/business as greater profit.
Hi Joseph. Having friends who have written tech books, I know the mix is nothing like that. How does hosting a server and emailing a file possibly cost even half of what it costs to print a book, ware house it, ship it, and have it hosted in a store ? I doubt that. I write my own music and I give it away for free. It costs me next to nothing to do that. You are right, if you cut out the middle man, many consumers would still complain, although I personally would not.
I already made the point, in no other place does the supply chain offer to provide the same goods two different ways, where one clearly cuts out the bulk of the cost of delivering the goods to me. And, in this case, if people go for the version that costs less to deliver, they are CHOOSING to buy it, as it’s very easy to just steal it. You are right that consumers will undervalue IP, at least in part b/c they know they can get it for free. It’s a tough one all round. I do think that the more that providers decide to charge the same for electronically delivered goods ( and the main one is surely music, where it’s NOT the same, mp3s do cause some degradation in quality ), the more people will justify to themselves just stealing it instead. I don’t know what can be done about that, because I certainly run in to it all the time, and my kids argue when I tell them that they will wait until a film comes out in the movies and pay to see it, or we’ll buy the album when it’s released, etc.
I believe you have missed the point. The point is “markup”. Consumers expect that people who provide them with a good or a service make a profit from doing so. Consumers know that a business is not a charity serving the mission of bringing consumers pleasure. Consumers are happy to reward businesses and their workers (including authors) for their time, effort and money put up covering their expenses. When I was young I used to think that things were priced at cost + markup. What a misconception! Goods and services are priced at what the market can bear. Cost is only a factor to the degree that if cost is greater than what the market can bear then the good or service is not offered until such time that the cost can be lowered. The airlines grand Saturday-night stay over scam of the 1990′s demonstrated the scam that pricing was. There is no way that an airline’s costs decrease if the passenger stays over on a Saturday night but it was the perfect dichotomous variable to separate business travelers (where the market can bear a higher price) from leisure travelers (where the market can only bear lower prices). I am well aware that one could argue that the very clever stipulation allowed some to travel at lower than cost.
So if a business can can produce something for 10c and can convince consumers that the fine item made with care and attention will bring the consumer happiness and status and the consumer “buys” into the marketing and pays $50 then $50 is what it will be priced at. The market can bear it. The consumer thinks it is worth $50 but when they find out that the product cost 10c to produce they feel conned. The feeling of deceit is stronger than the feeling of value. Everyone worships the wealthy but the observers feels like a total dupe when they realize that it was the transfer of their own net worth to the businessman (paying 50000% markup) that made the businessman wealthy in 3 years while they the observer are still just a middle class pleb. We admire the gumption and dominance of others but not when we realize that we are the dupes.
Only marketers live by the “value added” proposition because that is the BS they are selling to justify their prices. The consumer is thinking “oh that’s what it costs to produce and make some profit from” and in a separate question, “Do I think it worth it for me to pay x for it?”
It is my belief that the cost of any product should be reasonable. I think should cost me no more to purchase a product than the cost of making and distributing it, including the time of those involved. An electronic book uses no physical distribution, and, once created, can be infinitely distributed with almost no additional work and nearly no resources. As such, I just can’t agree with selling electronic copies for $15 each.
“Time” is not simply the amount of time spent working on a task/project. “Time” is the amount of time spent becoming proficient, and continually growing, learning, improving and refining one’s craft.
If we were to charge others for our Time, in most cases they’d likely never be able to afford our services. Instead, we charge them only for the value we feel that our Time brings to the table in a particular role or on a specific project. (Of course, their willingness to pay for it is a different story.)
Another example of Time vs time: top athletes aren’t paid for the precise amount of time they spend playing each game nor the length of the games in which they participate. They’re paid for their skills honed over many years of training and experience, and brought to bear in every game. What we witness during an hour or two of a game, or even a single event such as a high jump or sprint, is the result of years of dedication to their craft, whether we happen to enjoy (or benefit from) the outcomes or not.
I wonder where they got the $14.99 price from. I thought the prices were $9? The question is, who’s trying to pad their pocket? For pricing breakdown, see: http://bit.ly/fjZQta
Andrew, I assume you are referring to the $9.99 that Amazon used to advertise on most New York Times bestsellers and some new releases, unless marked otherwise?
That changed with the Agency Model (which is when the publishers started setting the consumer prices). That came into effect for five of the six largest US trade publishers on April 1st of 2010, with Random House joining them in March of this year. That price was always just for select books, and while the percentage of books in what I call the “prime range” (from one penny to fifty dollars) that are under ten dollars has been pretty consistent, the average price of New York Times bestsllers with hardback equivalents has risen.
“When publisher Hachette Book Group set its price for Michael Connelly’s latest suspense thriller, The Fifth Witness, it decided to charge $14.99 for the Kindle version and $14.28 for the hardback version, a difference of $0.71.”
This is WRONG, and I really wish people would understand the difference. Hachette, through the Agency Model, set the Kindle ebook price to $14.99. The PUBLISHER also set the LIST price of the print book to $27.99.
AMAZON, not the publisher, then set the DISCOUNTED price of the print book to $14.28, thereby undercutting the ebook price by $0.71.
So, the PUBLISHER isn’t pricing the pbook less than the ebook, AMAZON is pricing the pbook less than the ebook.
This is a major point. The PUBLISHER did, in fact, price the ebook at nearly half the price of the print edition. Good for them.
AMAZON, however, made a choice. and CHOOSE to discount the physical book’s price below that of the publisher’s ebook price.
The question is why? Loss-leader? Make it up the difference in shipping charges? Or perhaps it’s publicity, as everyone and their kid brother (including the author of this article) is blogging and writing about the discrepancy. “Greedy publishers are pricing ebooks higher than the print version!”
Let’s lynch the bastards! Yar!
Or does AMAZON, currently the largest seller of ebooks and electronic reading devices, and owner of the largest ebook reader platform, have something to gain from forcing down ebook price points???
Perhaps back down to their original $9.99 price point?
Think about it.
The price of producing a book, e-book or dead tree, is the same up to the point of physical production. Publishers have fixed costs, including editors, marketing and advertising, as well as the usual layers of management. Instead of paying for the book to be printed in hardcover they have to pay the e-book company to offer the book in e-book mode. What we don’t know about the regular $9.99 price is whether that is a “loss leader” price used to entice consumers to purchase the Kindle, etc. Do consumers feel “conned” by having spent $139.00 with the “promise” of $9.99 books? Is the $14.99 a price where the publisher thinks it can start recouping some of its loss? Or do they believe that certain authors can command a higher price? Men will be willing to pay more for a Tom Clancy e-book ($14.99) than they would, say, Lewis Black ($10.99). Is demand a factor? E-books are just now taking off, but will the trend last? Will something else replace it? Reason suggests that e-book prices will be near the same or slightly lower than those sold in a brick and mortar store. The publishers can’t put the price too low or it will hurt the chain stores thus hurting sales of their own dead tree editions of their titles.
Dan, I became your fan after reading predictably irrational. However, i disagree with the premises in post above. I am one who believes digital content should be cheaper .. and much for the same reasons as some people have commented above. Compare with Music tracks being sold online.
For online sales, its definitely a rip off to charge more than hardcover. The costs of production, distribution are significantly lower online. Plus there is no inventory cost, or upfront costs, other things being equal.
http://techcrunch.com/2011/04/12/ipad-newsstand-pricing/
The example the author uses is hardly irrational economic behavior; it’s simply group negotiation. You should probably be happy it exists – for consider the price you might otherwise need to pay for things like your phone, electricity, software etc.
Barring luxury, people would preferably not pay at all. It is a necessary evil – and for ebooks, it’s simply less necessary. It’s not just about *this* book, it’s about content in general – refusing to pay more than necessary will push prices down in the long run, and that’s economically entirely rational.
The framing of the question – to regard merely this book and merely this customer – is (hopefully unintentionally) damaging to a critically needed feature in assymmetric markets such as these. Based on price differences across the globe, it’s reasonable to assume that producers of content and natural monopolies are still extracting an inefficient premium on their product.
A more interesting question might be why people form groups, and that question too isn’t new nor unresearched – but that’s a different question.
To repurpose a phrase the author used:
I am convinced that the article’s author engages in mental gymnastics to rationalize why he “deserves” to earn more for books, music and other works based solely on how much they could get if consumers were dummies. He convieniently ignores the “real value” — the overall marketplace and broad variety of affordable, quality content — possibly because it’s so difficult to realize not everything is about one book.
(whoops, the repurposed, rather unsubtle phrase was in a comment by “josephmartins”, not Dan Ariely).
I have to disagree with you on this one Dan. No matter the convenience to the buyer of having something instantaneous and without shipping the fact is that it costs the book manufactures less to send an electronic version then to put together a hard copy (paper costs), package (labor costs) and send it to the customer. Therefore it should cost less for the electronic version.
Personally I have been known to pay big bucks and I prefer the hard copy so my house is full of books but what they are doing is greed and I also give then one star! They are not doing it for the joy the customer receives or the convenience of the customer.
WOW! It has been very interesting to read all of these comments (not to mention using this not to prepare for my class today).
I still think that fairness has a lot to do with the anger people are feeling about the price of electronic books — and many of the comments do seem to be about marginal production cost. Of course in a pure competition price should equal production cost, but the reasons people are mostly giving are about the morality of charging and not about the utility (pleasure).
But as was pointed out maybe I have my own conflicts of interests.
it is also interesting for me to think about who we are blaming for this: the publisher? the revenue model? Amazon? The Authors?
I also think that I will try to sell my next book as NYOP (Name your own price) and see how this works out.
Thanks so much for all the points and ideas
Dan
http://www.internetevolution.com/author.asp?section_id=568&doc_id=143385
The problem with all the objections people make out of their sense of fairness is that it might get to the point where it’s convenient for the publishers so simply raise the paperback just to sell the Kindle version for the amount they want to.
I would also contest the “better value” out of an ebook. I have both a lot of ebooks and real books, and I perceive a printed book as worth more.
- instant delivery is not worth extra. many of us have a bit “to read” pile and can wait even a week for our book
- a printed book is easy to lend, an ebook isnt. that is extra value
- free delivery is also available for printed books
- most printed books have handy bookmarks…
- a printed book will last longer. I have books that are 30 years old, 100 years old. I think unlikely that it will be easy to read kindle format books in even 10 years. PDF/epub might fare a little better.
- can’t give it or resell it (at least for kindle version) when i am done with it
So as a result I perceive my ebook to be worth less – and I will buy an ebook that costs less than or the same as the printed book.
The economics of books/ebooks on amazon are skewed though, as amazon’s margin often makes the ebook more expensive than the printed book even if the publisher has set the price “reasonably” at equal level. That’s one of the reasons I chose a different reader and to buy my ebooks directly from publishers.
What i meant to say is that it does not strike me as irrational to assign more value to a printed, durable, resellable printed book as opposed to the more transient and non durable ebook
I agree this is something I do not think very many people have mentioned.
Of course I see the issue of fairness but more I see the issue of actual value. Instant gratification really isnt why I buy a book and there are very few instances that I cannot wait. To be honest the benefit I receive in buying an ebook doesnt make up for what I loose. I cant easily lend it I cant resell it If i need it in colour or a larger print I cant conveniently have this. A real book also has no starting cost(the kindle). There is not any visceral feel to appreciate as with a real book.
As for the guy who keeps saying the book list price is $27.99. and Amazon choose to discount and thus the ebook was priced properly well I beg to differ. I have rarely ever seen most books in a book store or online actually sell for the list price. It is almost as if they purposely price the list well above what they plan to actually sell it for so you can see what a “deal” you are getting.
I work in sw industry and for most things I prefer a hard copy. I want a CD a DVD a Book. I will always have a copy of the digital one is lost. Granted I could misplace my physical copy but this is much less likely for me. As such physical copy would be worth more and something only digital worth much less.
I do buy ebooks but really they have to be priced significantly less as their value perceived and real is less.
I would agree that a printed book has greater inherent value, beyond what is written. An e-book should cost less, the publishers costs should be less because they haven’t had to print, bind, ship, etc. that book.
Having read most of these comments, as well as much of what Dan has written for several years, I think there is another interesting aspect that is not much discussed.
That aspect is that rationality is different for each person depending on the weights each assigns to different factors of value. If I weight the reading experience as 100% and ignore all other aspects, then there is no difference in perceived value between the e-copy and the physical copy. If I give a non-zero weight to the physical inconvenience of moving around a heavy book, then the e-copy will be worth more. If I give a greater weight to my distrust of DRM and sharing prohibitions, then the physical copy is worth more. If I want to try and send a message to a ‘greedy’ publisher, then a 1-star review is likely rational, because there may be no other practical way to communicate my distaste for their higher profit margins due to low production costs. Etc, Etc. The blend of factors and weightings is potentially infinite.
So, really, what is rationality? Who is more or less rational in these scenarios? Is there an objective standard for how to weight the different factors? What IS rationality anyway?
Answer me that.
1. I usually spend 2 hours with a book, maybe 3. The $/hour equation shifts a bit for fast readers.
2. No-one appears to be addressing the fact than many kindle versions of books that have illustrations are useless, and therefore of tangibly less value.
3. I can get most books on amazon used for $1.00, or at the Friends of the Library book sale, $5.00 a bag. If a book’s any good at all, its value holds that long.
4. Someone on HBR.org this weekend wrote about whether Amazon would ever give away the Kindle, ala Gilette and its razors. My theory is that the Kindle is more valuable to travellers and minimalists. People who read on the couch, at home, and who can afford self-space because they don’t live in Manhattan, may more incentive to go e-. I’ve bought 76 books this year so far, but only 4 have been brand new, and one of those was to use up a Borders gift card before they go away altogether.
Yeah, it really pisses consumers off, but fuck it, NEVER LEAVE MONEY ON THE TABLE.
Pissing consumers off leaves money on the table.
Dan, thought provoking. I had never considered book prices when buying a book around the edges but it is obvious that larger changes in prices do affect purchasing behavior. I can see easily why readers would be upset that after paying up for a Kindle that they would be charged more for a book where the incremental cost to the publishing company is lower. I have never seen work done on what happens to the consumption of books based on various price points but would be very interested. I suspect that people assume a very inexpensive book might not be as good and aren’t willing to pay up for random books so a middle of the pack approach probably prevails.
I have also wondered why movies aren’t priced as you suggest as well; why should the same junk movie cost the same as a high cost production like Avatar or a really great story, etc.
While my relevant expertise here is in the world of e-books, EBRs (E-Book Readers) and e-publishing generally, I thought I would give my lay opinion on the rationality of the reactions to e-book prices.
It would seem the rational thing would be to compare the price of something you are buying to the value it has to you.
It does not seem logical to compare the price of something you would buy to something you would not buy. Anecdotally, many e-book readers have made the switch in terms of mainstream fiction (not, for example, for cookbooks, textbooks, or illustrated children’s books). They don’t buy paperbooks: so the price of the paperbook compared to the e-book should make no difference.
I’ve often see people say that they will never pay more for an e-book than a p-book (paperbook). I asked one person if the Encyclopaedia Britannica was one penny as a p-book and two pennies an e-book, would they then refuse to buy the e-book? That seems unlikely…because a two penny Britannica is a great value.
Similarly, it seems irrational to compare the cost of the item to the price. It’s the value to you, not the production cost, that should determine the price you are willing to pay. A videogame costs less than $5 in materials, but people pay $50 for them. If the costs go up, do people insist on paying more? Gas prices have risen…would people refuse to pay the same price at the grocery store, but only take the object if they are allowed to compensate for the additional cost?
Third, people seem to tend to blame the closest transactor. If they buy things from Amazon, they blame Amazon for: prices (which Amazon does not set on e-books from the six largest US trade publishers); whether or not books are in the Kindle store (which is up to the rightsholders principally); and even whether or not sales tax is collected at the time of sale (that also changed with the Agency Model).
It may be very complicated to assess the value of something to you, but a computer would make very different buying decisions than a person would do in this case.
Just my thoughts on it, though…
Fairness is always important for a consumer. People do not like buying stuff that went up in price just because it is more popular. And consumers do expect the manufacturers to reduce the prices if the manufacturing costs have fallen.
If this were universally true, ticket scalpers would be out of business.
Would really help to know where the profits go so we could rationalize our “mispending”…if I want something bad enough, I’ll work hard to meet the price negotiated or not, but would feel foolish as a stake, share, stock or any other kind of “holder” in society if I didn’t pay attention to the trickle down effect of my buyer behavior. I like eBooks better than lining my shelves and weighing down my handbag and I say to myself…”oh…for this price, I’ll have to skip a night out this week…” on the other hand…I know that the read will probably enhance my mind and personally make me more interesting which brings value to those I surround myself with and you can’t really say that about a cheap 12 pack, now can you…???
i am not sure if fairness is the only issue here. if buyers were so discerning they wouldnt buy iphones and ipads where the price is ridiculously unfair…and I hope people know the cost of ipod/iphone/ipad is purely it’s popularity. We are more comfortable with fixed prices if we know for sure they are not going to change – things like the ipods/iphones/ipads, disney tickets..etc and don’t might planning to pay for them at some point but once we think something can change we rationalize by any means one or the other…
The outrage is rational for two reasons:
1. The Hardback version should be compared to Kindle version + the amortization rate ( for example, divide the cost of the device by the expected number of books to be read along its useful life) of the device and not only to the direct cost of the electronic version .
2. People exchange freedom ( if buy these kind of devices, they consciously become a captive market) for time but also for money ( relatively not so important on my opinion).
3. Fairness : It is quite clear that the marginal cost of distributing an electronic version is several times lower than the hardback. Thus, if the supplier maintains the same price
for the electronic version he/she retains all the social surplus ( in money terms) of the new technology. Costumers accept that innovators should be rewarded but society should also benefit from technological innovations.
How much the average person wants to read that book and the advantages of a particular medium are only part of the equation. The fact is it’s much cheaper for the publisher to publish in e-Book form than in pulp form. It’s greedy of the publisher to want to keep all of this margin for themselves.
A lot of people invest in a Kindle thinking it will save them money over time, so it makes sense to protest if you think an implicit promise of lower costs has been broken. I don’t think everyone thinks of the Kindle as a hands-down better reading experience. There is still something great about reading a real book. I use the Kindle because it seems crazy to keep killing trees in an age when the Kindle exists and because Kindle books are usually cheaper, not just because the Kindle is convenient.
Different people might have different reasons for disliking the fact that amazon has priced the ebook similar to the hardcopy, but for me, it comes down to this:
I often sell my books after having read them, and usually, for a book that costs $14, I can get ca $8 when I sell it; hence, I effectively spend $6, not $14. At the same time, I cannot sell an ebook on the Kindle.
To put it in other words, when I buy the ebook, I purchase the right to read it, but not the right to resell it. With a hardcopy book, I buy both rights.
I love what I do. Writing is my job. And like every other person who has a job, I hope to earn a living from my work. Every time my books are re-sold, I make nothing. And please do not point out that I’m making name for myself, building a following. I have house and car payments, grocery and utility bills, and none of my creditors are dazzled by my name. The only way they want to see it is on checks. That’s why I am looking forward to getting my work converted to e-books. I’ll actually be paid every time a book is sold…paid for what I do. What a great new concept!
On the one hand, it is true that any other manufacturer only gets paid for their goods being sold the first time. On the other hand, the maker of a PC, or a guitar, or a table, does not have to deal with piracy. No-one can, for no real cost, copy my camera and sell the copy, or even just copy it and give it away. On the other hand, copyright laws have always established that when I buy a book or CD, I buy the right to use, not the right to resell. That’s why, for instance, I can’t buy a DVD, then play it in a cinema. I’ve bought limited rights to the material, not the material.
“copyright laws have always established that when I buy a book or CD, I buy the right to use, not the right to resell.”
This is not true. Copyright law limits you ability to make copies of a CD or book. You can sell a book or CD without copying it, so copyright law doesn’t prevent that. End user licenses might say you can’t resell something, but they have very questionable legality.
I don’t see how piracy justifies limiting the rights of legitimate owners.
I know that when you buy software, all you buy is the right to use it ( I write software ). I felt that music CDs had a similar clause. I still feel like they did in the past, although I can’t find the relevant clause in any CDs I own, I feel like I’ve talked to friends in the past about second hand stores being based on the impossibility of enforcing that clause. I do know for sure that buying a DVD does not give me unlimited rights to broadcast it, just as buying a CD does not give me rights to broadcast the music. So, it’s definitely true that I do not OWN the contents, I only buy limited rights to it’s use. I’ve tried to sell software on ebay and Microsoft forced ebay to end the listings and tell people who bid that I was a pirate, when it was not true at all.
I agree – and yet, piracy is at least one reason that mp3s cost so much, the industry is trying to recoup money from legitimate users that is lost to pirates. As music sales in general have dropped, the only way to maintain and increase profit is to give less to providers, and make more from consumers, right or wrong.
“Every time my books are re-sold, I make nothing.”
Why do you think you should have more rights then other people who make things? People who make tables or computers also lose money when people resell them. Should buying and selling all used items be banned?
Christian,
Darwin is correct that *original copies* of books, movies and music (and even most software) may be resold legally.
However, music/movie CDs/DVDs, books and software applications cannot be compared to other physical goods such as dining room sets, televisions and automobiles. That is an apples to oranges comparison.
Many visitors to this blog are well aware of what I am about to write. The following is intended for those who aren’t aware of the differences.
First, even if the packaging of a book, movie, album or application is physical (e.g. on a CD or DVD) the actual product–that is to say the real value and reason we purchased it in the first place–is digital and able to be effortlessly and virtually infinitely cloned. I think it is safe to say that we aren’t making copies of the automobiles and dining room sets that we purchase, then reselling the originals.
Second, quite a few people (dare I claim a large majority of people) make “personal copies” of the original content, then resell the content to “make their money back”. That is they get to keep the value (i.e. the songs, movies, insight, entertainment) and yet make money from its resale. Just another form of piracy and it can happen again and again as a single book, DVD or CD is resold on the secondary market. Effectively, consumers give themselves permission to become publishers of a product that is not theirs to reproduce. While illegal to do so, it’s so ridiculously simple and abstract that they don’t “feel like” they’re stealing. Kindle and Apple iTunes are two of the many attempts to minimize the impact of “copy and resell”.
Finally, there is the term “used”. While it is true that a physical package (that CD, DVD or paperback) may be described as “used”, the digital/written content contained in the original package–it’s core value– is basically like-new in the context of each new owner (obviously, assuming pages are not ripped out, or unreadable, and CD/DVDs are able to be read.). Over a period of just a few years a CD/DVD can easily be purchased, copied, resold and copied again by subsequent buyers–dozens or even hundreds of times–with virtually no diminished value. Print books less so. But try doing that with an automobile or LCD tv.
Consumers aren’t replicating automobiles and televisions for their own continued personal use and selling the original on a secondary market. No, they sell the original and that ends their ability to continue to extract value from it.
Yes, it is true that the purchaser of a used car isn’t buying new, but the previous owner might choose to buy a new model, or a different used car. If book, CD and DVD buyers followed the law and sold only original books/discs without making themselves a personal copy first, fantastic, but they’re not. The cumulative impact, over many copies and resales, does hurt a writer’s/musician’s/artist’s ability to earn a better income. And that’s why the comparison is apples to oranges.
Thanks Joseph….well said!
OK – I wonder where I got the idea that one could not resell CDs from, then. You live and learn. I realise the rest of what you said is true, I felt I said as much somewhere in this discussion, and I write software for a living, so I know all about piracy
However, it is true that if I buy a DVD or CD, I own a license to the content, and not the content. That is why I am not allowed to buy a DVD and open a small movie theatre with my big screen TV, or buy CDs and start a radio station.
“I wonder where I got the idea that one could not resell CDs from”
The dishonest and manipulative RIAA.
“However, it is true that if I buy a DVD or CD, I own a license to the content, and not the content.”
You own the DVD or CD. You don’t own the copyright to the content. What you can and cannot do is covered by copyright law. You can get a license from the copyright holder that allows you to do things disallowed by copyright. You don’t need a license if what you are doing is allowed under copyright law, like selling a CD or watching a DVD. Showing your video in a small movie theatre is prohibited by copyright law as a public performance. I understand there are some weird rules in the US related to radio stations and copyright.
Well, I am in Australia, and I had the idea this was true, in the 80s, so, I don’t think it’s the RIAA. Who have conducted themselves badly but are obviously running in fear from a tidal wave that is making them utterly irrelevant and possibly bringing an end to the age of selling music as big business.
It might be interesting to study what motivates people to pirate or choose to pay for a legal copy when they know they could pirate it. I suspect that things like overcharging for digital copies that have greater restrictions then physical copies would be one factor.
“Consumers aren’t replicating automobiles and televisions”
Not yet, but someday they will.
I certainly wouldn’t claim it as a study, but I polled my readers some time back about when they thought piracy was justified. I didn’t specifically ask about restrictions from DRM (Digital Rights Management), but that might have been a good question. Here are the results I’ve had:
===
Under what circumstances would you consider book piracy acceptable?
Never 42.11%
If the book was otherwise unavailable in e-book form 30.26%
If the book had text-to-speech blocked 6.58%
If the price was too high 17.11%
Other: 3.95%
ROTFL – I doubt that anyone will ever be able to replicate a car. What DOES happen is that people buy cheap knock offs of luxury goods. In the case of stealing music and movies, I think that because nothing physical changes hands, people are able to blind themselves to the fact that what they are stealing is the core value proposition of the physical media, and to believe that no theft has taken place. That’s how most people justify it to me, and I tend to be a vociferous defender of IP rights amongst my circle, which sadly includes some family members who appear to have every album and every movie before they are released. Which makes for a good case study to discuss with my kids (‘if everyone stole my software, we’d have no house, clothes or food’ ), I guess.
>If the price was too high 17.11%
Wow. What limited imaginations. If “costs too much” is justification for stealing, why on earth bother with something that’s only $10?? Willie Sutton had a much better idea. (Of course today, many banks don’t have much more than a couple of tens of thousands in cash available, and I can find better ways to get $20,000 than stealing it, with the risk of a 20-year sentence.)
Read ICE, by Ice-T. He got away with a lot of high-end piracy. Hammer and a glass jewelry case, and (presumably) a good lawyer and the statute of limitations. He didn’t wasn’t any time on e-books, for sure.
Karen, there are a number of possible answers to your question.
First, my readers probably tend to be better informed than the average person on the differences between theft, infringement, and downloading what someone else has made available through infringement. They know I personally don’t approve of downloading unauthorized copies of books under copyright protection, but they are also likely to know that robbing a bank (a la Willie Sutton) and downloading an infringing copy are not equivalent under the law. In Dowling vs the United States, the Supreme Court specifically ruled that having unauthorized copies is not the same as having stolen goods.
Second, many people do have a “sliding scale of morality” whereby a smaller violation may be acceptable when a larger one would not. They may consider it acceptable to take a pen from work for personal use, but not to steal a car. They may think it is okay to slap someone, but not to hit them with a baseball bat.
Third, I don’t have any data that the 17.11 percent of my respondents were not also bank robbers.
I agree. The ‘I steal music because I can’t afford it’ argument is rubbish. Anyone can afford a book, a CD, or a DVD. It’s just that they can ‘afford’ more, if they justify stealing them to themselves.
Aiieeee…. I’ve lost the comment thread via email updates. Also suspect we’re writing Dan’s next book for him, and then wonder if a) he’ll pay us for the content, at least in free copies, and b) how we’ll feel about donating our content if/when we see these ideas in “print.” But I digress.
>difference between feeling that the person who is helping me, got rewarded, and feeling like the middle man gouged me…
Except anyone who buys anything BUT fair trade coffee and chocolate, and I have my doubts about whether fair trade is really true, is doing this–paying much more to the middleman than to the person who really sucks up the danger, risk, and hard work.
We pay middlemen when we buy from a store instead of a farmer’s market. Ditto bottled water–a penny a gallon for something I’m allowed to put in a bottle myself, or $4+/gallon if I let a vendor make it convenient for me?
I can’t help but think this entire exercise (at the book level, of which Dan’s column + comments is only a small part) is some massive split test and we simply can’t see the B alternative from here. Real question: has the fracas affected book sales?
I agree – that’s why I ONLY buy fair trade chocolate and coffee. And it doesn’t really matter in the long run if fair trade works right now, because my actions show the market that that’s what I want, so if fair trade is not cutting it, someone will step in and do it better, in order to attract my business.
The issue is slightly different though. Everyone knows we need middlemen ( although the internet is decreasing the level to which we do ). The question is, if I cut the costs to the middle man, who I know has done nothing to actually create the content I value, but merely provided a service necessary to connect me to the content provider, why should I not share in the benefits of doing that ? If publishers had a system like fair trade, that said ‘if you pay the same for an electronic book as for a paper one, I’ll take some of the extra money I make and give it to the author’, that would remove the feeling that I was being gouged, and, all things being equal, such a statement could be worded in such a way as to make the flow on to the content provider negligible, while satisfying the majority of consumers. To pay the same for a file as for a real book, in a world where most IP can be stolen, so consumers are essentially required to CHOOSE to pay for them and not steal them, seems like a slap in the face.
As I said above, I buy Kindle books when I travel, I read most books once, so I don’t care either way, and I pay for what is convenient. I buy CDs, not mp3s. But, I can see the argument being put forward by those who prefer, or will at least accept, digital media.
Think about it this way — if you were going to spend 10 hours with a book, do you really care if it costs $3 more?
Think about this, if you were a slow reader, and it took you hours to read the book, would it make sense to pay $30 more? Or if I were a fast reader, and finished the book in three hours, should I pay less? Since the publisher can’t determine how fast I read, don’t you think this approach is silly?
When I had Sauelson at MIT he made more sense.
I’m the 122nd commenter, so while I suspect someone has already addressed what I’m about to mention, there’s simply no way for me to go over all of the comments and see what’s been written.
What I want to bring to the table is the issue of text books. If we should pay for a book according to the utility we derive from it, paying $150 for a text book seems like a great deal. Obviously, getting a good grade and higher education would produce hundreds of thousands, maybe even millions of dollars in excess revenue over a full life span, that a $150 book seems like a bargain. However, we feel cheated, even outraged, at the price of text books. People who are aware of “international editions” are even more outraged, since they know for a fact publishers can sell the same book for a fraction of the price in the US, and still make a profit.
Hi Alon.
You’re mistaken. Publishers know that in countries like India, people are not going to pay full price for textbooks. So they do editions on cheaper paper, and sell them for what the market will bear. It’s wrong to assume that this means they can make an adequate profit overall if they sold those editions in the US, etc. It’s right to say that they make money on the cost of producing those poorer quality books in the third world, but not to assume that means that selling all copies at that price would meet their fixed price costs, or result in enough profit to attract authors for future projects.
You’re missing the point. The point is not about the international version – the point is the feeling of being ripped off when purchasing a text book, while in theory the utility it gives you is huge. That’s the point I was trying to make in relation to this post.
BUT, if you insist:
a) not always is the international version of the book printed on cheaper paper. (see: vhttp://i56.tinypic.com/b64qs8.jpg
http://i52.tinypic.com/359lmv7.jpg
).
b) The difference in price doesn’t stem from the quality of the book. It has more to do with “versioning”, in my opinion. See: http://faculty.haas.berkeley.edu/shapiro/version.pdf
c) I think that while (some) people recognize the concept of fixed or set-up cost, people tend to think about marginal costs. It is as if they think that everyone else should pay the fair price, which is set based on total costs, while they themselves feel they should pay something closer to the marginal cost.
But again, the international edition remark really shouldn’t be the focus of my comment…
Well, it seemed to me that you were focusing on the value of a text book on one side, then pointing out that there’s cheaper versions on the other. So, if that was ancillary to your point, and your point was that people derive good value from them, then fair enough. I know in IT, a service called ‘safari’ was all the rage, you’d have a bookshelf and be able to read up to 5 current books at a time, online. Trouble is, they did not pay the authors, and in doing that, they devalued their books as a whole in the eyes of a lot of people. I know the magazines I used to write for, all folded a long time ago. The internet makes it pretty hard, especially if you’re trying to present up to date info. Most magazines I buy have a news section that reports things I knew months before.
I think reading a book ties in to the top of the Maslow’s pyramid of needs. I read book to learn something, or to have a joyful imaginative ride of a fiction, or to expand my perspective in some way. So, to me, the value of the book is in the content, and not the form or medium (hard copy or electronic). And from that point of view, the comparable price of online version and hard copy version is justified.
However, I do enjoy reading hard copy books.
Why?
1. I enjoy the relaxed experience of sitting in a comfortable chair and reading it, sometimes with coffee or tea even.
2. I love writing notes while reading and that is much more than typing notes, or bookmarking different parts of the book on-line.
3. It connects me emotionally with the experience and idea of doing something fun, enriching, meaningful, and even leaving a legacy (library of books). Having a book-shelf full of books gives a nice uplifting experience to home.
That way, may be, we are genetically hard wired from thousands of years. It’s hard to think of an on-line book in the same light, not just yet. Though, I do admit that I am getting more and more used to reading articles and news on-line.
The irrationality of poor ratings comes probably in part due to the close connection of the perceived value to a hard copy book. When an on-line version costs the same, the perception is much lower value for the same price, as this other perceived value isn’t realized with an online version.
This is perception and not all real. But, then we are irrational.
I may have missed it somewhere in the 976 pages of comments above, but I didn’t see any mention of “perception.”
A 127 page E-book on stopping divorce has been selling quite successfully online for $67. It’s been doing so for over 10 years.
I recently downloaded another E-book for $47 that’s got less than 100 pages.
People have no qualms about buying an E-book online for $27, $47, and even $197 if it answers a burning question or tweaks their emotions in just the right way.
But, publish that same book through conventional publishing and they’d be hung by their thumbs for charging more than $15-20.
The problem isn’t Amazon, and it’s not the publisher. It’s simply our perception of what a “Book” should cost. When we sell “information” online we can charge 10 times the cost of a book. We’ve been conditioned to accept the higher price for an E-book we buy through a slick online landing page, even if that book has no more value than a similar book sold through Amazon.
Several of us wrote about different aspects of consumer perception.
My point further up in the thread was that some consumers like to frame the pricing debate in the context of packaging costs while others such as myself frame it in the context of value (of the content).
Perception is subjective, as it should be.
Different people value different things, and so would be willing to pay more or less for an online version. I have seen it working both ways.
What fascinates me is how consummate writers, marketers, thought leaders, innovators are able to associate their content with what people perceive as of higher value. And in the process, generate more traction, get their target audience to take desired action, or get people to pay more for the “product” or “service”.
It’s outrageous that Amazon should charge so much for ebooks, not that 30 cents is the problem. I buy ebooks from fictionwise.com and baen.com for about 5 or 6 dollars.Ebooks should cost less because they don’require printing, shipping, storing or remaindering. Amszon is charging too much. It’ s arip-off.
If I purchase a book for my Kindle, I am getting something loaded down with DRM, difficult (or impossible) to lend, and running the risk of Amazon simply taking it back from me.
That and the fact that seeing as they don’t have to print, ship and take back unsold copies, means that I object to being ripped off.
I wouldn’t, however, take it out on the author: I’m nearly certain they had no say in it, and yet they are they ones truly being punished by the negative reviews.
I dont agree with the negative reviews because the point of a review is to review the item not necessarily the service the Item received or the price of said item.
How ever I can agree with the reaction to the value of the book vs ebook. Simply put the book is more valuable as t has resell value where as the ebook has no value past the content. Saying (as some have) that they both have same content thus should cost same no matter Is ridiculous to my mind. Because essentially one is worth less to me in the long run than the other.
Go ahead and charge those high prices. It will only decrease the opportunity cost for others to seek out a pirated free version of the book, and then Amazon and the publishers can trade that high revenue for… none (oh…and a huge legal effort to try and enforce the wild west of the digital book world).
Hi, you are writing:
From a utility point of view, charging more for the Kindle version seems quite reasonable considering that Kindle books are delivered instantly and for free
I stronly believe, that the pricing is way to high. The reasons:
1.) The publisher has absolutely no costs for printing.
2.) There cannot be “too many digital books on stock”, and “hang around” not being sold.
3.) You do not need a big delivery chain, that costs money.
… I bet, if one thinks a little longer, you find way more reasons, that there is _more_ money for the publisher when delivering the book digital. So to me those prices are unfair, and this is why I try to avoid them. (Plus a bad book, can make a cold winter eveing realy cozy and warm, …)