Things Publishers Fear: #4 ~ Price

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About This Series
Things Publishers Fear is an occasional series about the realities of publishing in the modern era. For the record, survival is not guaranteed, nor is it always deserved.


Price

  • Information Wants To Be Free!
  • Freemium Model!
  • $9.99
  • Agency Model
  • Right now it seems the whole publishing industry is obsessed with price. The FT carried a piece on Tuesday about how Random House “Fear An iPad Price War“. Macmillan CEO John Sargent has been blogging about it, there is even a FREEMIUM SUMMIT in San Francisco on Friday (Contrary to what you’d expect tickets cost $449.00 rather than $0.00).

    And who can blame them. Price is already creating enormous problems for publishers. And it’s not just things like Kindle users punishing authors with non-existent, delayed or expensive Kindle editions by giving them one star reviews (here and here for good discussion).

    Price is a problem in the real world as well as the digital one. You only need to look to last winter’s price war in the US to see that. Amazon and Walmart kicked each other (and publishers) in the head to prove they had the best price for some key hardcover titles. The price point flavour of the day was $9.99. Then Target joined the fray.

    The problem of course is that these price wars and ebook protests are driving a value perception home in consumers minds. On the one hand it reinforces the idea of ebooks being “worth” less than physical books and on the other, the price of physical books is too high, why else would retailers be selling them at such large discounts.

    Bizarrely enough, until the enforced change to an agency model (which is by the by not across the board and is unlikely to become the standard if Amazon has its way), Amazon was selling ebooks at a loss, at least on new releases. And all three companies (Amazon, Target and Walmart) were selling their hardcovers at loss prices.

    Free Will Increase Sales
    And then there is the giving away stuff will help you sell more stuff argument. There are studies which seem to suggest that there are benefits. But the key point about those studies, is that they are by their nature, short-termist. This is not a criticism, just a reality.

    As the aforementioned John Sargent noted about the longer term of “Free” (HT to Mike Cane for pulling this quote):

    We had a car guide, Edmund’s Car Guide. That was a distributed line we had at one point.

    Edmund’s decided to put a little content up on the web. We said, “Great, it’ll drive the sales.”

    He said, “I’m gonna put it all up.” We said, “Don’t do it. You won’t sell books.” He said, “I’m gonna prove you wrong.” He put one-hundred per cent of his content up for free.

    First year, sales of the book went up.

    Second year, they went up again.

    Third year, they dropped by fifty per cent.

    Fourth year, we didn’t sell another book. You don’t find them on a bookstore shelf anymore.

    So there is that danger of the experimental stage of, “I give it away free and look! — my sales go up.”

    There’s gonna come a point in time where I give it away for free and my sales don’t go up and then there’s gonna be a point in time when I give it away for free and I ain’t selling shit anymore.

    Pushing For More
    From the perspective of a book publisher, price is about the only lever one has to drive revenue. Getting more for the books you sell is going to increase your top and bottom lines results. That is if you can control costs. So it seems like great territory for a fight, it seems like a great place to drag a bigger percentage from the other guys side of the maths to your side.

    Apple provided the opportunity to beat Amazon with a stick and to actually enable that clawback. Publishers, by some thinking, would have been fools not to take it.

    Besieged
    There are many potential retorts to this post, so many “but what about x, or y, or z” but the logic of fighting on price, of resisting free, of pushing for a higher value on content seems inescapable to most publishers who have for so long been on the losing edge of the price war.

    As some of the posts in this series have explored (Apple, Google, Amazon) as an industry the ground on which Publishing is built is being undermined.

    The smartest heads in the building are seeing that the future is not necessarily rosy, that survival is not guaranteed. That places an awesome responsibility on the heads of managers and executives. No one wants to be the man or the woman who brought X Company down. That leads to defensive thinking.

    That is why Publishers Fear Price and when you look at it from their perspective, they are right to.


    In an interesting aside, OR Books Co-Publisher Colin Robinson has an interesting post over at HuffPo. I expect to see similar decisions over the next few years. Disintermediation works both ways.


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