My latest Publishers Weekly column, "The Price Is Right," looks at the Amazon-Macmillan price dispute as a fight between two strategies for maximizing profit: price discrimination (getting the most out of each customer) and demand elasticity (sacrificing some per-customer revenue to sell to more people) and how these two strategies are challenged by the nature of digital goods and complexified by proprietary formats and DRM:
Everyone with a product to sell practices both price discrimination and demand elasticity in varying degrees. But when the product you're selling is digital, the correct ratio of one to the other becomes a lot harder to calculate. If you're selling hard goods, whether books, shovels, or coffee beans, the math is easy: you can't make money if you drop your price below the marginal cost of production. But digital goods, like e-books, have almost no marginal costs. Things like credit card processing fees, electricity and bandwidth, and a few other considerations keep the cost from truly falling to $0, but the low marginal cost of selling digital copies opens up some very exciting possibilities for publishers. Could the pool of people willing to buy books--the total number of regular readers--be increased by dropping the price? And could that increase in new customers be large enough to offset losses from smaller margins? Amazon clearly thinks so.
But pricing and profit-maximizing strategies aren't the whole story. Consumer electronics buyer demographics tilt heavily to the coveted 18-34-year-old who'll buy anything slim with an eggshell finish. Turning those big spenders into readers is an exciting prospect for anyone who cares about bringing in new business--and Macmillan executives are keenly aware of the opportunity e-books represent for turning nonreaders into new customers. Tom Doherty, publisher of Macmillan's Tor imprint (Tor publishes my novels), is positively luminous on the importance of inducting nonreaders into the practice of regular reading. And there's no bookseller on earth with more nonreader customers than Amazon, which, in addition to books sells everything from server space to freeze-dried steaks, sex toys, and uranium ore.
Big telcos and cable operators demand the right to impose data caps that punish their most enthusiastic customers for using too much Internet (with exceptions to the caps made for services that have paid bribes for “preferred carriage” of course), and they say that it’s simple economics: if you use up more of a service, […]
In Millionaire Migration and the Taxation of the Elite: Evidence from Administrative Data, Stanford sociologist Cristobal Young builds on his substantial research on “millionaire migration,” to show that only a small minority of millionaires move when local taxes go up — far too few to represent a net loss to the tax coffers.
Many years ago, EFF co-founder John Gilmore and I were discussing the prevalence of botnets, which are commonly used to launch distributed denial of service (DDoS) attacks that overwhelm websites with floods of traffic; John said that if the botnets were really on the rise at the reported rate, we should expect to see a […]
We’d all love a 75-inch TV screen on which to view our favorite shows. But not all of us can drop the cash needed to get one of those broadcasting beauties (or even have the space needed to house them).Thankfully, there’s an alternative. With the SainSonic Mini LED Portable Projector (only $59.99 in the Boing Boing Store), you can project a picture […]
If you want to add some real firepower to your programming repertoire, learn Java–one of the most adaptable, widely-used programming platforms around. You can easily do that with this Ultimate Java bundle, now just $69 in the Boing Boing Store.Across 14 lectures and 117 hours of content, the educators at online academy eduCBA will walk you through […]
Every company wants to harness the power of social media, but few understand how to make that happen. Be one of those select few with this Social Media Marketing Course & Certification package, now just $29 in the Boing Boing Store.Over 12 modules of course material, you’ll learn what it takes to increase a brand’s […]