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.
Greenpeace has handed newspapers 240 pages of current negotiating documents from the Transatlantic Trade and Investment Partnership (TTIP), a secretly conducted trade deal between the USA and the EU, which has run in parallel with the notorious Trans Pacific Partnership (TPP).
White hat hackers get paid to find holes in their own employers’ online systems, and plug those holes before they become serious security risks. It’s a job that pays handsomely…mostly because few job candidates, even experienced IT professionals, have the skills to scamper over firewalls and infiltrate the deepest recesses of a battle-tested network. But […]
Why buy one of those expensive and confusing universal remotes, clogged with enough buttons to launch a space shuttle, when you could accomplish the same electronic control right on your favorite mobile device? The Blumoo Universal Remote, now just $52.99 in the Boing Boing Store, harnesses the audio power of all your household equipment right […]
You may not love Microsoft Word, but you’ve definitely used it. Other than being one of the most ubiquitous programs on the planet, it’s been the go-to word processing system for more than a quarter-century because it’s as basic as it gets. But occasionally, you’ve got assignments that beg for a lot more options than simple […]