Wednesday, December 23, 2009

E-Book Pricing: Attack of the Consultants

Seth Godin was famously dismissive this week of Carolyn Reidy's call for publishers to battle the current market trend for bestseller e-books to be priced lower than their wholesale cost, declaring that this is a matter of "competition" and "the market," which -- as all good little capitalists know -- cannot be fought.

There's two problems with his assertion. The first, and most obvious, is that it's not "the market" that is creating this artificially low price, it's one particular retailer, which has a long history of undercutting the competition on price to gain market share before increasing prices, and which is generally believed to be losing money on each sale under the current pricing structure. And businesses, despite what Godin might believe, are not obliged to help individual customers gain power over them.

The second problem is more basic: books are not an unfettered free market. Books do compete with each other for consumer dollars, but they are not competing evenly. The reader who wants Under the Dome will not be satisfied if he finds The Guernsey Literary and Potato Peel Pie Society at an amazing price. Each book creates its own market, only loosely tied to the market for any other book. So publishers do have quite a bit of leeway in setting a price for a particular book or format.

Or, to put it another way: Godin reportedly charges at least $30,000 for a speaking engagement. (And that number is from 2000; it's likely he charges much more now.) Many other speakers, who talk about the same subject, receive much smaller fees. If capitalism worked the way Godin claims it does, he would have no income, since there are cheaper, equivalent goods in the market. Given that Godin keeps making wrong-headed pronouncements, I expect that he's still finding plenty of people to pay him lots of money, even when his advice is the business equivalent of "lie back and think of England."

In short: the fact that Godin has a career proves that he's wrong.

[Godin link originally seen via GalleyCat]

1 comment:

Becky Brasington Clark, Johns Hopkins University Press said...

Thank you for insightful analysis and for using those rare things we call "facts". It's refreshing and reassuring in light of so much uninformed finger-pointing (a la "publishers are all greedy") and flat-out mischaracterizations ("ebooks have no costs).

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