Thursday, September 3, 2015

Imagine That Higher E-book Prices Lead to Fewer Sales

WSJ has the details:
When the world’s largest publishers struck e-book distribution deals with Amazon.com Inc. over the past several months, they seemingly got what they wanted: the right to set the prices of their titles and avoid the steep discounts the online retail giant often applies.

But in the early going, that strategy doesn’t appear to be paying off. Three big publishers that signed new pacts with Amazon— Lagardere SCA’s Hachette Book Group, News Corp’s HarperCollins Publishers and CBS Corp.’s Simon & Schuster—reported declining e-book revenue in their latest reporting periods.
Who knew this would occur? These kids must be geniuses.




 -RW

8 comments:

  1. The old school suits cling to visions of the past as innovation and disruption explodes all around them. The paradigm has shifted and thick skulls abound!

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  2. I can attest that the higher prices lead to fewer sales. I've passed on several eBooks I would have purchased under the old pricing. I noticed the prices have been a lot higher of late -- often the eBook is almost the same price as the hard-version. That makes no sense whatsoever.

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  3. "I can attest that the higher prices lead to fewer sales. I've passed on several eBooks I would have purchased under the old pricing. I noticed the prices have been a lot higher of late -- often the eBook is almost the same price as the hard-version. That makes no sense whatsoever."

    True! How can they charge the same amount for an ebook as they do for a hardcopy? The only answer can be that they don't really want to sell ebooks.

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  4. We're talking about revenue here not quantity demanded. Clearly the quantity demanded falls as the price increases. However, the change in revenues could be up or down, depending the elasticity of demand. If the price increases and revenue falls, we are on the elastic portion of the demand curve for e-books. You guys need an economically literate editor.

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    1. Elasticity of demand is a useless aggregate statistic with no real world basis. No consumer thinks "ok, my demand is elastic so I will continue to buy it upto a certain price and then yada yada yada....". Consumers buy stuff that is priced within a certain price range. If the price falls above that range, which is different for each individual customer, that effects the buying decision. Just because some consumers price ranges overlap and others fall out of the range on either end of the spectrum does not mean that there is some "elasticity" of demand. Stupid aggregate statistics and bad analogies to physical properties from people with serious physics envy not withstanding. Next thing we know, you will be talking about young modulus of demand. Utter retardation. And before you ask, I do understand math. My background is in applied physics, BS and MS from a top 5 univ.

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    2. You don't understand this problem either. Consumers don't even think about elasticity of demand. If a price increase causes a much smaller percentage reduction in quantity demanded, revenues will go up. Next time get an econ degree.

      http://www.investopedia.com/terms/p/priceelasticity.asp

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    3. Which is why you need to learn some math before you throw away borrowed analogies that have nothing to do with what they intend to describe. Elasticity is a terrible term for what you are describing. There is nothing "elastic" about demand. The less replaceable the good is, the less decrease in demand for a unit increase in cost, ceteris paribus. Making stupid analogies and basing your worldview on ridiculous equations that do not correspond to reality is what professional economists that cannot hack it in math do.

      A joke among my friends is that if an economist were to pitch a startup, he would put the production function figure on a slide and be laughed out of the room.

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    4. Go look in any basic micro econ 101 textbook, you'll find it's a term in economics. Read my link above and then try to understand the difference between units sold and revenue. Then stick to physics.

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