Rovio Recognizes That Massive, Massive Volume At Cheap Prices Beats Low Sales At Inflated Prices

from the unrealistic-ebook-pricing-is-nothing-more-than-a-paywall dept

Maybe it takes a "digital native" like an app developer to instantly "get" digital publishing. Asking those who've spent most of the ebook era actively fighting the new medium is frustrating for both sides of the conversation.

Rovio, the Finnish developer behind the omnipresent "Angry Birds" game, is releasing its first ebook/app, based on the print version that debuted last year. Mike Cane has a brief but excellent rundown on what Rovio's doing right, and where other publishers are continuing to fall short.

Cane starts by quoting from PaidContent's article on the ebook release, which points out a couple of important aspects of Rovio's offering:
[T]he app is "not just a book," said Peter Vesterbacka, Angry Birds CMO. "We took the content from the book, 41 egg recipes, but didn't want to just take the book, make a PDF and sell it to people. We actually made it a lot more interactive."

"Bad Piggies' Best Egg Recipes" is on sale for an introductory price of $0.99 or €0.79 in the iTunes Store and includes step-by-step photo instructions, an egg timer and photos of the finished dishes. Users can also upload their own pictures of the recipes they make.
First off, the app/ebook is not just a quick and cheap "port" being thrown into iTunes to grab some quick digital dimes. Secondly, the price is well under what most publishers would be willing to charge for a comparable ebook.
Why is this such a frikkin big deal?

[T]hey are selling an app-book for one-tenth of the print version's discount price. ($9.99) One-tenth!
That's a much steeper discount than most publishers would be willing to take, especially on a potential cash cow like this. Sure, one could argue that it's just an app spinoff, or that Rovio made plenty of money with its games, or that there's no "real writing" involved, or any number of tangents in an effort to minimize Rovio's deep discounting. One could even argue that Rovio is leaving money on the table or, as an outsider, just doesn't "get" publishing and price points.

Here's what Rovio has to say about the price point:
"We're not looking thousands or tens of thousands of downloads," he [Peter Vesterbacka, Angry Birds CMO] continued, "we're looking for millions of downloads of this book…We're going for massive, massive volume."
Oh, those crazy Finns and their madcap ideas! Volume! It's as if Rovio believes that it can distribute an infinite good at an extremely low price and still make some very good money. Insanity! Mike Cane points out the sheer incongruity of the situation:
He gets it. None of the Big Six of publishing — or the Little Sixes of it — do.

What if the Big Six started massively discounting their frontlist titles, going for that volume instead of trying to bleed each reader for the most they could squeeze out of them? They'd be able to transition their businesses to e faster and make lots more money in the process — and also help to thwart piracy!
Yeah. What if? Unfortunately, that's still largely open to speculation as none of the publishers seem willing to try it out. Even in the wake of a DOJ investigation into price fixing, prices have tended to move up rather than down (or remain unchanged) as publishers burn through remaining discounts. Even after various self-published authors have demonstrated the ability to make a living selling thousands of cheap ebooks rather than dozens of expensive ones, the tendency is to price ebooks in the same neighborhood as their physical counterparts.

Mike suggests deeply discounting the frontline titles and making more money through volume. But even if publishers aren't ready to take their current bestsellers down that road, what's stopping them from knocking the price of their back catalogs down to an impulse purchase level? Making the back catalog a bargain bin could turn casual fans into completists and give readers a reason to dip their digital toes into unfamiliar waters.

But, if nothing else, Rovio's pricing strategy has to, at the very least, highlight how many publishers are overvaluing their digital offerings, as if charging unrealistic prices will somehow prevent "devaluation." In reality, these higher prices simply show the huge gap between what the publishers desire and what the customers actually want.


Reader Comments (rss)

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  1. This comment has been flagged by the community. Click here to show it
     
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    out_of_the_blue, Oct 18th, 2012 @ 4:11pm

    I doubt you're ever going to understand that

    some DO want the higher prices regardless of all else! Yes, some would really rather sell fewer, and you need to at least understand their mindset. -- Publishers and other middle-men have an interest in keeping prices high so they can skim from it. -- And that is relevant, 'cause they ain't going away.

    Mainly,though, low-cost, "pulp fiction", "penny-dreadfuls", "pocket books", and even paperbacks as such are NOT new. You kids just think that it is because now it's on a COMPUTER! -- This is NOT a general solution, particularly as the seller broke out (somehow) and is widely known..

    SO, the real question remains how one gets noticed in this new area that keeps getting flooded with yet more people wanting to get rich quick -- regardless how many sales they make. Heck, I once knew an author who'd have been happy just selling ONE book, if was for a million bucks.

     

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    Chosen Reject (profile), Oct 18th, 2012 @ 4:14pm

    I walked into a grocery store last night and saw a stand for Disney movies "on sale". Dumbo was $19.99. A 71 year old movie! That's OK Disney. My kids will just grow up without having seen any of your classics. When they get older, they'll say "Disney?"

     

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  3.  
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    Anonymous Coward, Oct 18th, 2012 @ 4:18pm

    Re:

    The real tragic thing is that it's still copyrighted after 70 years. That's absurd

     

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    Zos (profile), Oct 18th, 2012 @ 4:31pm

    Re: I doubt you're ever going to understand that

    no, we don't need to understand their mindset. we just laugh at them, then pirate it for free. because it's a click away, and that's not going to go away.

    Then maybe we go buy the author a drink at a con, or a tshirt at a concert, but that gatekeeper? all he gets is a hearty "go fuck yourself".

     

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    Mike Dee, Oct 18th, 2012 @ 5:21pm

    Re: I doubt you're ever going to understand that

    We do understand that some people want the higher price. But you have to understand that most want the lower price. It's tough economy still and if I can pick up a good book at a discount price, I'm more likely to buy it. Companies can still make a profit on discount prices.

     

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  6.  
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    Anonymous Coward, Oct 18th, 2012 @ 5:37pm

    Re: Re:

    Centuries from now, technology will have progressed to levels beyond even the imagination of today. Mankind may cure all diseases, end world hunger, take to the stars...

    And somewhere on Earth (or what's left of it), there will be a tiny, dilapidated building, housing a few ancient men on life support. They will spend all their days shouting hoarsely into microphones that broadcast over ancient frequencies, ranting endlessly about how much money they are owed by everyone for infringing their copyright.

    I can picture a bored teenager listening to the audio stream for a few minutes, then turning to a friend and asking, "Hey, what's that 'money' stuff they keep asking for, anyway?"

     

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    Bill W (profile), Oct 18th, 2012 @ 5:45pm

    Not in my iTunes store ...

    Maybe I missed it but I see a $4.99 price in iTunes. Maybe someone "convinced" them that less than a buck was whatch'ya call a 'bad idear?'

     

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  8.  
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    Zos (profile), Oct 18th, 2012 @ 6:42pm

    Re: Re: I doubt you're ever going to understand that

    i have a book a day habit. when i wanted books to own, they come from used book stores. new books came from the library.

    nowhere in that was the author, who i loved, making any money off of me. Now i get them in ebook, and there isn't exactly a used digital goods market to be found. So i'm going to pirate them. i'd much rather give a buck or two straight to an author i like. but that option isn't available. Remember, i don't buy new books. i'm not a lost sale, i never was a sale...but i could have been.

     

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    Greevar (profile), Oct 18th, 2012 @ 7:13pm

    What about Steam?

    Steam has massive discounts on game all the time and they've been reporting 1000% increase in revenue for those games (yes, revenue, not sales). If they made these prices a matter of course rather than a limited engagement, I doubt that the numbers would still outstrip the conventional retail model.

    The logic you have to yield to is that high price points for digital goods act as a barrier to all those people that want to buy. Sure, you'll get everyone that is willing to pay that price to buy it, but little more than that. Others will wait for a lower priced option to arrive. This is why used games is such a big market, they make a high-priced good more accessible by lowering the price in a second hand market.

    There are just only so many sales you're going to grab at that price and interest will steadily decline once each new customer exhausts their social circle to publicize the game to. It's like a chain reaction. It only lasts as long as your supply of reactants last. If you lower the price so that a greater number of people can get a copy, each new customer is additional access to new social circles, creating more opportunities for publicity.

    There's minimal extra cost to distributing 1 million digital copies compared to 100,000 copies. The overhead is small, so why not lower the price in kind so that you can access a larger audience? The worst thing you can do to your prospects of notoriety and visibility is artificially limit your audience. Volume is more important than the revenue ratio per sale.

     

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    Anonymous Coward, Oct 18th, 2012 @ 8:02pm

    This works great if your product happens to be really popular. But if you undercut your price and it isn't so widely received, like most products, you are going to suffer horribly.

     

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    Greevar (profile), Oct 18th, 2012 @ 10:19pm

    Re:

    That's not the fault of the price model, that's a failure to overcoming obscurity. Higher prices aren't going to make more people aware of you. The biggest hurdle is going to let people know you exist, the price is just what's going to determine if you get a sale or get passed over.

     

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  12.  
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    Anonymous Coward, Oct 18th, 2012 @ 11:12pm

    "Rovio Recognizes That Massive, Massive Volume At Cheap Prices Beats Low Sales At Inflated Prices

    hahah,, yes that might be true, but it certainly does not beat massive volume at suitably priced or even inflated prices.

    for example Apple, massive volume, inflated price, happy users..

    but you dont really know what expenses are involved, so it is only your opinion that a price in inflated..

    clearly with companies like apple, the consumers do not believe the price they are paying is inflated, in other words they feel they are getting value for their money..

    provide value for money, and the rest will follow..

    why do you think things like linux have not really taken off (as a desktop OS) ? it's because price is not everything.. people are willing and happy to pay a fair price to recieve a product they consider of that value.

    ie, it's worth the cost.

    it's got nothing to do with scarcity or some other crap that masnick goes on about.. it's about knowing that consumers want to spend their money on products they see as valuable and worthwile for them..

    have you even been to a bargin basment record (CD) shop, where they have a big box of albums for a super low price, 3 for $1 but them you look at the titles, nana mascuri, kenny rodgers and so on... mostly crap (all crap)..

    BUT IT"S CHEAP,, if your product is crap price does not matter, scarcity does not matter, it's crap..

    if your product is quality, prices does not matter, scarcity does not matter, people are willing and WANT to pay their money to purchase things they want..

    people buy what they want, not what there are alot of..

    it's a consumer led market, masnick would have you believe that it is a vendor led market, no the vendors follow the consumers. the vendors fill niches that consumers create.

     

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  13.  
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    Anonymous Coward, Oct 19th, 2012 @ 12:26am

    Re:

    More than that, at some point, because the potential buying public isn't infinite, they are in fact shooting themselves in the foot if the price too low.

    What would the effects be of even a small price increase, say from 99 cents to $1.49 or $1.99? If you lose 10% of your sales, but gain 50% or 100% more income (and net Itunes fees, more than that), would it not be better to sell it slightly higher?

    Why the rush to the bottom all the time?

    Rovio makes good enough products, they have a good reputation, they shouldn't need an insanely cheap price to sell their wares. Increases in income might even let them hire on even more staff to create even more products, and continue to grow faster than they are now.

    There are a limited number of consumers for the product, pricing it below what they are willing to spend isn't a great way to do thing. yes, they sell a lot, but they also leave a ton on the table.

     

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  14.  
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    PaulT (profile), Oct 19th, 2012 @ 12:46am

    Re: Re: Re: I doubt you're ever going to understand that

    I used to buy physical books mainly from second hand stores, one of which did a decent trade-in offer where you essentially got one book back for every 2 or 3 you took in. If I bought new paperbacks, it would be at discounted prices from supermarkets and the like, while I never bought hardbacks myself - way to frigging expensive (though I did sometimes request select copies for Christmas).

    In other words - if your book was too expensive, I wasn't buying it - or at least if I was, I'd be obtaining it legally with no money going back to the publisher.

    Since I got a Kindle last year, my physical purchasing has almost completely stopped. But, with the Kindle I follow the same pattern. Most of my legal purchases have been below 1, most of them free. I've made a number of impulse buys on top of those, but nothing below 2. I've bought a couple of more expensive titles but if your eBook is over 5, forget it, you'll never sell that to me because it's simply not worth that much (more than a supermarket paperback, with less value).

    People like ootb are deluding themselves if they think people *want* higher prices. They may be willing to pay more for certain titles, or immediacy rather than waiting for a price drop, but nobody wants the higher price point. unlike the physical market, where there was a definite reason to pay more for a hardback rather than a paperback, the eBook you buy for 20p is the same as the eBook you buy for 5 (and I've seen those price points on the same titles recently). Why would anyone *want* to pay the higher amount, and how many more people buy at the lower price point?

     

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  15.  
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    PaulT (profile), Oct 19th, 2012 @ 12:59am

    Re: Not in my iTunes store ...

    Sure you're looking at the right thing? I checked the US store and it's definitely 99c, and it's 69p in the UK store...

     

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    PaulT (profile), Oct 19th, 2012 @ 1:13am

    Re: What about Steam?

    I've noticed that in the UK Kindle store recently, one publisher (MacMillan) has been experimenting with heavy discounts of some of its new books - from around 5 to 20p. I bought a couple during the first round (including James Herbert's Ash). The second round seems to be mainly second books in a series, presumably to leverage the interest into sales for older books. A couple of other publishers seem to be experimenting with 20p books as well (Hodder & Stoughton, Quercus and Faber & Faber among them), to great success judging by their regular positions in the chart.

    I'd be very intrigued to see how well these are doing for the publishers, especially the MacMillan titles as they are new books from very well established and notable authors. I'd dare say that many more casual readers are buying the books compared to buying at the higher price point. How much more profit is debatable, but I can guarantee that I've bought books that I'd never have bothered with at full price.

     

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  17.  
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    PaulT (profile), Oct 19th, 2012 @ 1:19am

    Re:

    What if you price it high, and the stupidly high price is the reason it's not well received?

     

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  18.  
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    PaulT (profile), Oct 19th, 2012 @ 1:24am

    Re: Re:

    "There are a limited number of consumers for the product, pricing it below what they are willing to spend isn't a great way to do thing. yes, they sell a lot, but they also leave a ton on the table."

    Or... They understand that this particular product is essentially a silly gimmick product that most people are going to buy on impulse rather than by making a considered purchase. More people will buy on impulse at the $1 price than they will at the $2, so they may actually be making more than they would at a higher price.

    There's arguments either way, but whatever they "leave on the table" from individuals who would have bought at the higher price point may well be largely made up for (if not surpassed) by those who wouldn't.

     

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  19.  
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    Anonymous Coward, Oct 19th, 2012 @ 1:51am

    Re: I doubt you're ever going to understand that

    I agree that this poster is annoying, but the post was mostly substantive.

    The fact that it is on a computer does matter -- it changes the cost of distribution radically. It will be a big battle. Very exciting. When the dust clears, there will be an entirely new landscape.

    And one serious and persistent issue -- as you imply -- will be that it's very hard to get rich by selling, say, a few hundred of anything for one dollar.

    Price-fixing or trying to protect the old industries won't work, however. The market forces (including the dark side of the market !) are too strong.

    But it's always been hard to make it as a writer or creative person. What is different now is the shape of the market. The writers will need all the old skills plus potentially new skills (to the extent that they now can operate as self-publicist if they have the ability and energy). The distributors will have to re-make themselves completely.

     

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  20.  
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    Anonymous Coward, Oct 19th, 2012 @ 1:53am

    Re: Re: Re:

    Gorgeous. Write it up. Film it.

     

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  21.  
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    Tim Griffiths (profile), Oct 19th, 2012 @ 2:55am

    Re: Re: What about Steam?

    Deeply discounting some books in a series is a genius idea honestly and giving away the first book in a planned series from a new writer is I think something we'll see more and more of.

    I picked up the The Phoenix Conspiracy by Richard Sanders free and enjoyed it so much that I didn't even hesitate to pick up the second book, The Phoenix Rising, when it came out for 5. The guy understands ebook pricing and got money from me he likely wouldn't have ever seen otherwise by doing so.

     

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  22.  
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    Niall (profile), Oct 19th, 2012 @ 3:23am

    Re: Re: Re: Re:

    Just hope Paramount/Viacom don't go after him for 'stealing' the 'idea' of 'no money in the future while flying to the stars' from $tar Trek...

     

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  23.  
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    Ninja (profile), Oct 19th, 2012 @ 3:34am

    Re: I doubt you're ever going to understand that

    Heck, I once knew an author who'd have been happy just selling ONE book, if was for a million bucks.

    What about selling a million books for 1 dollar?

     

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  24.  
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    Ninja (profile), Oct 19th, 2012 @ 4:40am

    Nowadays this is probably the best way to go but it should never be the only way to go. You see, they also rely on free aspects while getting revenue from advertisement, merchandise (I've bought an usb stick and a toy angry bird for my sister already).

    Most people will not fork $20 for an unknown author but $0,99? Probably.

     

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    Ninja (profile), Oct 19th, 2012 @ 4:43am

    Re:

    provide value for money, and the rest will follow..

    Well said sir, even though the rest of your argument only addresses one part of the truth. Both models can work, if your brand manages to get people to buy at higher prices then so be it, if not... Massive sales for very low prices.

     

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  26.  
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    Anonymous Coward, Oct 19th, 2012 @ 5:10am

    Re:

    And that $0.99 investment by the publisher could be exactly what is needed to build popularity and sales for further titles from the same author. That is exactly the point. When 99% of what comes out is pure crap, anyways, tagging it at top dollar makes no sense at all.

     

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  27.  
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    Anonymous Coward, Oct 19th, 2012 @ 6:26am

    Re: Re: Re:

    Well, consider:

    If the 99 cent Itunes / app store sale gives them net 50 cents... and $1.49 gives them net $1 (because the processing is already covered within the Itunes cost structure), then they have doubled their income without increasing cost. They would have to double the number of consumers (or lose half of their consumers) to make this happen.

    There has already been some indictions (even here on Techdirt) that too cheap isn't the actual sweet spot.

    The point is that raising the price may not in fact cost them any users, and lowering the price to the lowest possibly price point (aside from free) may not garner them any new customers.

    It's sounds cool that they sell a lot at 99 cents. Selling almost as many at $1.99 and making a ton more money (to reinvest) seems cooler!

     

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  28.  
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    Anonymous Coward, Oct 19th, 2012 @ 6:53am

    I'm cheap, and I like to read. There's no way I'd ever spend anywhere near 10$ for an e-book (10$! *laughs hysterically*) I would pay 1, or even 2 dollars for a very good title which offers convenience, and the interactivity and cool features are a bonus for this one. So there you have it, you can either get a bit of money from everyone, or none from most. And I hear there are quite a few people who read these days.

     

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  29.  
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    PaulT (profile), Oct 19th, 2012 @ 7:01am

    Re: Re: Re: Re:

    Sure, I understand that and agree for the most part. There's no easy answer as far as I can tell. I'd agree that $1.49 probably wouldn't lose too many customers, but other than that I don't really know. However, I think we can all agree (as per the point of the article) that Rovio is making a very smart decision here by not trying to rip off consumers as other publishers are doing by pricing the book close to the physical version's price. Whatever the real difference between 99c and $1.49, $5 or $9.99 would definitely lose customers whose revenue would not necessarily be replaced by buyers at the higher price point.

    While fools like the AC at the top of this thread are whining that 99c makes it a bargain price and somehow implies low quality, and artificially propping up their own prices, Rovio are going to be raking in far more than they would have done at 10x the price.

    I think that's clear, whether you think 99c or $1.49 was the real sweet spot. Fine-tuning can come later, but it's those who deliberately overprice their product who are going to be the ultimate losers here.

     

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  30.  
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    Zos (profile), Oct 19th, 2012 @ 9:32am

    Re:

    so...the fact that your product sucks is somehow the consumers fault?

     

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  31.  
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    Anonymous Coward, Oct 19th, 2012 @ 3:47pm

    Re: I doubt you're ever going to understand that

    >Publishers and other middle-men have an interest in keeping prices high so they can skim from it. -- And that is relevant, 'cause they ain't going away.

    Sure thing. Just don't whine when people aren't paying those high prices.

    >Mainly,though, low-cost, "pulp fiction", "penny-dreadfuls", "pocket books", and even paperbacks as such are NOT new.

    No one is saying it's new, but criticism against anything that's not Big Label is usually stated on the grounds that doing things cheaply is "new" - contrary to publisher tradition and therefore doomed to fail.

    >Heck, I once knew an author who'd have been happy just selling ONE book, if was for a million bucks.

    Your point? Who wouldn't want to make that kind of money? Doesn't mean it's practical, though. It also doesn't mean that we should be propping up this sort of example as the standard.

     

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  32.  
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    mrbfd, Oct 19th, 2012 @ 3:55pm

    Price point; sweet spot; supply & demand

    Could I just throw this question out there?  If music CD's were $3 instead of $13, would they have more buyers?  Isn't there anybody that could make a profit shipping $3 CD's to the public?  If not, why not?  A few cents to manufacture 'em plus "shipping & handling."

    Okay, maybe $3 is a tad too low.  There must be a "sweet spot" somewhere in there between 3 & 13.  But the industry never even tried to experiment with lowering the price to find that sweet spot, did they.  They must have figured the Copyright Police would enable them to dictate the price & keep it sky-high.  How'd that work out again?  Oh yeah, they killed off their own monopoly market.  Way to go, a-holes!

     

    reply to this | link to this | view in thread ]

  33.  
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    Anonymous Coward, Oct 22nd, 2012 @ 6:27am

    Re: Re: Not in my iTunes store ...

    OK I just looked in the iTunes Store- on an iMac through the iTunes application. To purchase Dumbo is $19.99 HD/$14.99SD through the iTunes store. 99c struck me as a rental price but I didn't see it offered as a rental.

     

    reply to this | link to this | view in thread ]


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