Marvel Pricing Digital Comics Three Times Higher Than Paper Copies [Updated]

Business Models

from the economics-failure dept

Adam sends over a link to Scott Kurtz’s discussion concerning Marvel’s decision to price its digital comics for the iPad higher than paper copies. (Update: as is noted in the comments, it looks like it’s not actually 3x the cost, but it still priced higher than the paper copy). As Kurtz notes, this serves no good consumer purpose whatsoever, and only serves to keep retailers happy:

I wish this made sense to me. The only reason to price the digital copy at 6 dollars is to keep retailers happy. It’s not in service of Marvel readers and it’s certainly not in service of expanding Marvel’s audience. I have a lot of friends discovering Marvel comics for the first time through the iPad app. Paying for 1/3 of a comic for the same price they normally pay for a whole comic is not something they’ll appreciate or understand. I get Marvel’s desire to make a move like this without spooking retailers or Diamond. It’s like a scuba-diver pacing his rise to the surface to avoid getting the bends. But what does Marvel risk by scaring off potential new digital customers by pricing a virtual copy of a comic higher than the physical copy you get to keep? And for what? To keep retailers happy?

Of course, we’ve seen this before. Incumbent businesses have legacy relationships. And one of the reasons why they’re often so slow to shift to smart new business models is because it will upset those legacy relationships. But if your upstart competitors don’t have those relationships and can route around them entirely to offer a better product for less, you’re going to get hung up by your legacy relationships. Kurtz suggests that Marvel stop worrying about retailers and focus on consumers for once:

The only problem with that thinking is that Marvel Comics isn’t in the business of keeping retailers solvent. Marvel Comics is in the business of producing and distributing comic books to as many readers as possible. At least it SHOULD be. And if digital distribution has a chance of being more profitable than brick-and-mortar store distribution then Marvel owes it to its readers, creators and stock holders to pursue that business without having to worry about someone else’s business for nostalgia’s sake.

Marvel should take a page out of Steve Job’s notebook on this one. Be visionary and push ahead no matter who it pisses off. Especially if it’s good for the company, readers and the industry itself.

It’s easier said than done, but not doing it can be a lot more costly in the long run.

Filed Under: comics, digital, pricing
Companies: marvel

Texas AG Looks Into Price Fixing Antitrust Questions Surrounding Ebooks

Legal Issues

from the had-to-happen dept

As many of you surely know, earlier this year, there was a bit of a fight between publishers and Amazon over ebook pricing, which resulted in Amazon backing down from its “all ebooks at $9.99” policy, and publishers getting the ability to raise the price on ebooks. The whole thing seemed a bit odd, and smacked of price fixing and antitrust (potentially collusion). Apparently I wasn’t the only one who thought so. Nastybutler77 points us to the news that the Attorney General in Texas is now investigating the issue. The theory is that it’s an investigation into Apple’s practices — which could fit with the Justice Department’s own investigation into potentially anti-competitive practices by Apple. But, I’m wondering why the focus isn’t more on the book publishers. It used to be that retailers got to set their own pricing, and vendors requiring retailers to set a certain price violated price fixing laws. Recent case law has backed away from that concept, though I’m still not sure I understand why.

Filed Under: antitrust, ebooks, price fixing, pricing, texas
Companies: amazon, apple

Even More Evidence Of How Free Ebooks Can Increase Sales Of Physical Books

Studies

from the but-free-doesn't-work!!!! dept

We’ve noted in the past the various stories of individual authors like Paulo Coelho and David Pogue, who showed that free (non-DRM’d) versions of their ebooks helped increase physical book sales. Then, in February, we wrote about some actual research that showed that when unauthorized ebooks get out into the wild, there is a “significant jump in sales” of the physical book. And, now there’s even more evidence to support this. A recent paper by a PhD. candidate noticed that free ebooks tend to increase sales of physical books. In this case, rather than looking at “unauthorized” ebooks, it looks like they focused on authorized free ebook versions. Not all of the books increased in sales, but you can see that there are lots of variables that impact this (how are the ebooks offered, how are the physical books offered, what types of books are they, etc.). Either way, though, it seems like there’s increasing evidence that when done right free ebooks can certainly increase the sales of physical books — despite claims from companies like Attributor that unauthorized ebooks are costing publishers money.

Filed Under: business models, ebooks, pricing, sales

Dear Macmillan, You Don't Embrace The New By Trying To Protect The Old

Overhype

from the that's-not-how-it-works dept

Lots of people have been sending over the blog post by the CEO of book publisher Macmillian, John Sargent, trying to explain the company’s ebook plans, following all the hubbub over its fight with Amazon. I was going to write up a long blog post about how backwards-facing Sargent’s viewpoint is, but frankly, Mathew Ingram, over at GigaOm, already wrote up the post I would have written (eerily, almost word for word). Go read that post.

In addition to Mathew’s points, however, I’d add that Sargent seems to think that pricing is done by producers, rather than the market — and historically when companies in competitive markets think that way, they end up being in line for a very rude awakening. Economic forces don’t work the way they do because someone wants them to work one way — they work because that’s how markets function. And if you price something too high, the market lets you know. But Sargent doesn’t seem to get that. Instead, he’s trying to set up totally artificial and made up pricing — which becomes really evident in his idea that “hardcover” ebooks will get one price, while “paperback” ebooks will get another. It’s not difficult to understand Sargent’s thinking here. He’s still thinking in terms of protecting the traditional windows and the traditional profit margins, and that means high-priced hardcover books for a year or so, then lower cost paperbacks later, in an attempt to segment the market. But with ebooks, that’s going to lead to frustration and confusion. As someone named CM Harrington noted in a comment on Sargent’s own blog post:

So how much more expensive is hardcover e-ink over paperback e-ink?

Your model is doomed.

One of the reasons why economic forces work the way that they do, and the reason why infinite goods with zero marginal cost get pushed in price towards zero, is that buyers implicitly understand the difference between scarce goods and abundant goods. They implicitly recognize the marginal cost of making another good, and they mentally price products accordingly. Pretending that consumers don’t do that is assuming that consumers are stupid. And that’s an even bigger mistake than looking backwards instead of forward.

Filed Under: ebooks, economics, john sargent, pricing, publishing
Companies: macmillan

NY Times Execs Think People Will Pay $20 To $30 Per Month For The iPad Edition Of The NY Times

Overhype

from the let-me-introduce-you-to-newsday dept

Wow. Doesn’t the NY Times have some of the world’s most famous and accomplished economists writing for them at times? You would think that, at some point, as they tried to figure out business model ideas, they would think to actually run some of these ideas by an economist. We’ve already explained why the NYT’s decision to put up a paywall makes little sense from an economic standpoint, but now it’s getting even worse. You see, there are still some folks who bizarrely believe that tablet computers — or, really, just Apple’s iPad — represent the savior for journalism because suddenly people will pay for apps. Already, this suggests a rather tragic misunderstanding of the economics of apps, but apparently it’s even worse than that.

Rumors are flying that there’s a battle within the NY Times on how to price their app for the iPad. Those on the newspaper side of the house apparently believe that it should be priced at $20 to $30/month to avoid cannibalizing the print product. By the way, if you want a simple tip for how to fail at business, it’s to make a decision to avoid cannibalizing your own business. When you do, you’ve just made it clear that a competitor is going to cannibalize your business for you. The folks on the interactive side of the house think that $10/month makes a lot more sense and believe that pricing it at the $20 to $30 range is suicidal. Of course, if you thought that the management at the NYT’s was really crafty, you might believe that this whole story was floated to reset the anchor price, though I have trouble believing that’s true.

The problem, of course, is that the NY Times is pricing based not just on trying not to cannibalize the physical product, but without regards to basic economics, and the fact that everyone knows that without a physical product, the costs of the paper actually go down. Yes, of course the costs of all the reporting and editing remain — no one is denying that. But you no longer have the printing and delivery costs, which are substantial. And reasonable people would expect that, at the very least, the cost of the app will reflect that. Either that, or (more likely), they’ll realize that other, more well managed news providers will step in and offer up news for free in order to get the market share that the NY Times once had.

Oh, and one final word for the NY Times. I recognize that you’re a better paper, with a much better reputation, than your neighboring competitor, Newsday, but remember what happened when Newsday tried to charge $20+ per month for access to its digital version? It got a grand total of 35 people to sign up. I’m sure more would sign up for a NY Times’ app, but how many more?

Filed Under: ipad, paid content, paywalls, pricing, subscirptions
Companies: ny times

Viacom To Record Labels: If You Want More Money For Music In Video Games, We'll Find Other Music

Culture

from the when-giants-fight dept

You may remember that Warner Music Group’s CEO, Edgar Bronfman Jr., has been beating the drum for a while that video games like Guitar Hero and Rock Band should be paying more to use songs in those games. This, despite the fact that having a song in those games helps sell more albums. It’s the typical fallacy of the record labels: overvaluing the content and undervaluing the platform or the context. So, what happens when two entertainment industry giants collide in such a debate?

Viacom, owners of MTV, which own Harmonix, who own Rock Band (and originally created Guitar Hero), seems to feel differently about all this than Warner Music — recently declaring that it wants to pay less for the music in video games, and if the record labels don’t like it, Viacom will find cheaper music elsewhere:

As we go forward, we are continuing to focus more on software than hardware, looking to reduce the cost structure associated with Rock Band, being selective in the music titles that we choose for Rock Band based on their cost. The music industry will assist with this category to make sure that it can continue on a profitable basis in the future and then finally we think we have the best games in the category, we’ll continue to rollout exciting products.

Filed Under: music, pricing, video games
Companies: viacom, warner music group

Author Claims $9.99 Is Not A 'Real Price' For Books

Say That Again

from the oh-really? dept

The NY Times is running an article about how publishers’ recent attempts (mostly successful) to boost the retail price of ebooks may backfire really badly as consumers revolt. Most of it is not particularly new to regular readers here, but it does talk to one author whose book received bad reviews on Amazon after his publisher decided to hold off releasing an ebook, hoping that it would “protect” hardcover sales. The author, Douglas Preston, lashes out and attacks his fans, rather than being willing to admit that his customers are telling him something:

“The sense of entitlement of the American consumer is absolutely astonishing…. It’s the Wal-Mart mentality, which in my view is very unhealthy for our country. It’s this notion of not wanting to pay the real price of something…. It gives me pause when I get 50 e-mails saying ‘I’m never buying one of your books ever again. I’m moving on, you greedy, greedy author.'”

So, what’s a bigger sense of entitlement? The one where your customers tell you that you’ve priced something too high and that they’re going to spend their money with others who are offering something at a price point they like? Or the one where you insist that books have to be priced high because you want them to be priced high? I’d argue it’s the latter… Along those lines, $9.99 is a real price. Just because you don’t like what the market decides a book is worth, doesn’t mean that it’s not a real price.

Filed Under: books, douglas preston, ebooks, entitlement, pricing

Duh: Raise Music Prices To $1.29/Song; Music Sales Growth Slows

Culture

from the like-you-couldn't-predict-that dept

Last year, we warned that treating digital music sales as the savior of the market was a dangerous thing, since there were indications that the market was fragile. In fact, we had already seen that after years of major record labels pleading with Apple to let them raise prices on songs, the initial results suggested a decrease in sales. Well, shockingly enough, it looks like the basic econ 101 concept of price elasticity works in music as well, as Warner Music has finally realized that raising prices of songs to $1.29 has slowed growth in the market. The digital music market, which had been growing pretty rapidly, slowed drastically following this pricing change. Warner Music is claiming that this this is because the market has “matured,” but gives no evidence of that whatsoever — and given the size of the market, that seems highly unlikely. Now, to be clear, the market is still growing, but only at 8% as compared to 20% the year before. And market growth should be expected to decline over time once the market matures, but it’s difficult to believe that the digital music market has reached the point of maturity yet. In fact, just a few weeks ago, we wrote about an economic study that suggested that if the labels wanted to maximize revenue on digital sales, they should be lowering prices. But, again, execs at major labels haven’t been known to be particularly good with their understanding of economics.

Filed Under: itunes, pricing
Companies: warner music group

Amazon, Macmillan Fight Over Ebook Prices; After Amazon Removes Macmillan Titles, It Caves To Higher Prices

News You Could Do Without

from the too-bad dept

On Friday, there was a sudden realization that Amazon had removed books published by publishing giant Macmillan, apparently over a dispute concerning ebook pricing. Of course, Amazon wasn’t just removing Macmillan ebooks, but the physical books as well. After a bit of back and forth over the weekend, Amazon caved in and accepted the way Macmillan wants to price books, which means that Macmillan sets the retail price, and Amazon gets a cut. Previously, Amazon had paid a wholesale price and then got to set the retail prices itself.

I had been under the impression that when manufacturers tell retailers what the end user price is, it’s a form of price fixing, but apparently not…

Of course, what may seem odd about this is that it appears Macmillan will make less per ebook under this model. That’s because with its old wholesale pricing, Amazon was actually losing money on every ebook sold. As the NY Times notes:

In the model that Amazon prefers, publishers typically collect $12.50 to $17.50 for new e-books. Under the new agency model, publishers will typically make $9 to $10.50 on new digital editions.

So why are publishers specifically trying to limit their own profits from ebooks? Because they’re afraid of ebooks cannibalizing hardcover book sales, which is why they’re also looking to delay ebook releases. In fact, in this case, Amazon was given the choice of either increasing the retail price for consumers on Macmillan ebooks, or getting them many months later. All in all, this looks like publishers hurting themselves, yet again, by going against what consumers want in a misguided effort to preserve the way things used to be. Yet, in an age when users are punishing authors and publishers who don’t treat them right, this could backfire in a big way.

Filed Under: ebooks, pricing
Companies: amazon, macmillan