Tuesday, June 02, 2009

Pinning the Tail on the Donkey

Today book pricing can be often regarded on a par with pinning a tail on a donkey. It’s not an exact science, its often a stab in the dark and as long as its in the general vicinity who cares. We would challenge any book buyer to go to any bookstore and accurately price the majority of books on the shelves. These can come in different shapes, sizes, pagination, with or without graphics, pictures, whatever, the diversity is very visible both of works and prices.

The issue of pricing for digital works is often complex. Do publishers base the price on the overall cost and effectively cross subsidise the various renditions and manifestations, or let each stand on its own with just the core acquisition costs being spread across all? As the revenue and cost mix changes, then the cost of producing and servicing the physical could rise, whilst the cost of the digital content should fall. However, we are a long way from that making a significant impact to many today.

So we have a digital investment cycle where publishers have the cost of establishing the infrastructure and support of digital workflow, content, metadata and marketing materials, rights management, distribution etc. with relatively little return. On the other hand they still have the cost of the physical world. To make matters worse, many still only create the digital content as an after thought and maintain the physical editorial and production process as the primary development process. Its perfectly understandable, but this ‘digital afterthought’ can also perpetuate the duplication of effort in creating and managing bibliographic and marketing materials, which in a digital workflow should be fully integrated.

So we come back to the thorny issue of pricing digital content. Yesterday the Rand Corporation announced that the suggested retail pricing on all RAND e-books was to be $9.95 each. RAND is a nonprofit research organization with some 900 titles which are available for the Kindle, iPhone, Sony and other platforms such as Overdrive, Books 24x7, ebrary, Ingram Digital/ MyiLibrary, netLibrary, Questia etc.

"In the past, we based our e-book price on the retail price of the print edition," said John Warren, marketing director for RAND Publications. "It's clear, however, that the economics of e-book distribution are different than print, where the cost of printing, distribution and returns factor into the price paid by consumers. Colour charts and a greater number of pages, for example, drive up the cost of print-on-demand, but are not a factor in electronic books."

So we have the infamous Amazon $9.99 price point and now a $9.95 one from Rand. Rand may not be a significant publisher to many, but the move again raises the issue on how to price digital content. Some will choose to base it on a discount off the latest edition. We can all see the issue when the paperback replaces the hardback and the price drops. We can all see the discount wars and a physical 3 for 2, which today is hard to replicate in the digital world. There is also the question of why the digital copy should be aligned to a physical one given that some may say it has, in some cases, been falsely inflated to accommodate deep discounts.

Often, when the situation becomes muddled, the market dictates. Look at music and the somewhat naïve moves by the trade to maintain artificially high regional and CD pricing against clear consumer backlash. They won the battle with the monopoly board, but lost the war on the street. The problem in publishing is that there are thousands of publishers and a growing number of digital resellers and it may only take a few to brake the ranks and set the price perception for all.

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