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Malcolm Gladwell Confronts Pieism With Amazon’s Vice President of Fulfillment

July 30, 2014

 

According to Reuters:

In a blog post on the Amazon site authored by the “Amazon Books team” [that is, an anonymous post], the ecommerce giant said e-books were very price sensitive. (amzn.to/1rD27WM)

[Imagine for a moment if Universal Music Group posted anonymous public statements on matters of sensitivity to artists and songwriters signed “Universal Music Team.”  Just think a moment about how freaking well that would go over.   But I digress…]

Based on a review of many titles, Amazon argued that ebook priced at $9.99 sold 1.74 times as many copies as one sold at $14.99, generating 16 percent more revenue.

It said keeping prices low saved money for consumers while authors would get higher royalties and 74 percent more readers, with publishers also getting more money.

“The total pie is bigger and there is more to share amongst the parties,” it said.

Amazon claims that pricing an e-book at $14.99 or $19.99 is too expensive and unjustifiable in most cases.

“With an ebook, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market — ebooks cannot be resold as used books.”  [Don’t count on that used book point–the digerati are busily trying to make the case for reselling “used” digital copies.]

That’s right, with the exception of printing, Amazon has ticked off all of the cost items that Amazon doesn’t have to bear.  That’s true–eBooks are very profitable for Amazon.

Here’s the other side that has to be born from the publisher’s and author’s end of the deal:  Finding authors, signing authors, advances, editors, marketing and promotion–and then there’s feeding your family and sending your kids to school.  And then there’s independent book sellers who Amazon has turned into showrooms for their books.  How much is all that worth?  Well, the good news is that there’s a really easy way to communicate that information.

It’s called a price.

Prices are how firms communicate their determination of breakeven for a particular good given the cost of all the inputs.

But Amazon, you see, is still selling that Internet snake oil a la the highly discredited Chris Anderson, one of the leading Millerites of the Internet.  You remember Chris Anderson, right?  He wrote one of the cornerstones of Internet claptrap: The Long Tail: Why the Future of Business Is Selling Less of More.

Yes, that’s right.

Less is more.

As long as you aren’t the one paying to produce the good that there’s less of more of.

What this dispute has really uncovered is not some received wisdom from the hive mind, but rather the market power that Amazon has in an environment where firms have done a poor job of educating consumers on the harms of creating a single centralized retailer who not only does not support their local community or local writers, but actually imposes the most corporate and biggest of big boxes on culture.  And it’s not just in the US, by the way, it’s all over the world.

And of course what is truly insulting about this is that authors are the ones who gave Jeff Bezos his start.  This is the real lesson of how Amazon is treating Hachette authors–as we have seen with music and audiovisual, do not give any of these people a break at any time about any thing.  They are going to act in their self interest and will screw you in the end.

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