Wednesday, July 30th, 2014

Moral Calculus Elucidated

booksAmazon, apparently no longer all that comfortable with the role that it has settled into during the course of its ongoing standoff with the publisher Hachette—unrepentant and unyielding monopoly monster—now wishes to explain itself:

It's also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. … Is it Amazon's position that all e-books should be $9.99 or less? No, we accept that there will be legitimate reasons for a small number of specialized titles to be above $9.99.

This is all strictly true, of course—numbers don't lie, except when they do—if you grant Amazon its central premise, which is that all books (except those exceptional exceptions!) are worth precisely one penny less than ten dollars, regardless of what's inside of them.

Photo by Conrad Bakker

7 Comments / Post A Comment

Usually I think you guys are right on about things, but in this case, not so much. Amazon's "central premise" isn't that all books are worth $9.99. Leaving out that they explicitly said some books will continue to sell for more (perhaps much more), their point is that $9.99 is the most that most books _will currently sell for_. They want to sell books and they have a heck of a lot of data about what people are willing to pay for them. They're not making any moral judgment about the value of the books. As for being a monopoly, it's hard to imagine an industry that big with lower barriers to entry. The fact that no one else cares to or knows how to compete is beside the point. Amazon is just doing to traditional book publishing what outlets like the Awl have long since done to newspapers and magazines (an industry which once employed me and which I mourned).

barnhouse (#1,326)

@William Reichard@facebook That's not the point of what's being said. The shocking thing about Amazon's conduct as a publisher (and retailer, and reviewer) of books is their imperial ignorance of (and total unconcern with) why one book might be worth more than another, or why anyone would care to read one.

As for monopolistic practices, the writing is on the wall there, too. Lots of it. But for one example: self-published authors aren't permitted to participate in the Kindle Unlimited program on Amazon unless they agree to give Amazon exclusive publishing rights.

KarenUhOh (#19)

Oughtn't it be "many fewer" rather than "much less"? Why does "price-elastic" require a hyphen, while "price elasticity" goes without? And what on earth is "price elasticity" anyhow, with or without the arbitrary dash?

Has there been a study done on that?

Ralph Haygood (#13,154)

@KarenUhOh: "price elasticity" or, more precisely, "price elasticity of demand" is a standard, reasonably well defined thing in economics (e.g.,

). Whether Amazon has measured it as they claim is, of course, another matter, and whether it implies what Amazon asserts it does is, of course, yet another matter.

KarenUhOh (#19)

@Ralph Haygood To wit, and to my point. I really didn't doubt that it was a term of art in the discipline of economics–just wasn't going to waste thirty seconds of valuable Google time to learn it thoroughly.

But I rather believe I am among the mass of doofi Amazon intended as the audience for this smug apologia, and my limited grasp of the economics of persuasion convinces me they used the term to shush bourgeois complainers.

holdup!holdmyphone! (#274,038)

frankly the problem with ebooks is, wtf do you do with them when you're done? a paper book can have hella owners so whoever buys it new knows theyre subsidizing hella future reads but an ebook? man who the heck borrows an ebook?

NeonTrotsky (#2,249)

Considering that an e-book is really more of a rental, maybe it's just psychologically harder to imagine paying a two-figure price for one???

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