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One-Question Interview at BookNet Canada Tech Forum

Last week I had the pleasure of speaking at the 2009 BookNet Canada Technology Forum in Toronto (motto: Even colder than you expected!), and Mark Bertils caught up with me on my way out for a quick video interview:

Two follow ups on what I said, now that I have my del.icio.us feed handy:

  • The Peter Drucker reference is from his 5 Deadly Business Sins: “Cost-driven Pricing. The only thing that works is price-driven costing. The only sound way to price is to start out with what the market is willing to pay–and thus what the competition will charge–and design to that price specification.”
  • It was Mike Shatzkin (referencing Michael Cader) who made the recent point about the relative low cost of experimentation for publishers around pricing digital products: “You can’t get rich or go broke whether you price the ebook 50% too high or 50% too low. Try everything. You’ll never have a cheaper opportunity to experiment.”
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  • bowerbird

    publishers should _experiment_ with lower e-book pricing?

    _experiment_?

    that’s the best advice you can give these days, andrew?

    geez, what a waste of 2 minutes and 11 seconds…

    to make more sales, publishers should _drop_prices_.

    forget the “experiment” part — all you have to do is
    open your ears and you’ll hear that customers want
    lower prices — demand them — won’t buy otherwise.

    so an exhortation to “experiment” is mealy-mouthed.

    of course, a “lower your price” command is a wash too,
    because it doesn’t address the reasons why the large
    corporate publishers aren’t already following that path.

    the reasons include a profound reluctance to avoid the
    cannibalization of the source of their _current_ profits
    – i.e., paper-books — by a “future” source that is still
    largely unproven, in their mind, and could be disastrous.
    they saw what napster did to music, and it _scares_ ‘em.

    so they’re afraid of electronic-books _in_general_ and
    lower prices _in_particular_ because income is impacted.

    even worse, though, lower prices impact their cost too.

    in a nutshell, they built an industry that has a very big
    _overhead_cost_ associated with each and every book.

    here is one of those “unavoidable laws” of business —
    budgets inflate to soak up all of the income generated.

    one of the realities of the book-publishing business
    is that most books sell very few copies, while a few
    books — who knows why — sell truckloads of copies.

    this has _always_ been true of the book-business, but
    it’s also part-and-parcel of the blockbuster approach,
    which corporations commonly import with a vengeance.
    they do it because they control the marketing channels,
    and marketing is what it takes to create a blockbuster…

    now, if you present this situation to accountants, they
    will advise you that the occasional bestseller creates a
    tax burden, which can be largely eliminated if you just
    _raise_your_overhead_, thereby lowering the amount of
    the proceeds from that bestseller that constitute “profit”.

    put another way, the “profit” from the lonely bestseller
    is shifted to cover the “losses” from all the other books.

    and if you make the “losses” from all the other books
    as big as necessary, you can hide the bestseller “profit”.

    this means corporate publishers have been motivated
    to raise the overhead cost associated with every book.

    ends up this is pretty easy to do. you get nice offices,
    in fancy buildings. heck, maybe you even just buy the
    whole building itself. you make a fancy organization,
    with a lot of high-paid vice-presidents that mess with
    the low-paid slugs in the trenches doing the real work.
    you give _huge_ royalties to celebrities and sports stars
    and politicians so that you can hang out with them, so
    no big deal if their books don’t make back the royalties,
    because you’re in the high-profile big-leagues, baby…
    speaking of celebrities, wasn’t that a fab party last week?
    speaking of politicians, you spread some lobbyist love.
    speaking of sports stars, you _love_ the stadium boxes!
    you hire high-priced consultants, and then ignore them.
    you get a slick ad agency to help you do your marketing.
    you slide some “co-op” money to the booksellers who
    – truth be told — you detest, but hey, it’s spare cash,
    so there’s no reason not to throw them a small pittance.
    you plow some money into organizations like the idpf,
    and then plow more into other stuff like “scrollmotion”.
    you spend a fortune on i.t. guys who introduce systems
    (like windows) that effectively hobble the real workers,
    because you don’t want them to do their job too quickly.
    you send a flock of mid-levels to the o’reilly conferences,
    where they represent your company as being important
    vis a vis the other corporate publishers who are there.
    you attend the “executive” conferences, in the bahamas.
    you give yourself a “performance bonus” so that you can
    afford that house in the hamptons that your wife wants.
    you give your token female vice-presidents huge raises,
    so they’ll stop jerking your chain about “feminism” stuff.
    you retain a high-priced law-firm to “make it all legal”…
    and of course you reward those accountants big-time,
    for making it so fun to play this corporate-titan game…

    all of that raises your “overhead” of “being a publisher”
    to the point where the vast majority of your titles will
    “lose money”, which then cumulates to a ton of “losses”.

    no worry, though, because you’ve got that blockbuster,
    which pulls “a ton of money” and “covers your overhead”,
    leaving a small amount of profit to satisfy shareholders
    – who get a standard “this is a tough business” line –
    without giving any exposure uncle sam can hook into…
    because hey, it would be _unamerican_ to _pay_taxes_!
    as that rich old witch said, “taxes are for little people”…

    speaking of the little people, the fact that their books
    “lost money” helps keep your mid-list authors “in line”.
    they can’t dare ask for a better deal on their next book.

    so there you go! now you’re a modern-day publisher!
    that’s right, you’re the caretaker of our societal culture!

    and now that you’ve built this nice expensive machine,
    some commie pinko wants you to “lower your prices”…

    um, yeah, thanks kid, now beat it…

    truth be told, they simply _cannot_ lower their prices.
    and once you have got _your_ home in the hamptons,
    and can’t give it up either, you’ll understand why, kid.

    and that’s why book-publishing, as we have known it
    (since corporations took over) will go down the tubes.

    but, you know, no problem. they will just sell off the
    publishing unit, or fold it if they cannot find a buyer,
    and mosey over to some other field where they _can_
    “make a profit”. because that’s what corporations do.

    -bowerbird