28 Dec 2011

Publishing predictions for 2012

It will be interesting to see if PaidContent's three predictions for book publishing come to fruition during 2012. The most interesting in my view is the idea that ebook pricing will shift to quality-focused debates. Seth Godin's contention that pricing should reflect the availability of substitutes, is derived from a basic principle of economics: the idea that monopolistic rents (i.e. higher prices and profits) can be extracted from a unique product with no close substitutes.

Whilst books are unique in one sense (with the obvious exception of plagiarism), a reader would probably be reasonably willing to substitute one back-list crime novel for another, and therefore, in theory, market forces dictate that these should be priced lower reflecting the increased competition in this segment and high price elasticity of demand. Conversely for a newly published controversial non-fiction book by a specialist in the field, there are arguably no real substitutes, and therefore higher profits can be extracted from higher pricing as these titles are more price inelastic.

Will readers embrace such a model of pricing? We already see it to a degree with hardback and paperback formats, and people seem to accept the substantial difference in price between both as a given even though it is far greater than the real cost differences in terms of production.  Ultimately costs are essentially only relevant for the producer and not the consumer. However, for some reason when it comes to ebooks most readers feel that pricing should reflect the lower cost of production, when really it comes down to demand and how much people are willing to pay for it, just like any other good.


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