Thanks to the leverage of their iPad distribution agreements with Apple, the big book publishing houses won their recent price skirmish against Amazon.com, but will the victory be a Pyrrhic one?
To be sure, Amazon’s Kindle book pricing had stiffed the publishers, giving the e-tailer most of the proceeds, while keeping eBook prices low enough to attract buyers of the Kindle hardware, from which Amazon makes all the money (though, infamously, Amazon continues to refuse to disclose how many Kindles it’s sold). Wit the advent of the iPad as a competing (and IMHO, superior) eBook reader, Amazon lost its leverage for dictating terms. Trouble is, the publishers’ win is likely a loss for us consumers — it means eBook prices will rise substantially (Amazon had bestsellers aggressively priced at $9.99 — loss leaders for other books and the Kindle itself), to at least $14.99.
Peter Kafka, in the Wall Street Journal’s All Things Digital blog, noted the other day that publishers should heed the lessons of the music industry’s experience with the iTunes Music Store:
After years of complaints, last year the music labels finally got what they wanted from Apple–the ability to raise prices on their songs. Last April, iTunes introduced a “variable pricing” scheme, which gave the labels the ability to move prices from 99 cents a song to $1.29 (and for some tracks, down to 69 cents). The result? Music sales are slowing.
Kafka goes on to quote the head of Warner Music Group as saying in hindsight that raising prices 30 percent during a recession wasn’t perhaps the wisest thing. But what lesson should publishers take from the iTunes experience? Kafka says he thinks the lesson publishers are taking is that they should push for higher prices early in the adoption cycle. But he cautions:
The counter here is the one that seems obvious to everyone else: Lower prices and you can sell more stuff. Looks like we’ll be getting another real-world test of this economics lesson soon.
My take is that the publishers and the music industry continue to define the terms of this debate in old world, brick and mortar terms. Back in the days when they could dictate their taste to the public, they were supremely important. But in a digital world, they’re reduced to intermediaries. Granted, their role as gatekeepers, filters and — most importantly — marketers of creative products remains important. But this is no longer a world of scarcity, of limited space on booksellers’ shelves.
Books aren’t commodities; one is not like the other. The function of publishers isn’t merely to vet. It’s also to edit, refine and — most importantly — to market. That’s where it costs them. And with eBooks, the fact there’s theoretically limitless shelf space doesn’t change the fact readers don’t have limitless attention. We rely on publishers and bookstores — intermediaries — to help us sort the signal from the noise, especially given the reality that one reader’s signal is another’s noise. Hence the “crappy” books you see out there; if they’re out there someone made an educated guess there’s a market for them.
However, I don’t think publishers see readers as their customers: booksellers are. If any one thing has changed because of the digital revolution it’s that consumers — end users — must be satisfied with your product and must be an important target of your marketing. Microsoft is a similar culprit, prizing its institutional customers over the needs of people who use its products every day. It creates and market its core products (i.e., Office) for the people high up in the corporate structure who pay the bills; it doesn’t rank usability for end users very highly, hence the clunkiness of so many Microsoft products. The result? Microsoft is losing its competitive edge, a reality that’s obscured by the fact it remains quite profitable — for now (“Microsoft’s Creative Destruction,” New York Times).
Industry analyst Mark Anderson went even further recently (“Microsoft Is Losing Fight for Consumers,” New York Times):
“Microsoft doesn’t have consumer DNA,” he said. “Walk the halls at Microsoft and you can see it is not a place that gets consumers.”
Book publishers need to navigate the changes wrought by the digital economy better than Microsoft or the music industry has. They need to “get” consumers, they need to bend over backwards to make their products fit the lifestyle of their customers, not the mere act of providing an electronic book. Publishers need to make their products match the way we live, and will be living, consuming our entertainment and culture on multiple devices at home, at work and on the road. Apple gets that, and that’s why the iPad will flourish.
