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The eBook reader wars
steeladept:
...and no one is saying anything about this? Am I just looking at this wrong?
-wraith808 (July 06, 2010, 03:46 PM)
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Um...maybe. :)
I'd suspect there's a little bit of a 'sense of entitlement' from the way you're asking the question.
The basic 'rule' of optimal pricing (in a free market) is to "charge what the market will bear."
By this theory, if a device is selling at $199, it would make no economic sense to reduce the price unless there were a compelling business reason (e.g. responding to or undercutting a competitor, locking in your customer base, buying market share, etc) to do so.
Lowering a price just because you can - or because some people don't think it's "fair" - isn't a compelling business reason.
Considering how well these gadgets have been selling (despite all the issues surrounding them) I'd guess most people Looking to get one don't have a serious problem with the price of a Nook or Kindle.
FWIW, the biggest complaints about these ebook readers revolve around the outrageously restrictive EULAs, ridiculous DRM implementation, and the high (and steadily increasing) prices for downloads. From what I've seen and heard, most people don't seem to be taking issue with the price of the reader hardware.
But there's also a few million people who think nothing of dropping $400-600 on a smartphone plus a $100/month 2-year service contract just for the priviledge of owning one...so what can we expect?
;D
-40hz (July 07, 2010, 09:28 AM)
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+1
The way business professionals are taught to price things is to price it as high as the market will bear. That will recover costs faster, start generating profit (the whole point from a business perspective), and provide working capital for improvements or improved positioning as deemed appropriate. So if your product costs $50/unit to make, $30/unit to market, ship, etc. with a total cost of production of $80, what do you price it at? $100? $200? Try this: You take a survey of hypothetical features and provide a bunch of price points. You then ask them "If this product existed, would you buy it at $300? What if it added this one feature? $400?" You always price high and see how many positives you get. Then, you ask at 3/4 that price. And again at 1/2 that price. You also ask at what price you think it would be viewed as cheap (inferior in business speak - which holds a very specific meaning not quite the same as, though related to, the typically understood meaning). Then once you have all these price points, you determine which one gets you the highest profit per unit and price it slightly higher than that. After all, people lie on those surveys and are really willing to pay higher than they say - usually about a price point higher. For those who didn't lie, they will have to wait until the price comes down as they aren't the bleeding edge market the 1st generation devices target anyway. If that price happens to be $1,500 per unit, well I guess you are making about $1,420 profit then, aren't you?
ljbirns:
It's all about market share. If B & N could get 70 % of the market for e-readers and to do it they had to lose $ 20.00 on each reader they would do it in a heartbeat.
wraith808:
It's all about market share. If B & N could get 70 % of the market for e-readers and to do it they had to lose $ 20.00 on each reader they would do it in a heartbeat.
-ljbirns (July 07, 2010, 10:50 AM)
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If that's truly the case, then why haven't they reduced the price again? I think as long as they can make money on readers, they will keep it as high as they can, because that is *their* money, while for the books, they are beholden to another industry. Just because they stock the physical books doesn't mean they will have the digital ones.
I'd suspect there's a little bit of a 'sense of entitlement' from the way you're asking the question.
-40hz (July 07, 2010, 09:28 AM)
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Actually, not a sense of entitlement, as I do believe that they should be able to charge whatever they can. But from the perspective of doing it so blatantly, and people actually joking on their side on the matter, it seems strange.
ljbirns:
From today's WSJ :
Borders Group Inc., the nation's second largest bookstore chain as measured by sales, has launched an e-bookstore powered by Kobo Inc., the Canadian e-book retailer in which Borders owns an investment stake. Borders is late to the e-book business, which is the fastest growing segment of book publishing and book retailing. Major e-book retailers include Amazon.com Inc., Barnes & Noble Inc., and Apple Inc., with Google Inc. expected to enter the market later this year.
Borders said it hopes to control about 17% of the e-book market by July 2011. By contrast, Albert Greco, a book industry researcher, estimates that in 2009 Borders had a 10% share of the retail book sales market.
It's all about selling books.
wraith808:
It's all about selling books.
-ljbirns (July 07, 2010, 12:28 PM)
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Selling books is a consideration. I don't think that anyone would deny that. But it's not the only consideration. If that was the case, the readers would have dropped long before now. If that was the case, the previous attempts to enter the market wouldn't have failed/received such a lukewarm reception.
It's not all about selling books. It's also about the medium that the books will take to the market, and the rights to get them there, more than it's ever been.
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