In the case of a free market economy, prices are supposed to rise and fall with the numbers of players in the system, and the value a product has in the market. Generally speaking, more people selling the same product should mean a price push downwards. That over-simplistic explanation of free markets just took a wacky hit the last couple of days. Apple should be falling all over themselves to make sure the price of their e-books is competitive with Amazon’s prices. But instead, Amazon is finding themselves in a world of re-negotiation with book publishers because companies like Macmillian think e-book prices should be more than $9.99. It’s not really coming as a surprise, considering a business wants to maximize their profits, and the quickest way to do that is to raise their prices, but what is coming as a suprise is that instead of Apple fighting with publishers to get prices comparable to the $9.99 price point that Amazon had negotiated, they’ve instead decided that more expensive ebooks were fine by them.
Now Amazon has been finding themselves under increased pressure to give into the demands of publishers who favor Apple Inc’s model over the Amazon model. These price changes directly affect a major area of Amazon’s business. Kindle sales will be the only potential loss in this move. Having cheaper e-books and a cheaper e-book reader means a lot to financially conscientious consumers. Could this be a case of a company taking the profit from one sector and moving it to another group? An increase in price generally means a decrease in sales, and finding the market equilibrium (aka economic sweet spot) where sales and price meet up is going to be crucial in determining the success of their product, because apparently the iPad has become a Veblen good.
Editor’s Note: Just in case you have absolutely no idea what a Veblen good is, wikipedia defines it as follows: “Veblen goods are a group of commodities for which peoples’ preference for buying them increases as a direct function of their price, as greater price confers greater status, instead of decreasing according to the law of demand.”
Sounds a little bit like Apple products doesn’t it?
February 7th, 2010 at 12:08 am
Yes, it does sound exactly like Apple products or any other premium brand product. I think the publishers already know that the people who are going to be buying the iPad are those that are willing to spend money. In general, people that buy Apple products are willing to spend more on what some people say is “perceived value.”
Publishers should be happier now that they’ll get more money for their books but that may only last for a while. Consumers are going to decide in the long run how much they’re willing to pay. So far, not one iPad has been sold. Nobody knows for certain how many iPads will be sold this year. So, this price increase may not last very long if Apple doesn’t sell enough iPads. The Kindle may end up having an advantage and force publishers to lower prices again. I don’t think this will happen, but theoretically it could.
If Apple becomes the tablet market leader, Apple could eventually have enough leverage to force prices back down again. Anything can happen. It’s honestly too early to tell where e-book prices are going to be in the next year or so.
February 7th, 2010 at 12:55 am
I thought Apple would have low balled the price of an e-book as an incentive to buy an iPad. Coaxing skeptical users in with the promise of cheaper books would have been a sure fire way to push some skeptics over the purchasing ledge. I’d buy a heck of a lot more books at 5.99-9.99. Anything over that 9.99 price point gets me to start thinking about the purchase being a want or a need. I can be pretty cheap though.
Love the insight about Apple renegotiating the prices with publishers once they sell a bunch of these iPads. I never thought of it in that light before.
More from author
February 25th, 2010 at 12:40 pm
“Publishers should be happier now that they’ll get more money for their books but that may only last for a while.”
Amazon wasn’t paying the publishers 9.99, they were actually paying them their list price and then discounting the books and taking a loss on them. So the publishers won’t be making more money w/ the new agreement, since they’re not the ones taking the hit w/ the current agreement. They think Amazon’s arrangement is training people to expect 9.99 ebook price and that it will hurt their sales in the future.
February 7th, 2010 at 3:44 pm
Amazon has been selling ebooks for more than $9.99 for some time, well before the spat with Macmillan, and not scholarly or technical books exclusively, either. Fiction has been sold for more than $9.99.
February 6th, 2010 at 5:18 pm
Macgasm.net: Amazon is slowly increasing ebook prices to be more in line with the Apple model: In the case of a… http://bit.ly/9QUU0b #fb
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 5:38 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model:
Amazon is slowly increasing ebo… http://bit.ly/bbM2LT
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 6:29 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model http://bit.ly/bGmBwg
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 6:42 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model http://bit.ly/bJxjqv Mac.alltop.com
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 6:42 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model http://bit.ly/bJxjqv
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 7:11 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model http://bit.ly/9LleDJ
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 7:11 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model http://bit.ly/ameCPI
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 7:40 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model: Macgasm (blog)
But instead, Amaz… http://bit.ly/bbM2LT
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 8:24 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model http://bit.ly/a9MhQi
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 9:30 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model http://bit.ly/a9L5Y4
This comment was originally posted on Twitter
More from author
February 6th, 2010 at 11:27 pm
Amazon is slowly increasing ebook prices to be more in line with the Apple model: Macgasm (blog)
In the case of a … http://bit.ly/bbM2LT
This comment was originally posted on Twitter
More from author
February 7th, 2010 at 12:38 pm
“Amazon is slowly increasing ebook prices to be more in line with the Apple model” and related posts http://bit.ly/brpZZI #News #Tech
This comment was originally posted on Twitter
More from author
February 7th, 2010 at 12:57 pm
“Amazon is slowly increasing ebook prices to be more in line with the Apple… http://goo.gl/fb/p7JA #technews #tech
This comment was originally posted on Twitter
More from author
February 7th, 2010 at 2:13 pm
‘ “Amazon is slowly increasing ebook prices to be more in line with the Apple model” and related posts http://bit.ly/bcAPWU ‘
This comment was originally posted on Twitter
More from author
February 8th, 2010 at 1:02 pm
Amazon is slowly rising e-book price… Why charge more than Apple’s price? http://bit.ly/b58qHa
This comment was originally posted on Twitter
More from author