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By Alejandro Sanchez

opinion.jpgI am going to do two things in this rebuttal. First, I would like to thank this site’s -ireadereview.com- authors for their tireless efforts at bringing us great pieces; second, I am going to state quite clearly that I vehemently disagree with this author’s core argument regarding the long term unsustainable nature of $9.99 and under pricing. I have seen pieces from Newsweek to the New York Times that clearly highlight that a $9.99 e-book has close to the same profit spread of a $26 hardcover.

At first the assumption may seem counter intuitive until one realizes that in publishing there exist two devilish things. The first concern being the uncertain nature of demand coupled with the wicked price elasticity of books. “How many books will we sell and for how long can we dictate prices before a viable used book market undermines our asking price?” are questions that publishers must always ask when creating works. Second item is the “Law of Diminishing Returns” in which each extra book produced comes with the built in risk that it will not pay for its own production cost, simply waiting around to be sold at a loss.

E-books remove both these concerns immediately by doing away with a used market and by also guaranteeing that only as many copies as are needed are produced. The effect from the Law of Diminishing Returns is mitigated while simultaneously the threat of lost revenue posed by a secondary grey market -in the form of used book sales- is obliterated. Both of these items make $9.99 and under not only viable but also profitable, because they serve to lower a publishers cost of production. By paying more than $9.99 ebook readers are merely subsidizing publishers’ chaotic and failing traditional book hierarchy, which is inherently unfair to ask and downright immoral to implement.
The problem is that producers of content in the 21st century suffer from what is known as the “Innovator’s Dilemma” in which they refuse to restructure due to the short term potential for massive losses that such restructuring entails. Inversely, consumers sensing that the products being sold are over-priced simply begin to steal the products. End result, old-media collapses while explicitly ignoring the potential for its safe passage into the digital era. Bezos and other 21st century technology gurus will seek to create refuges –derisively known as walled gardens- for old media in a wise bid to profit from their bleak situation.

In this arrangement consumers are rewarded by being given access to quality materials usually at reasonable prices but suffer due to a genuine lack of portability due to crippling DRM. The assumption that these microcosms are inherently unstable is foolish conjecture in that it explicitly ignores the stark reality that consumers will otherwise hold too much power resulting in the electronic version of overgrazing. In which too many consumers exceed a given piece of land’s carrying ability.

By creating a stable price range consumers tendency to over consume is effectively controlled while encouraging higher price points from producers: preventing a “race to the bottom” in which producers out compete one another on price thus driving down prices to the point of starvation. If I were a media producer, I would hopefully realize that perhaps the only way to survive is to join these stable ecosystems without delay. For everyday that they waste is another day closer to their day of financial judgment.

 
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