the big stick

Tag: the big stick

Is Amazon Going to Give Away Kindles?

The answer is yes.  The only question now is, to whom?

Okay, so that’s not the only question. Another question might be, why on earth would they do that?   Tyler Cowen suggests a durable goods monopoly (what’s a durable goods monopoly?),  while his commenters break into a fascinating discussion on platforms and other possible competitive dimensions.

The graph and some discussion are courtesy of the undoubtedly fine folks over at The Technium.  Though the story is more than a year old, the current superior Kindle is $137 and has been since December.

Okay, so maybe the answer isn’t yes, either.   In fact, in the short term the answer is a resounding no. But the idea that they would bundle them with Amazon Prime membership seems reasonable.

The Levee Appears to be Drying Up

Today I give to you a couple of visual snapshots of the recorded music industry, along with a lesson on the importance of adjusting for inflation &/or population growth.

Here are the raw numbers that caused something of a hubbub.  Ask yourself — where is the industry at its peak?

So, there are several technology transitions going on here, culminating in a sorry state of affairs for the supply side of the music industry.  One implication is that the introduction of cassette tapes had no real discernible impact on industry revenues, even though people rampantly started taping one anothers vinyl at that point.  (I actually have several boxes of tapes that I recorded from record rentals from That’s Rentertainment.)   Interesting that the Record Labels only began shaking them down when the compact disk market took off).  A second implication is that CDs marked the real heyday for the record labels.

With that in mind, let’s look at these same numbers adjusted for inflation and put in per capita terms:

Completely different picture, isn’t it?

This seems to suggest that (non-prerecorded) cassettes cannibalized vinyl revenues, and it was only the introduction of the superior CD format that resuscitated the industry.

In IO, we are talking about the big challenge of the “New Economy” is often not in creating value, but in capturing it.  Do you think the total value of recorded music is 35% of what it was 15 years ago?  Or, is it more likely that consumer surplus has gone through the roof?  I don’t have any way of answering that question, but I have my doubts about the former proposition.

As per usual, I nicked this from O&M.  And their comment section pointed me to a really excellent analysis of all of this at Business Insider, where I now subscribe to their Chart of the Day!

It’s a (Very Exclusive) Jungle Out There

While we’re on the topic of the publishing industry, my insider contact has tipped me off to the latest delicious controversy.  Literary superagent Andrew Wylie is taking his clients’ backlist titles and selling the e-book rights directly and exclusively to Amazon.

Wow. I wonder what that means?

Let’s take a step back.  Suppose you are, say, John Updike, and Random House wants to publish your book.  The company gives you an advance and then pays you royalties based on sales and all things are right in the world.

But now, technology marches on and the next thing you know the Kindle and the iPad emerge, and all of a sudden there is a potentially new version of your product, the e-book.  What should we make of this? Does your contract with Random House extend to the right to publish the e-book? Or do they have exclusive rights to  Or do you maintain that right?

It wasn’t until the mid-1990s that Random House began explicitly covering e-books in its contracts, and Wylie seems to think that his clients maintain e-book rights.  The courts seem to agree.

It’s not clear from the article that that is the biggest problem.  According to the New York Times blurb:

John Sargent, chief executive of Macmillan, posted a response on his company’s Web site, criticizing Mr. Wylie for cutting an exclusive deal with Amazon for the 20 e-books, which in addition to Mr. Nabokov’s “Lolita” and Mr. Roth’s “Portnoy’s Complaint” include Ralph Ellison’s “Invisible Man” and John Updike’s “Rabbit” books.

“It is an extraordinarily bad deal for writers, illustrators, publishers, other booksellers and for anyone who believes that books should be as widely available as possible,” Mr. Sargent said.

Some of you may remember Mr. Sargent who locked horns with Amazon not too long ago over  rights to set prices for e-book prices.  The effect of that was for Macmilian and others to wrestle control from Amazon and raise consumer prices for many e-book titles.  Certainly, at least in terms of a partial equilibrium model, the higher prices aren’t consistent with “as widely available as possible.”

It’s probably more complicated than that, though.

The Price is Right? UPDATED, TWICE!

The Summer marches on, and that means it’s time for some more summer reading. My recommendation this week is from George Mason economist and Marginal Revolution blogger extraordinaire, Tyler Cowen.  His latest book is The Age of the Infovore.

So, I was poised to pick up a copy for my wife at Amazon for what seemed to be a bargain price of $10.88, but then noticed that the hardcover version, Create Your Own Economy, was selling for only $4.64.   It’s the same book, but the title changed when the paperback edition was released.

But then I thought, maybe she’d want the Kindle version instead.  But the Kindle edition of Create Your Own Economy is $12.99, whereas the Kindle for The Age of the Inforvore is $9.99.  Huh. So I’m paying a premium for a Kindle version of a hardcover version of the book, but I enjoy a steep discount if I actually purchase the hardcover.

Then I thought, well, maybe I’ll get her some perfume.

I think Yoram Bauman is right – choices are bad.

UPDATE: I sent this pricing info to Professor Cowen and he sent me a copy of his book with the inscription, “How is $0.00 for a price?”  Thanks!

UPDATE 2: While trolling the EconTalk archives, I came across an episode of Roberts and Cowen talking about the book.

Big Apple Stirs Up Bezos’ Hive

A few months ago we saw Amazon and Walmart and Target engaged in some aggressive price competition in the sale of on-line books. I haven’t heard to much on that front of late, so I assume that the dust has settled and those firms will fight another day. Amazon is back in the thick of things, this time aggressively defending its Ebook turf from the encroachment of Apple and its new iPad.

The book world is all a flutter. Here’s a note from one of friend of mine, who has intimate knowledge of the sordid dealings of the book world (edited for content; these book people drink like journalists and swear like sailors):

So this ebook pricing conflict is getting serious. Amazon has pulled all of Macmillan’s titles from its store — physical, ebook, etc. — in response to Macmillan wanting higher prices for some kindle editions than $9.99. So, for example, you can’t buy any Picador titles. That’s a lot of bestselling books.

[I’m not certain I agree with Amazon’s actions here]. To dictate $9.99 for all books and instill that price point in readers minds as the only appropriate ebook price is just ridiculous — especially when they’re losing money on every kindle edition they sell of a hardcover book.

And this:

So it’s about Macmillan trying to switch over the agency model of pricing, which is what Apple is offering with their new ibookstore. It makes a lot more sense than the distribution model that Amazon uses for ebooks.

Nothing like a good old fashioned price squabble to keep things interesting. I’m looking into the details of this “agency pricing” model and of course will let you know when I find out.

Stay tuned to this space.

Update: This stuff is so delicious I just want to take a big bite out of it. It appears to be more of a market power argument than a transaction costs argument. And it appears this may well have all come to a head with or without the iPad.

Thanks to my source, “The Big Stick,” for the tips.