Joat42 wrote:I read an article a couple of weeks back that the big publishers are selling less books after they have hiked the prices on books (and especially eBooks).
Found the article:
http://www.wsj.com/articles/e-book-sales-weaken-amid-higher-prices-1441307826Publishers succeeded in preventing Amazon from lowballing prices, but “unfortunately, it may be that consumers aren’t happy with the higher prices,” said Mike Shatzkin, chief executive of publishing consulting firm Idea Logical Co.
Who would have thought that a price hike would mean less sales..
The problem really stems from Amazons history of undercutting the cost of product (not just ebook/books). They have such a large customer base and they have been balancing on a knife edge of lose money here, make money on this large margin item to make up for it. It has created a false perception that it is cost effective to have these lower prices on everything because the majority of people can't grasp that a huge company such as Amazon would lose money on so many things. "So it must be profitable at that price, right?" If you only sell one type of thing (publisher, books/ebooks) you don't have a something else to make up the money by selling for a profit. And if Amazon controls the only real outlet for your product because they have shut down all the competition in that category you can't even sell your stuff directly without being seen as gouging, when in fact if you look at the margins and profits, you're simply trying to pay the bills.
As I said earlier Amazon is running on less than 1% operating margin. That is walking such a fine line it's nuts. Their P/S ratio is almost 3! The only reason they are making it is the near monolithic faith the consumer/investor has in them that they are and always will be profitable or growing (investors often forgo profit for growth, Haven anyone?). But if anything shakes that faith even a little you'll see a market correction and they will start raising prices back to where they and their suppliers can actually make money on the products.
What about Baen, you say? Baen is smart, and they have created a upwelling of support from their customers and created a community. We buy books from them directly as often as not where they can protect their margins (Amazon undercuts them as well). Even so if you look at Baen's new ebooks you see inexpensive books at 6-8 bucks and you see books 15-20. But we all have a firm belief (because they communicate and support the community in other ways besides selling where-as the other big publishers are seen as simply big publishers) that it's priced in as low they really can (again despite the fact that Amazon is undercutting them by 15-20% on Kindle) so we support them. That's always been Baen's strength. They treat their authors well and the authors tell us that. They treat us well and we tell other customers that. They create an environment of trust and it succeeds.
Google "Amazon Stock is a Bubble" and do some reading. Forbes had a nice article on it last year. It's quite scary actually. If Bezos' baby ever get colic it's
really going to hurt the economy.
Oh and one last thought, Sales do not = profit. Margin does. If you break even or lose money on an item it doesn't matter how many you sell.
