It could just be bad writing, but Amazon's point about elasticity reads like a sleight-of-hand trick to me. They say:
> So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99.
So, 74,000 people choose to buy the cheaper book. Great! But without the price cut, those people might have bought other books. Maybe some other $9.99 book, maybe some $12.99 book, maybe none at all. Growing the market for an individual book is only impressive if you're selling the book to people who would not have bought a book at all, not if you're competing with other books on price.
> The pie is simply bigger.
The 'pie' they're referring to here is not publishing revenues in total, but revenues for a single book. This feels sneaky because when people refer to the 'pie' as an economic metaphor, they generally mean the total across a sector or the economy as a whole. That's probably not codified anywhere, so it's not possible to say that Amazon's usage is definitively wrong, but it's something that can be easy to misinterpret in a way very favourable to Amazon's argument.
Now, maybe Amazon really does mean that revenues across the whole industry would go up if prices were lower, as books take market share away from other sources of entertainment and information. If so, their example case is a bad one, because it doesn't demonstrate this. It feels a bit like they're talking a big talk about promoting books against other forms of entertainment, but when talking facts and numbers they're giving a subtly different story.
EDIT: I should say that I broadly agree with the rest of the OP. Ebook pricing does look high to me, and I would like to see lower prices. The general 'vision' that the OP puts across is one that I like, I'm just not sure how much it aligns with the reality of what's happening.
But without the price cut, those people might have bought other books.
As the article says:
But in reality, books compete against mobile games, television, movies, Facebook, blogs, free news sites and more
Amazon has data that shows eBooks are better sold at lower prices because books aren't just competing with books. If that is not good enough, basic fairness states that a virtual good with no manufacturing, spoilage or delivery costs without a secondary market should be sold for substantially less than a physical good with manufacturing, spoilage and delivery costs with a secondary market that competes with new goods sold.
I think what you're missing is that Amazon's point, that lower ebook prices are generally good for all parties, applies to all ebooks. They do use the phrase "a particular e-book" in their example, but I assumed that the real desire is for all ebooks to get a similarly proportional discount.
Of course, even if we just consider a price drop on a single ebook, it's still a valid point that this helps that ebook compete against other ebooks that don't change their prices, and there's nothing wrong with that.
Some goods are price elastic and some aren't. All Steam Sales have proven is that lowering prices of video games -over time- leads to a larger total profit. You shouldn't try to apply one item's price elasticity to another, especially since it is also highly dependent on the buying audience.
Well, if I buy two books at $15 each I would probably buy three at €10 each. So the individual book has more readers and some other book has more readers.
> So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99.
So, 74,000 people choose to buy the cheaper book. Great! But without the price cut, those people might have bought other books. Maybe some other $9.99 book, maybe some $12.99 book, maybe none at all. Growing the market for an individual book is only impressive if you're selling the book to people who would not have bought a book at all, not if you're competing with other books on price.
> The pie is simply bigger.
The 'pie' they're referring to here is not publishing revenues in total, but revenues for a single book. This feels sneaky because when people refer to the 'pie' as an economic metaphor, they generally mean the total across a sector or the economy as a whole. That's probably not codified anywhere, so it's not possible to say that Amazon's usage is definitively wrong, but it's something that can be easy to misinterpret in a way very favourable to Amazon's argument.
Now, maybe Amazon really does mean that revenues across the whole industry would go up if prices were lower, as books take market share away from other sources of entertainment and information. If so, their example case is a bad one, because it doesn't demonstrate this. It feels a bit like they're talking a big talk about promoting books against other forms of entertainment, but when talking facts and numbers they're giving a subtly different story.
EDIT: I should say that I broadly agree with the rest of the OP. Ebook pricing does look high to me, and I would like to see lower prices. The general 'vision' that the OP puts across is one that I like, I'm just not sure how much it aligns with the reality of what's happening.