Monday, March 1, 2010

How NOT to Price an e-Book

Have you ever walked into a butcher store and asked why the filet mignon was so expensive and received a reply along the following lines: “Well, ma’am, that cow had to stand out in the hot sun for two years, someone had to feed him all that time, then they had to put him in a truck, which costs money…” No. I don’t think so.

Yet, a month or so ago, there was Jonathan Galassi, a bright man and president of Farrar, Straus & Giroux, explaining on the op-ed page of the New York Times how expensive it is to produce a book, whether it’s printed on paper or delivered in pixels. And now, this week, we have an article in the business section with more publishers weighing in on the cost of designing covers and copy editing and paying all that rent on the big building in Times Square.


We writers and others in book publishing should think back for a moment to the last time we considered buying some other product — say, the latest iPhone. Did we expect Steve Jobs to justify the price based upon how much that neat, scratch resistant glass cost to manufacture? No. We were more interested, undoubtedly, in what that iPhone might do for us or how owning one might make us feel.

When I first got to New York in 1984, I went to work as an administrative assistant for the Association of American Publishers. I was the staff person on several committees, among them a committee of textbook publishing executives. At the time, consumers were beginning to grumble about the prices of textbooks, so the committee was working on a slide show meant to explain why a textbook might seem so expensive but really wasn’t.

I — an English major — learned my first lesson of business in that meeting, when one of the executives said, “The reason we’re having so much trouble making this work is that the biggest influence on price is the one thing we can’t mention. Like everything else in the world, textbooks are priced at what the market will bear.”

Some things have an intrinsic value. Finished products, for the most part, don’t. They have a perceived value to the consumer — a value that the consumer will set in his or her own mind — a value that corresponds to the price the market will bear.

The filet mignon is expensive because there’s so little of it, not because the knife that slit the cow’s throat cost a dollar more this year than last. Consumers will decide whether the price of the steak corresponds to what they perceive its value to be. And it’s the same with any product, including a book. If the market won’t bear the price, it doesn’t matter what price the seller thinks is fair.

When will publishers understand that if you have to explain how you arrived at the price you have already lost your battle with the consumer?