The Battle for a Digital Pricing Model that Works Part 3: The Dark Side of the Force & A New Hope

By Rebekah Hunt
The book industry has been slower to evolve than other industries. The big retail chains, who had undercut the already wobbly industry’s prices on paperback books back in the 1980s, are now seeing the same thing done to them by the burgeoning digital market and Amazon.com. Advancements in e-reader technology such as the Kindle and the iPad make the transmission of print media in digital form far more practical and attractive than ever, but the industry has yet to develop a good standard for continuing to profit from the sales of these new kinds of media, as evidenced by the suit filed by the Department of Justice regarding ebook pricing.
Of course, where there is instability, there is vulnerability. One of the primary dangers presented by the lack of a good pricing model for ebooks is piracy. Despite the January 2010 unveiling of the ominous findings from research group Attributor, which showed between 1.5 and 3 million daily Google searches for pirated ebooks; the threat of ebook piracy may be more of a moon than a Death Star.
According to electronicbook-readers.com (see previous blog), “…there are a large number of consumers who are unwilling to pay the current price for ebooks, and they are willing to pirate those books rather than do without. Consumers who feel their needs are met are much more willing to part with their hard earned money than those who are frustrated with companies who simply no longer seem to ‘get’ them and their lifestyle.”
However, they go on to say, “What [publishers] do not realize is that piracy is only a problem when industry does not provide consumption models wanted by particular classes of consumers… The decision to allow her Harry Potter series to be distributed in electronic format is expected to net JK Rowling over 100 million in revenue and has probably cost her triple that amount due to her previous reticence toward ebook distribution.”
Rowling’s resistance to making her golden goose available in ebook format is the stuff of industry legend, demonstrating the entrenched backwardness and misunderstanding of the market that is a major impediment to the progress of book publishing. However, as stated, even Rowling was forced to capitulate to the demands of the market.
A New Hope: The Market Evolves
“The publishing industry… is where the music industry was seven years ago,” electronicbook-readers.com says. They advise that publishers adopt a similar strategy to the music industry and “…ignore piracy of ebooks on non-commercial sites and focus on producing content and connecting with their readers. If digital distributors were to start looking at digital piracy as a business deduction similar to advertising and charity donations and [focus] more on delivering content consumption models that encourage everyone to participate, they would discover a method to survive the massive disruption to their industry that technology has created.”
They encourage the publishing industry to look at the success of Netflix and Napster when developing new models for future business practices. “Such a move early in the fledgling ebook economic model,” they say, “would turn massive numbers of potential pirates into happy consumers paying monthly subscriptions who in turn become a new revenue stream to authors and distributors.”
For book publishers, ebooks integrated with other media are the way the market is going, and pricing models must evolve to meet the need. International publishing conglomerate, the Penguin Group, is extending their reach far into the electronic market. A recent article from appleinsider.com reports that Penguin expects their ebooks to grow from 4 percent to 10 percent of their sales next year, and they will also introduce a series of interactive ebooks for the Apple iPad.
Penguin CEO, John Makinson attributes this to the compatibility of the iPad with the company’s business model. The features of the iPad that are attracting publishers such as Penguin, fit the market trend toward integrating multimedia experiences with books in order to get consumers interested in books again. Makinson states that it is Penguin’s intention to take full advantage of the iPad’s capabilities, saying, “…we’ll be creating a lot of our digital content as applications, to sell on app stores in HTML, rather than as ebooks.” Makinson admits uncertainty concerning the success of these new strategies, however, reflecting the apprehension apparent throughout the publishing industry that the market is still in a precarious position.
Stay tuned for next week’s blog, the Return of the Jedi (an ebook pricing strategy that works)!
 
Image by Maximilian Schönherr. Used with permission under  the Creative Commons Attribution-Share Alike 3.0 Unported, 2.5 Generic, 2.0 Generic and 1.0 Generic license.