That's a fairly horrible blog post. - Edit 1
Before modification by Ghavrel at 03/09/2009 11:05:52 PM
Talking to a couple of publishers recently, I’ve been surprised by how the cost of a book breaks down; I had assumed that the physical costs were considerably higher than they are. According to what they told me, the bulk of the cost part of a book’s jacket price is operational – editing, publicity, and the business of running a publishing house. If a book costs twenty five dollars, one U.S. editor said to me, only a few bucks of that is print and paper. At which point, of course, eBooks just aren’t that much cheaper than dead tree books to make.
So I find myself looking at the ten dollar eBooks and thinking: huh. That cannot possibly cover everyone’s costs.
So I find myself looking at the ten dollar eBooks and thinking: huh. That cannot possibly cover everyone’s costs.
This is simply the wrong way of comparing eBooks to traditional books, and so Harkaway reaches the wrong conclusions. Harkaway, unsurprisingly (not an insult; it just doesn't occur to many people when to do so when looking at microeconomic systems), just isn't looking at the long run. One of the reasons operational costs are so high is because you have to deal with economies of scale, diseconomies of scale, and all of the fun things that producing a physical product entails.
For books, if you're expanding your publishing, you have to build warehouses, buy machinery, rent/buy transport... the cost is staggering (it's made up, of course, and fairly quickly, but it's still huge). For eBooks, you buy or rent some servers.
Completely different. The pricing system works. It's been demonstrated countless times over the past decade. Why do you think iTunes has been so rampantly successful?
One way of looking at that is to say that it’s not relevant – it’s not a question of what the costs are, but what the market will pay. I’m not comfortable with that. The market can be an idiot. Large groups of people make many decisions very well, but they’re not always rational about what they should pay for things – ask the State of California (2). Given the choice between raising taxes and getting a tax break, people will generally go for the break. They will then also – and here’s California’s problem – vote for a bunch of really expensive stuff they would like for the government to do immediately.
Comparing a largely cut-and-dried, largely monopolistic microeconomic system (book publishing) to a hugely complicated macroeconomic system (the economy of friggin' California), and then using the complexity of the latter as a damnation of the free market is at best disingenuous and at worst outright stupid. Taxation has nothing to do with the free market. It's definitely not a good example of an externality.
The success of electronic media is not predicated upon advanced economics. It is very simple economics.