Digital Pricing

Seems like there's some data to suggest that, shockingly, raising prices results in lower sales. Who would have ever thought?

It's amazing to me that music and book publishers are apparently making pricing decisions based on gut feelings rather than experimenting, generating sales data for different price points, and using math. I guess they haven't realized that (unlike hard goods) they don't have to worry about the cost of inventory, which means they have more freedom in pricing. Look, if a book cost you $10 to print, and you made thousands of them and they're sitting in boxes in your warehouse, you have to price the book at well more than $10 apiece (perhaps $20 or $30) to make any money. (After all, you did spend some money on editorial, and perhaps even plan on paying the author something.) The converse is, if you don't pay anything for inventory, you could price the book at $30 just like the physical book... and maybe sell 10 digital copies. Perhaps you'd find if you priced the digital book at $10 you'd sell 100 copies... with no change in your upfront costs (transaction costs would be a little different, and the author's royalty would be different, I hope). And what if you found that at $5 you sold 1000 copies? Any sane person would want to make the most money, which would mean pricing the book at $5. (Unless they really hated to see an author make more money, even if it meant they were also making money.)

So watching music publishers trying to raise download prices on iTunes, and book publishers scrambling to strongarm Amazon so they can charge higher prices for e-books, strikes me as insane. I agree Amazon's restrictions are draconian... but I'd like to see a bigger cut for authors and publishers, real freedom in file formats, and publishers competing to sell their books for lower prices (especially older titles who have long since stopped generating significant revenue).