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If Publishers Can't Cover Their Costs With $10 Ebooks, Then They Deserve To Go Out Of Business (Techdirt)

With the legal dispute over ebook pricing going on, one thing we've heard over
and over again from the traditional publishing industry and their supporters
is that higher prices for ebooks make sense because of all of the "costs" that
the publishers have to cover. This is a fundamental error in how pricing (and
economics) works. It reminds me of the MPAA folks who demand to know the
business model for making $200 million movies. Years ago, someone who
understood these things taught me why cost-based pricing will always get you
into trouble. If you start from the overall pricing, including overhead and
other fixed costs, then you're not basing the price on what the consumer
values -- and, more importantly, you're taking away your own incentives to
become more efficient and decrease costs. Instead, you're just "baking them
in." But the most important reason not to base pricing on overhead costs is
that _your competitors won't do that_, and they'll under cut your price and
then you're in serious trouble.

That moment of reckoning is coming for book publishers, even if they don't
realize it yet. David Pakman, who watched all of this happen ...

Techdirt