The recent tagging spurt/protest of Amazon Kindle owners rebelling against eBook prices above $9.99 sheds a lot of light on the way power dynamics are shifting.
The electronic supply chain is still evolving but at least three factors are influencing existing power dynamics when it comes to pricing (and maybe more).
Here’s an (apologetically simplistic) diagram of a somewhat typical pricing loop:
- Publisher assesses material cost, desirability of a title and market analysis of what the reader’s wallet will bear and sets Recommended Retail Price accordingly.
- Bookseller checks out RRP and analyzes on-the-ground factors (competitors, needs of customers, amount of stock) and sells at RRP or applies discount. Average Actual Selling Price is then a mix of RRP and discounting.
- Reader has choices: buy book at this store, shop around to see if better price can be found or just walk away from the purchase. Reader might be able to chat about good/bad price with their own networks either on or offline but chances that direct input goes back into the pricing feedback loop not high.
Now three major factors are changing the way these decisions are going to be made in the digital space:
- Device specific DRM: if you own a Kindle, there’s just one way to buy books and one major player who might be able to influences what the publishers price the books at, and how much it’s going to cost the readers. DRM of this type changes the game - there isn’t another way into this channel. This increases retailer power over pricing significantly.
- Online Communities and Tagging: and yet! The Amazon $9.99 boycott shows that information is powerful for the masses. It’s simple and fast to connect with thousands (if not millions) of like-minded consumers to instantly reshape the rules of the buyer/consumer relationship. Twister Sister comes on the radio and readers unite!
- Twitter and Other Social Networks: the uniting doesn’t have a self-contained bubble anymore either. It’s not just those who participate in the online community directly who are involved: Twitter and other grass roots social networking allows protests and questioning to extend from primary users to secondary and tertiary, creating an up swell of outrage/coverage/debate.
- Publisher Response: now that publisher have access to this kind of information, what are they going to do with it? Is there a way to use this public pressure as a check/balance system?
Not to get preachy, but…readers becoming an active part of the supply chain can’t be a bad thing - without them, the book business doesn’t exist. With their active and engaged support, the industry’s health can continue to improve and new relationship dynamics (mutually beneficial!) can evolve.