Sunday, July 01, 2007

Lost Profits

What is the point of selling Harry Potter cheap? What is the point of giving away free copies of Prince's latest album?

The traditional economic structure of the media industry - including books, films and recorded music - is that the risk of supporting unknown and struggling creative talent is compensated by huge profits from a small number of blockbusters. A similar equation applies to the viability of specialist retailers (such as independent booksellers). It is hard to avoid the conclusion that massive discounting of selected items represents a deliberate price war by the larger retailers against the smaller independent ones, with the intent of driving them out of business.

But why do the publishers go along with these tactics? Why do they succumb to discounting pressure from general-purpose retailers? Surely J.K. Rowling and her publishers would make just as much money, perhaps more, by selling a smaller number of volumes at the full price? There are certainly large numbers of Harry Potter fans who would prefer to pay the full price rather than wait for a cheaper edition, if that was the choice available. Perhaps it's because everyone is focused on achieving impressive sales volumes, rather than thinking more intelligently about objectives and targets.

WYMIWYG - what you measure is what you get.

1 comment:

Scribe said...

This ties in with some comments on the recent closure of Fopp stores, I think. In the case of Fopp and HMV, they're (possibly) competing against both the cut-pricers (i.e. supermarkets) and the "long tail" of independent music (maybe).

The difference between books and music, though, is that there seems to be much less of a "long tail" for the former. It's difficult to "sample" independent writing (where's the myspace for books?), and I suspect the market is also generally smaller. Harry Potter may "[create] the impression among kids that books are cool" (BBC news article), but that doesn't mean kids didn't read before, or are reading twice as much now. (Chances are they're going to the HP films and buying the HP computer games, etc, instead.)

This leaves a heavier emphasis on "mainstream" books - the top 10. Dan Brown and Rowling are both obvious examples of this - the key to making cash from books is to drive the hype around them, no matter if they're any good or not. The problem is there's just nothing else to offset that drive - no indie books.

Why do the publishers go along with it? I'd go with a "satisficing" perspective: they know it's better, for stability and long-term business, to get into a partnership with a retailer that can give them these sales numbers *and* drive the branding hyping process at the same time. Bookshops can't do what supermarkets do, because bookshops don't sell HP clothes, HP food, HP tie-in offers.

The problem with bookshops, in other words, is they sell books.