I’ve gotten multiple requests to dance on Sun’s grave, but Fake Steve seems to have the ceremonies well in hand. I just need something from the wine cellar to accompany the festivities. Perhaps a nice bottle of Churlish Chardonnay…
(What ever happened to that Java ring?)
This was an Intel product if I remember correctly, underscoring how tough it is to pair chips and wine.
Amidst news of Amazon’s apparent surrender today in the war with Macmillan over ebook pricing, the highlighted book on Macmillan’s home page is Priceless, subtitled “The Myth of Fair Value (and How to Take Advantage of It)”:
I haven’t read the book so can’t comment on whether this placement is intentional or ironic, but it does tee up a discussion about the “collective hallucination” of Macmillan’s pricing.
The tiff between Macmillan and Amazon is over who sets end customer ebook prices. Amazon wants most books to be priced at $9.99 and is today selling ebooks at a loss to realize that price. Macmillan wants dictate ebook prices for end customers (in other words, no discounting by resellers) and will treat its resellers as “agents” who get a fixed 30% of the sale. In Macmillan’s own words:
Under the agency model, we will sell the digital editions of our books to consumers through our retailers. Our retailers will act as our agents and will take a 30% commission (the standard split today for many digital media businesses). The price will be set the price for each book individually. Our plan is to price the digital edition of most adult trade books in a price range from $14.99 to $5.99. At first release, concurrent with a hardcover, most titles will be priced between $14.99 and $12.99. E books will almost always appear day on date with the physical edition. Pricing will be dynamic over time.
Macmillan lets you buy Priceless in hardcover from their site for the full $26.99 list price and provides links to other resellers including Amazon. They would no doubt say they sell at full list price because they don’t want to compete with their resellers. When you click through to Amazon tonight, they still aren’t taking orders but third party sellers on Amazon offer it new for as low as $14.41. Now Priceless (at least before this blog post…) is not exactly a blockbuster title, so lets look at The New York Times Bestseller list on Amazon:
|
Title |
Publisher’s |
Amazon Price |
| Game Change | $27.99 | $13.00 |
| Committed | $26.95 | $12.00 |
| Stones into Schools | $26.95 | $11.50 |
| Have a Little Faith | $23.99 | $13.19 |
| Going Rogue | $28.99 | $13.50 |
| Outliers | $27.99 | $11.75 |
| Just Kids | $27.00 | $12.49 |
| The Checklist Manifesto | N/A | N/A |
| SuperFreakonomics | $29.99 | $13.96 |
| What the Dog Saw | $27.99 | $14.47 |
| Drive | $26.95 | $14.45 |
| Open | $28.95 | $15.92 |
| Intellectuals and Society | $29.95 | $16.47 |
| Evidence of the Afterlife | $25.99 | $14.97 |
| Too Big to Fail | $32.95 | $17.96 |
| Freefall | $27.95 | $15.37 |
| Comeback America | $26.00 | $14.97 |
| Born to Run | $24.95 | $13.72 |
| Anticancer | $26.95 | $14.82 |
| Half the Sky | $27.95 | $14.97 |
| Average | $27.71 | $14.18 |
| Average Savings | 49% |
Amazon also isn’t selling The Checklist Manifesto tonight, which is the only Macmillan book to make the list (you’d think as one of the “big six” publishing houses Macmillan would have a better showing, but maybe they’ve been focused on things other than publishing popular books). But for the rest of the list, list prices average $27.71 and range between $24.95 and $32.95, while Amazon’s average price is $14.18 and range between $11.50 and $17.96. You average 49% savings off list from Amazon.
The net is, at a $14.99 list price for a new ebook, Macmillan wants to actually increase the effective price of new books to end customers even as the cost of cutting down trees, making them into paper, putting ink on that paper, putting those books in trucks and shipping them all over the place to stores disappears from the equation. The savings, needless to say, are not being passed on to you and me. Macmillan evidently sees themselves as a lone exception to the deflationary pressure of the Internet. We’ll see how that goes.
If it is not obvious, the big loser here is not Amazon, but the we the consumer:
| Price | Margin | Reseller | Publisher |
| $9.99 | 50% | $4.99 | $4.99 |
| $14.99 | 30% | $4.50 | $10.49 |
To the degree Amazon is paying over $9.99 for ebooks today and subsidizing them, then they’re actually much better off margin-wise under this model. The question is what happens to volume and Amazon clearly believes there is price elasticity for new books (and so do I, speaking purely as a consumer). Macmillan meanwhile believes they can roll out a new book at $14.99, sell to everyone who will pay at that price, and then slide down the demand curve and pick up all the purchasers who were holding out for $14.98 or $13.99 or whatever. They will be profit maximizers like the world has never seen before. We’ll see how that goes.
Amazon waited too long to drop to the 30% revenue share Apple pioneered with iTunes and let Steve “all music should be priced at $0.99 a song” Jobs suck at least some of the publishers into his reality distortion field. Jobs even seems to have had advance knowledge of Macmillan’s ultimatum to Amazon. It is hard to see how other publishers don’t follow and put a damper on the ebook market overall.
I’m too lazy to pull links from Apple playing hardball previously with record companies and movie studios who wanted to set their own pricing in iTunes, but the degree of Apple involvement here appears significant. Despite the soft sell on iBooks at the iPad announcement, they seem to take Kindle very seriously. It will be interesting to see to what degree they impede the current Kindle app for iPhone/iPod Touch that should also work without modification on the iPad.
I have a few questions for Macmillan:
Macmillan in the US is a group of publishing companies in the United States held by Verlagsgruppe Georg von Holtzbrinck, which is based in Stuttgart, Germany.
Disclosure: I need to get around to commenting on/lampooning the FTC’s vague requirement that bloggers disclose commercial relationships, but in the meantime I hold no stocks of any of the companies mentioned in this post. Amazon pays me pennies if you buy books that I link to, which I then spend on more books, though I anticipate buying fewer books from Macmillan in the future. I might read Priceless (click here to tell them to make it available for the Kindle).
Quick thoughts:
It is a Big iPhone
Looks nice, but more evolutionary than revolutionary. Price better than expected, but still won’t be racing out to buy one. Expectations were impossible to meet, but Apple gets a lot of blame for setting them so high.
Flash in the Pan?
I thought after inadvertently showing that Flash didn’t work on the Time web site (above), they were setting up a reconciliation with Adobe. Guess not. Was this an intentional nose-thumbing at Adobe or is Jobs less scripted in demos than we all assume?
The Dumb Pipe
Even though it was greeted with derision, Apple’s deal with AT&T for 3G data service is significant. No doubt part of a broader negotiation between the two companies, the iPad data plans set a bar for other operators to meet or beat on price, quota and lack of contractual commitment. AT&T, along with other operators around the world, end up more removed from the customer and one step closer to being not just a dumb pipe, but an invisible dumb pipe. It will be interesting to see the terms and conditions and to what degree AT&T gets brand awareness.
Rumors of Kindle’s Death Greatly Exaggerated
Apple seemed a little faint-hearted in their commitment to iBook – they threw it out there but seem ready to do an AppleTV-style “its just a hobby” repudiation if it doesn’t pan out. Kindle is first and foremost a bookstore and available across an ever increasing number of devices, including the iPad from the day it ships. Publishers used Apple to get Amazon to drop their cut to 30% but Amazon still has way more leverage over publishers than Apple does (assuming publishers still care about selling those ink on paper books). And Apple seems to have conceded consistent pricing, which of course was fundamental to iTunes’ success. The publishers will get greedy and undermine the platform.
And I wouldn’t write off Kindle as a device. It has a price advantage, the screen is easier on the eyes and it has a huge advantage in battery life – I can fly to Asia and back for a week on a single charge. And I’ll bet we get a new one for the holidays this year.
Media Salvation
Much false hope has been raised on this front – newspapers and magazines, you still have your work cut out for you. There is also some weirdness in Apple’s iBook store with what looks like a New York Times icon built in (below). Strange choice as it makes enemies and given the New York Times’ business savvy (or lack thereof), their deep embrace is a bearish indicator for the device.
Apple’s Cloud Strategy Still Missing in Action
USB sync? Color me underwhelmed but am sure they are working furiously on this.
What else did I miss?
When it isn’t too cloudy (weather-wise or work-wise), my office has a great view of Elliott Bay in Seattle, where I see the ships come and go (airplanes too):
My new indispensable companion is MarineTraffic.com which uses a network of crowdsourced receivers to pull data off the transponders most ships have and plot them on a map. Here is a live view of what is floating around:
You can follow specific vessels like the Shanghai Express pictured above on their travels (and you won’t see anything if it is out of range of transceivers in the middle of the ocean).
As yet, no enterprising and cutting edge Somali pirate has joined the network and set up shop to track shipping traffic in that area:
More broadly, the rise of container shipping is fascinating and a dramatic tale of disruption. There is a great book, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, that tells the humble shipping container’s story.
The story begins not so long ago in 1958 with a trucking entrepreneur who gets into shipping. Shipping before containers is unbelievably inefficient, with freight being packed and repacked repeatedly over the course of a trip, getting damaged or stolen, taking forever to get its destination and the whole industry was intensely regulated. Thinking end-to-end and “intermodal” was a profound breakthrough but it still takes a couple decades to play out as the transportation business, their customers and governments needed time to wrap their heads around and embrace the shift.
The geographic consequences are fascinating. Ports win by offering lower costs through volume and the ability to load and unload quickly. The winners see increasing returns and the losers disappear. Some cities like New York, San Francisco and London were the biggest ports in the world, but they bungled the transition to containers and their ports disappeared. Some of them like New York spent hugely to defend the old approach and wasted tons of money. Other cities won with their early commitment to containers. Some winners like Los Angeles and Long Beach are not particularly surprising but other, unlikelier ports like Seattle and Felixstowe in England have prospered because of their early bet on containers overcame the disadvantages of their small local markets. The drive towards bigger ships and bigger ports continues today, with individual ships carrying thousands of containers. Most of the world’s biggest ports are now in Asia.
It is also a good tale of labor strategy in the face of technological change. The longshoremen initially fought the coming of the container (and thereby preserve perks like the right to steal loose cargo), but ultimately the longshoremen on both the east and west coast did deals that protected existing jobs at the expense of new employees. But the fact there are no longer longshoremen in New York City, once the US’s biggest port, shows perils of flouting change.
It really took until the 1980s for shipping containers to start to significantly drive down shipping prices, as deregulation was required in addition to both shippers and shipping companies fully understanding the economics of containers and embracing them on an end-to-end basis. But costs have plummeted and in many ways shipping costs are invariant with distance today as a result. Our just-in-time, globalized economy wouldn’t exist without containers and the ability to cheaply move goods, including intermediate goods, around the world cheaply and reliably.
Hey, I actually get this obscure xkcd reference:
We did three Entertainment Packs for Windows soon after Windows 3.0 came out (tagline: “Not the most fun you can have with Windows, the only fun”). Each had about eight games. Some like Minesweeper and FreeCell got bundled with subsequent versions of Windows, but I never would have guessed SkiFree would continue to have a cult following nearly two decades later. There are SkiFree updates, ports, exhaustive overviews, numerous videos, cheat codes, fan mail and even fan fiction. The Wikipedia entry has even dug into the philosophical underpinnings of the game (though inexplicably provides no scatological discussions of the sources of and scoring for yellow snow in the game).
The funniest part is (if I recall correctly), the origin of the Abominable Snowman was the game had a stack overflow bug and instead of fixing the bug (hey, we were on Internet time way way before it was popular, cranking these things out in a couple months), the Snowman was introduced as a way to sidestep the bug by devouring the player with a small loophole that if you outran him in a specific way (appreciate the annotated video and opportunity to buy the soundtrack…), you’d start again.
I assume it is just a matter of time before the Snowman gets a movie deal. Every other comic character with any nostalgic appeal already seems to have one.
It is time for Microsoft and Mozilla to make peace and together face their common enemy: Google.
For Mozilla, Google is both sole patron and now direct competitor, which is at best strategically awkward. Firefox market share has plateaued. They’re losing their status as the browser of choice amongst the cool kids to Chrome. It is no longer the svelte and solid product it once was as lobbying seems increasingly prized at Mozilla above software development. The idealistic fire burns low as the dog is not sure what to do after catching the car.
While Mozilla drifts, Microsoft, meanwhile, has a tremendous need to change the browser game. Internet Explorer is getting bigger faster than it is getting better. Attenuating market share loss does not constitute a winning strategy. Instead of inflicting yet another column on the compatibility test matrix with a new rendering engine, why not just embrace Firefox? At this point, Microsoft has acquiesced to the idea of cross-platform browser compatibility. The browser anyway is just a container for Silverlight which is the real presentation strategy. Mozilla can help propagate Silverlight as well as help with browser search defaults. Mozilla executives are publicly expressing a preference for Bing despite their Google-funded paychecks, so cultivating Firefox users and the open source community more broadly is not nearly as crazy as it might have sounded even six months ago.
Microsoft has already paid almost $2.5 billion for the privilege of being required to ship Firefox and other browsers with Windows in Europe (who knew there were 12 “popular” browsers?). And the company has gotten nothing out of strategic control of IE all the while butting heads with the EU. Now that the (Fire)fox’s nose is through the Windows’ window (to butcher a metaphor badly), the renowned software designers of Brussels and their various friends (aka “Other” in most market share reports) are now hard at work trying to expand that toehold (and the scariest part of this for Microsoft should be the regulations starting entangle Office as part of this).
In yet another eerie Richard Nixon parallel, Microsoft has a history of surprise rapprochements with once bitter foes (Apple, Novell, Sun, arguably China and they’ll probably end up bailing IBM out one of these days…). Why not add Mozilla to the list? It not only costs little to let the wookie win, but it helps on multiple fronts of the new competitive landscape. And maybe more importantly, is a powerful demonstration to the world just how much that landscape has shifted, all to Microsoft’s advantage amidst its metamorphosis from Evil Empire to benign-by-comparison former Evil Empire.
Just a thought.
With two chase planes. Sorry for crummy phone photo.
Reaction to the disclosure of University of East Anglia Climatic Research Unit internal email is predictably bimodal. “Deniers” see it as conclusive proof global warming is a fraud. True believers are righteously ignoring the contents altogether because of how the information was acquired (it took me a while to get a Pentagon Papers reference this morning).
The interesting question is who did the hacking and subsequent disclosure? This isn’t the act of your stereotypical pasty-faced teenaged hacker looking for some weekend entertainment. This was an overtly political hack and shows savvy timing right before the big Copenhagen climate shindig. Who had means, motive and opportunity? When you ask the question this way, one suspect looms large: a very populous Asian nation who happens to be a large carbon emitter, isn’t so keen on being embarrassed in Copenhagen and reputedly has some hacking skills at state disposal. Forget about Twitter – perhaps black hats are the new cutting edge PR tool.
Apple is getting grief for what appears to be an underwhelming launch of the iPhone in China.
It is not really a surprise – China is awash in fake and gray market iPhones. When you walk down the street, the street hawkers greet you with “Watch, DVD, iPhone”.
Why settle for the WiFi-less plain old iPhone sold by China Unicom when you can choose from the much wider variety of iPhones available in China?
There are flip iPhones:
Mini iPhones:
A “Lengthened edition”:
Additional colors:
The hardware quality is very good – the straight knockoffs are pretty much indistinguishable from the real thing. But what is really cool is there are multiple fake iPhone software loads that are evolving quickly:
Note the Finder, Windows Media and Firefox icons (the Firefox icon launches Opera).
I find myself perplexed by this inexplicable award. Has the Nobel prize selection committee completely lost its senses?
I mean, what exactly is “the landscape of the dispossessed” and how do you win the Nobel prize in literature for writing about it? Why isn’t there more discussion of this bizarre choice? I know there is a long history of controversy around prize winners, but this is a new low. How can you possibly mention Herta Müller in the same breath as previous winners and immortal literary titans like Sully Prudhomme or Bjørnstjerne Bjørnson? (Imagine the link juice from that last one…).
I’m Charles Fitzgerald and this is my blog. I write infrequently and nominally on the economics of platforms, or whatever else captures my interest.
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