Add to this that Steven Covey is e-publishing direct with Amazon, cutting out his publisher entirely. And who is his publisher? S&S;.

Wholly agreed.  Although I don’t touch upon it directly in this post, the Post-Gazette article in which Amazon criticizes S&S;(linked above the quote) covers the move by Covey to publish digital books through Amazon.

Is there an ebook related study you’re looking at that shows consumers will pay more for DRM-free ebooks?  The success of the Kindle (both on the iphone and as a reader) over open platforms suggests this may not be the case, but I’m curious if there’s evidence to the contrary (other than the anecdotal).

I’ve not seen a structured study that compares prices of or demand for interoperable content against that for e-books on a closed system.  The nook’s “lending” feature may provide a basis for such a comparison, although you’d need to get three entities (publisher, Amazon and BN) to play ball to make such a study work.

The success of the Kindle probably is not a vote up or down on aggregate consumer demand for DRM-restricted content.  I’d attribute the lion’s share of the Kindle’s success to untethered downloads, a relatively seamless transaction process, healthy (though not exhaustive) content libraries and overall device reliability.

Content interoperability and lending may or may not be driving down the price of digital content; we just don’t have enough data to be able to say one way or another.  Publishers like O’Reilly have found significant price sensitivity for some digital content, but that seems to be a function of direct response, as O’Reilly does not use DRM on its downloads.

Here’s the hook that’s been snagging me with regards towards the inevitable business model shift - publishers seem to be in the same boat that they’ve put authors in, that is publishers are demanding that the business model not change despite the shift in demand in the area of the ultimate consumer. That is, the “art” of selling books is coming into conflict with the “business”.

I know my math can often be dismissed as pure theory on this, but I’ve gone over it many times. Yes, the P+L statement effect the general “cost” to produce a book, but the big difference between print publishing and digital formatting is that the P+L isn’t altered to meet demand in a digital environment. This means that, for the first time in history, there is a solid line where a book can go recouping to profitable.

This puts publishers in much the same boat as authors, in that publishers selling in a digital environment now have an desired end result. Once profit passes expenses, a digital book will remain profitable forever.

If a publisher has a strong enough backlist of titles that have achieved perpetual profitability, than they can systematically lower the risk of new properties.

To that end, all that remains is pricing a book so that it can incentivize people to buy, or to put it in bluntly economic terms, to price in order to increase demand.

For me, that would mean pricing the bigger names lower, so that the occasional book buyers are more inclined to buy them. Yes, this reduces profits on each unique sale, but also increases overall profits per title by garnering sales from customers who otherwise wouldn’t buy a book.

It seems we’re quickly moving into a term of great publishing disruption, the Wild West that will separate 19th century publishing from the 21st.

Agreed.  If you buy the notion that content is increasingly provided by entities that “surround” a community and effectively own the relationships, then you are absolutely matching price and demand dynamically.  You’re always testing pricing strategies (including free) and measuring aggregate revenue.  Costs mean a lot less; revenue maximization is the primary game.

I think you’ve nailed my frustration, Brian. Because I grew up as a digital native (although on the older edge of that spectrum), I’ve always focused on doing things as close to free as possible and then maximizing the exposure through tinkering with demand. I don’t see that willingness to experiment in today’s publishers, rather it’s often a dragging of feet.

I’ve been playing with notes on an article about publishers going through the Kubler-Ross Stages of Grief over eBooks and I think it might need to come out soon.

I’m looking forward to that “grief over e-books” piece…

Competitive strategy is hard to tackle in comments, but businesses that have captured their customers and whose marginal costs are low generally are best pursuing strategies that maximize total demand.  To do that, you have to be able to test (experiment) with the price - service mix and then adjust according to what you find.

Trade publishers have little or no ability to test directly; their experiments are negotiated with what might feel like hostile third parties.  The stronger experiments might come in markets (professional and scholarly, or associations) that have established a more direct, multi-dimensional relationship with a community.

I’ll come back to this in a full post, I think.  You might also look at some of my “association” segment blog posts, visible on the home page.  The themes pop up there, as well.