Are We Really Only Renting When We Buy?

While my three-year-old son has a huge stash of nearly brand new toys and books, occasionally he plays with a Hot Wheels toy car that I once pushed around as a small child. Other times, he may read a book that belonged to my wife when she was growing up. Both the car and book represent not only ownership, but a real material ability to pass on the product regardless of any system it may find itself situated. But what of a digital version of Cat in the Hat? Or perhaps an Amazon-purchased streaming version of a movie instead of the DVD?

A recent article in The Atlantic highlights the ephemeral nature of the media that we buy. Check that, media that we think that we buy, but in fact actually rent, so the argument in this piece goes. Various experts chime in to tell us that we are fooling ourselves with our “purchases.” Indeed, we are not buying a book or movie when they are in digital format, but rather renting them for the long term. It’s not clear what Amazon, iTunes, or other services will look like in ten years, but it’s more than certain that in 100 years these businesses will be in radically different forms, and, with that, whatever we have now (e.g. the Kindle, Kindle APP, our ePubs) will no longer exist in any recognizable form. While it could be argued that video tapes, records, and CDs are all materially owned media that have been and are just as susceptible to obsolescence, these are physical items still owned and presumably still able to be used If desired. Record players are available. It’s still possible to find a VHS player, and cars do still in many cases come with CD drives in their music systems as a standard feature.

The question is this: do we really own anything anymore, or just the right to use it for a while? Moreover, is something lost with this? To some degree, it’s the dilemma found in buying Kindle books that cannot be shared, sold, or handed down. That was bad enough; now we have to ponder the fact that the Kindle app will likely go the way of the dinosaur, and our digital library books may be at risk. For those of us who favor books—the kinds made of paper and that collect a little dust, perhaps the constant chaos in the electronic realm is good news; job security for real books, so to speak.

Just as the video games I played as a child have long ago found their way to a landfill, the current wave of entertainment and media is just as, or perhaps more so, disposable. Unlike a well-maintained library of physical books that may see another generation of readers pick through its shelves.

Greg Pece

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E-book Sales Hit a Speed Bump in Early 2015

According to a 3 September article in the Wall Street Journal by Jeffrey Trachtenberg, recent e-book distribution deals struck between the major publishing houses and Amazon.com may find the online retail giant vindicated through its seemingly recent defeat. Within the first few months of these new policies having been put into place, the industry has seen a commensurate decline in e-book revenue and sales. The major publishing houses got what they wanted: the right to set higher prices. What they may not have bargained for was a huge hit to the top line. One can almost imagine Jeff Bezos laughing and wagging a knowing finger at the publishing houses, an I-told-you-so kind of moment justifying the corporate strategies of the Seattle behemoth.

2014 marked an end (somewhat) to the tumultuous back and forth between Amazon and publishers, most notably coming to a head with the well-reported Hachette struggle. Through the fall 2014, one agreement after another was signed between Amazon and the large houses that allowed the publishers to set their e-book pricing. The result? Higher e-Book prices are now found throughout Amazon; an ostensible win for the publishers who saw Amazon’s low ball approach undercutting profits to both publishers and authors, and their tactics analogous to corporate bullying. But not so fast.

According to the Trachtenberg article, increased prices have correlated almost directly to a plummet in e-book sales. According to the Association of American Publishers, revenue for e-books fell 10.4% as compared with the same period in 2014. Coincidence? Maybe, but unlikely.

Yet publishers aren’t willing to accept defeat nor direct causality just yet. They point to a recent lack of hot titles and perhaps a seasonal slump. In the words of one executive, who, like the industry writ large, refuses to accept the possibility that the recent victory be in fact be hollow: “this is a title driven business…. if you have a good book, price is not an issue.” Perhaps, but it is hard to imagine that the changes in price are not affecting sales. And the changes are quite radical.

As Trachtenberg points out, and I have confirmed, what was once a landscape of $9.99 eBooks is now a significantly pricier Amazon shopping experience. For example, Jonathan Franzen’s new release, Purity, is available for $14.99 in its Kindle e-book version, while the newly released hardcover edition sits one click away at only $15.10. For any Prime member of Amazon, with its free two-day shipping, it really is only a dime more. I had to look twice.

Several factors may be in play. First, e-book sales were already stagnating since 2013, and recent data may indicate a larger cultural shift at work, as the pendulum is possibly swinging back toward physical books. More likely, though, we might have to start with the simple fact, supported by every economics 101 class, that a large increase in price has impacted sales. E-books are clearly not a product commanding inelastic demand.  What complicates the analysis further is the tiny difference in price between e-books and their hardcover counterparts. Further market research might reveal an unsurprising fact given all the evidence: that former Kindle readers are now cozying up by the fire with a real paper product in their hands. Why not, when it only costs another dime?

While the top line to the publishing companies may have taken a hit, in terms of eBook sales, it would also not surprise to find a corresponding increase in hardcover revenues. Time and data will tell.

Greg Pece