Re: whether prices are excessive.

[David Farber <dave () farber net>]

________________________________________
From: Tony Lauck [tlauck () madriver com]
Sent: Tuesday, July 08, 2008 11:34 AM
To: David Farber
Subject: Re: [IP] whether prices are excessive.

Organizations tend to perpetuate themselves, including their outdated
cost structures. Unfortunately, in the marketplace avoidable costs don't
justify high prices, although organizations would like to believe this.
For example, oil companies have recently claimed that their prices
aren't really excessive, because their profit margins remain low. They
don't mention that their cost structure includes palatial headquarters
and high priced executives. As another example, some large charitable
organizations maintain a "non-profit" status by spending money on luxury
hotels for their workers instead of improving the lot of destitute
disaster victims.

In the case of Mary Shaw's textbook model two thirds of the price goes
to manufacturing and distribution. These costs are largely avoided by
Internet distribution. In addition, part of the publisher's investment
goes for fronting the printing, and this also could be reduced by online
distribution.

Once unnecessary costs have been removed the marketplace may decide how
much of a premium to pay for some of the remaining costs, e.g. some of
the editing and reviewing costs. Internet music sites pay the artists
over 50% of the purchase price and I think that that is something that
could happen in the book marketplace as well. Many fewer people would
"protest" if they believed that their money was going where it belonged,
to the content creators, rather than to rent-seeking quasi-monopolists.

Tony Lauck
www.aglauck.com



David Farber wrote:
> ________________________________________
> From: Mary Shaw [mary.shaw () gmail com]
> Sent: Monday, July 07, 2008 10:06 PM
> To: Sunil Garg; David Farber
> Subject: Re: [IP] The real meaning of the Act of 'Civil Disobedience'
>
> Not that I take Wikipedia as definitive, but in the university model the professor can usually choose the textbook 
> from among competing texts for the same course.
>
> The underlying question is whether prices are excessive.
>
> Here's a quick overview of where the price of a book goes. This is for regional guidebooks, which I understand pretty 
> well.  I don't know how closely it corresponds to textbooks, but it's probably a good first cut.
>
> Divide the retail price of a book into six roughly equal segments -- 15-20% per segment.
>       Two parts (40%) goes to the retailer for rent, salaries, stocking books, etc
>       One part (15%) goes to the wholesaler for warehousing, distribution, etc
>       One part goes to the publisher for editing, business risk (fronting the money), marketing
>       One part goes to the printer for putting ink on paper and binding the volume
>       One part goes to the author.
> For a $60 textbook, that's about $10/part.
>
> The retail markup seems to be in line with general retail practice. A low-visibility cost to the publisher is 
> fronting the money to edit and print a text that doesn't compete well in the market. A few years ago I paid my 
> printer $3-4/copy for 250-300 pages softbound, so $10-15 per copy for a large textbook doesn't seem out of line. For 
> textbooks, author royalties used to go 10-15%, higher as volume goes up, so that's about right. As I noted earlier, 
> it doesn't pay the author very much per hour.
>
> Note that the author does get a cut of the income.  This isn't like the music industry, where a common complaint is 
> that the performer isn't getting any of the income.
>
> So which of these parts is exorbitantly expensive?
>
> As for frequently-changing editions, it's gratuitous to suggest that they're changed solely to force students to buy 
> new books. Particularly in computer science, the material changes.  For some large freshman courses, 
> university-specific editions are sometimes printed to keep the size and cost of the book down by including only the 
> chapters required for the course.
>
> One way to get the cost of textbooks down would be to sidestep the retailer.  For example, a student could sign up at 
> course registration time to get the books automatically, and a distributor could make up individualized text packages 
> and ship them in bulk to a university dispensary. Given the lead time, it seems like this could take a third off the 
> top of the price.
>
> Another possibility to explore would be sets of monographs rather than monolithic textbooks.  That, however, has 
> integration problems of various kinds.
>
> Mary Shaw




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