A few weeks ago, I wrote a post analyzing whether ebooks cause print cannibalization. The motivation for the post was Sourcebooks’ decision to delay the ebook release for “Bran Hambric: The Farfield Curse” in an effort to prevent hardcover cannibalization. A similar issue has come up again (albeit with a different result) with Dan Brown’s new book, “Lost Symbol.”
The issue of cannibalization is important for publishers and centers around the practice of versioning. For-profit companies design and implement strategies in order to maximize profits. In theory, profit would be maximized when a company is able to charge consumers their individual willingness to pay for an item. However, such personal knowledge is not easily shared by consumers, making this theoretical pricing practice impossible. Versioning is an attempt to understand consumer’s approximate willingness to pay and charge accordingly. Companies will release one version of a product designed to appeal to high paying consumers and more basic versions targeted at others.
Companies can implement versioning strategies in several different ways. Publishers, however, have long used time versioning. Publishing companies attempt to identify those consumers with a high willingness to pay by initially releasing only the more expensive (and more profitable) hardcover version of a book. Those who place the highest value on the content will want the book immediately and will not wait for the lower priced paperback. The result is higher total profit.
The fear among some publishers is that the simultaneous release of hardcover and ebook versions will limit the effectiveness of this strategy and thereby reduce profit. However, the underlying assumption of this strategy -- and the reason why this type of versioning works -- is that consumers choose content first and format second. Ebook consumers seem to be challenging this (at least those who have purchased a dedicated device).
Choice of format before content clouds a publishing company’s ability to use time as a metric of willingness to pay. Therefore,while ebooks will likely have a limited impact on a company’s print versioning strategy, publishers will need to find new methods of segmenting ebook consumers. Such segmentation can still occur through versioning strategies, though companies must be willing to experiment with different applications.
Random House, for example, has launched Book and Beyond in the UK. Consumers most interested in an author’s content can pay extra for enhanced versions containing audio and video components, interviews, and images. Those with a lower willingness to pay will likely forgo these extra features and purchase the basic version.
Other types of versioning strategies exist and could help publishers segment the ebook market. However, the success of these strategies may be determined by the extent to which the ebook market becomes modularized. Complete, vertical control over a market has its advantages, but it often acts as a disincentive for experimentation.
Publishing companies should recognize that current versioning strategies are effective (and therefore profitable) because they allow consumers to reveal their willingness to pay. While ebooks challenge current versioning practices, the same result can be obtained if companies are able to experiment with new methods.
