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[publishing] Amazon, Gillette, cross-subsidies and supply chain integration

Reuters continues with the lazy reporting about the actuality of Macmillan’s pricing proposal.

at Making Light with a very cogent analysis of the agency model, and why it’s critical to the continued health of publishing. As usual, that woman makes a hell of a lot of sense.

I asked on Twitter this morning, “Trying to figure out why the price of ebook readers (sold by tech cos) should be linked to the price of ebooks (sold by publishing cos.)” @philipbrewer responded, “Cross-subsidies are an old trick, as in “give away the razor sell the blades.”

He’s got a great point, but I think he’s wrong. Gillette owned the razors and the blades, controlled the whole supply chain. Likewise HP with printers and ink, another example of this. That integration allows them to set the dial on profit and loss in different lines to maximize overall profit.

[ ETA: @philipbrewer responds thoughtfully to my point and counterpoint here. ]

Amazon with the Kindle does not control the supply of content. As explains (and has been explained elsewhere), they’ve been inserting themselves as a publisher with the rights play embedded in the up-til-now Kindle contract. That’s still not supply chain integration. So where Gillette can take a loss on razors to sell blades within one larger profit-and-loss calculation, Amazon has been pushing publishers into a position of taking a loss on hardcover sales to elevate Amazon’s Kindle profits. They’re killing their own supply chain, unless they plan to go into originating content on Kindle in a big way. Which would be an unsurprising next step for Amazon, but still provides the publishers with no incentive to continue down Amazon’s path.

I probably have a lot more to say next week, when I’m out from under this chemo infusion session. Currently on the 5FU pump, and rather hard of thinking. I do suspect the razors-and-blades issue also ties into my recent observation that ebooks (at least the DRM variety) are a service and not a product. More to come, when I have brainpower to pursue it. In the mean time, feel free to be intelligent about these question in comments.

[links] Link salad flies to California with a smile on its face

Don’t miss the upcoming Borderlands Books events in San Francisco on 7/18: [ jlake.com | LiveJournal ]

In the same vein, there’s an open dinner in San Francisco next Monday: [ jlake.com | LiveJournal ]

The blog subtitle poll

reviews Green Powell’s | Amazon | Barnes & Noble | Borders ]

More on steampunk from the Onion’s AV Club — A summary of the history and current state of steampunk as literature.

Letters to Myself with a dead cute poll

1930 Shell Gas Station — When architecture meant something, damn it.

The Motor Behind the Fun — 60 horsepower to move 200 tons of steel. (Thanks to .)

To Sleep, Perchance to Analyze — A very smart alarm clock. (Thanks to my Dad.)

Cryovolcanism on Charon?Centauri Dreams with some more planetary science so cool it’s icy.

?otD: Friday again?


7/17/2009
Body movement: n/a (travelling)
This morning’s weigh-in: n/a (travelling)
Currently reading: Memory by Lois McMaster Bujold