But as we move farther in the direction of digital distribution, this substitution goes away.  As more people read books on screens instead of paper, the hardcover and the ebook are no longer substitutes.  Sometimes they are complements, and sometimes they are completely unrelated.  For authors we love, we will read the electronic version and take the pristine hardback to the author’s reading at the local bookstore for a personalized signature.  For other authors, more and more people are only going to be interested in the ebook.  The hardcover will not be a substitute or a complement – it will be a waste of space in their living room.

Unless we rethink the way windowing is done, and really only window the substitute goods, this practice will only hurt authors and publishers.  When goods are complementary or unrelated, holding one back hurts sales, not helps.  If you put out the hardcover first, people who want the electronic version will be angry, and are more likely to look for entertainment elsewhere, or turn to filesharing sites who are sure to have nice leaked or scanned copies.

No, I don’t mean that marketing is bad or that it doesn’t exist or that you shouldn’t pay for it.  Good marketing is a very valuable tool.

However, when you say, “I have to charge this much for my product to cover marketing costs”, you are doing it wrong.  If you aren’t making back the money spent on marketing in extra profits, you should find someone else to do your marketing, or stop doing it altogether.

If you spend $10 on marketing, your profits (not your total sales) should increase by at least $11.  Otherwise you were better off to just keep your $10.

So what “I have to charge this much for my product to cover marketing costs” really means is “I am charging you more so I can make more money”.  Good work if you can get it, but you’d better make sure your customers never find out what’s going on.  They aren’t likely to be happy about it.

See part 1