Re: US consumer purchase of international editions

[Joseph Esposito <espositoj@gmail.com>]

This is simply not true and it should not be allowed to stand.
Differential pricing and market segmentation make materials
available to people who otherwise could not afford it.  I won't
get into a debate about what copyright law says, which we will
leave to lawyers, but let's focus just on the economics.

Let's imagine a sophisticated college textbook that costs $1
million to develop.  (That figure is not out of range.)  That
cost is for the creation of the "master":  the initial work that
is then copied for sale.  Let's assume that 50,000 copies are
printed, that the unit manufacturing cost is $8 and that the
royalty is $10/copy.  That means the variable costs (how much
incremental cost is incurred for each additional copy sole) is
$18. The development cost has to be spread over each copy sold,
and we will assume that the entire print run is sold, with no
returns.  That means the allocated development cost is $20/copy.
So for each copy sold, the accountants record an expense of $38.
This figure is the same whether the book costs $50 (low) or $150
(in range).

The typical pattern (not just for books) is that the *entire*
development cost is borne by the American customers.  The reason
for this is that people in less developed economies cannot afford
the full share of the development cost.  This means that the
$20/copy of amortized development is NOT charged to students in
less privileged economies.

Thus the American students are faced with a price based on at
least a total cost of $38 (or more, if the international edition
is being subsidized, as it almost always is).  Students in Latin
America or Africa are faced with a price based on an imputed cost
of $18.  This makes it possible to sell books outside the U.S.
for much less than in the U.S.

One could say that this is all accounting, and that would be
true; but accounting is real.  Nothing "costs" anything:
everything is imputed from a financial model.

If students in Latin America were asked to pay their full share
of the development costs, the books would be priced beyond their
means.  The entire point of discriminatory pricing is not to
charge more in one market but to charge less in other markets.

When someone takes a book from China and sells it in San Diego,
he or she is not lowering the cost in San Diego; rather the cost
is being raised in China.  If you are looking for the greedy,
look for the arbitrageurs.

Joe Esposito


On 9/24/09 5:19 PM, "Jean-Claude Guedon <jean.claude.guedon@umontreal.ca>
wrote:

> Market segmentation by region of the world has nothing to do
> with copyright. it has all to do with extracting maximum profit
> from each market by playing on the total "price x #sales". It
> is the same strategy with the zones for DVD's and just as
> reprehensible. it also works for drugs, and there is is
> downright abominable (remember US elders coming to Canada to
> buy drugs at about half the price of US prices a few years
> back)..
>
> Nothing in copyright law says anything about marketing
> strategies. It speaks to modalities of property when applied to
> documents (in the widest sense) of all kinds, and only to that.
>
> Moreover, and so far as I know, no country has any law capable
> of stopping a book from being introduced in a country even if
> the cover says "not for resale in x, y and z. I am not talking
> about books banned for whatever reasons here. Division of world
> markets between various distributors is based on contracts. It
> is implemented through contract laws, not copyright. In any
> case, at the individual level, the first sale doctrine allows
> me to resell a book from somewhere to be sold again in the US
> or elsewhere.
>
> What I would hope for is that students should quickly organize
> (within the limits of the law) ways to bring in these cheaper
> volumes in their country and thus save a lot of money to their
> colleagues, perhaps make a little bit of money themselves, and
> expose one of the most despicable strategies of multinationals.
> Or better still, students should get involved in the OER
> movement (open educational resources).
>
> Jean-Claude Guedon
>
> Le mercredi 23 septembre 2009 a 21:02 -0400, Joseph Esposito a
> ecrit :
>
>> Oh, agree entirely with the diagnosis.  It's the remedy that
>> eludes me.
>>
>> Arbitration is growing.  A couple undergraduates a few years ago
>> at UCSD starting purchasing English-language science texts in
>> China (with Chinese-language covers) and reselling them to their
>> classmates. Undergraduates.  I can only see this situation
>> worsening (or improving, depending on your point of view).
>>
>> Copyright is screwy. Even people who defend it, as I do, know it
>> is screwy.
>>
>> Joe Esposito