If eBooks are seen as competing with physical books, then you are going to worry about the price of eBooks and want them to be priced higher so as to keep up demand for physical books. But if they are not competing, then the analysis can change significantly. In particular, if I am shopping for a gift for someone am I more likely to buy them a book I have read and liked or something else? The point being that if the price of an eBook is reduced in the Summer and that leads to more people buying that book as a gift in November than they are competing but are complements in the market.
This also hits on analyses such as those from Mike Shatzkin. He argues that big publishers are having trouble getting big hits because prices for eBooks are too high. This means that they can’t pick up an unknown author with a good book because no one will shell out $14.99 to read it. For Shatzkin, he argues that eBook prices are kept high so as not to reduce physical book sales. To overcome the ‘discovery’ issue, he suggests having a promotional period for eBooks. However, he argues that is a tough sell as physical booksellers won’t be happy. So publishers don’t try that.
