Approved-By:  Public-Access Computer Systems Forum <LIBPACS@UHUPVM1.BITNET>
Newsgroups: bit.listserv.pacs-l
Date:         Thu, 9 Apr 1992 09:48:52 CDT
From:         "Lee Jaffe, McHenry Library, UC Santa Cruz,
              408/459-3297" <jaffe@ucscm.UCSC.EDU>
Subject:      Re: Network License Agreements

----------------------------Original message----------------------------
Hannah King writes:

        I submit, again, that the cost of a CD-ROM product has little
relationship to the costs of production.


The price of information has NEVER had anything to do with the cost
of production.  Information is not a production commodity like corn
or automobiles.  The price of information is based on its value to
the buyer.  When you think about it, based on production costs the
most expensive information in the world would be the US Census and
the least would be the last Jackie Collins novel.  The fact that
JC's latest in hardback goes for $19.95 and the paperback sells for
$9.95 is not entirely based on the difference in binding costs, but
in what people are willing to pay to read it earlier.  And the $9.95
price is based on market research that says that if they sold it for
$10.95 they would lose 1 million in sales and if they sold it for
$8.95 they'd only gain 50,000 copies sold.  [Warning all figures are
entirely fictious.  As a matter of fact, is there really a writer
by the name of Jackie Collins?]  And if the US tried to make a profit
on the Census it would cost $20M to the 4-5 corporations that would
buy it.

What our vendors are doing is trying to find a balance.  Most of
them are looking at what the competition is charging.  Was anyone
surprised when SilverPlatter's versions of ERIC and the Monthly
Catalog were just a little lower than versions already offered by
competitors?  They price the material to sell, to make enough to
be here tomorrow, to pay the support and research staff so that
you'll keep buying the product, enough to cover the pension funds
and the Christmas parties so the staff will stick around.  But if
XYZ is selling the same thing for $1200/yr why should they price it
at $800 when selling for $1195 is incentive enough for you to swtich.
Anyone seen a long distance telco ad on TV recently?  The other part
of the balance is not competing with themselves.  For bigger vendors
like Wilson and Dialog, pricing CD-ROMs too low means that they
could lose big sales on the online versions and, in Wilson's case,
the book versions.  On the other hand, diversity gives them some
depth.  They can live on a smaller margin for their CD sales than
SilverPlatter because they have other income and SP doesn't.  Thus
Wilson can offer free network access while SilverPlatter takes a
bigger hit for every subscription they don't sell.  (It helps
Wilson A LOT that they own the data and can make these decisions
by themselves.)  Wilson also has the advantage of knowing that in
a lot of cases, if the CD market stays too high for a lot of
libraries, most of those libraries will continue as Wilson print
subscribers.  And if the market goes down and more libraries get
CDs, Wilson has to make enough back to still make up their lost
sales, not only to SilverPlatter, UMI, etc. but also to Wilson.

One last point:  If you weren't getting added value for the network
access, why would you be networking?  While I'm unhappy as most
people about how much network access costs, I think our situation
is not quite so much of the debating podium as of the marketplace.
To (mis)quote G.B. Shaw, "We've already determined what you are.
Now we're haggling over the price."

-- Lee Jaffe
   UC Santa Cruz
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