10/24/2011

10-24-11 - We Cut Costs ...

"We cut costs, and pass the savings on to .... us (!?) "

That's the motto of the modern era. Your Jeff Bezoses and Steve Jobs of the world are like a late night "mattress king" but with much less integrity, since the mattress king also slashes prices.

Music and books are digital. The producers save 90% of their costs. No manufaturing. No distribution. No retail space. Where are the savings? In their pocket.

Nobody has a physical location anymore where you can go and get help. Even the horrible call centers are often just automated, or moved to the web. Savings for consumers? Nope.

It struck me when I got an "Orca card" , the local transit pass. I have to load up an e-wallet so they get to hold onto a bunch of my money all the time. All my fares are prepaid and processed in one big transaction. They save massive amounts (vs. collecting physical money to pay for rides). Where are the savings? Not for me of course.

It's gotten so bad that when a new technology comes around and the savings are not passed on to the consumer we don't even blink. They never are.

6 comments:

Tom Forsyth said...

But the transactions are always outsourced to some internet-savvy company rather than doing it in-house (because nobody would trust them otherwise), so there really aren't any savings for e.g. the transit company. And the internet company needs to pay crazy insurance for when it gets hacked and the class-action lawsuit happens, so they don't exactly save any money either. So the real profits go to the Chinese script kiddies who steal the credit-card info. Except they pay through the nose to the Russian mafia for their equipment. So really it's a pretty egalitarian one-world trickle-down system that we in the blue-tinged ex-hippy PacNW should be all in favour of.

Vincent said...

+1

trixter said...

This is all true, but sometimes they need to do this to stay profitable. For example, with publishers, the marketplace is so damn saturated that if all they had were traditional brick'n'mortar they would already be dead (see Borders as an example).

Per Vognsen said...

The most ridiculous example of this I noticed recently was when I was shopping for a pricey item on Amazon and they allowed me to pay with my checking account. The pop-up help clearly stated that the only reason to do this was to save Amazon some money that they might, by some unexplained process, pass on to the consumer. I instantly thought of a version of this image with Bezos's face photoshopped into it: http://filipspagnoli.files.wordpress.com/2010/12/trickle-down.jpg

brian said...

There was this article about the lawsuit levied against Apple and a bunch of book publishers accusing them of collusion to stop Amazon's attempt to set ebook prices mentally at $9.99, and it had this quote that was totally amazing. Here's a similar article but not exactly the same one:

http://www.nytimes.com/2009/05/17/weekinreview/17rich.html

This one has a great quote, though, too:

"“The concept that because a book is an e-book it should automatically be priced significantly lower than a paper book is one we don’t agree with,” said Carolyn Reidy, chief executive of Simon & Schuster. “What a consumer is buying is the content, not necessarily the format.”"

Fuck you. That's essentially the Ticketmaster approach: we don't have to be accountable for what it costs us, we will only discuss what it's giving you. That road leads you to where Ticketmaster is now, where they slap charges on their tickets that are just called "Convenience Charge", blatantly charging you extra money for something that is more convenient for you, even though it also clearly SAVES Ticketmaster money.

The quote in the original article was spoken by a publishing executive and was something like, "If the $9.99 book price catches on and takes hold, the entire print publishing industry is dead."

And my response there is, what the fuck is wrong with you? If you can't find a way to make those numbers work when you're able to abandon HUGE logistical challenges and goods costs - enormous amounts of physical paper, printing costs, freight, warehouse storage, distribution networks, etc. - then you are fucking fired and your company deserves to fail.

This is a corollary to your point about capitalism not really optimizing for good products; it also abhors open communication. It's absolutely to these companies' benefit not to have an open forum where consumers can question them directly, so they can control the discourse and structure all communication so it never even ventures near the question, "Doesn't this cost YOU a lot less, too?"

jfb said...

I think the reasoning may be less malicious. If their book sales are in fact declining, they still have a ton of infrastructure they need to pay for (as well as lots of employees whose function is rendered useless by computer distribution).

They see they may have a numbers problem, and hope the prices on electronic books make up for the loss elsewhere. It's easier to ride on inertia like this than to restructure things. To be honest, I think electronic books render publishers obsolete. They're middle-men now unnecessary. But if you were one, you might want your company to keep going. Kids to feed and whatnot.

On a side note, Apple etc. *requiring* the use of their company store for installing programs is all about artificially keeping a middle-man where one is not needed. They sell it by fear. Purely parasitic. It's a play for money for nothing. Sad.

old rants