The Kindle and the iPad as "roach motel" devices
Question: What's the difference between demand elasticity and price discrimination? Exactly. I didn't know, either, but novelist, blogger and hedonist Cory Doctorow does. In an excellent Publishers Weekly essay titled "With a Little Help: The Price Is Right", he looks at demand elasticity ("the idea that new customers will come into your shop if you lower prices") and price discrimination ("the idea that you make more money by segmenting your customers based on how much they're willing to spend") in the context of print, Kindle and iPad. Money quote:
At the heart of the Macmillan-Amazon spat is the realization that allowing Amazon to dominate the e-book market will only make it harder for publishers to balance their interests with Amazon's.That's because the Kindle is a "roach motel" device: its license terms and DRM ensure that books can check in, but they can't check out. Readers are contractually prohibited from moving their books to competing devices...
...Don't hope for a better shake from Apple, either. Apple's longstanding love-affair with proprietary formats and lock-ins will very likely make the iPad every inch the roach motel that the Kindle is. Apple pitches this as a design decision, but it's also a powerful anticompetitive strategy that raises the cost of switching to a competitor's device.
Factoid: In the 1980s, Muhammad Ali was a spokesman for the Roach Motel product. His famous tagline was: "Roaches check in, but they don't check out!" Purveyors of intellectual property might need to study more of Ali's sayings and moves before entering the ring with Amazon or Apple.
