On 26 Nov 2005, at 21:14, Dan Shafer wrote:
As someone who has been playing in the software universe for far,
far too long, I can tell you that:
(a) your basic idea is attractive and workable
(b) it is an economic disaster for the publisher
Why? Because of something called SKUs. That stands for "Stock
Keeping Unit" and it's the number by which wholesalers,
distributors and retailers identify a specific product uniquely for
inventory tracking and sales monitoring purposes. There is a
fundamental business principle that says the more SKUs you try to
put into the channel of distribution, the greater will be the
resistance to your entire line. Large companies can overcome that
resistance. Small companies are hard-pressed to do so.
This is very true - with one qualification:
If the price of adding an extra item (and maintaining it) to your
inventory falls below a certain threshold the economics get
substantially reversed. Amazon is a case-study here. Most publishers
make 80% or more of their money from the big sellers making virtually
all of the rest of their inventory useless in terms of a hard bottom-
line. This goes for music and video too.
However recent analysis of Amazon sales has shown that they manage to
generate a substantial part of their profits from the bottom end of
their stock (in terms of sales) - from memory some 30%. This is
because of the very low cost to them of adding (and maintaining) new
SKU's to their inventory - this combined with their reseller
programme greatly facilitated by the REST based web services which
allow just about anybody to offer selections of Amazon books for sale
on their own custom sites.
No-one has managed to do this with software components yet. My view
is that due to the technology and community involved in the
Revolution environment - RunRev are uniquely placed to pull such a
trick off. Whether anyone agrees with me on that is another question.
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