Internet: Friend or Foe to

¶ … Internet: Friend or Foe to the Book and Publishing Trade? Business Research Problem Clearly, the Internet is a book bargain hunter's "paradise. Ebay is an easy example, but there are many places for deals on used goods," including Amazon.com. (Varian, 2005) However, along with the boon it offers to book consumers, there is also a potential issue of harm to book retailers, publishers, and authors in terms of the bargains such widespread bargain hunting and shopping offers to consumers.

For example, while Amazon "is best known for selling new products, an estimated 23% of its sales are from used goods, many of them secondhand books. Used bookstores have been around for centuries, but the Internet has allowed such markets to become larger and more efficient.

And that has upset a number of publishers and authors" as "aggressive promotion of used book sales" have cut significantly into sales of new titles," perhaps "directly harming authors and publishers." (Varian, 2005) Clearly, while consumers can save money when they easily buy used books, authors and publishers will lose sales from the new book market. Simple economics -- if I have a second hand copy of the latest, greatest bestseller, I am unlikely to purchase a new one for new money.

But there is also evidence that this used book feature of Amazon is not the new Napster, cutting into book profits the way the free downloadable music database cut into profits to contemporary album producers and musicians. In fact, because books are difficult commodities to sell in today's visual and verbal saturated culture, some even suggest that the costs to publishers outweigh any losses as they increase interest in reading. Anindya Ghose of New York University and Michael D.

Smith and Rahul Telang of Carnegie-Mellon stated in a recent study of online book consumption and selling patterns that they found "only 15% of used book sales at Amazon cannibalize new book purchases. The remaining 85% of used book sales apparently would not have occurred at Amazon's new book prices," in other words the book's consumers would never have bought the books at all, and instead availed themselves of the library.

"This low cannibalization means that book publishers lose only $32 million in gross profit annually (about 0.2% of total gross profit) due to the presence of Amazon's used book markets. Further, the additional used book readership gain from these electronic markets may mitigate author losses through increased revenue from secondary sources, such as speaking and licensing fees.

These surplus changes, combined with the estimated $64 million the used book market added to Amazon's gross profits, show that IT-enabled used markets for books have a strong positive first-order impact on total welfare." (Ghose, Smith, Telang, 2005) Also, the authors of the Carnegie Mellon study on book purchasing argued that the very presence of a market for used books makes consumers more willing to buy new books, because they could easily dispose of these durable goods later, much in the way that the selling price of a car may be accepted by a consumer when a salesman highlights the resale value of a used car.

"College bookstores typically buy used books at 50% of cover price and resell them at 75% of cover price. Hence the price to "rent" a book for a semester is about $50 for a $100 book." (Varian, 2005) This means that some author's books, if there is a sure demand for them on the resale market, can benefit from a more accessible second hand book market, where before students would simply share books with one another, or photocopy the necessary pages, despite the inconvenience, because of the textbook's great expense.

Thus, there are a number of critical factors that come into play when evaluating the impact of second-hand shopping upon an industry, in this case the book and publishing industry online as well as in the real or non-virtual world.

First of all, what is the current state of the industry overall? Second of all, what is the perceived difference in the eye of the consumer between the value of the second hand and new materials? Thirdly, what is the resale value of the materials, and how might the existence of such an online forum actually contribute rather than deter sales? Appendix Survey Question How frequently do you buy books online? A very frequently 2 somewhat frequently 3 never/not at all Question How often, if you do buy books, do you buy used books online? A very frequently 2 somewhat frequently 3 never/not at all Question How often, if you do buy books, do you buy new books online? A very frequently 2 somewhat frequently 3 never/not at all Question Sometimes I was going to buy a new book, then found a used version online and bought it instead at a cheaper price.

A very frequently 2 somewhat frequently 3 never/not at all Question 5 prefer new to used books. A very frequently 2 somewhat frequently 3 never/not at all Question 6 buy textbooks online. A very frequently 2 somewhat frequently 3 never/not at all Question.