Becoming Professional: A Blog

Three Approaches to Pricing Digital Publishing

Posted on: May 20, 2011


roll of money

by AMagill on Flickr

Pricing is a sticky issue for publishers, particularly in the digital world. Basically, if a price is too high, you, the reader, may ask why on Earth would you want to pay that and go to your friendly neighborhood pirate for a free copy.

So how can a publisher approach pricing in the digital world? Here are three methods.

1. As Cheap As Possible

Because why not? Distribution is free and, as Clay Shirky suggests in his book Cognitive Surplus, there are almost no marginal costs. Basically, each ebook sale is added gravy. Going along in this line, ebooks can be priced fairly cheaply. While speaking at Bloomsbury Publishing in London, Cory Doctorow, author and journalist, acknowledges that there is the possibility of these cheap ebooks cannibalizing the more expensive paperbacks and hard covers, but he doubts it. Rather, he thinks he is merely hitting a market that has a lower price point. Those who want the more expensive hard covers will get them at that price point.

Though Doctorow sells his ebooks, he doesn’t lock the ebook files to one device or prevent users from doing what they want with them. He says that if I could lend and give away copies of my paper books why, when digital is supposed to give us so much more freedom, do I actually have less freedom to share the things I enjoy with my friends? He has a good point. In order to enable this, he protects his work using the Creative Commons license online. While his ebooks may be easy to find, he can still make money off of movie rights and physical book sales. Furthermore, he contends in that by allowing free distribution of his ebooks, he has actually done better in hardcover sales than he generally would. His reasoning? It’s great publicity.

Harry Potter and the Deathly Hollows Book Cover

A good, but long, book

People want to share the things they love. This is the motivation behind much of the digital piracy online. Seth Godin suggests in his book Tribes that pirate copies are being produced by the work’s biggest fans who want to spread the good word. Doctorow tells of how the 7th Harry Potter book was available online within 24 hours of release, and translated by fans into German within 24 hours of that. No one sits and translates a book into another language, for free, without a sizable amount of passion and love. And particularly Harry Potter and the Deathly Hallows. I mean, did you see the size of that book? Doctorow is suggesting that this passion be harnessed into good publicity by allowing fans to freely share the work in a completely legal manner, rather than having to do so illegally.

2. Price What You Can Get

Rupert Murdoch certainly does not agree with Doctorow, having put The Times behind a pay wall. The experts are divided about whether or not this will work. Vivian Schiller from nytimes.com maintains that a blanket pay wall damages publishing’s traditional revenue driver: advertising. Bear in mind, she was the one who took down the TimesSelect pay wall. But there are others who think that Murdoch has a good chance at success, such as Rob Grimshaw from FT.com and Charlie Beckett from LSE’s thinktank Polis. They basically think that it will succeed as long as the payment is easy and accommodating to the readers, either bundled in with another News Corps service or with different packages for readers to choose from. Obviously FT.com thinks pay walls work, having successfully implemented their own.

Financial Times LogoBut, as Clay Shirky has said, “Financial information is one of the few kinds of information whose recipients don’t want to share.” If a pay wall is to work, it has to protect information that both the readers and the publishers want protected, such as financial advice and information that helps those in the know come out better than those who aren’t privy to the necessary info. More than that, the information has to be unique enough that it is not easily replaceable. This goes to what the doubting experts touched on. Sly Bailey from the Daily Mirror and John Temple, from the now closed Rocky Mountain News, think that trying to force payment for what is, in essence, rather standard news coverage will not work. The FT.com has a reputation for good advice and financial news coverage. This is rather hard to find. Good world news coverage? Now that’s actually pretty easy.

3. Price Based On Costs

Kent Anderson at The Scholarly Kitchen also seems to disagree with Doctorow. Anderson holds that publishers have to be able to recoup the sizable investment required to create the material in the first place, plus cover the on-going maintenance of the publishing outfit. The manufacturing mindset of costing out items based on how much they cost to produce no longer works. There is a zero marginal cost to creating a copy of a file, as Clay Shirky has pointed out, but there is an accumulated cost over time to maintaining a decent publishing website and staff.

Anderson suggests adopting more of a software-style approach to publishing that makes up this initial investment over the foreseeable lifespan of the product. This approach is already working in some industries, such as the music publishing industry, which he calls, “one of the more mature areas of digital business.” The price of an iTunes song is creeping upwards, to as much as $1.29 for the more popular releases. People are willing to pay that, and the companies can’t afford to price lower.

Final Thoughts

These three approaches to pricing each make sense, but they all can’t be right. It is possible that, thanks to the ease of reproducing digital material, we can easily hit lower price points, saving those sales, while still enjoying the more profitable sales of premium products, such as hard covers, as Doctorow suggest. It is also completely valid for publishers to try and price what they think they can get, as Murdoch is attempting to do with The Times pay wall. But it is also true that we may be approaching how we think of a publisher’s costs from the wrong direction. Perhaps what we are really looking at is a large initial cost followed by a steady stream of a lower maintenance cost, and this must be recouped via pricing, as Anderson proposed.

There is no easy way to tell which will work out in the long run. Of course, I have my ideas, though. Those are the subject of my next post. Stay tuned for Part 2!

*This post was written as part of an assignment for my

Masters in Digital Marketing from Hult International Business School,

but since the topic was interesting, I decided to use it for this blog.

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6 Responses to "Three Approaches to Pricing Digital Publishing"

This is a subject that is somewhat close to my heart and I think that you have hit the major plot points directly, squarely on the noggin. As someone with family in the Music Industry overseas, I have secondhand knowledge of what it is to be a professional entertainer. That ofcourse tints the glasses that frame my perspective. The New York Times Paywall is something that I think will be successful; because you are right on the fact that a world news outlet is realitively easy to come upon, it is difficult to argue that the Times is also one of the most respected providers in the industry. Look at the demographics that the Times panders to; Professionals in the financial sector, New Yorks’ Elite, and a vast majority of the political class. These people are willing to pay, to a degree, for information that can be trusted. Right there, in the last sentence that I typed, is the key to their approach… Trust. the New York Times has built itself an empire that has garnished respect and honor worldwide in the news industry for decades. They are in the upper echilon of the News industry, and they stand atop the Print Periodical piramide. I am willing to pay a certain price to be able to trust the information that is being fed to me, as I have grown a hunger for international news and National Politics and events.

I guess, without ranting that much more from my soapbox, I think the phrase that says it best is “You got to pay to Play the Game”. Nothing in life is free, as there is always someone that has to produce and manage a product. If you want to get it for free, there is always a cost associated… If I had a dime for every one of my friends that has caught a virus or had their information stolen from one of these torent sights, I would be a little better off.

It would be nice to discuss this over coffee. But again, got to pay for the beans, and Pay Attention. Easily done when the company is intelligent and Beautiful… I am a male of the species afterall. 😉

I needed to come back to this and give this a second look. seeing as I already pretty much proved that I am a subscriber to the Times (I subscribe when I know I will be in port for the majority of the month). I like the example of I-TUNES and what they have done with their new music. I think in all we are seeing a market shift and a different type of Inflation/deflation. As the industry is born the price is going to fluxuate, up and down, till there is a happy medium that is reached.
I think as we see the Mass Market Paperback go away, digital is going to fill that place in the market. Your going to ofcourse have your hardcover versions, that might even still be released earlier than the digital edition, but in the end, I think that publishers are going to start seeing digital as the second wind for a periodical/novel due to the fact that you don’t have the cost associated with destruction of the unused copies.

The price point will hopefully go down to maybe that of a song on I~tunes, maybe around 2.50 or so, that would be awesome!

As usual, Ty, great comments!

I think The Times I meant here is a UK newspaper, but your points are valid for both the UK and the NY Times. I agree as well that the price will go down, but I think that, especially for entertainment goods, the price will go down to free in digital. It is just too easy to pirate and there are marketing benefits. Money can come from other places, after all. But that’s a subject of my next blog post (comes out today!). But your point about trusting news sources is quite valid. I just worry that the smaller news sources that don’t have a strong brand (like our home town AZ Republic) will suffer. Would enough people trust that brand enough to buy a subscription when the Wall Street Journal is just a click away? How many are truly that interested in local news? It’s a cynical question to ask, but I think valid.

You are correct that all can’t be right. But they all can be wrong.

Do you have any suggestions? Because, yes, they could all be wrong. Indeed, I don’t think this is an exhaustive list of ways to price content. I think we’ll likely figure out something new that works… until something else changes the landscape that is. Thank you for your comment!

Kate
I have written extensively about pricing in my blog. Pricing starts with the customer segment and their needs.
-rags

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Who Am I?

I am a Digital Native who is trying to puzzle out what exactly that means. I share my thoughts on social media, digital business models, and PR here on this blog.

I am currently getting my Masters in Digital Marketing from Hult International Business School, having gotten my B.S. in Marketing from Arizona State University. Everything is on track and I am making headway towards my dream: World Domination... or being a productive, helpful citizen and marketer. Whichever comes first.

Don't hesitate to get in touch. I Tweet daily at @KateDavids and also have a science fiction and fantasy blog (maskedgeek.wordpress.com) and Twitter (@Masked_Geek).

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