The Art and Science of Pricing Content in a Digital Universe

I recently read an excellent piece by Michael Cairns in his Personanondata blog called "Your Price May Vary"  - that in turn references an article in The Economist entitled "E Pluribus Tunum" about online pricing of music.  I’ve been reading and thinking about pricing models for a long time, and I am still not certain what is the best path for pricing strategies.  But I have determined that there are some essential principles I think the book industry needs to pay attention to. As Michael points out: "Pricing is complicated: publishers can approach this in an unsophisticated manner but in doing so they are unlikely to maximize their revenue. More analysis is likely to show that a variable approach to pricing and packaging will generate more revenue."  My principles thus far include:

1. Pay attention to what customers want and are willing to pay.  Prices cannot be set by publishers based on existing models, cost structures, margin requirements, etc. 

2. It’s a buyer’s market with a huge amount of competition for what the consumer values most (her time!)

3. In times of change, it pays to be flexible.  Experimentation is called for.  A rigorous and scientific approach to data is critical.

4. The content marketplace is highly segmented; what works for one type of content and publishing will not necessarily work for any other.

5. New rules apply.  Therefore our business models need to be open to change, as do our minds.

Earlier this week, Susan Danziger’s excellent DailyLit announced it is changing to an all free model, with sponsorships covering costs.  Today (December 5, 2009), Atlantic Magazine announced it would be the first magazine to sell short stories on Amazon’s Kindle: http://bit.ly/4KFjJ4.  If you look around the web - the biggest publishing ecosystem the world has ever seen - you will find many variants on pricing models for content.  Book publishers have the benefit of learning from all who have preceded them.  Study wisely.

(my next blog will provide a specific business case for a new model of pricing; I am looking for publishers who have experimented with pricing models for online content and welcome communications on this topic).

December 5, 2009