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Elastic Pricing for Content: Should Popularity Drive Prices Up or Down?



This morning, I visited the online portal for my local newspaper to check on my subscription. (I didn’t get my Sunday paper.) When I hit the page, I saw a story that interested me, so I clicked on the headline to read it and got this:

ocregister

I understand their need to make money but there are several things that bothered me about this graphic. First, the idea that this particular story is “original content exclusively for subscribers.” It’s a story about a traffic accident that led to a freeway closure. Even though I subscribe to the newspaper, rather than deal with figuring out how to log in, guess what I did? I left the site and went to local news station KTLA where I was able to read the story right now and for free.

What really bothers me about this graphic is the line “we understand how frustrating it can be to know that others are getting for free the same value you are paying for.”

Value? I’m paying to have a newspaper with coupons delivered to my front doorstep. It doesn’t bother me at all if people go online and read the stories that are in the paper. As a matter of fact, I think immediate access to local news is vitally important so it should be readily available for everyone to read. You can put ads on the page to help pay the rent, but charging someone to read about the shut down of the I-5 seems wrong.

Also, and maybe it’s just me, but doesn’t that whole line sound a little pandering?

Shortly after my experience with the register, I hit a post on Paid Content about a new paywall idea. Publisher John Battelle was thinking out loud on his blog when he came up with this idea: what if the price for a piece of content dropped with every click?

The piece costs $1.99 for the first 5,000 articles sold, garnering $10,000 in revenue (Ok, $9,500 for you sticklers). Once that threshold hits, the price adjusts dynamically to maintain at least $10,000 in overall revenue, but adjusting downward against the paying population as more and more readers commit (which also earns Esquire additional advertising revenue). A “clearing price” is set, perhaps at 50 cents, after which all profits go to Esquire. In this case, the clearing price kicks in at 20,000 copies sold – everyone would pay .50 at that point, and it’s a win win win for all.

The concept assumes that the initial buyers would be incentivized to share the link with their friends, hoping that their clicks would cause the price to drop. This works if the model actually drops the price for everyone and results in a refund or credit for early clickers. That sounds complicated.

What if you didn’t lower the prices for the early buyers. They wouldn’t have any incentive to promote the piece but dropping the price would still bring in more readers. More readers means higher ad dollars per page. . . . etc. Think people would go for it or would they put off buying until they see the price drop (which might never happen if no one agrees to go first) ?

There’s a DVD model that works this way. Some studios begin by releasing a massive, full series, several hundred dollar box set of a popular TV show. They figure the die-hard fans are going to buy, regardless of the hefty price tag. Once they have that money secured, they cut the box set up into individual seasons which they can sell for a lower price. Now, they pick up the casual fan who may only buy one or two seasons.

Some studios go the other way, releasing seasons first, then glorious full series sets second. The die-hards who bought every season complain, then they sell their sets on eBay to get the money to buy the better full series. That’s called double dipping and though it results in more income for the studio, it makes fans angry and it makes them reluctant to fall for that ploy the next time.

Let’s go back to the paywall pricing model. Suppose we start an article out at .50 but after 1,000 buy it, the price goes up to .99, then up to $1.99. Now, you’re rewarding those who got in first, so hopefully the late comers will learn their lesson and buy right away the next time. And shouldn’t you be able to charge more for something that’s popular versus something that’s not?

Again, in the DVD world, the opposite is true. Burn on demand DVDs are more expensive because they’re hard-to-sell titles. Mass produced movie DVDs are cheaper because their titles that are more likely to sell to the masses – i.e. more popular is less expensive.

Maybe Battelle has something here.

What do you think? Would you support a model that drops prices on more popular articles? Or should it be the other way round?