May 23, 2011

Six Controversial Pricing Models For Digital Publishers

Users are now more used to receiving “free” content due to the immense amount of free information available online, and of course piracy. Unfortunately, this is bad news for publishers who are trying to monetize their digital content. 

I have compiled six pricing models and trends that I think provide lucrative opportunities as revenue streams for publishers in the digital space. 

1. The Agency Model

This model is based on the idea of moving from the ‘retail model’ of selling e-books (publishers sell to retailers, who then sell to readers at a price that the retailer determines) to the ‘agency model’ (publishers set the price, and retailers take a commission on the sale to readers). This approach gives publishers the ability to control how much digital books are sold on a per-book basis. It gives the control to publishers, similar to how music publishers sell certain digital tracks or digital albums for around $0.99 per track/$9.99 per album standard. 

2. Contextual Upsell
E-books allow publishers to interact with their customers in new ways. This interactivity can be used in a way to cross-sell products that are relevant to the publisher’s content. For example, users who are trying to learn music theory and get stuck on a particular point, they can click a help button, which points them to the publisher site where they can download relevant tutorials about specific music theory aspects for $2.99. They choose the one they need and get a new learning tool, which helps them progress in their learning. Multiply this by hundreds of thousands of users who share similar learning gaps who will purchase through the book. The combination of commerce and content provides an interesting new marketing opportunity.

3. Social Media Following
Yes, social media could eventually be a revenue model for some publishers. Building content outside the paywall to attract followings within commercial social environments is one way of building readership and an alternative way of generating revenue. Rather than trying to directly build subscribers to its paywalled content, The Sunday Times attempts to build its social media following through its Social List as a participatory, fun and engaging piece of social entertainment which eventually increases the number of paid subscribers. 

4. Virtual Credits
Earlier this month, Facebook announced it was tying up with Dealspot to let US users earn Credits in return for watching branded videos. This might work well with news sites publishing exclusive teaser videos on Facebook. Users will be willing to pay for such content. 

5. Paywall / Freemium
You probably know this one; it has applied by a number of publishers so far including Econsultancy, New Media Age and others. This model allows site visitors to view the majority of website content for free, while unlimited access requires a weekly or monthly subscription. This works mostly for news and other general-interest content that is widely available on the Web. The New York Times' paywall represents a freemium model where users are asked to subscribe after viewing a predefined number of articles a month. 

6. Pay-What-You-Want
This model has been applied by some including Radiohead who decided to let buyers name their own price for the band’s “In Rainbows” album, and Panera Bread who opened a restaurant in which customers can pay however much they think the food is worth. The “pay what you want” strategy works best when it allows companies to share social responsibility with consumers. When buyers are able to set prices in a way that directly shows their support for a cause, it proves to be successful. However, I don’t think this concept is commercially sustainable, it might be a good temporary route to follow. Besides, it requires strong relationship and loyalty between the customer and the brand. 

These are tough times for publishers to try and make sense of their pricing model, but it should be noted that success is directly related to the quality of content. According to a study by eMarketer, if the publication has content that the consumer believes is of quality and worth paying for, they will. The publisher then has to figure out how much that consumer is willing to spend and develop a reasonable pricing model. It all goes down to two interconnected points; the monetization strategy and the quality of the content. 

What other pricing models provide opportunities for publishers in the digital environment? Let me know in the comments below.

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