I predicted that payment systems and paid services/content were going to take off this year (see here), but this isn’t what I had in mind. But it did get me thinking. What if you added social and elastic elements to the price? For example, the article would initially cost, say, $1.99, but if enough people decided to buy it, the price goes down for everyone. The more people who buy, the cheaper the price gets. It’d never go to zero, of course, but there’d be some kind of a demand/price curve that satisfies the two most important things publishers care about: readership (the more, the better) and revenue (ideally, enough to cover the costs of creation and make a fair profit).
The tools to do this already exist. There are plenty of sites that crowdsource demand to create pricing leverage, and sites like Kickstarter have gotten all of us used to the idea of hitting funding goals. And the social sharing behaviors already exist as well: Nearly all content has social sharing widgets attached these days. Why not combine the two? Those who initially paid the highest price – $1.99 say – would be motivated to share a summary of the article with friends and encourage them to buy it as well. They are economically incented to do so – the more friends who buy, the greater the chance that their initial $1.99 charge will decrease. And they’re socially incented to do so – perhaps they could get credit for being one of the early advocates or tastemakers who recognized and surfaced a great piece of content before anyone else did.
Let’s break down the economics to see how it might work. A really great piece of long form journalism in a magazine like Esquire pays around $15,000 (sometimes more, sometimes less, depending on the author, subject, length, and title). But for this model, let’s say the payment to the journalist is $15K. Then you need to factor in the cost of the editor, copy editor, production, sales and design, as well as general overhead of the publication per piece. Let’s call that another $5K per piece (I’m spitballing here but probably not too far off). So for this article to make a profit, it needs to make $20,000 – or sell roughly 10,000 copies. Of course, the article is also monetized through the regular magazine and tablet editions, so the real number it has to hit is probably far less – let’s cut it in half and say it’s $10,000. Now to clear a profit, the article really just needs to sell 5,000 copies at $1.99.
Let’s not forget that Esquire also shows advertising against its articles. If it maintains a healthy $25 CPM, and shows two “spread” (two-page) ads between those 10,000 words, that’s roughly $100 per 1000 readers that Esquire can make. If it indeed does sell 5,000 copies of that article, that’s $500 of advertising revenue earned. And if it gets more readers, it can earn more advertising revenue – and decrease the paid content price in some correlated fashion. (No matter what, Esquire wants more readers – both to increase its advertising revenue, but also to accomplish its journalistic mission – all authors want more readers).
Perhaps a model could work like this: 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.
Just spitballing, as I said, but I think it’s a pretty cool idea. What do you think?