« Murdoch + Freston = ? | Main | AOL’s New Platform-A »
December 08, 2007
The New Pricing Model For Media Content?
The popular band Radiohead put its new album “In the Rainbow” online in October and asked people to pay whatever they wanted to download in an MP3 format. Anything from zero to £99.99 ($212) was fine with the band. Is “pay what you want” a new pricing model for media content?
Jon Parales wrote in his December 9 The New York Times article, “Sixteen years and seven albums into the career that has made Radiohead the most widely pondered band in rock, it is taking chances with its commerce as well as its art. For the beleaguered recording business Radiohead has put in motion the most audacious experiment in years.”
In the article, Parales indicates that the experiment has paid of financially, although Radiohead won’t release the numbers. He writes, “A statement from the band rejected estimates by the online survey company ComScore that during October about three-fifths of worldwide downloaders took the album free, while the rest paid an average of $6.
“Factoring in free downloads, ComScore said the average price per download was $2.26. But it did not specify a total number of downloads, saying only that a ‘significant percentage’ of the 1.2 million people who visited the Radiohead Web site, inrainbows.com, in October downloaded the album. Under a typical recording contract, a band receives royalties of about 15 percent of an album’s wholesale price after expenses are recovered. Without middlemen, and with zero material costs for a download, $2.26 per album would work out to Radiohead’s advantage — not to mention the worldwide publicity.”
NPR-affiliated non-commercial radio stations, such as WNYC–AM/FM in New York, use a similar pay-what-you-want model during their annual fund-raising drives. Not all listeners pay, but enough do to keep the station going—and going quite well, thank you.
This pay-what-you-want pricing tactic is known in the negotiating and sales world as a crunch (see Chapter 12, “Negotiating and Closing” of my Media Selling textbook). If you are negotiating, when the other side mentions a price, you say “that’s too much,” without mentioning a price. The other side is likely to come back with a price that is lower than you might have had in mind. Or, when negotiating with people who are not informed about your cost structure or market demand, instead of opening a negotiation with a price, you would say, “what are you willing to pay,” because the chances are good that they will pay more than an informed buyer.
This tactic works if you have a well-known product or brand for which there is strong demand because it will be worth a great deal to some and perhaps nothing to others, but on average it will work out to your advantage, as it has with Radiohead.
Perhaps Rupert Murdoch read this article and will reconsider his plan to charge nothing for the Wall Street Journal online. Maybe he should use the pay-what-you-want model, which might be a win-win situation. He’d get some revenue for his content that people thought was valuable and he would increase traffic to the site with people who are not willing to pay.
Going forward, newspapers and magazines that are migrating their content online should consider this radical new pricing model. I think it might work. Think about it—what would you pay to get The New York Times, the Wall Street Journal, Slate, the Huffington Post, or the Media Curmudgeon online? I know the answer to the last item, but for the others how much?
Posted by Charles Warner at December 8, 2007 12:02 PM
Comments
Media Curmudgeon ![[TypeKey Profile Page]](http://www.mediacurmudgeon.com/nav-commenters.gif)
at December 9, 2007 05:06 PM writes:
Jesse Kornbluth writes:
"The flaw in your argument: When the owner is widely known, a gazillionaire and, at bottom, an enemy of honest journalism, WHO is going to send him a dime?
Not this boy. My view: Gazillionaires should pay me to read their media. Now there's a content model!"
Media Curmudgeon at December 9, 2007 10:02 AM writes:
Nick Kotz writes:
"Good column. Made me reflect again on a discussion a couple of weeks ago at a Cosmos Club event at which Gene Roberts,the former New York Times and Philadelphia Inquirer editor spoke about the decline of serious journalism as newspapers cut costs as they strive to maintain their outlandish return on investment to satisfy Wall Street expectations. Somewhere along the way, there was discussion of possible alternative models for producing serious quality journalism. Two examples cited were the St. Petersburg Times, owned by the Poynter Foundation, and of a new online publication in Minneapolis/St.Paul put together by folks fired or eliminated by the various Twin City papers. Roberts said the St. Pete paper is among the nation's best."
Post a comment
Thanks for signing in, . Now you can comment. (sign out)
(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)Printer-Friendly