A few years ago I was part of a team evaluating a consumer magazine that had recently started to lose money. The primary reason it was hurting: on a per-issue basis, readers paid less than half what was needed to support the magazine when advertising revenues were soft.
The magazine reached an affluent audience whose readers live in homes that had more vehicles than occupants, among other measures. These readers were able to pay more – much more – for their subscriptions. But they weren’t doing so.
We recommended a two-part response. The first: ask for more money and see what happens. Our hopes were not high, as the magazine had tested higher prices in the past and found that subscribers fell off faster than prices rose (a bad combination). But a confirming test made sense at the outset.
The second: examine the value proposition for current and untapped subscribers. It was a niche publication, so we weren’t trying to grow it significantly, but we wanted to research whether people paid less because they didn’t think the magazine was worth very much.
The client did the first thing, with poor results. The follow-on research was never done. The business and editorial staff felt strongly that they knew their audience, and that they were giving readers exactly what they wanted. In their view, subscribers just didn’t understand that they should be paying more.
Over time, the magazine continued to struggle, reducing both its rate base and its frequency. Years later, it has not substantially changed what its readers pay.
Although this is a magazine example, it applies to book publishers, who are grappling with how to price and when to release e-book versions of their titles. Constrained by a trade model, many publishers have little or no direct experience with price testing.
Faced with evidence that consumers on average pay less than $10 for e-books, book publishers have sounded a lot like my erstwhile client: “Don’t they know how much work goes into a book? Readers should realize that they need to pay more.”
Via Twitter, Jane Litte pointed me to a post at The Consumerist that puts a dart into the argument that publishers need to convince people to pay more for content. Their writer, Chris Walters, picks apart the notion that content should cost what the reader can afford. Walters makes a well-reasoned call for book prices that match what consumers value.
I understand that the current business model makes it quite hard for traditional publishers to survive if the majority of digital content is sold for less than $10. But I do think that the majority of digital content is being sold for less than $10 for a reason, and it’s not because Amazon said so.
Publishers can either increase the perceived value of their digital products, or they can change their business models. Arguing that prices “should” be higher won’t carry the day.