Pricing models:
Adding and extracting value online
February 11th 2004
Mary Waltham
Princeton, USA
www.MaryWaltham.com
Are publishers losing sight of emerging markets?
Business models
 Who is your customer?
 What does your customer value?
 How do you make money?
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Strategy
 How will you beat your competitors?
 How do you differentiate what you
do?
 Publishing permits some sloppiness here
because each publication is ‘different’
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Strategic Planning Process is required
user needs
planning
competition
trends
Creating value- typical publishing
value chain




Gathering
Selecting and organizing
Synthesizing
Distributing
 Key drivers ~ quality, speed and cost
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Creating value -
where will you add it?
 Gathering
 Selecting and organizing
 Synthesizing
 Distributing
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Extracting value –
which customer segments will you serve and how?
 Institutional
 Corporate
 Academic
 Government
 Individual
 Society and association Members
 Non-members
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Extracting value –
which markets will you serve and how?
 Domestic/national
 Non-domestic
 What % of your revenue comes from
each?
 Is that changing online?
 Are you making the most of the
‘reach’ of online?
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Extracting value –
which products and services to offer online?
 Unit of online content – what is it?
 What do you offer customers?
 Do all customers want the same
products and services?
 Do you build to order or prepackage?
 Can you sell more content by
enabling more granular choices – at
the article/chapter vs the whole
publication level?
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In order to make a change from
“prepackaged” content
 Effective and reliable distribution
 Understanding of what customers want
 Ability to create new products and services
 In theory every customer can buy something
different online
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What has changed online?
 Digital assets – not used up by
consumption
 Economies of scale – communicate with
authors, readers and customers faster and
cheaper
 Economies of scope – extract value across
many different and disparate markets
 Customer records – cost of keeping them
and using them low
 Publishers have the opportunity to sense and
respond to demands rather than simply making
and selling products
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Online pricing models
 Institutional/organizational site
license sold to libraries/corporations
 Individual/members subscriptions
 Pay-per-view article sales
 Price of each has an impact on the
others
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Impact of price on number of customers
Number of people willing to buy
1200
1000
800
600
400
200
0
0
20
40
60
Price of publication ($)
80
100
120
Why online site licenses extract more value and
are a win-win
Number of
customers
..willing to pay
Possible revenue
Each customer
group
900
$0
$0
10
$10
$100
10
$20
$200
10
$30
$300
10
$40
$400
10
$50
$500
10
$60
$600
10
$70
$700
10
$80
$800
10
$90
$900
10
$100
$1,000
TOTAL
$5,500
Impact of price on revenue:
Revenue = price x no. of users
Note the maximum total revenue
3500
Total revenue ($)
3000
2500
2000
1500
1000
500
0
0
20
40
60
Price of publication ($)
80
100
120
Lessons from the PEAK project
340,000 users at 10 campuses and 2 commercial
companies; 1200 journals with a total of 849,371 articles
 Traditional subscriptions – unlimited
access to any journal – $4/article
 Generalized subscriptions – pre-paid
bundles of 120 articles @
$548/bundle - $4.50/article
 Per article purchase - $7.00
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What is the cost of access?
 Pecuniary cost – even small per
article fees suppressed usage
 Non-pecuniary cost – time and
inconvenience to obtain access
 Number of screens to navigate
 Amount of external information to recall
 Action required to have costs subsidized
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What worked well?
 Generalized subscription purchasing – was
a success
 It had the following features:-
 Opened up access to all content by all users
 User defined the subscription
 It was pre-paid
 User cost of access – money and effort –
effects the number of articles readers
access
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Examples of article pricing
Product
Cost ($)
Number of
articles
Cost/article
Inter-library loan (ILL)
30
1
30
Document Delivery
25
1
25
7
1
7
431
143
3
Journal bundle price ~ large society
publisher
24,995
44,500
0.56
Journals and proceedings ~ large
society publisher
48,588
699,289
0.07
Pay-per-article- PEAK
Institutional subscription ~ one online
journal
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Examples of article pricing
100
100
10
1
0.1
0.01
1
10
100
1000
10,000
100,000
1,000,000
Using examples of article pricing
100
100
10
1
0.1
0.01
1
10
100
1000
10,000
100,000
1,000,000
Using examples of article pricing
Number of articles
Price ($) per article
Fee
15
$5.00
$75
150
$3.50
$525
1000
$1.80
$1,800
10,000
60 cents
$6,000
100,000
11 cents
$11,000
1,000,000
6 cents
$60,000
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Some examples- online choice
 AIP 12 articles from 9 journals @ $96
or $8 per article
 AIP 25 articles from 9 journals @
$150 or $6 per article
 AIP Members receive a 50% discount
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Some examples- online collections
 American Geophysical Union (AGU) – “Editors’ choice”
for Members only – bundles of selected articles online
only from across all AGU journals – 4 themes so far.
Price range $45 - $65
 AGU – “Multi- choice” of article packs for Members
 10 articles @ $20
 20 articles @ $30
 40 articles @ $50
•
AGU – “Personal choice” for Members 27 collections –
by theme. Priced according to the amount of content
range is $43 to $175
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Some examples
 Consumerreports.org
 Annual online subscription $24
 Print subscribers – special discount $19
 Monthly subscription $4.95
 Note consumerreports.org online
subscriptions all bill directly to a credit
card
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Revenue model – Grateful Dead
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Thank you!
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