The Pay What You Want (PWYW) Business Model

Free spreads faster than expensive, low cost items are purchased more often and in larger quantities than luxury goods, and when price is not a barrier, more people buy (and share). So if a self-published author or publisher wants to reach more people, they should lower the price of their book(s). Free is the best option but free lowers the perceived value of a book, destroys revenue and does not validate the book being offered. Why? Because people take things for free simply because the product or service being offered is free, not particularly caring for it. So where is the line between free and paid, where authors and publishers can distribute their book(s) to as many people as possible without the negative effects mentioned above? Enter the Pay-What-You-Want (PWYW) business model.

Under this business model, customers are in control and pay a publisher or author (if self-published) what they feel is a fair price for their book. A suggested price is stated, that is the price made by the author or publisher of how much they feel the book is worth so the customer can pay that, nothing at all or anything above $0 (Tuttle, 2014). In short, the customer determines the value of the book – reflected in the amount they paid. The PWYW model thus gives the undecided customer a reason to buy. When the price barrier is removed, customers are compelled to spend what they consider to be a fair price for the book. Publishers and authors also maximise the number of people paying for the book since customers may not have purchased the book had the price been a few dollars higher.

American author, Stephen King decided to use the PWYW model in 2000 for his serial novel, The Plant. King strictly published The Plant as an ebook using an honour system. Readers were asked to pay $1 per installment and King said he would keep writing if three-quarters of those who downloaded paid their $1. In the end, less than half of the people downloading paid so King never completed the novel. However, King later revealed that The Plant made him $463 832 (Gans, 2011). I am not sure if this would work for any other author than King or any author of his calibre who does not have a loyal following and a strong, popular presence in mainstream society. Although King still profited off The Plant, his PWYW model did not work since less than half of the downloaders paid their $1 and the amount of money he made is a rare case (since he is a reputable and well-established author). The PWYW model acts more as an experiment than a long term business model for growth and sustainability. Large publishers and well-established authors can afford to gamble on the PWYW business model and walk away successful but for the unknown and aspiring authors, PWYW is not a viable business model that they should be replicating. There is too much risk and not enough profit coming back into their pockets. But what the PWYW model does for every author and publisher is that it gives them exposure because PWYW is still considered a unique and exclusive business model that customers love since they determine the price they pay for a product.

That being said, there have been success stories with unknown authors who have used the PWYW model and received higher royalties than if they sold their ebook on Amazon. Author, Tom Morkes used the PWYW model to publish his ebook that made him $493.50 in the first month of the book’s release. 49% of readers paid for the ebook, with the average price at $14.15 of $1.00 or more sales and $7.15 of overall sales (Morkes, 2013). If Morkes sold his ebook on Amazon, he would not of had the same success if he priced his book at $15 because many of the downloaders who took the book for free or contributed under $15 promoted the book to their network. As a result, more people visited Morkes’s website, giving him exposure. Moreover, the majority of self-published books on Amazon are priced between $2.99 and $9.99. Any higher or lower, Amazon cuts royalties from 70% to 35% (Amazon, n.d.). This means readers are not used to higher priced ebooks so Morkes’s $15 ebook would be largely ignored, especially since he is a first time author. Although the PWYW model works for Morkes, I am unsure if using the model will bring in a steady income for Morkes and unknown authors as a whole because making nearly $500 in the first month is not nearly enough to live comfortably. Who knows how much Morkes made in the subsequent months but it is probably less than his opening month. In the end, the PWYW model should only be used for unknown authors if they are writing as a hobby and have another steady stream of income. It is not a dependable long term business model to be reliant upon.  

However, if unknown authors are hoping to drive sales to their other work, they should consider OpenBooks.com, an ebookstore that opened in March 2015 where prospective buyers are told to read first and PWYW later. Like Amazon, authors receive 70% of royalties (OpenBooks.com, n.d.). Although the average conversion rate is 1.08%, OpenBooks is a young and fresh company that is passionate about their authors. They will promote their author’s book on their social media and blog, and can drive customers to their other work (Siler, 2015). For unknown authors, OpenBooks.com is an option where extra money can flow in and gives authors a platform to boost themselves and their work, and generate hype and buzz.

For large publishers and well known authors on the other hand, I see the PWYW model as more of a marketing strategy than a business model that will change how people pay for goods and services. The problem with the PWYW model is that it involves too much risk for authors and publishers because consumers can decide not to pay for the book yet still receive it. Take OnlyIndie, an online bookstore that specialises in new and independent authors for example. Every ebook sold starts at $0. Only after the first fifteen downloads does OnlyIndie begin to charge for their ebooks. Cent by cent, the ebooks reach a fixed price that ranges between $2 and $8. Authors receive 50% royalties of the sale price on books priced up to $1.99 and 75% for books from $2 to $7.98. Authors get royalty statements and checks every two weeks and can set their own upper limit on the price of a book as long as it is below $7.98 (Greenfield, 2012). OnlyIndie has since closed because it could not compete with the likes of Amazon, even with its niche market and attractive pricing.  

However, it might be valuable for authors and publishers to consider using the PWYW model as a short term strategy for traffic and sales. For example, in 2007, Paste Magazine offered readers a one year subscription using the PWYW model in a campaign that lasted two weeks. The time limit was crucial to motivate Paste fans to take the next step and accept the magazine’s offer to subscribe. By the end of the campaign, Paste made $275,000 and 30,000 new subscribers, averaging to $9 per subscription (Sattersten, 2010). In turn, many companies decided to advertise in Paste because of the buzz created by the campaign, allowing the magazine to raise its advertising rates. Paste’s campaign demonstrates that PWYW is a low risk, high reward situation for customers since they have the opportunity to test out the magazine without committing, and are potentially long term customers if Paste’s content can prove itself to be valuable.

Even though I am still skeptical of PWYW’s long term durability, I like what Humble Bundle is doing. They run on a PWYW model where customers decide how to allocate their purchase dollars between the author, charities and Humble Bundle. If customers pay more than the suggested price, they receive additional works of the author’s they purchased, thus giving customers incentive to pay more. Plus, customers are giving to charity which always makes them feel like they are positively contributing to society. Bestselling author Neil Gaiman put an exclusive bundle of his rare work on Humble Bundle for two weeks in September 2015. If customers paid more than $15, they also received Gaiman’s first published book, a biography of the band Duran Duran, and an unpublished short story, “Manuscript from a Milk Bottle,” among others exclusive content (Holub, 2015). Although no statistics have been released from Humble Bundle or Gaiman about his bundle’s results, Gaiman nevertheless garnered a lot of attention online during the bundle period, with many news articles from The Huffington Post, The Washington Post, and The Guardian written about his exclusive bundle. Even American comedian, Amy Schumer tweeted to the world about Gaiman’s bundle, urging them to buy it (Holub, 2015). Again, Gaiman is a bestselling author with a visible author platform. He does not use the PWYW model for all his books, just a carefully selected few. Gaiman’s bundle demonstrates that the PWYW model works when there is a time limit on the product being offered and when the author is already well-established in his community and mainstream society.  

While the PWYW business model works for everyone involved – publishers, authors, and readers – with the readers/customers getting the most out of the model, I still question its long-term sustainability. There is something about PWYW’s exclusivity that makes the model desirable and “too good to be true” in the eyes of the customer, especially when authors and publishers put a time limit on the featured product(s). So when all authors start using this business model, customers will take this practice as a norm and over time, customers will just download books for free for the simple fact that they are free. While free is the ideal for customers, authors and publishers still need to make a living so using PWYW in increments is a smart strategy to generate revenue and more than anything, increase exposure to the author or publisher and their book on offer. As Paste magazine and Gaiman demonstrate, putting a time limit on a PWYW product works best because there is a sense of urgency for the customer and they are more likely to ‘pay now’ than contemplate about buying the product(s).

 

Reference List

Amazon. (n.d.). List Price Requirements. Retrieved from https://kdp.amazon.com/help?topicId=A301WJ6XCJ8KW0

Burton, B. (2015, September, 09). Get rarities by author Neil Gaiman — and pay what you want for them. CNet. Retrieved from http://www.cnet.com/news/pay-what-you-want-for-neil-gaiman-rarities-on-humble-bundle/

Flood, A. (2015, October 23). Pay-what-you-want ebooks ‘bundle’ makes $1.1 m in two weeks. The Guardian. Retrieved from http://www.theguardian.com/books/2012/oct/23/pay-what-you-want-ebooks

Gans, J. (2011, May 03). Pay-What-You-Want Experiments, from Stephen King to Kickstarter. Harvard Business Review. Retrieved from https://hbr.org/2011/05/pay-what-you-want-experiments

Greenfield, J. (2012, June 25). OnlyIndie Wants to Sell Your Book for $0 and a Penny More. Digital Book World. Retrieved from http://www.digitalbookworld.com/2012/onlyindie-wants-to-sell-your-book-for-0-and-a-penny-more/

Holub, C. (2015, September, 21). Neil Gaiman is giving away a bunch of rarities for charity. Entertainment Weekly. Retrieved from http://www.ew.com/article/2015/09/21/neil-gaiman-humble-bundle

Morkes, T. (2013, August 20). Generosity Pays: Results from Launching a “Pay What You Want” eBook [Blog post]. Retrieved from https://fizzle.co/sparkline/generosity-pays-results-from-launching-a-pay-what-you-want-ebook

OpenBooks.com (n.d.), Quick Guide for True Talent. Retrieved from https://openbooks.com/how-to-publish

Qoora. (2015, May 29). You Can Earn As Much Or More From A Pay-What-You-Want Model As From A Fixed Price Model. Forbes. Retrieved from http://www.forbes.com/sites/quora/2015/05/29/you-can-earn-as-much-or-more-from-a-pay-what-you-want-model-as-from-a-fixed-price-model/

Sattersten, T. (2010, February 16). Paste Magazine’s Pay-What-You-Want Experiment [Blog post]. Retrieved from http://toddsattersten.com/2010/02/16/paste-magazines-pay-what-you-want/

Siler, M.L. (2015, June 20). On Openbooks.com and who should be using it [Blog post]. Retrieved from http://infinitefreetime.com/2015/06/20/on-openbooks-com-and-who-should-be-using-it/

Tuttle, B. (2014, November 11). A Brief History of ‘Pay What You Want’ Businesses. Time. Retrieved from http://time.com/money/3576844/pay-what-you-want-businesses/

Zell, K. (2013, August 05). Do Pay What You Want Models Work? Spinnakr. Retrieved from http://spinnakr.com/blog/ideas/2013/08/do-pay-what-you-want-models-work/

 

2 Comments

  1. The author has written an intriguing and well researched piece on the Pay What You Want (PWYW) business model for publishing. I appreciated the many real world examples used to illustrate the main points of the author’s analysis on the PWYW model. I like how personal opinions are interjected in the piece to show the writers’ personality, but I feel sometimes these opinions or assumptions are used instead of facts, and these areas could be researched further. For example, when the author talks about Tom Morkes, who made around $500 from his PWYW-published ebook, they assume that Morkes “probably” did not make that much in subsequent months, and therefore is unable to depend on this business model for steady income. Instead of asking “who knows how much Morkes made in the subsequent months?”, the author could have done more research to support their assumption – either using Morkes or another author who used the PWYW model. More research would have strengthened the argument.
    I came out of reading this piece with a good general idea of the benefits and drawbacks of the PWYW model for authors, publishers and also readers. The author did a good job painting the general picture of how this model affects these three parties, and also how this model can be integrated into other business models for maximum benefit (mostly from the author/publisher perspective). I found myself agreeing with many of the author’s analyses and deductions: this model can be more beneficial for star authors with a big and established audience and less beneficial (also more risky) for smaller, unknown and new authors. Also, the PWYW model can also be used effectively for specific books or for a limited time period to promote authors and their books; it has the possibility to lead to success, but depending on the actor, success rates can be high or low.
    However, as I reached the end, I found myself wondering a lot about some unaddressed questions: how does this business model affect the book market as a whole? The author could have discussed the effects this model would have on the industry if it became a widespread model: the declining value of books and book authors. If customers are allowed to decide how much a book is worth (potentially nothing), many readers could start to believe that the couple dollars (or cents) they pay for books is the norm, and they won’t be willing to pay full price for any book. Also, customers could believe that since the author is willing to give their book away for any price, they don’t value their own work as much as another author who sells their books a full, set price.
    There are many more unanswered questions: what are the implications for unknown/new authors who want to use this model if all the big authors end up using it? Won’t it further hinder discoverability for them? How does this model affect print books? However, I realize that the author cannot answer all these questions in one piece; otherwise it would be extremely lengthy. So I believe under the given conditions, the author succeeded in writing a cohesive piece discussing some of the positives and negatives of this model, and also some of its implications.

  2. This essay describes the PWYW model, and showcases several examples, but does so without really debating the merits of the model. This lack of a deeper discussion about what the model is really useful for, or any systematic presentation of what it looks like in practice, make the essay far more descriptive than argumentative. It is unfortunate, because the topic is inherently interesting, and has a lot of potential if done right. The idea of integrating it into marketing campaigns, or using it to arrive at the price of a book, for examples, have a lot potential, and merit further discussion.

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