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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/

 

Competitive & Innovative: The Porn & Publishing Industry

The introduction of technology has brought forth a change in business model for the porn and publishing industry. A business model that is unpredictable, never stagnant and always uncertain. Since technology is continuously developing, so too is pornography and publishing. What results is steep competition and incredible innovation as porn producers and traditional publishers find different avenues to entice their consumers while still making a profit.

From centuries ago to present day, technology has helped pornography flourish. With the rise of the printing press in Europe, erotic books such as The Sixteen Pleasures in 1527 gained popularity, increasing the general demand for printing. During World War I and II, soldiers’ desires for erotic photography and pulp novels drove both formats, helping lead to the widespread adoption of the paperback book. Telecommunication technologies in the late 1900s were abundant with pornography uses, from telephone to cable television to early computers (Pappas, 2010). When home videos developed, Video Home System (VHS) reigned (beating Betamax in the videotape format war) and was adopted by the porn industry. This eventually led to DVDs and their formats: HD DVD and Blu-ray. Currently, businesses in the porn industry “were among the first firms to use streaming video, e-commerce models, online security and digital rights management as they are employed today by mainstream companies” (Arellano, 2011). What ever new media technology there is, the porn industry is the testing ground for its success or failure. I truly believe that the porn industry is the entrepreneur of the internet because of the various services and applications that have come out of ‘testing’ and into mainstream business models to great success. Digital video streaming is currently the primary medium of porn distribution however, webcam pornography and virtual reality may be the ‘next big thing’ as businesses in the industry, large and small are experimenting. “The future is definitely bright for the industry…I believe adult entertainment can lead things as it has in the past” says Alec Helmy, president and publisher of XBIZ.com (Abram, 2015).

Helmy also says that the number of porn studios in the United States have decreased from over 200 to 20. Actors who used to make $1,500 an hour now get $500. Before the “tube” sites took off, worldwide industry revenues estimated at $40 billion to $50 billion (Abram, 2015). Moreover, data from FilmL.A.Inc., the nonprofit group that handles film permits for the city of Los Angeles, shows that the number of permits in 2014 issued for X-rated productions decreased to 20 in comparison to 480 in 2012 (Verrier, 2014). This dramatic decrease goes hand in hand with the dramatic increase in views of free internet porn on the “tube” sites and subscription sites. When the internet makes pornography extremely easy to copy and share without official authorisation, why would you want to pay for something that is essentially, the same thing? In contrast, traditional books are still the primary medium for distribution, with the online world only taking a small percentage of sales. This small percentage however, is steadily increasing while traditional book sales are steadily decreasing.

The ultimate result of technology on the publishing industry is publishers must create a new business model specifically for the online world. Publishers currently still utilise their traditional business model for printed material, just less so because of the rise of ebooks and self-publishing. The prevalence of online “do-it-yourself” tools and applications such as CreateSpace and BookSurge allows users to create a brand around themselves and successfully publish online and printed books without the help of a traditional publisher who often administered this task (Bingham, 2015). One such author is Scott Nicholson, who has published over 70 books and sells them online through Amazon for the Kindle and other ereaders. “He handles the entire process himself” (Graham, 2012) and the lucrative 70% royalties on ebook sales attracts Nicholson and other authors more than the traditional publisher’s offer of 25% (Bingham, 2015). With that said, Amy-Mae Elliott says that “with the advent of e-books, social reading sites and simple digital self-publishing software and platforms, all that has changed. An increasing proportion of authors now actively choose to self-publish their work, giving them better control over their books’ rights, marketing, distribution and pricing” (Elliot, 2014). Moreover, editors and designers, are creating start-up businesses such as Gimp, Lightning Source and Wattpad catered towards content strategies for publishers and authors. These self-publishing tools, applications and businesses directed specifically for users to publish their own book diminishes the value of the traditional publisher as gatekeeper, annihilating them completely.

While technology has created new opportunities for the porn industry, it has simultaneously shaken its previous business model and stiffened competition. David Rosen from Salon Media Group identifies five factors contributing to the porn industry’s change in business model due to technology: (i) content piracy in the form of peer-to-peer file-sharing and user-generated content platforms; (ii) do-it-yourself (DIY) amateur porn videos; (iii) free porn sites known as “tube” sites, allowing any registered user to upload a video. The user is not held liable for copyright infringement so long as he or she complies with takedown notices from copyright owners; (iv) the resulting change in business economics; and (v) the ongoing recession with cuts discretionary spending (Rosen, 2013). These five factors have made the porn industry undergo a significant restructure of their business model, leading to the closure of many porn companies or downsizing and reduced pay for industry workers. Just like the publishing industry, the porn industry is trying to find its path to success and balance – embracing technology to ultimately satisfy its consumers while still keeping the industry profitable.

This is where porn producers must be innovative and grab their consumers’ attention long enough to peak their interest. Since “tube” sites are free, consumers are now less inclined to pay to watch pornography so competition in the marketplace understandably increases. High competition means more content, ultimately giving consumers a large and eclectic range to choose from. Numerous web hosting companies will not host porn-related content so those in pornography must work harder to get their projects in motion. Reputable institutions such as banks refuse to fund pornographic projects, no matter how promising and profitable said project may be. Moreover, crowdfunding websites such as GoFundMe.com also refuse to publish porn-related campaigns – and if they do, they must meet a long list of guidelines. Because of this censorship, websites like CumFundMe.com have been created but do not receive as much attention (Rosen, 2013). I admire porn marketers because they have managed to make porn a phenomenon despite so many teams rioting against the work.

Traditional publishers, who already face competition from retail giants such as Amazon, must now also consider their competitive edge against the consumer. Not only can we see this through self-publishing platforms but also social computing applications such as the google chrome extension, Hypothesis. In this form of reading, the reader assumes the role of annotator, and thereby contributes to the work of the original author. In this sense, authorship is not overtly important, but the overall collaboration of the project is instead. Users of Hypothesis can add a tag to their annotations so they are easily searchable by other Hypothesis users. What emerges is a shared network and the development of a community from which both authors and users are able to grow an audience base and communicate upon.

Technology has also halted in-house marketing teams in porn production companies. The marketing teams responsible for promoting their stars have vanished for the most part in the porn industry. This means that marketing is now in the star’s hands, who must effectively self-promote. Whether it is via their website, blog, or social media accounts, these stars must self advertise to stay relevant and keep their fans and the wider community updated with their work projects (Verrier, 2014). Increasingly, we also see authors promoting their book(s) via social media. Actress and singer Lea Michele for example, released a book titled, You First last month. Prior to the release, she had been consistently posting images on her Instagram account of the themes of each chapter in and encouraging her fans to put #youfirst. Michele started her promotional campaign in June 2015 for a September 22, 2015 release. This gave her fans enough time to stay interested in You First while not getting bored. Although the fact that Michele is a celebrity is probably why she has such a big platform and influence, having the opportunity to do book signings and special appearances to promote her book. However, marketing for books are still heavily done the traditional way – via newspaper reviews and press releases.

What is clear is that the digital market is becoming the choice for consumers. Both porn producers and traditional publishers must compete in the same marketplace alongside people with little to no experience in their field of expertise and are able to attract and maintain an audience with free tools and platforms on the web. How traditional publishers or porn producers will fare in the future is uncertain but what they can do to offset the loss in offline sales is to find ways to take advantage of the online environment. One of the benefits of online stores is that there is no inventory cost so publishers and porn producers can make more of a profit selling backlist titles without worrying about stores returning their books or videos. Though they still have to keep their stock in warehouses or storage rooms, the amount published and stored is likely to decrease because online orders can give a better sense of how many copies are desired by customers. Traditional publishers and porn producers need to embrace non-traditional marketing methods and engage with their customers online in order to take full advantage of the digital market. Though they will have to contend with Amazon’s reign over book sales and the experimentation of up and coming technologies like virtual reality, workers can at least ensure that there is a place for their products in the digital world.

I believe that bookstores or video porn shops will not completely disappear. As long as readers and viewers continue to exist, so too will the demand for books and videos, in either print or digital. The traditional bookselling and pornography venues however, will diminish in capacity and the transition to a primarily digital market will change how books and pornography are produced and marketed. If publishers and porn producers can develop effective strategies to make use of the online world, the publishing and porn industry will continue. However, it will evolve into something that is no longer associated with what we now consider publishing and pornography.

Technology has innovated the way we read and watch videos. Watching and downloading videos online has never been so easy as the user is in control of what he or she watches instead of the user planning around a television schedule. Technology has publicised its users in likes, comments and shares, made documents and videos searchable and shareable, and brought forth debates on the changing state of reading and our relationship with text and videos. Two industries that have been greatly affected by technology is the porn and publishing industry. From how pornography or a book is created, manufactured, what forms they take, and the means by which they are distributed, discovered, and read or watched, technology has disrupted their previous business models as both industries face significant restructuring. The porn and publishing industry must now adapt to the changing technological times and rework their business models to stay relevant and up to date.

Reference List

Abram, S. (2015, January, 12). Porn industry still at home in San Fernando Valley despite condom laws, Web, piracy. Los Angeles Daily News. Retrieved from http://www.dailynews.com/social-affairs/20150112/porn-industry-still-at-home-in-san-fernando-valley-despite-condom-laws-web-piracy

Arellano, N. (2011, May 30). Adult content sites battle piracy, innovate porn. itbusiness.ca. Retrieved from http://www.itbusiness.ca/news/adult-content-sites-battle-piracy-innovate-porn/16330

Bingham, H. (2015, February 05). Why Authors Walk Away From Good, Big 5 Publishers. Jane Friedman. Retrieved from https://janefriedman.com/walk-away-good-big-5-publishers/

Elliot, A.M. (2014, February 09). People-Powered Publishing Is Changing All the Rules. Mashable. Retrieved from http://mashable.com/2014/02/09/self-publishing-digital/#92UyoAfW1sqY

Graham, J. (2012, February 15). New tools make self-publishing e-books easier. USA Today. Retrieved from http://usatoday30.usatoday.com/tech/columnist/talkingtech/story/2012-02-14/ebook-self-publishing/53097762/1

Pappas, S. (2010, October 11). The History of Pornography No More Prudish Than the Present. Live Science. Retrieved from http://www.livescience.com/8748-history-pornography-prudish-present.html

Rosen. D. (2013, May 30). Is the Internet killing the porn industry?. Salon. Retrieved from http://www.salon.com/2013/05/30/is_success_killing_the_porn_industry_partner/

Verrier, R. (2014, August 06). On Location Porn production plummets in Los Angeles. Los Angeles Times. Retrieved from http://www.latimes.com/entertainment/envelope/cotown/la-et-ct-onlocation-la-porn-industry-20140806-story.html

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