There are plenty of experiments going on that are aimed at monetizing content in different ways — standard paywalls are an obvious example, along with “metered access” and other models, as well as crowdfunding campaigns that are designed to help fund specific pieces of long-form reporting. But one that hasn’t gotten much traction so far is the “group buying” model: in other words, a per-article paywall that gets cheaper as more people sign up and say they want to read it. Could that help publishers find new audiences and revenue?
John Battelle, a veteran online publisher and founder of Federated Media, wrote in a recent blog post that this idea occurred to him when he heard about an experiment that Esquire magazine launched earlier this month, in which the magazine charged non-subscribers a $1.99 fee to read one of its long-form pieces. What if, Battelle wondered, Esquire instead started with that price but lowered it a little every time someone agreed to buy the story, up to some pre-determined floor price?
Group buying and online content
This is similar to the way that many group-buying services work. In most cases, they have deals with manufacturers or distributors of various products who agree to give members of the group discounts based on the number of people who purchase something. Services like Groupon, meanwhile, don’t lower the price but instead set a specific discount price that is only triggered if enough people sign up for it. Battelle describes his idea in more detail in his post:
“A model could work like this: The piece costs $1.99 for the first 5,000 articles sold, garnering $10,000 in revenue [and] once that threshold hits, the price adjusts dynamically to maintain at least $10,000 in overall revenue, but adjusting downward against the paying population as more and more readers commit (which also earns Esquire additional advertising revenue). A ‘clearing price’ is set, perhaps at 50 cents, after which all profits go to Esquire.”
In a sense, this model also shares something with the kind of crowdfunded approach that finances a specific project via a platform like Kickstarter or Indiegogo: in cases like the National Public Radio T-shirt project, for example, the non-profit broadcaster set up the campaign and then provided its supporters with rewards such as shirts and tote bags based on their level of commitment. Battelle’s model would provide supporters with another incentive — namely, the potential of paying a lower price.
But would publishers bite?
As the Federated Media founder notes, pricing a story in this way would also encourage social sharing, since those who signed up to pay the highest price would have an incentive to share a summary of the piece with friends, hoping to convince some of them to sign up and reduce the overall cost.
It’s pretty obvious what the benefit of this kind of model would be for readers, but would publishers want to embrace it? They might get more social engagement because of the incentive to share — and they might be able to convince advertisers that a more engaged and paying audience is more desirable, and therefore should cost more. But I think the biggest problem with the group-buying idea is that it goes against the traditional economic principle that when there is more demand for something, the price rises.
While Battelle’s model would bring in a certain predictable amount of revenue for Esquire by setting a floor price, it’s not hard to imagine some financial executive moaning about how much more money they could have made if they had charged everyone $1.99 instead of whatever the floor price worked out to. That said, however, it would be interesting to see someone experiment with such an approach, if only to see what would happen.
Post and thumbnail images courtesy of Shutterstock / Digital Genetics