How do you make money when everything is going free?

Stop worrying about the price of books, or music, or art, going to zero. It’s happening. It’s happened. There is no going back.

So now that we’ve accepted that, how do we answer the really interesting question of the twenty-first century: how do we take advantage of the unique, amazing features of a connected society to finance the profitable creation of art and culture?

Most people fixate on the threat of digital. As it becomes easier to distribute content than ever before, and as it becomes cost-effective to drop prices to drive volume, or market share, or cross-promotion, the cosy assumption that books cost somewhere between £5 and £20 is being destroyed. Earlier this year, Amazon and Sony got into a price war that saw many recent releases selling for as little as 20p. I own four of them. I haven’t read them. I can’t even remember which ones I bought. But for a while, every single book in Amazon’s Top 10 ebooks cost 20p.

But what about the other side of digital? The web has enabled one-to-one-relationships between consumer and author/publisher on an unprecedented scale. It allows us to start building dialogues with our customers. And that allows us to start offering our customers different things depending on how much they love what we do.

The prescription for twenty-first business comes in three parts:

·         Find an audience for what you do, probably but not necessarily using the power of free to reach as many people as possible.

·         Use technology to figure out what they value

·         Allow those people who love what you do to spend lots of money on things they really value.

Andrew Sullivan is the British journalist who writes The Dish, a website about American politics. He gives much of his content away for free but encourages his fans and supporters to subscribe to enable him to continue reporting. He says the price is $19.99, but when you come to subscribe, the message changes to “Pay 19.99 a year or 1.99 a month - Or More If You Really Love Us”. The box where users entered how much they wanted to pay was going to be pre-filled with $19.99. On the night before he went live with this experiment, Sullivan decided to leave the box blank.

That decision has generated him more than $100,000 in extra revenue, as superfans chose to give him more than the minimum in order to support his work.

The truth is that hardly anyone in the world values whatever it is that you produce. Amongst the 7 billion people on the planet, your audience is a rounding error. Yet for centuries we have targeted the mass-market, trying to make everyone value the same thing, at the same price. Different industries have had slight price discrimination (such as the hardback/paperback), but that is still a small variation.

I’m talking about allowing the people who love what you do to spend 10x the average. Or 100x. Or 1,000x. In games, superfans spend hundreds or thousands of dollars on their games, while 95 per cent of the audience play entirely for free.

If you want to see this in action, check out Kickstarter. Crowd-funding won’t replace publishing, but boy, does it show you what people will value. Amanda Palmer raised over a million dollars with some fans paying $10,000 to be painted in the nude by Ms Palmer. The value in Kickstarter is how it creates a one-to-one relationship between artist and audience and allows those who really love the artist’s work to spend lots of money on things they truly value.

Sometimes, that is access to the artist. Sometimes that is a unique artefact. Sometimes it is an event, or a limited edition physical item, or being part of something. Smart creators in the twenty-first century won’t fight the inexorable downward pressure on price. They will see free or low prices as the place where they find their audience. They will understand their fans and create things that those fans truly value. They will expect that nearly everyone who experiences their creations will experience them for free, while building one-to-one relationships with those who will be happy to pay.

In the long term, if something is digital, it is likely to be free. It will also be connected. It will be the starting point of a relationship with customers, some of whom will go on to spend thousands of pounds with you over their lifetime. If your modus operandi is to treat all of your customers the same, you will struggle to make money in the Internet age.

Oh, and I said customers. But if you work in a publishing company, your customer used to be the retailer. Now it’s a consumer. You need to start selling to consumers, not the buyer at a retail chain. That’s a whole different kettle of fish.

 

 

Nicholas Lovell’s book The Curve: From Freeloaders to Superfans: The Future of Business, on making money in the digital age, will be published on 3rd October 2013 in the UK and the US by Portfolio Penguin. http://www.bit.ly/thecurveuk

Comments

Relationship

Hello Walter,

I am not seeing how you are building relationships with your players. You ran a free campaign to juice the title up the charts, and then stopped it.

The book is 645 pages long, according to Amazon. 645 pages. That's enormous. I took one look at that and went no, that's not for me.

So consider splitting the book into 4-5 volumes. Give the first story away for free (make sure it has a beginning, a middle and an end - this should be a full product, not a taster). Build a long term relationship with your fans. Start figuring out what they love, and give it to them. Allow your biggest fans to spend £10s or £100s with you.

Just making a book free for a few days does nothing to build a relationship

Zero Price

I agree with Walter that Nicholas is being a bit ingenuous.  Get a major publisher to push your stuff at $20/pop telling everyone how to thrive by giving your stuff away.  Answer: you do not win by giving everything away.  This is obvious.  How you win is also obvious, by getting everyone to know what you have done and to appreciate it.  look at J.K Rowling's latest.  by now everyone knows the story.  truly everyone.  so, how do you get everyone to know? well, that is indeed the question, but the answer is not just giving it away, nor probably not getting a few folks to pony up big $$.  (although that may work in gaming)  probably it means painstakingly and continually pushing and promoting, especially if you are not J.K anybody.  no free lunch, unfortunately.

Profit and loss

A few weeks ago I posted my thriller Franco's Map on Kindle. A few days later, Amazon prompted me to sell it for free for up to five days as a promotion. I did so. At the same time, I initiated a multi-lingual Twitter campaign and also posted on Facebook and Linkedin. I tried not to be boring, though I may not have succeeded. After five days, I had given away 541 copies. The book then reverted to its normal price: £2.65/$3.99.

Since then, I have sold, I think, six copies.

How did I profit from this promotion? What should I have done, and what should I do now?

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