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Pricing, Positioning, and Profits

we must decide is perhaps how we are valuable, rather than how valuable we are.

F. Scott Fitzgerald, The Crack-Up

At this point such publishers have become general subscription services acquiring, developing, packaging, and distributing intellectual property just as publishers do now, but with higher profit and lower risk. With a captive reader base of 50,000, such a publisher can charge subscribers only $10 to $20 a month, and still gross $6 to $12 million a year. And, except for salaries and royalties, every cost and risk of contemporary publishing will be near zero.

These all-you-can-read publishers charge $120 a year, but the subscriber can then get any number of books, each for $1. The $10 subscription rate and $1 book rate are not based on market surveys or sensitivity analyses. Prestige, niche, and designer-label publishers may be able to get away with more than $20 a month. Or perhaps they should leave the subscription rate at $10 a month, but charge $5 per book.

As fear of scientific and economic non-competitiveness grows in the U.S. the fastest growing domestic book market may be electronic educational books for the 5-20 age group. This market may easily bear $20 a month subscription charges.

Publishers should split their list into subgroups based on expected readership for each grouping. That will let them charge different amounts for each sublist. They should also offer packages of the whole list for those willing to pay more for the full service. Finally, they should offer the general public a per use cost that is higher per book than the subscription price per book, so that there is incentive to become, and remain, a subscriber either to the whole list or to some subset of it. That encourages subscription and lets people who do not want the whole service get just one or a few books.

As long as publishers charge roughly as much as it costs to copy a book they will not have serious piracy loss. It is even reasonable to charge triple the copying costs, since they can be more convenient suppliers than pirates, but more than quintuple the copying cost may lead to serious piracy. Publishers should resist the temptation to charge a lot per book; they should not try to make each book necessarily pay for itself immediately. They should resist the lure of historical precedent and avoid charging subscribers by the book.

It is better if they charge a flat rate for access to their entire list. If the flat rate is low, subscribers will not ask themselves which titles they should get. In the subscription scheme, publishers' attractiveness to subscribers is their list--how many good books they carry, not what proportion of good books they carry. When their lists are fully electronic, with the concomitant near-zero marginal cost to distribute a copy of any title, it is not relevant if some of their titles are not big sellers--they cost nothing to keep, they can be kept forever, and they cost almost nothing to distribute if demand ever rises.

next up previous contents
Next: Lures to Subscribe Up: The New Publishing Technology's Previous: The Long Term
Gregory J. E. Rawlins