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3 October 2007 - 9:44“Set your own price” for goods?

[Update – added Kottke.org micropatron report near the end]

RadioHead have taken a bold move with their latest album “In Rainbows” as they allow fans to set their own pricing for the digital download (summary, long write-up with pictures of the process).

Except for a fixed credit-card overhead (around 45p) it seems that you can set any price you want (0p? Apparently 0p can work). Obviously this is a damned disruptive move for a large music group in the established industry, and about time too.

This is covered at Slashdot and BoingBoing and with an economics twist on The Long Tail and at the always-insightful BubbleGeneration:

“In quite a bit of recent work, we’ve been pointing out to clients that it’s a trend that is on the cusp of explosion…because it’s gonna absolutely revolutionize the economics of music.

Suffice it to say that open pricing is a strategic solution which deeply, deeply dominates the economics of music.”

I’ve toyed with the idea of using adaptive and user-defined pricing for our two commercial Python tutorials at ShowMeDo. So far we’ve settled for a fixed $10 purchase price – but maybe we should revisit a more flexible pricing model?

I particularly like the idea of letting a user choose their own price, having first established a ‘recommended’ price, and later giving the user the option of donating more if they really liked the content.

This lets people pay less than they might if they’re unsure and then come back and top-up the price if they found the information valuable. This would of course be backed by a money-back guarantee, that goes without saying.

A similar thread was discussed over on the 37signals blog for ‘Jane Siberry’s “you decide what feels right” pricing‘:

“The Canadian folk-pop singer Jane Siberry has a clever system: she has a ‘pay what you can’ policy with her downloadable songs, so fans can download them free – but her site also shows the average price her customers have paid for each track. This subtly creates a community standard, a generalized awareness of how much people think each track is really worth. The result? The average price is as much as $1.30 a track, more than her fans would pay at iTunes.”

Jane’s site includes a page describing her approach and it contains statistics on the prices currently being paid by purchasers.

This comment on the RadioHead thread at Slashdot covers several related examples of set-your-own-price music sales.

Matt Weston sent me a pointer to Jason Kottke’s kottke.org – during 2005 he ran a fund drive asking his readers (as ‘micropatrons’) to support his salary so he could work on the blog full-time. As far as I’m concerned his blog is a ‘digital good’ for the sakes of this entry.

He reports on day 2 and got some media coverage and raised just enough money to pay 1/2 his normal salary for a year.

After 2 months he gave an informative report on the results of the funding drive:

“And finally, the answer to the $64,000 question: is this a sustainable business model for independent media on the Web? The short answer is probably no, with a few caveats.”

Along with a concluding report after a year:

“[2] Since everyone and their uncle has been asking, about 1450 micropatrons contributed $39,900 over the past year…99.9% of that coming during the 3 week fund drive.”

Jason’s case is the only micropatron experiment that I know of (thanks for the reminder Matt) – anyone know of others?

A feedback mechanism is important, in ShowMeDo we could easily show what a user paid (and donated) and a user’s profile would presumably state if they were a penniless student or the MD of a tech company. Giving people a chance to be honest, pay what they want, and be a responsible member of a community feels like a very sensible thing to consider.

Are there more examples of setting your own price for a digital good that I’ve not covered here?

3 Comments | Tags: Business Idea, Entrepreneur, Life, ShowMeDo