The Publishing Industry: An Economic Thought Experiment

Case Study 1: During Presidents Day Weekend, the software company Valve tried out an experiment. Valve, the company behind the successful Half-Life franchise, temporarily halved the price for Left 4 Dead, a cooperative first-person shooter title, from $49.99 to $24.99, over the course of a few days through its centralized Steam client. The results exceeded Valve’s wildest expectations. Sales rose 3,000 percent, and the revenue generated over the weekend dwarfed the game’s sales during its launch. By temporarily offering the game at a price point that was affordable to everybody, and making the game instantly downloadable, not only was Valve able to breathe life into a four month-old game, but they were able to get more people attracted to the product. Valve’s DRM policy is fairly straightforward. If you purchased a game, you can download the game on another computer, should you login as that user. (This was, incidentally, how I was able to redownload Half-Life 2 last year after a move, when I had accidentally deleted my Steam files and couldn’t find the original disc that I had purchased. One overnight download and I was back in action, happily fragging alien creatures.)

There are a number of important points here.

1. Unlike the Kindle or the eReader, there isn’t an expensive entry point here. You don’t have to pay $400 to get started on Steam. You can download the client for free on the hardware you already have and just pay for the games. The cost is minimal and affordable.

2. Unlike the Kindle, the DRM rights aren’t limited to the device or a singular computer (unlike last year’s Spore DRM controversy). If your hard drive goes kaput, then you can download the game again on another computer. Simply identify yourself through your Steam ID, and you can download the game on as many PCs as you want.

3. By offering a variable price point that considered what the general (and probably out-of-work) consumer wanted, Valve was able to generate more interest in the title than they anticipated.

Case Study 2: For seven years, the comic book industry has offered Free Comic Book Day. The idea is this. The general consumer goes into a store, gets a few free comic books, and is reminded why comics are great in the first place. The consumer divagates through a store and purchases more titles. And the whole thing gets considerable media attention.

The smart retailers, like Mike Sterling, spiff up their stores and offer additional in-store sales: 10% off graphic novels, four for the price of three on manga. (And in Sterling’s case, the graphic novel sales alone paid for the cost of the FCBD floppies.) You get the community involved by making celebratory cakes. You get to find out what titles get people excited. You get to form relationships with potential new customers. You move product. (For Heroes Aren’t Hard to Find owner Shelton Drum, FCBD is one of the top three sales days of the year.) You get to demonstrate to people why they need to keep going to a comic book store. And, like the Valve experiment, there’s no expensive entry point. Plus, the consumers will walk away from the store with something.

Case Study 3: Board game manufacturers are now considering something that worked very well during the Great Depression. If you offer an American family a reasonably priced form of entertainment that will last for a long time, they may very well set aside $20 to buy the product during lean times. (According to a Hasbro spokesman, board games and puzzle sales rose 2% in 2008.)

Case Study 4: Soft Skull had a surprisingly profitable year in 2008 because the efforts here were focused on (1) knowing the audience and (2) working hard to connect the audience as intimately and personally as possible. (In other words, if you treat your audience like some dopey general demographic, why on earth would they bother to buy your product?)

* * *

So what do we take away from all this? How did these successes emerge during a recession? In each case, the individual’s daily realities were respected. There probably isn’t a lot of money to go around in the household, but there was just enough cash for a micropayment. The individual wasn’t asked to invest money she didn’t have in some fancy-schmancy technological doodad before purchasing an affordable form of entertainment. The individual received an affordable long-term option that would keep her entertained or occupied for many hours. The individual did not have to deal with invasive DRM that suggested she was a criminal. The individual was listened to and treated with respect by the retailer. And the retailer never assumed that it would make a sale. But the retailer likewise had opportunities to listen to what the audience wanted and to find out what it may be doing wrong.

So if there is a modicum of money to be made in a limping economy, why aren’t today’s publishers and book retailers accounting for these realities?

Most people who are now out of work cannot afford a $30 hardcover, let alone a $400 Kindle. And yet corporate arrogance keeps these units at prices unreasonable to someone unemployed who needs a little entertainment during an economic downturn. And what is the result? Anger boils to the surface. Long-term relationships with potential customers suffer because the corporate overlords remain inflexible on price point.

So if you’re a publisher or a bookseller, consider this. If you know that people can afford a $10 hardcover (as opposed to a $30 hardcover), why in the hell aren’t you learning from these examples? Why aren’t you offering a Valve-like time window where people can walk into a bookstore and purchase a few $10 hardcovers over a weekend? And why aren’t you promoting the hell out of this? Why isn’t there a Free Book Day in which you get to introduce people to the joys of books and you get to know your customers? Why aren’t you forming intimate and personal connections with readers so that they’ll continue to buy your products? And why aren’t you considering that they really don’t have a hell of a lot of cash to throw around right now?

Are you willing to take a hit on the first spate of units, much as Valve did, if there’s the possibility that you may just hit a thundering mother lode after the initial curve? Or do you want to continue to turn off readers?

Can you truly afford to refer to the territory between the coasts as “flyover states” when there are good people there who want to enjoy books right now? If you’re an author or a publicist, can you afford to thumb your nose up at any media opportunity that isn’t the New York Times Book Review? Or are you not really all that interested in establishing relationships? If you’re a newspaper or a magazine, why aren’t you citing the blogs or providing helpful URLs to the blogs that break the stories or make the connections? Why aren’t you hiring bloggers to write the articles? Don’t you realize that online audiences might come your way if they know that a particular voice is attached? And here’s a bold concept to consider. If you took the top 10,000 bloggers on Technorati and paid each of them $40,000 a year — a livable wage that would permit them all to carry out their work, which could also include serious investigations — that’s a cost of $400 million. For $400 million a year, someone could get the top 10,000 bloggers reporting for newspapers and seamlessly integrate their content into the great whole. And the newspapers could offer copy editing and journalistic resources so that their voices might improve. (Of course, you’d have to accept their unadulterated voices. For these voices, differing from the mainstream, are what caused these bloggers to rise up in the first place.)

If today’s publishers, booksellers, and media outlets hope to answer these questions and produce results similar to the above four case studies, then bolder ideas and experiments need to be attempted and shared with transparency in mind. It is not economically feasible to sit back and wait for the magic results of the stimulus package to trickle around. The current Dow Jones declivity has demonstrated the follies of lame ducks. The previous ways of doing things may very well be at an end: possibly with some permanence. But we won’t know this for sure until those in positions of power attempt a little innovation and modify the current formulas that aren’t working. Change, it seems, was something we hoped somebody else would do. But it’s now become quite apparent that today’s real innovators are those with the courage to take hold of their own destinies.

[UPDATE: Since this post, like many of these lengthy ones, originated from thoughts and musings I expressed on Twitter, here are a few related thoughts from others on the subject. @jimmydare observes that Orbit is experimenting with the $1 ebook. @AnnKingman pointed out that Record Store Day was a huge success for her local record store. (More details on what goes on at Record Store Day here.) @thebookmaven suggests that a Free Book Day might be one way that independent bookstores can compete with ebooks, and also suggests a $5 Book of Your Choice Day.]

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5 Comments

  1. Lots to chew over here, Ed. One point that should be stressed in your “Free Comic Book Day” case study: through a central website, FCBD allowed consumers to discover that they did indeed have comic book stores in their area. As the parent of children who are just at the age for comics, it was a revelation to me that there were several comic book stores in my area. I had driven past them for years, but as comics weren’t really on my radar, I had never noticed them. And in fact, I wouldn’t have even thought about introducing my kids to comic books if I hadn’t heard about FCBD — they were totally off my radar.

    I’d love to see this concept rolled out to indie bookstores.

  2. “So if you’re a publisher or a bookseller, consider this. If you know that people can afford a $10 hardcover (as opposed to a $30 hardcover), why in the hell aren’t you learning from these examples? Why aren’t you offering a Valve-like time window where people can walk into a bookstore and purchase a few $10 hardcovers over a weekend?”

    Most people who become unemployed can’t affor any luxury. They might buy a used paperback, oherwise they’ll resort to the library. The only effect temporary price reductions will have is to make many people wonder why the prices of books can’t be permanenly rolled back, eventually leading many of them to resent what they’ll perceive as gouging, leading to increased sales resistance to the $30 book.

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