Pricing models: Adding and extracting value online February 11 th 2004 Mary Waltham Princeton, USA

Are publishers losing sight of emerging markets?

Business models Who is your customer? What does your customer value? How do you make money?

Strategy How will you beat your competitors? How do you differentiate what you do? Publishing permits some sloppiness here because each publication is different

Strategic Planning Process is required user needs planningcompetition trends

Creating value- typical publishing value chain Gathering Selecting and organizing Synthesizing Distributing Key drivers ~ quality, speed and cost

Creating value - where will you add it? Gathering Selecting and organizing Synthesizing Distributing

Extracting value – which customer segments will you serve and how? Institutional Corporate Academic Government Individual Society and association Members Non-members

Extracting value – which markets will you serve and how? Domestic/national Non-domestic What % of your revenue comes from each? Is that changing online? Are you making the most of the reach of online?

Extracting value – which products and services to offer online? Unit of online content – what is it? What do you offer customers? Do all customers want the same products and services? Do you build to order or prepackage? Can you sell more content by enabling more granular choices – at the article/chapter vs the whole publication level?

In order to make a change from prepackaged content Effective and reliable distribution Understanding of what customers want Ability to create new products and services In theory every customer can buy something different online

What has changed online? Digital assets – not used up by consumption Economies of scale – communicate with authors, readers and customers faster and cheaper Economies of scope – extract value across many different and disparate markets Customer records – cost of keeping them and using them low Publishers have the opportunity to sense and respond to demands rather than simply making and selling products

Online pricing models Institutional/organizational site license sold to libraries/corporations Individual/members subscriptions Pay-per-view article sales Price of each has an impact on the others

Impact of price on number of customers

Why online site licenses extract more value and are a win-win Number of customers..willing to payPossible revenue Each customer group 900$0 10$10$100 10$20$200 10$30$300 10$40$400 10$50$500 10$60$600 10$70$700 10$80$800 10$90$900 10$100$1,000 TOTAL$5,500

Impact of price on revenue: Revenue = price x no. of users Note the maximum total revenue

Lessons from the PEAK project 340,000 users at 10 campuses and 2 commercial companies; 1200 journals with a total of 849,371 articles Traditional subscriptions – unlimited access to any journal – $4/article Generalized subscriptions – pre-paid bundles of 120 $548/bundle - $4.50/article Per article purchase - $7.00

What is the cost of access? Pecuniary cost – even small per article fees suppressed usage Non-pecuniary cost – time and inconvenience to obtain access Number of screens to navigate Amount of external information to recall Action required to have costs subsidized

What worked well? Generalized subscription purchasing – was a success It had the following features:- Opened up access to all content by all users User defined the subscription It was pre-paid User cost of access – money and effort – effects the number of articles readers access

ProductCost ($)Number of articles Cost/article Inter-library loan (ILL)301 Document Delivery251 Pay-per-article- PEAK717 Institutional subscription ~ one online journal Journal bundle price ~ large society publisher 24,99544, Journals and proceedings ~ large society publisher 48,588699, Examples of article pricing

, ,000 1,000,

Using examples of article pricing , ,000 1,000,

Using examples of article pricing Number of articlesPrice ($) per articleFee 15$5.00$75 150$3.50$ $1.80$1,800 10,00060 cents$6, ,00011 cents$11,000 1,000,0006 cents$60,000

Some examples- online choice AIP 12 articles from 9 $96 or $8 per article AIP 25 articles from 9 $150 or $6 per article AIP Members receive a 50% discount

Some examples- online collections American Geophysical Union (AGU) – Editors choice for Members only – bundles of selected articles online only from across all AGU journals – 4 themes so far. Price range $45 - $65 AGU – Multi- choice of article packs for Members 10 $20 20 $30 40 $50 AGU – Personal choice for Members 27 collections – by theme. Priced according to the amount of content range is $43 to $175

Some examples Consumerreports.org Annual online subscription $24 Print subscribers – special discount - $19 Monthly subscription $4.95 Note consumerreports.org online subscriptions all bill directly to a credit card

Revenue model – Grateful Dead

Thank you!