An Argument Against “Pay What You Want” Pricing
Guest post by Brian Hazard of Passive Promotion.
Lady Gaga shot to the top of the sales charts upon the release of her last album, in part because it was deeply discounted on Amazon. Radiohead pioneered the "pay what you want" approach, with most downloaders opting to pay nothing at all. Last week I asked my fans which pricing model they prefer, and received dozens of enlightening and thoughtful answers. The discussion continues, but as you've already deduced from the title of this article, I've made my decision.
I tried both approaches over the past two months, with two full-length rarities sets. Both consist of material already released on USB key, so the audience is relatively limited. I sold the first set for $5 with a discount code, and made the second set name-your-price. The latter features more recent recordings, and is clearly the superior release, so there's little point in comparing sales numbers directly.
Name-your-price certainly has a lot going for it:
- It provides a legal alternative to piracy
- It generates far more downloads, which can boost your mailing list if you require an email address
- Anyone can "own" your album, even in countries with weak economies or rampant piracy (a decent percentage of my downloads were from Russia)
- People are more likely to share a link to a "free" download with their friends
- Potential fans can download first, and decide if they like it later
But in my opinion, those pros don't offset the cons:
- "You get what you pay for" is a deeply embedded mental shortcut that holds true in most cases. By that maxim, free music is worthless. Yet when we pay for something, we've already at some level decided we're going to like it. Which perception do you want to reinforce?
- It means less money per download. A lot less. I averaged $2, with 70% of downloaders opting to pay nothing.
- It forces every fan to tell you what your music is worth to them.
That last one is a dealbreaker for me. Each of my fans knows that when they enter a dollar amount, I'm going to see it. Some even follow up with an email to explain their thought process. This creates a lot of unnecessary friction. While it may compel some to opt for a higher price, the decision can be paralyzing, as Color Theory fan Simon Lewis describes in the comments:
"I spent too long pondering how much to pay that I missed my chance. I don't want to rip off the artists (especially ones I care about) but I also want to get stuff cheap (who doesn't love a bargain?). Then I listened to the ep several times because I could and, although I really liked it, felt I didn't need to download it yet. I would opt for having just samples up there to tempt me into buying it all. I should have just bought it for the price you put on the first one (but is that enough?)."
Even if you set a minimum price, the option to pay more can be a stumbling block. Of course, those who don't care what you think will enter the minimum and download away, but are those the fans you want to cultivate?
Here's my 3-step plan for next time:
Keep in mind that I don't have the time or resources to create an elaborate collector's edition or ancillary merchandise, so a tiered approach isn't an option. Nor do I perform. All I have to offer is the music itself.
- Three weeks before the release date, I'll give away a free song in exchange for an email address (via my Bandcamp site).
- Two weeks before the release date, I'll start taking pre-orders at $5. I'll post a single 2-3 minute audio teaser with 30 seconds each of 4-6 songs.
- On the release date, the price will go up to $10 and the entire album will be streamable.
What do you think? Will this provide the best experience for the fans?
4. After 6 months, offer it as pay-what-you-want, together with the rest of my back catalogue.
Catering to the full range of music consumer types 🙂
I don’t think your third con (“It forces every fan to tell you what your music is worth to them.”) is entirely true. ‘Pay what you think it’s worth’ isn’t the same as ‘pay what you want’. What people want to pay isn’t necessarily related to what it’s worth to them. Things can have value that aren’t economic and what people want to pay might not be solely connected to how excited they are about hearing your tunes.
I think your 3-step plan is a perfectly valid model, but doesn’t serve as a replacement for the PWYW model, only an alternative. There is no ‘universal’ model for how to sell your music. People can only do what works for them.
I’m happy for my music to be PWYW and I’m happy for your music not to be.
Maybe we should all offer our services & products for free. Everything should be common with actual ownership being ascribed to the community! Music, Heath care, everything … why not! Free Studio Time here in L.A. !!! Hope the utility companies jump on board with this soon!
Artists have been getting ripped off since the beginning of the marriage of commerce and art. It’s time to stand for something!
founder & ceo
Thanks for the comments guys!
@Bas – Sure, why not go PWYW after 6 months? It gives you another opportunity to spotlight an old release that’s otherwise collecting digital dust.
@Jake – I agree. You should do what works for you. I’m simply offering up my perspective and results after trying both models. If my yet-to-be-tested plan works even better, I’ll let you know! As for the third con, Bandcamp actually calls it “name your price,” and it’s reasonable to say that the price selected has a strong correlation with how much the buyer values the product.
I like the 3-step plan. Because Free, Sells. Call that ‘freebie’ a business expense or “giving up your first unborn child”/song to get attention. But there has to be a business model that makes sense. Uploading music “to the cloud” for the community to download for free or even a minimal subscription fee is the worst idea ever. We still have overhead to cover in recording studios, producers & musicians to create REAL records. Not to mention the other MARKETING campaigns it takes to build your brand.
Sure, the “pay-what-you-want model was a clever BRANDING campaign. Of course 70% of the downloaders opted to pay nothing. I’m surprised it wasnt higher. At the same time, I’m sure there was surprising percentage of downloaders who never heard of Radiohead before. So that’s nice but Branding is only part of it.
The 3 step plan is definitely one of the better approaches I’ve heard of in a long time. I look forward to following your posts!
Given the opportunity I will take what I can for free every single time. Try your three step plan and then let us know how it goes.
“It forces every fan to tell you what your music is worth to them.”
That’s not a con!!! You need to know everything about your audience to successfully market to them, knowing what they are willing to pay for your release under PWYW is big win, surely.
I like the aproach where the standard edition is PWYW and you release a version with bonus content for what YOU think it’s worth.
This is not to say PWYW is for everyone BTW, it’s not.
Thanks for posting this article and perspective.
On the Nimbit platform, we’ve seen the Pay What You Want model have varying levels of success with our artists.
One thing to consider, when determining success is that you can use this tool with different goals in mind:
1. pure monetization where you let the market set the price
2. customer acquisition with some revenue generation
So what is your goal, making money or capturing fans?
Depending on your goal the strategy and messaging you use for the campaign will be different.
Also, different artists will have varying levels of success depending on where they are in their career and their level of engagement with their fans.
Well established artists and those with highly engaged fanbases can do well monetarily with a pay what you want promotion on their release. They’ll generate revenue from their core fanbase and will also acquire new customers from the fringe of their fanbase.
Newer artists, or those with a less connected fanbase, typically will not generate much revenue from Pay What You Want, but they will acquire new fans, and they will make some money in the process.
Once you’ve acquired the fan, it’s up to you to build the relationship and get them excited about your next release.
One thing that I do like about Pay What You Want as a customer acquisition strategy, is on the Nimbit Platform, you can segment your fans by what they paid. If you do that after a PWYW promotion, you can identify your best fans (the highest contributors), Fans that paid anything at all, and fans who were just getting something for free. Knowing that information you can then come up with targeted promotions for each group with some expectation of the results.
Radiohead, Radiohead, Radiohead… we always get the same example when this subject comes up. It should be pointed out that Radiohead only adopted PWYW for one album, which happened to be their first after they split from EMI. It was a great publicity stunt, but it hasn’t been widely copied, and Radiohead themselves reverted to standard pricing for their next album. It is vital to note that the value of PWYW as a publicity stunt depends on its rarity. There may be other good reasons for adopting PWYW (some of which has been mentioned) but don’t let the Radiohead example fool anyone into thinking it is a reliable way of attracting attention, especially for artists who don’t have Radiohead’s advantage of a big existing fan base and a high media profile.
Why not offer ‘Pay What You Want, with a minimum’? Either:
– Set a low minimum of $1 so ‘free’ isn’t an option
– Set a minimum that you’d be happy with (like the $5 pre-order) and let fans add a bonus on top if they want to. That way you’re not leaving any money on the table.
On our platform, we find that around 60% of people pay more than the minimum (which can’t be less than $1)
Of course, charging anything other than $0 adds friction because you’re requiring people to enter their Paypal or credit card info.
@Dylan – It’s great to know your market, but I’d rather gather that information outside of a financial transaction. I’d love to try out the standard/deluxe edition idea, though I worry it would cause confusion or that many would overlook one of the editions (on Bandcamp at least).
@Carljacobson – Segmenting your fans by what they paid is a cool feature. I can see myself writing targeted email updates starting with, “Dear Freeloader.” But in all seriousness, that could be really helpful, for example to offer your superfans a surprise bonus.
@David – I’m sick of discussing Radiohead too, but AFAIK they created the model, and it’s the one example we’re all familiar with. I agree – the novelty has long since worn off.
@Rob – My guess is that most fans would see the minimum as “the price,” but I suppose there’s no reason to not let people pay more if they want to.
@Brian – Yes you get it…because you’re one of our best fans, we’re giving you the privilege of VIP ticket access for our record release party… or even just a thank you would be appropriate
I do agree with all of your points, including segmenting fans for targeted promotions based on how much they paid. But to regard your highest contributors as your “best fans” implies that you think people who paid more are always exactly that much more loyal and worth more to you than people who paid less. Well, there may be an observable correlation, but it’s not necessarily true across the board. There are many reasons why someone pays what they pay. Maybe their entertainment budget was very limited that month. Maybe they just didn’t think that particular offering was as good as your others; if you put out a turd no one wants, it doesn’t mean the people who got it for free or who didn’t give you positive feedback on it aren’t your “real” fans. Likewise, those who did pay for it maybe just had an unexpected windfall and decided to give more than they would’ve normally. Maybe they gave generously once, in anticipation of not being able to do so in the future. You never know; that’s why when soliciting donations, it’s generally bad form to make too big a deal out of the amounts people give. Personally, I’m overjoyed when anyone expresses sincere appreciation for my music and photography, but I don’t regard the non-payers or non-acknowledgers as any “less of a fan” than anyone else. Sure, some of them probably are less of a fan, but it’s not an assumption I can or should make about all of them.
There is an important distinction that we focus on at Patronism. Patronism offers pay what you feel subscriptions for artists and fans to connect. There is a $2/mo minimum, but the message is this: There is a difference between consumers and patrons.
Consumer mentality primes people to pay a little, and get a lot. They generally sink an all-in approach to pay what you want.
Patron mentality is that they want to help you keep doing what you’re doing, almost regardless of the knick knacks and artifacts (CDs, Tee shirts).
Being able to tell the difference will determine how successful you are with pay what you want. Furthermore, “pay what you want” is different than “pay what you feel”. PWYW is consumer mindset; “What do I want? A bargain!”. PWYF appeals to patrons; “How do I feel about this artist?”
And yes, some people have asked that their subscriptions be anonymous, because they feel that the musician is worth more than they can afford. This anonymity allows them to opt in without worrying about explaining their decision process. It’s another important way to maximize a sojourn into artist-patron subscription relationships.
I’m definitely intrigued by the Patronism model John! I’m reluctant to try it out because I surveyed my fans awhile back about a subscription model, and the response was lukewarm at best.
You bring up a great point. Perhaps I should have said “Your best fans for a targeted VIP sales promotion. ”
Just because a fan hasn’t supported you with a purchase, doesn’t mean that they’re not one of your best fans. They very well could attending your live shows and bringing friends, promoting you to everyone you know, etc.
Thanks for the thoughtful response.
I kind of agree that the PWYW model has the potential to render the music as “worthless”.
I could go onto a long rant about how it’s this culture of desiring a “bargain” or getting free stuff that is ultimately responsible for the exploitation of workers in third-world countries, and various other evils.. But I’ll try to calm down and shut-up 😛
The novelty factor mentioned above in regards to Radiohead is worth remembering though, and I think every artist can benefit from *occasionally* releasing a free album or ep… if only to be seen to be giving something back to their supporters.
We’ve kind of opted for a middle ground for most of our releases.. Our CDs are set at a price just below what you’d pay on Amazon or from a record store.. with the option to pay more if you want to (ie if you really really like the music and want to support the band a bit more).
Most people pay the regular price of £7.50 (about $11 I think) .. but very occasionally someone pays a little more than that too… Also, we set the price for the MP3 download significantly cheaper than the physical release (£3.50 per album – about $5)
After they have had/downloaded their potentially free track and they do like it, people will tend to pay anything for the next one(if they like you that much after the first) provided you have set the price.
Interesting discussion, thanks guys! Could write a lot about it… which I’m actually doing for my Master’s thesis. It’s about the success factors of PWYW in the music industry.
One remark about Radiohead: actually they weren’t the first to introduce PWYW. Jane Sibbery (Issa) already did the same in 2005 and even before, the pricing strategy was already used in hotels/restaurants/bars.
If you are interested in the subject and my thesis results, please help me by filling in my survey (https://qtrial.qualtrics.com/SE/?SID=SV_eku6P1lO3XdFzTK) and leaving your email address at the end of the survey.
Comments are closed.