Price discrimination without coercion: the Humble Ebook Bundle

My latest Guardian column is "Giving online customers the chance to pay what they want works," which describes the thinking behind the Humble Ebook Bundle, a bold name-your-price ebook promo that launches today:

What if the experience of purchasing electronic media was redesigned around making you feel trusted and sincerely appreciated? What if you knew that the lion's share of the money you spent on electronic media went straight to the creator? What if, in short, you knew your honesty would be rewarded with a fair deal for all parties?

Of all the ideas from the heady days of internet futurism, none is as fraught as "price discrimination," the practice of charging different rates to different customers for the same product. Price discrimination is a mainstay of the travel industry, where airlines and hotels try all manner of tricks to try and figure out who's willing to pay more and charge them accordingly.

For example, travellers who won't endure an overnight Saturday stay are presumed to be travelling on business, charging the ticket to someone else, and therefore less price-sensitive. So itineraries with Saturday stays are often much cheaper than those without.

Region-coding on DVDs is a crack at this: the cost of producing a DVD is very low, so the retail price is pretty much arbitrary. The studios thought they could offer goods at one price in rich countries, and a lower price in poor countries, and use region-codes to prevent the flow of cheap versions from the poor world to the rich world. But DVDs actually cost something to produce on a per-unit basis. What about purely digital goods?

Giving online customers the chance to pay what they want works

• [Robert Holmén]

  ” the cost of producing a DVD is very low,”

  If all you were buying was the plastic that might be true, but the cost of making the content that actually makes the DVD attractive to buy is substantial.  For most movies that DVD revenue isn’t some surprise extra they hadn’t even planned on, it’s part of the budget that got the movie greenlit and financed in the first place.

  • [Cory Doctorow]

    Did you read the article? It’s pretty clear that I’m talking about the marginal cost of a DVD, not the fixed cost of the film.

    • [Don Smith]

      But Cory, it’s so much easier to argue against the thing you WANT to rather than the thing that’s actually posited.

• [facebook-739100197]

  This is gonna be a game changer for sure. I’ve bought several of their game bundles, but this one’s average is much higher.

• [ZikZak]

  It’s not the same as conventional price discrimination, though.  Like Cory writes, that normally involves getting someone to pay the absolute most that they’re willing in exchange for a given product.  This works because of the aforementioned coercion: the seller can threaten to withhold access.

  But with the absence of coercion, the “buyer” isn’t really buying anything at all.  They’re not purchasing access to the product, because they already have access.  Really what they’re doing is making a philanthropic contribution.  They are giving money away to people who have made wonderful things for everyone, because they trust that those people will continue and we’ll all get to enjoy the results.  Or maybe because they have a sense of “irrational” fairness or respect, which says that people deserve payment for the wonderful things they’ve already given away for free.

  We’re kind of stuck talking about this in terms of prices and customers and sales, but the terms are increasingly awkward.  Because something completely different is going on here.

• [traalfaz]

  I like this.  Unfortunately I’ve already bought over half the titles on it and I’m not that interested in most of the rest.

  I may buy it anyway just to support the model.  I think eventually we’re going to get to a point where most of the revenue goes to the creator.  The fact that this is not currently the case is one of the reasons why I am not totally happy buying ebooks today.  If perhaps 75% or even 50% of the revenue went to the creator I’d be a lot happier pulling out the plastic.

• [pKp]

  Bought it yesterday. Currently being amazed by Signal to Noise. I would have started Pirate Cinema, but I can’t find my goddamned ereader…