Pay-What-You-Want, the wave of the future?

Jim Raggi, the creator and publisher of LotFP, has been on a pretty crazy pay-what-you-want binge lately: in addition to selling adventure modules for his game in digital format as pay what you want - as others have been experimenting with through the last couple years - Jim has also started going to conventions with that same model: he sells paper books face to face with the customers paying what they feel the products are worth. He's done this at about half a dozen conventions so far, and apparently it roughly doubles the revenue at the cost of what amounts to a moderate discount to the customers. Well worth it for direct sales, I understand.

A couple weeks ago Jim floated the idea that he's itching to do a crowdfunding campaign for a new paper book as pay-what-you-want. I was initially rather skeptical about the math of the matter; the Internet can be a cruel mistress, and it can be difficult to predict when 4chan or some such Internet jury decides to make an example of you. What if you just end up printing thousands of books at your own expense for assholes who want free swag, or who just want to see you squirm?

Jim's not exactly one to listen to the voice of reason, so now he's started this crowdfunding drive with Rafael Chandler: a goal of 5,000 €, no contribution levels, and every contributor gets the book at the end. There are fortunately certain mathematical constraints that work to make it very unlikely that they'll go bust with this experiment. For instance, consider these points:
* Jim's not actually selling books, he's selling 100% discount coupons for books in his webstore. This means that the contributors will still have to pay postage for the books if they want a paper copy. (PDF you get regardless, of course.) That's an effective bottom on the unit price at which you can get the book, as even if you were to contribute a close-to-zero amount of money into the campaign, you'd still have to pay the 5 € or whatever to have the book shipped.
* Each contributor only gets one copy of the book. Not that you couldn't get around this with shenanigans if you wanted, but at least trolling Jim here isn't as simple as clicking a button.
* The actual profit of this enterprise basically comes in the form of a lowered unit price for the books: even if Jim ends up selling the first 500 or 1,000 units at a harsh discount, he'll still benefit in that he can use his own money to extend the print run and then make money by selling the cheap units later, via distribution and long tail direct sales. From this perspective it's not that important for him to get a good profit margin from the initial crowdfunding project, as long as it pays for those first 500-1,000 books; thanks to the way set-up costs for printing work, those are the most expensive books to print, after all :D

Anyway, I've been following Jim's antics with pay-what-you-want, and I'm curious about what others think regarding this business model: why is it working, will it work in the long term, and could it work on a larger scale? What are the limits here? Economic armchair theory would seem to indicate that this can't be an universally successful sales strategy due to the way it loses pricing information (the customer has to rely on competition to get a sense for what the appropriate price is), but one has to admit that it seems to be working for Jim here and now. Should I be planning to throw myself to the mercies of the customer base in this same way with my next project?

It occurs to me that this approach might work for rpg products as well as it does because of the specific traits that rpgs have as products, in comparison to some other things one might sell. For example, rpgs are luxury products (the demand is elastic, people only buy them for want, not need), and the competing products are generally not directly comparable, and the customers have at least a little bit of social investment in the producers. Toilet paper, for comparison's sake, has none of those qualities - could a paper factory sell toilet paper as a pay-what-you-want product? Crazy thought. Why does pay-what-you-want work at all?

Comments

  • edited August 2014
    I think you hit a few of the most pertinent points. Another is the tight-knit nature of the RPG community; there is not that much difference between a "hobbyist" and a "pro" in our world. There's also a blurry line between a "designer" and a "GM". So we are rewarding our own sisters and brothers when we download their games and pay for them. It feels good.

    Lastly, there's just plain loving an artist's art, and wanting to show your appreciation for them. When Radiohead released "In Rainbows" under a PWYW model, being a fan, I paid the same full amount that I would have paid in a music store. I loved knowing that they were getting 100% of that money, instead of the measly cut they would have got if they went through through traditional distribution channels. I felt HAPPY that I was helping to feed Thom's kids, helping Jonny to buy new guitar strings, etc. They deserve the money FAR more than any record industry executive. Again, it feels good.
  • I've had this theory that eventually some new model of supporting artists who produce easily copyable art will eventually emerge that do not depend on everyone paying some minimal amount. If the artist produces stuff people like, my assumption is that some dedicated following (which might be a very small group) will contribute enough to keep the artist producing. A huge mass of folks who barely appreciate the work and perhaps just like to "collect" will get the work for almost nothing.

    Now I guess an interesting thing is if that can include almost nothing distribution of physical copies (print or CD or whatever).

    On the flip side, I wonder how our economy will survive the hackers.

    A hacker COULD cause Jim problems if they hacked enough accounts to make fake orders and charges (and maybe actually cause Jim some financial pain when a bunch of the hacked folks attempt to reverse the charges for the order they didn't place, before everyone figures out it's a fraud - but not sure, Jim as seller might still not get paid, while the hacked "buyers" get their money back).

    Frank
  • edited August 2014
    Yeah @ffilz I have wondered about that possibility too. A couple weeks ago I posted this idea on G+:
    I'm wondering if this would actually work...
    Instead of saying "Pay what you like" for a game, what if you said: "If one person pays (a kinda large amount) then it becomes free for everyone." So basically one person gets to be the "patron" who enables everyone else to enjoy the game for free.
    Brilliant? Insane? Reeking of desperation?
    One fellow answered that Greg Stolz has done this successfully with RPGs in the past, he called it the "Ransom Model" :-) ...but I have no further data besides that.
  • I think there's a huge difference between the "Ransom Model" a.k.a. the Street Performer Protocol, which I totally understand and adore, and a more vague "Pay what you want [and we hope that people pay a lot]", which I don't understand and don't know how to interact with. What I want to pay is zero. What I want them to receive is infinite. The two clash and confuse me.

    Which of the two models is closest to what Raggi's doing, I don't know. His experiments seem to have been successful so far.
  • Yes, the ransom model is a well-known approach - Greg Stolze has been rocking it in roleplaying, and it's been used in other arts as well to consistent success. With crowdfunding it basically becomes "collect X amount of money and I shall release this thing free into the wild". I personally find the ransom model and similar patronage arrangements pretty credible as a solution to the future of the culture industry in a world where information wants to be free.

    The pay what you want thing, when applied to digital product, is sort of an itemized version of the ransom model: it's still patronage, except instead of asking for money to release the thing, you ask for money each time somebody downloads it. The ransom model is economically pretty clear in that I can understand the incentives; with pay what you want the incentive scheme is more nebulous, as you're basically requiring the customer to put a price tag on their own decency. I wonder, would more extensive use of pay what you want continue to scale elegantly, or would the customer base start reacting to it in some different way?
  • And yes, Sandra hits the nail in the head - I have similar problems understanding the pay what you want proposition on a gut level - unlike the Ransom model, which works in terms of game theory, pay what you want only seems to work insofar as the players are gripped by a social mythology that encourages them to pay instead of merely taking for free.

    I should note that this social myth thing totally works for me if you set up for peer pressure: make the list of contributors public, and collect contributions from a cohesive community, and I think you'll find the number of shirkers to be quite low. In this regard pay what you want seems rather unproblematic as a solution for e.g. covering a club picnic's expenses.

    Yet regardless, at least so far the pay what you want experiments seem to have been successful in the Internet: I haven't heard Ben Lehman (who's been doing this for a while now) complain, and Jim seems happy and eager to get deeper with it. Are people so decent at base, or are they transferring face to face habits into the Internet, or what is this?
  • Are people so decent at base, or are they transferring face to face habits into the Internet
    Only the especially decent people. :-)
    I have a couple PWYW products at rpgnow. I think the number of people who pay are about 3-5% of the total downloads. That's what made me start considering the "ransom model" to begin with. Glad to hear Stolze has had success with it!
  • I think PWYW has had limited success with some people. I mostly think of it as a way to advertise.

    The Ransom Model is interestingly different, because it invites you to cooperate with other fellow customers in order to release the product to everyone.
  • edited August 2014
    Ok I thought of another reason why PWYW is popular. Many artists have a real problem assigning monetary value to their work. This apparently-simple material question can invoke a complex of internal questions about self-esteem, capitalism, relative suffering, the practical value of what is essentially a luxury item, etc... Publishing the work under a PWYW model allows the artist to step clear of that whole complex of issues, taking a load off their mind (and leaving the question in the hands of the audience). I imagine this is especially true for artists who are not yet established in the market.
  • Aslf, percentages of people who pay money for a pay-what-you-want aren't much of a metric, because when the download cost is zero, you get people downloading your product because they're curious and it's available, not because they have any intention of using it.

    That's why some of the biggest successes of PWYW have been as advertising rather than as profit-making. PWYW is more attractive than free from a price-signalling point of view, you get free products given to people you want to have free products, and the people that already know and enjoy your stuff are willing to kick a few bucks your way.
  • To me, buying a pay-what-you-want product creates feelbad for me. I always always feel like I did not pay enough regardless of how much I paid.
  • Ok I thought of another reason why PWYW is popular. Many artists have a real problem assigning monetary value to their work. This apparently-simple material question can invoke a complex of internal questions about self-esteem, capitalism, relative suffering, the practical value of what is essentially a luxury item, etc... Publishing the work under a PWYW model allows the artist to step clear of that whole complex of issues, taking a load off their mind (and leaving the question in the hands of the audience). I imagine this is especially true for artists who are not yet established in the market.
    OK, yeah, this rings true for me. As an artist I'd like to try the PWYW model.

    I just don't like it as a consumer. :p
  • "Pay what you want" doesn't mean "Pay what you honestly think it's worth". Shame, that.

    I'm really warming up to the ransom model.

  • I'm a really big fan of PWYW models that include a sliding scale (for example, "$5-15, depending on what you can afford") because they recognize that different people have different economic means. Sliding scale admission costs are a big part of queer event organizing locally, something which I am very thankful for - it means I spend less time anxiously worrying about whether it's okay to invite broke friends to join me at events.

    PWYW without parameters or guidelines can be a lot harder to engage with.

    When I sold Ribbon Drive PWYW, and also specified what its previous retail value had been, people tended to pay more than that previous retail value and I also made more sales. I really like flexible payment models, especially within small communities.
  • An auction would be the right method for "pay what you honestly think it's worth". In the digital world you could set up to sell e.g. a single copy of the thing per day, with auctioning as the mechanism of sale. Each day the single customer willing to pay the most gets the copy. This ensures that most customers get the thing at the exact price (accounting for time preference) they think it's worth. With a custom auctioneering platform you could just have a potential customer set their target price, and then inform them days or weeks later whenever their offer finally ends up the best one of the day :D

    That's all about artificial scarcity, of course. Just the thing to encourage piracy. Unfortunately it's not very feasible to do the time preference auction on physical goods...
  • I'm a really big fan of PWYW models that include a sliding scale (for example, "$5-15, depending on what you can afford") because they recognize that different people have different economic means. Sliding scale admission costs are a big part of queer event organizing locally, something which I am very thankful for - it means I spend less time anxiously worrying about whether it's okay to invite broke friends to join me at events.

    PWYW without parameters or guidelines can be a lot harder to engage with.

    When I sold Ribbon Drive PWYW, and also specified what its previous retail value had been, people tended to pay more than that previous retail value and I also made more sales. I really like flexible payment models, especially within small communities.
    Oooh! Yes! When I see a PWYW product, I'm at a bit of a loss for how to value it, because...yeah. It's such a weird thing to be deciding. With a sliding scale, I can simplify my decision to "am I paying a lot or a little or something in between?"
  • @Mcdaldno - Good idea, Avery. Gonna try that.

    @CarpeGuitarrem - When looking at a PWYW product, I always used to let the "average contribution" inform my decision. But since becoming a publisher at rpgnow, I've realized something about their model that sucks: If you have a product at rpgnow that's PWYW and somebody comes along and pays 1 cent for it instead of paying nothing, it pulls your average contribution down significantly with a single click. Not only that, but since it's easier to type "1" than ".01" I kinda have to assume it's intentional, not just a typo.
  • edited August 2014
    Not only that, but since it's easier to type "1" than ".01" I kinda have to assume it's intentional, not just a typo.
    I am often baffled by some of the amounts people put into the PWYW field. $X.99 for one - I guess the lure of the .99 really is culturally strong.
    I'd prefer to be able to set an RRP, as you can when you first upload the product, alongside the average.
    edit: Just realised you can actually do that. Duh.

  • @CarpeGuitarrem - When looking at a PWYW product, I always used to let the "average contribution" inform my decision. But since becoming a publisher at rpgnow, I've realized something about their model that sucks: If you have a product at rpgnow that's PWYW and somebody comes along and pays 1 cent for it instead of paying nothing, it pulls your average contribution down significantly with a single click. Not only that, but since it's easier to type "1" than ".01" I kinda have to assume it's intentional, not just a typo.
    Yep; that's why Bundle of Holding "weights" their stuff with pseudo-purchases for the sake of averages.
  • That's all about artificial scarcity, of course. Just the thing to encourage piracy.
    Arguably copyright's standard ban on consumers making and redistributing copies is itself artificial scarcity.
  • I've paid some really weird amounts for PWYW stuff. Mostly I'll pay a bit more than I'd expect to pay, just to encourage more stuff like it. But sometimes I'll pay a bit extra to hit an amusing number, and then realise they won't see it because the conversion to USD messes it up. I don't tend to worry about averages and stuff.

  • Yep; that's why Bundle of Holding "weights" their stuff with pseudo-purchases for the sake of averages.
    DTRPG lets you set your own artificial average for the first X number of purchases, then changes to the actual average paid contribution.
    I'm not sure how many sales it is before it changes. Probably 10 at least?
  • PWYW without parameters or guidelines can be a lot harder to engage with.
    So true.

    If I don't know anything at all about the actual cost of the PYWY product (not even enough to hazard a guess), then I tend to pick an amount that falls at or below my "I wouldn't be gutted if I lost this amount of money on the street" level, because I'm more likely to feel bad about not having money when I need it than I am to feel bad about whether I paid what the product was worth. I don't know what to think about their situation, so I'm forced to think about my own, and act accordingly.

    So really, the best strategy for someone trying to sell me a thing via PWYW is to tell me how much they need to break even. If making that product or shipping it or licensing it or whatever cost them money, then I want to know that. It sets an absolute minimum for the price I'll pay, and encourages me to scale the actual amount I'll pay up to the point where they'll get at least a little bit of profit out of it. I wouldn't say I'm happy to pay what I think a product is worth (it feels too good to get a bargain!), but I'm happy knowing that I'm not driving someone into the poorhouse.
  • edited August 2014
    I'm naive when it comes to money and I always has faith in humanity where it's not controlled by greed. So I'm glad that this is a working model. I can see several reasons why this works, and I guess I'm trying to map out different kinds of buyers here.

    Patronage. I think PWYW only works up until the creator has been burned. Sitting on conventions with PWYW gives you control to put a stop to it if you're seeing that the model spins out of control. The consumer also sees the face of the creator, which makes it more honest. The consumer probably realize this, and pays so the creator can produce even more stuff.

    Pay what you can afford. I downloaded a lot of games, music and movies when I was a student. Today, I pay for Spotify every month, I pay for indie games (I bought FTL after I downloaded and finished it), I give money in F2P games because I want to support the developer, but I still download movies. I can afford what I pay for now.

    Pay to see what it is. Sometimes, something catches your eyes and out of curiosity you buy the pig in the poke. I don't know how many times I've been burned, but with PWYW I can pay what I feel I can invest in it.
    And yes, Sandra hits the nail in the head
    As a sidenote. I got a general dislike to people using the real names instead of the usernames AND doesn't quote. I usually have no idea what you're talking about when doing that. I think it's bad manners to force someone else to backtrack just to keep up with the conversation.
  • edited August 2014
    I am Sandra!
  • edited August 2014
    Hi Sandra. That's what I suspected. But Rickard does have a point. :-)
    BTW, I'm Tod.
  • edited August 2014
    It was a strangely enormous deal when the software was upgraded and we lost the ability to hover over a username and see real name pop up.
  • Wow. That's a very easy hack to put in. I wonder if there was a particular reason it was removed or if it was just forgotten.
  • I'd like to see everyone switch to sliding scale to avoid the insulting 1¢ purchases. If a product was priced at $1-10 then suddenly there's a fair metric for the consumer and a guaranteed bottom line for the seller.

    Myself, I love PYWYW because it cuts down piracy (or does it just legalize it? Hmmmm). Also, I'm one of those people that pays reasonable prices when I buy PYWYW. But the weird thing is, my price is always dictated by how much I think I'll use it, not what I think it's worth in general. If I'm curious about a game's mechanics but don't think I'll ever play it, I may throw down $2-5. If I think I'll actually play it regularly, that price goes up significantly. It has nothing to do with the product, the creator, or the suggested price.

    So there's one issue with PYWYW instead of sliding scale, right there. Or maybe it's a benefit, depending on who you're talking to.
  • It is quite a bait and switch to refuse to indicate a minimum price, and then guilt-trip those who pay too little, isn't it? One would think that either you indicate a price scale, or you take it courteously when people take advantage of your offer. They weren't planning to buy into a character assassination when they under-paid you, after all, so it's not very fair to complain after the fact about any minimal payments.

    One issue with all negotiable pricing strategies, PWYW included, is that there's no particular reason for a customer to know better how much they should/would pay for the thing - they aren't as familiar with the product as the seller, after all. Assuming that a customer wants to actually pay according to their perceived value, then what makes the most sense for them would be to first take the product for free, explore it, and then pay afterwards as an informed decision. I suppose that the main reason for why this sort of thing wouldn't work is that PWYW actually relies quite a bit on social convention to get people to pay - too many people would presumably not pay if the payment was due a month after receiving the product.
  • Yeah, unfortunately drivethru's model doesn't support "play before you pay".
  • Yeah, unfortunately drivethru's model doesn't support "play before you pay".
    Can't you re-purchase it later?
  • edited August 2014
    Tod, doesn't it? Buy it for nothing. Play it. Buy it again. Right? (Or can't you?) If not, buy their next thing for what you think the last one was worth and keep pushing it forward.

    ETA: Ha!
  • edited August 2014
    I stand corrected. Just checked it out. When you add a PWYW product to your cart there is a little text that appears saying "Thank you for your interest! If you enjoy this title you can come back and 'buy' it again to support the publisher." I think the interface could be a little more obvious, but yeah, you can add it to your cart and "buy" it a second time.
  • That's my MO, get it and if it strikes my fancy then re-purchase it.

  • So really, the best strategy for someone trying to sell me a thing via PWYW is to tell me how much they need to break even.
    You can count me in on this side of the fence, too. That would make me very happy, and allow me not to feel guilty about whether I underpaid the author.

    It's a great idea, and I encourage everyone to try it out.

Sign In or Register to comment.