OnDemand WTP Pricing Research

Part 1 – KU or KO? On streaming, subscription and big data | The Bookseller

Most of the above quoted frustrations were gone. But, the design would not have been complete without a properly designed pricing scheme. Fail the pricing and you fail everything.

The pricing model has to be simple, easy to understand and, last but not least, fair. It has to properly align partners’ incentives. After days of reflection and market research, we concluded that an “all you can eat” subscription/streaming model with revenue sharing was what was needed. Schools, universities subscribe on a yearly basis on behalf of students, professors and librarians. In a sense, they (yearly) rent books which they never own as opposed to the physical library where owned books are stored. So 11 years ago we went live!

You may wonder why we did not opt for an individual subscription model.

  • First it is costly to chase subscribers one-by-one.
  • Second, the whole idea is to embed the digital library into the teaching process and this can only be done at the institutional level.
  • Third — which is in fact first — to avoid what insurance companies call adverse selection or anti-selection.

At the end of the day, the best metaphor I can offer for what we do is “group insurance.” Indeed, in group insurance, corporations buy a global insurance policy on behalf of their employees. This is usually good for the insurance company because with a large group of people at once the law of large numbers has a better chance to work and, more importantly, the issue of adverse selection may turn out to be less severe. In other words, with a large group, if you do the pricing job properly, you will benefit from the law of large numbers (not everybody has a claim at the same time) and you won’t end up carrying high-risk people only, namely those who should have paid a lot more in the first place.

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Part 1 – KU or KO? On streaming, subscription and big data.

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