Another 'Exception'? Jonathan Coulton Making Half A Million A Year With No Record Label

from the and-on-and-on-and-on dept

We've mentioned musician Jonathan Coulton a bunch of times in the past when talking about musicians and embracing new business models. He's definitely a great example of someone who charted his own path and was able to make a living doing so. However, the only dollar figure we'd seen was that, soon after he'd committed to music, he was making $5,000 per month. That was four or five years ago, if I remember correctly. However, the Planet Money team over at NPR caught up with him recently, and he noted that in 2010 he brought in about half a million dollars. Of course, defenders of the old system will insist that he's an "exception," but, really, just how many exceptions do we need until people realize that the market is changing rapidly, and those who embrace new models and new methods of distribution are finding that they can make a lot more money than they did in the past.

Coulton is an interesting case for a variety of reasons. He tried to become a professional musician 20 years ago, but was unable to make it work. It's only through the power of the internet that he was able to become a success this time around. This is a point that gets missed quite frequently in these discussions. Part of what's so exciting to many of us about the world today is that those who wouldn't have been able to become professional musicians at all in the past now have an opportunity to do so. Yes, plenty will fail, but under the old system, almost everyone failed. Today, a much larger percentage of people wishing to be musicians can find their community, can find their niche and they can make pretty good money doing so. As Coulton notes:

Coulton says sure, he's niche. But there are a lot of niches out there for others to find, with more forming all the time. After all, he says, that's what the Internet is.

Filed Under: business model, jonathan coulton

Help Fund Nina Paley's Minibooks About Intellectual Pooperty

from the i-got-five dept

Occasional Techdirt poster, filmmaker, comic artist and copyright critic Nina Paley recently put up her first Kickstarter campaign, seeking to raise $3,000 to produce a large print run of some "minibooks" of her series of comics about "Intellectual Pooperty." The idea is to put together these small books that can also be carried around and passed around. At $3,000, she could do a large enough print run to keep the prices down (print-on-demand is much more expensive). It took all of two days to reach $3,000 and the number keeps going up (full disclaimer: I kicked in $25 in order to get five of these books, so I can hand them out to folks when necessary). If you're unfamiliar with her work (and you shouldn't be if you read this site), here's a sampling of strips that we had posted last year:

Filed Under: crowdfunding, intellectual pooperty, mimi & eunice, nina paley
Companies: kickstarter

Professional Photographers Find Massively Successful New Careers Helping Amateurs Be Better Photographers

from the don't-sit-and-whine dept

One of the most vocal groups of folks we've seen, when it comes to resisting the changing market dynamics brought about by digital technologies and the internet, is not the music or movie industries... but photographers. We've seen photographers compare microstock photo sites to pollution and drug dealing in terms of the "harm" that they can do. We've seen photographers complain that amateurs are destroying the market. Certainly, not all professional photographers are like this -- and we've heard from plenty who are doing cool and unique business models as well. Rob Hyndman pointed us to an interesting story at Slate, that discusses a few professional photographers who have found massive success (much more than they had before) by helping those nasty amateurs become much better in the craft of photography:

At first glance, David Hobby looks like just another casualty of the decline of print media: A longtime staff photographer for the Baltimore Sun, he was one of many employees who accepted a buyout in 2008 as part of broad staff reductions at the distressed newspaper.

Yet last month he embarked on a sold-out, cross-country tour that will visit 29 cities. Approximately $1 million in tickets have been sold for the privilege of hearing Hobby and famed magazine photographer Joe McNally speak about their craft. Hobby's blog, Strobist, on which he teaches amateurs the lighting techniques used by professionals, welcomed 2 million unique visitors last year.

Those two photographers totally have the right attitude. Rather than looking at the changing market and crying about how they can't make money the way they used to, they both see these changes as an opportunity, which is allowing them to do quite well, from the sound of things. The attitude that McNally has is really perfect:

McNally doesn't see anything demeaning in sharing his insights with thousands of amateurs; rather, he says he's come to enjoy teaching. "If you encounter passion, you have to counter it with your own passion," he says. "Even if, at the end of the day, you feel they're not going to go out the next day and climb the Empire State Building."

That sentiment is alien to the old guard in the professional photography world, where, Hobby says, "there's a lot of information-hoarding, and [a sense that] if I teach this person how to do this, he'll become my competition." Once the dust settles from all the change he's helped bring about, Hobby thinks there will still be legitimate careers for professional photographers. "You'll have fewer rock stars, and a much larger middle class," he says, a group of photographers who will find ways to distinguish themselves from the rest of the pack.

Those two paragraphs could certainly apply to almost all of the various industries we talk about here. You can fight change, or you can realize how change often opens up a much larger market, and you can take the same passion you have directly into that new market.

Filed Under: amateurs, business models, photography, teaching

Beastie Boys Embrace Many Different Platforms In 'Leaking' Own Album

from the having-fun-b-boy-style dept

More and more musicians seem to be recognizing that having a record leak is not a bad thing. Even as some artists decide to send leakers to jail -- others are recognizing that it's yet another opportunity to connect. The latest is the Beastie Boys, with their (long-awaited) latest album. There's been a buildup over the past few weeks, with the band "leaking" stuff as they go. While I have a hard time believing the claims from the band that these leaks were not part of the "plan," it really seems to have built up anticipation for the album. First the band offered up the single after it had already started to be found online:

This wasn't really part of the plan, but since this track is out there we wanted to let you hear it here first, or maybe second. Enjoy

Of course, the band has also been promoting the combination half-hour movie/five minute music video thing they put together with more famous actors than any music video in the history of music videos. If you're in the US (yes, I know regional restrictions suck, but I didn't do it), you can watch the full video here: The five minute music video is here: There's also a two minute "trailer" for the longer movie here: And, finally, earlier this week, the band started streaming the entire album using SoundCloud, claiming that it was in response to the "clean" version of the album being leaked:

Good people, unfortunately due to circumstances beyond our control, the “clean” version of our new album, The Hot Sauce Committee pt 2 has leaked. So as a hostile and retaliatory measure with great hubris we are making the full explicit aka filthy dirty nasty version available for streaming on our site. We hope this brings much happiness, hugs, and harmony.

Again, whether or not this is all planned out (and I'm still betting it was), it's interesting to see the band embracing so many different ways to promote and share its content. If you look at just the content here, we're talking about video, audio and text... and a ton of different platforms. There's Tumblr, Hulu, MTV, YouTube and Soundcloud. I find this interesting, since many bands seem to pick a single platform and stick with it. I'm not sure why the Beastie Boys are going with a different platform for different pieces, but I'd be curious if the band ever explains some of the thinking behind these choices. And while the different limitations on different platforms (mainly Hulu -- no permission for TV browsers? WTF?) it does seem pretty clear that most people should be able to access at least some of all of this. I particularly like the use of SoundCloud as it really makes the audio more interactive in allowing fans to comment at specific time points in the songs.

Once again, I have no idea if this particular strategy will work, but it's always interesting to see how bands -- new and old -- look for better ways to embrace the internet.

Filed Under: beastie boys, culture, leak, releases

Atlas Shrugged Movie Leaves Hollywood Scratching Its Head, Because It's Succeeding Without Them

from the shrugged dept

We've already talked about how Kevin Smith has been succeeding with his new movie, Red State, by defying much of the "conventional wisdom," when it comes to how you have to market a Hollywood movie. He's not the only one. Apparently the "conventional wisdom" folks in Hollywood are all in shock that the movie Atlas Shrugged is doing fantastically well at the box office, despite its "awful marketing plan," of not buying TV ads.

Smith has actually talked about this issue as well, discussing how the major studios "buy" an opening weekend gross number, knowing that if you just spend $x million on TV advertising, you can pretty much guarantee a certain level of turnout for a film. However, in many cases, it's really a waste of money, because the money spent on the TV advertising can actually outweigh the value of the people they bring to the theaters (Smith has a funny story about studios advertising some of his movies on Lifetime, the "women-focused" TV station, whose demographics don't match at all with Smith's standard audience).

In the case of Atlas Shrugged the filmmakers relied on Ayn Rand's fans to build the buzz and apparently it worked. Word of mouth on Twitter and via various "like-minded" groups -- including some libertarians and Tea Party folks -- apparently drove interest in the movie. It's making a lot of money per screen and there's demand that it open on a bunch more screens. The filmmakers are apparently mainly limited by the fact that they didn't make enough prints (no reason to, without knowing the real demand) and they're trying to rectify that as quickly as possible.

Of course, some will claim that this is a one-off situation. And, certainly, some elements are unique. The fan base for this kind of thing is... well... somewhat fanatical. I read the book years ago and thought it was... well... pretty bad. Thought provoking -- yes -- but the core ideas don't hold up to much scrutiny. But, I certainly know plenty of folks who are obsessive about the book, and are willing to promote it quite a bit. You can see it in the Rotten Tomatoes reviews. Only 7% of the critics liked the movie (I particularly liked Roger Ebert's review). Yet 85% of the user reviews liked it.

But that's the thing: it's not a movie for the reviewers. It's a movie for a specific audience, and it seems to have hit that audience head on. Once again, that's a similarity with what Smith is doing. He's made a movie for a specific audience, and he doesn't need to try to market to people outside of that audience, because it's just not worth it. And when you do that right -- find an audience, have a connection with them, and make a movie for them, it can be quite profitable.

Separately, it appears that the producers of Atlas Shrugged are employing some smart alternative business models too, rather than just relying on box office take:

Merchandise, he said, is helping the cause. When Aglialoro obtained rights to the movie almost 19 years ago, he also got rights to sell such items as T-shirts, mugs, posters and even jewelry, though not dolls, video games and other "interesting exceptions."

On Tuesday, the Website atlasshruggedpart1.com was sold out of its most expensive item: a $159 bracelet made of "Rearden Metal," a replica of the one heroine Dagny Taggart (Taylor Schilling) wears in the film.

"The merchandise has taken off like we couldn't believe," he said. "We're shipping to every continent."

So, while some will ignore both of these flicks and their success, claiming that they're "exceptions" to the rule, I think more observant folks may notice some key lessons that can be pulled from both:

• create for a specific audience and target them where they are, rather than casting a wide (but super expensive) net.
• connect, connect, connect with that audience and let them help you spread the word
• offer alternative business models that let people support you at much higher price points ($159 bracelet for AS, $60+ tickets for a movie and Q+A for Smith)

What other generalized lessons might people pull from these two examples?

Filed Under: atlas shrugged, connecting, fans, hollywood, kevin smith, word of mouth

Kevin Smith's Red State Movie Nearing Profitability... Even Prior To Regular Theatrical Release

from the not-bad dept

We've written a few times about filmmaker Kevin Smith and why he's a content creator (not just filmmaker) you should be paying attention to if (like most of us around these parts) you're interested in new business models for content creators. That's because he's really done an amazing job (for years) combining the two key elements that we believe are at the heart of any new successful business model: connecting with fans and giving them a reason to buy. The key thing is that he doesn't go through the motions on either part (as many do), but really goes to great lengths, both in connecting and in giving really powerful reasons to buy.

Lots of folks panned him for his plan to take his latest movie, Red State, on a nationwide tour this spring, followed in the fall with a standard theatrical release -- but via his own distribution efforts, rather than teaming up with a US distributor (they're still working with foreign distributors due to lack of familiarity or simple feet on the ground in those markets). As we noted at the time, the plan didn't seem all that crazy when you looked at it. He's done very successful Q&A tours where he just performs by himself. This time around he'd be doing the same thing... but with a movie. And, part of the reason why all of this works is because he's made a real, rather than superficial, effort to connect with his fans.

It seems like the plan is working so far. At the very end of a (somewhat touching, if slightly fawning) blog post about Quentin Tarantino, Smith mentions in passing some details about the economics of Red State, concerning the tour and other deals in place, which show that the film is pretty close to being out of the red (no pun intended, really) and into the black:

Over the course of the 15 shows of the Red State USA Tour, we made almost one million dollars from ticket and merchandise sales. A few times, we had the highest per screen average in the country. We started out with a record-making show at Radio City Music Hall and went on to average 1100 people per screening. Had we booked ourselves into smaller houses, we could’ve SOLD OUT every show; but being in the larger houses cost us nothing extra.

And apparently, we managed to pull 1100 a night solely from our podcasts: when asked nightly if they heard about the show from a show at SModcast.com, an overwhelming 85/90% of the audience indicated yes (Jon swears it was 100% in Seattle). That bodes well for SIR.

You take what we made on the tour, you add that to the $1.5mil we’ve pulled in from foreign sales thus far (with a few big territories yet to sell). Add to that $3mil we’re on the verge of closing for all North American distribution rights excluding theatrical (which means VOD/HomeVideo/PayTV/Streaming).

The flick cost $5mil to make, but $4mil after the California tax incentive. One of the only things Jon and I promised the Red State investors in exchange for letting us handle American theatrical distribution ourselves was that their $4mil would be covered as soon as possible – something very few other production entities can promise or even offer. Invest a million dollars in almost any production, and you rarely if ever get your money back within five years, let alone the one year it’s looking like it’s gonna take for our guys to make their money back.

Add up all those figures above and you’ll notice our gains are higher than our spending. And without any dopey marketing figures to have to recoup, once we close the aforementioned deals (which Jonn Sloss & LawCo are working to close as we speak), simple math dictates Red State is in the black – long before any wide release. That’s music to the ears of any investor who only put up their money in September.

Now, he claims that "this business bullshit should only be important to the investors," but I disagree. I think it's important and helpful for those who are blazing new trails to share whatever they're comfortable sharing so that others can learn from it. And, by learn from it, I don't mean to mimic it. I'm not talking about cargo cult copying. But learn from the general concepts, and see what can be applied to other situations.

And, given a world with Hollywood accounting, where most movies are designed on purpose to "lose" money on paper, it's quite interesting (and nice) to see a different path being taken.

Now, there is one element that I'm not clear on and perhaps some of you with experience in the movie industry can help out. I tried to reach out to Kevin himself on Twitter, but the man's busy (and sick) and (from the sound of it) getting even less sleep than I do. Here's the part that I'm confused about: I'm familiar with startup investing, where investors (generally VCs) plow a bunch of money into a company in exchange for equity. In those cases, they don't ever expect to get paid back out of revenue, but through the eventual sale of their equity (hopefully for many, many, many, many times what they paid for it). However, in this case, Smith is talking about getting the investment back to his investors quickly (out of the revenue). So, if that's the case... do they still have a financial stake in the later success of the movie? Is it structured as a combination of loan and equity, where they have to pay the investors back first, but then there's also upside on the latter part? Because if they're just getting their principle back, that's nothing special. No one invests in something just to get their money back. They invest for upside. Does it work like a record label deal? Where the "investment" is really an "advance," and the first chunk of revenue all goes to paying back that advance, and then after you "recoup" (as is about to happen here), there's a royalty split? I'm guessing it's something like that, but it would be nice to know the details.

But, even without that information, one thing that is nice to see is an experiment in trying something different with how a film is marketed, distributed and monetized is already working. That's exciting.

Filed Under: business model, funding, investment, kevin smith, profitability, red state

Being Successful With New Business Models Still Means Hard Work

from the no-sitting-back-and-relaxing dept

One of the interesting things we've seen in talking with various content creators who seem down on some of the new business models that are out there, is that they balk at the realization that some of them involve real work. We point to examples of musicians better connecting with fans and giving them reasons to buy, and we get critics mocking those because some of them involve such horrible things as having to do actual work or involve (horror!) actually having to go out and talk to fans. I'm beginning to come to the conclusion that these people might just be lazy. They seem to want everything handed to them. Because one thing that becomes clear as you talk to the many success stories in the content creation world is one simple fact: they work their asses off.

That doesn't mean that all it takes is work, or that if you work hard at things, you're guaranteed to succeed. There's nothing that's ever guaranteed success. But working hard can't hurt. Parker sent over this cool example of the band Hollerado, who detailed not just a variety of creative ideas, but also detailed the almost superhuman level of work and commitment the band put into building up their success as an indie band. The details come out in an email the band sent to Bob Lefsetz, whom they follow (not surprisingly). I was trying to pick the highlights, but there are so many, that I'll repost a big chunk of the letter, because the story is really worth reading (if you want to see the full thing click the link above):

For our first american tour, no-one wanted to book us. So, instead of booking shows, we drove as far way from our homes in canada as we could get. We would then show up at venues where a show was going on and tell them we were 2000 miles away from home, had a gig booked down the street but it somehow feel through. "Would you guys mind if we played a short set here tonight?" IT WORKED! We played countless shows this way.

-Since we rarely got paid more than a few drinks and sometimes pizza, we needed to make gas money.

-We had a laptop with the the tracks to our demo CD. We would go to best buy, get a CD burner and a couple spindles of blank cds. We would burn a hundred demos in the parking lot and then return the CD burner to Best Buy. we would then put the demos in ziplock bags. (hence the name of our first record… record in a bag)

-Once we had a stash of demos we would drive to the nearest mall and set up shop in front of Hot Topic (probly the most shameless thing we have done for our band). We would stand there for hours, with discmen and demos asking anyone who would stop to take a listen if they wanted to buy a demo in a bag. We could sell the discs for 5 bucks and still make $4.50 to put towards gas.

-We did this for 2 years. Anything to avoid having a real job, right?

-In febuary 2009, we released our first full length album for FREE online.

-That same month we invented the RESIDENCY TOUR. We took the old concept of playing a residency one day a week at the same bar and made it psyco. We booked 7 residencies for the month, one for each night of the week. Every Sunday of that cold February we played in at the same club in Boston, every monday at Piano’s in NYC, Tuesday was Lacolle Quebec, Wednesdays- Hamilton ontario, Thursdays - Toronto, Friday - Ottawa, Saturday - Montreal. Repeat 4 times. 28 shows in a row. over 12,000 miles of crap canadian winter driving in 28 days.

- In febuary 2010, we started our own record label to release "record in a bag" in stores in Canada. Although every distributor we talked to said it was impossible, we were finally able to convince one (Arts and Crafts) that we could literally package "record in a bag" in a ziplock bag filled with goodies. So far we have sold over 10,000 copies of it in Canada. With no label support, our first single "Juliette" went top 5 in mainstream Canadian alternative radio.

- Things began to take hold in Canada and we soon became privy to the Canadian grant system for touring acts. Still, when they gave us a budget to play a showcase in China, we took the budget and stretched it for all it was worth. We turned it into a 3 week tour deep into china. We recorded a song in mandarin chinese and released it on the internet in China. We were able to return for another tour 6 months later.

Now that's a hard working band. But it's also a band that doesn't take anything for granted and that isn't sitting around waiting for someone else to give it the magic answer for success. It's a band that clearly cares about its craft as well, and recognizes the value of getting out there and playing. While it doesn't come through as fully in the letter, some of the commenters on the post also add in the point that the band is also extremely engaging with fans, and puts on a fantastic live show (not a surprise, given everything else).

I'm sure some of the usual commenters will claim that this is somehow horrible or will misrepresent this as me saying that all bands should just start driving 12,000 miles to do a show in a different city every night. But, as I've pointed out over and over again, there is no magic bullet to be successful (and there never was). The point is that if you're committed, hard working, good, creative and willing to embrace what fans want and what the technology allows, you have a much better chance of succeeding today than ever before. As these guys have shown, you don't have to worry about gatekeepers any more. In the past, the strategy was almost entirely focused on getting "noticed" by a gatekeeper and then hoping that they would provide that magic bullet (which they rarely did in real life).

For those who are willing to embrace what this world allows, the story above is likely to be inspiring. For those who want to sit back and have everything handed to them, I could see how it would be horrifying. But I get the feeling those people won't ever be satisfied.

Oh, and make sure to check out this absolutely awesome live action "human" 8-bit video they did (all in one take!) for one of their songs.

Filed Under: business models, hollerado, work

More Data And Thoughts On The Pay What You Want For A Stylus Experiment

from the fascinating dept

We already covered the interesting "pay what you want" experiment done by the two guys who developed a nicer stylus for the iPad. As we noted at the time, "pay what you want" seems like a risky way to do tangible goods offerings, but with the Kickstarter model, it was possible to set it up with a threshold that had to be met to make the experiment work. That resulted in what appeared to have been a mix of motivations in the prices that people chose, with some trying to come in just a bit under the average needed to get the deal. And, of course, some came in at the cheapest possible. In the end the pricing came close, but didn't quite hit the threshold, so the guys added a flat-rate $25 option (what they planned to charge when the product came on the market) and they got plenty of buyers at that price, allowing them to go way past the amount they needed.

It appears that the two guys are quite interested in the thinking behind the experiment as well, so they've posted both some interesting data and comments from users concerning the experiment. Since we're all about digging in to these kinds of experiments, this is great. They put up two charts, showing the overall distribution in terms of dollars, as well as the distribution in terms of actual number of orders. They're both quite interesting:
As you can see, there was a more or less standard distribution in terms of actual dollars raised, but that meant there were lots of people down at the cheap end of the scale. In this case, it looks like a bit over 200 out of the 3,000 buyers put in the minimum $1 rate. Also quite interesting is how many people did increments of $5. In case it's not clear, that second graph shows the exact dollar amounts, with the light green being the lowest amount in that range, and the dark green being the highest amount. So, you can see a little over 200 people paid $1, and what appears to be a little over 400 paid $5. As you look down the chart, it looks like most people hit those $5 increments: $5, $10, $15, $20, $25 and $30. In fact, it looks like the mode would be $10.

Some people seemed to get upset that many backers paid less than the "average" amount needed to get to the $50,000. But in the comments, some people pointed out that it's unfair to be upset about that:

"I think it's funny how everyone automatically places such a high value on this thing because of the $50k/3000 calculation. I asked myself how much I would pay for this simple item if it were an impulse buy at the registers at a place like Micro Center, and decided on $3. I didn't think I was "freeloading" or screwing anyone over; I was using the opportunity given to tell the seller what I think their product is worth. It seems some people are forgetting that products are allowed to fail if they can't be sold for a price people are willing to pay." -- Justin Cardinal

"I personally own two styluses and have backed another one here on Kickstarter. The fact that I was given the opportunity to pay what it's worth *to me* was awesome. And so my pledge was less than the $16. On the plus side, I tweeted the link as well as posted it to Facebook. I also found this a great opportunity to introduce my teen to Kickstarter. He signed up and pledged as well. Sure, he didn't put in a lot of $$$ but he's actually really excited about getting in on the ground floor." -- Jose Lema

I think the two comments above are both really important. There are all sorts of reasons why people might pay less than the "average" amount needed that have nothing to do with "freeloading." The experiment clearly stated that it was "pay what you want," and I don't see how you can fault anyone for paying what they honestly felt it was worth. Also, there's the point of letting others know about it as well, which shouldn't be underestimated.

Others found that they liked this pay what you want model better than the typical Kickstarter offering:

"Bottom line: this should be the default for all Kickstarter project funding. Early adopters can get in for minimal contribution, they'll be more apt to share to their circles, and it keeps you coming back to Kickstarter for more neat ideas to fund. The later you buy-in, the more it costs. (Of course this would be an optional project setting.)" -- Benjamin Bertrand

As I've said time and time again, I'm not always a big fan of "pay what you want," but I can see applications for it. There is definitely an added advantage describe here, in that it offers "early adopters" a chance to get in at a lower price point. In some ways, that's a bit like what the music service Aimee Street tried to do for a while (until it was swallowed up and killed off by Amazon.com). Again, I see some promotional benefit here, but I'm not sure it really makes sense long term.

A lot of the commenters talked up how there was a freerider problem here, but again, I don't see it that way. While I'm sure some people just bought it because they thought they could get a "deal," I'm sure many paid what they really felt it was worth. The fact that there were only about 200 $1 bids seems to support that. If there were really so many freeriders, I imagine there would have been a lot more $1 bids.

That said, I'm curious how the experiment would have gone if the makers of the stylus hadn't shared the two key pieces of information: (1) that they needed $50,000 out of 3,000, thus establishing the $16.67 average price needed and (2) that they were going to sell it on the market for $25 once they made them. Without those two bits of info, would the charts above have looked different? It seems likely that they would. I would guess a lot more people would have paid lower amounts, but I don't know that for sure. I'm curious what others think on that subject.

Filed Under: business model, pay what you want, stylus

Foo Fighters Album Leaked; Band Relieved

from the and-that's-how-not-to-freak-out dept

We're seeing more and more bands realizing that when albums leak, it's not the end of the world, and, in fact, that there are ways to take advantage of that. Simon Bodger points us to the news that the band the Foo Fighters appears to recognize this completely. After discovering that their new album had leaked, the band went to Facebook, and noted that it was "Rad" that the album had leaked because they were "starting to think no one cared," and then noted that "our version sounds better," and pointed people to a streamable version of the album instead. Seems like a more effective way to build up happy fans, rather than to tear them down...

Filed Under: foo fighters, leaks

Results Of The 'Pay What You Want' Tangible Goods Experiment

from the sorta,-almost-worked dept

We recently wrote about an interesting experiment with a "pay what you want" business model for an iPad stylus. While I tend not to be a fan of "pay what you want" for tangible goods (since there's a significant marginal cost), the two designers behind the device decided to combine it with Kickstarter's "threshold" setup. Basically, they asked people to pay what they wanted for the stylus, but also only left open 3,000 spots, and said they needed $50,000. Well, the 3,000 slots went quickly -- in just about a day. But the funding didn't quite reach the necessary level. Instead, it came out at just around $45,000.

While this is just a single data point, it probably isn't that surprising from a psychological standpoint. I would imagine many people went through the thought process of realizing that they could try any price, but if they went too low... it might not get made at all. So, for people who want to be cheap, perhaps the "logical" price point is just a bit below the necessary average, hoping that some others will overpay and subsidize you. And that's what happened. As some in our comments noted, perhaps a much more interesting (and possibly better) model would be if there were a way to take the 3,000 highest bidders. In that scenario, if you bid too low, you wouldn't get the stylus at all... but others who bid slightly more would. I'd be fascinated to see how something like that worked out.

Either way, with a few weeks left, and the ability to change bids, many expected that enough people would change their bids to hit the necessary threshold. However, rather than wait for that, the designers just added some new fixed-price tiers, that priced the item at the $25 they plan to officially market it at, and a whole bunch of people have paid up, so the overall project did end up going well past the threshold. Definitely an interesting business model experiment, which, once again, highlights one of the risks with a pure "pay what you want" model especially with tangible goods. It can work, but there are pressures to keep in mind.

Filed Under: ipad, kickstarter, pay what you want, stylus