Michael Ross is the Founder of Ross & Associates, LLC, an educational publishing and technology consultancy serving the PreK through higher education markets, and an executive coach to CEOs. He previously held executive positions in several publishing companies, most recently as the SVP/ GM at Encyclopaedia Britannica. He has authored four books, including Publishing in the Digital Age: How Business Can Thrive in a Rapidly Changing Environment (Routledge). As an executive coach, Michael leads a Vistage CEO peer group, bringing together leaders from diverse industries to work on their most difficult challenges. He holds a B.A., summa cum laude, from the University of Minnesota; an M.A. from Brandeis University; and a certificate from Stanford University’s Advanced Management College.
The Past Is Not Prologue
Our access to print-based knowledge and information has not changed very much since the arrival of digital alternatives in the early 1990s. Print options today are limited to single units and multivolume sets, in hardback or softback versions, and in four-color or black-and-white. Also, from a reader’s perspective, books produced today are no better than they were a century or more ago.
All print innovations over the last 30 years have targeted the production (pre-press and printing methods) of books—with digital files and print-on-demand technology—as opposed to the enhancement of the reading experience. Still, printed books remain popular because they are universally accessible, portable, transferable, require only available light—and are free for library patrons to borrow.
Amazingly, even the cost of books hasn’t changed very much. Over the last decade, the prices for print products have remained flat, despite inflation. Moreover, with the proliferation of second-hand buying options, in both the trade and education markets, book ownership can be a bargain.
But the trajectory of knowledge and information transmitted through digital media reveals quite a different story regarding both the variety of digital solutions available as well as what consumers must pay. Digital outputs have been in a constant state of flux ever since the first e-book hit the market 30 years ago, followed by the rapid development of the world wide web, which has made most other digital formats for content distribution—such as compact discs, CD-ROMs, and thumb drives—obsolete.
Digital content, available either to limited audiences through proprietary networks or more extensively over the web, has been transmuting at the speed of technology.
The options available today to educators and consumers accessing web-based content can vary depending on the market, the content type, and the platforms that provide end-users access to the content.
At the same time, ever since publishers of digital content have made the user experience a priority, they have been experimenting with payment models that can cover the internal costs of producing, acquiring, and maintaining digital content at price points that meet two goals: how to grow market share and increase lifetime customer value.
As a result of publishers’ ongoing experimentation with pricing models, readers and viewers of dynamic and archival content face a range of pricing models, both fixed and variable.
For buyers of multiple databases, keeping track of the various payment options for accessing digital content can be baffling.
Fixed Versus Variable Pricing Options
For years, entertainment platforms, such as HBO or Netflix, have followed a subscription model that, for a fixed monthly fee, allows the user unlimited access to all the content available on the site, including new and dated content. A single subscription normally accommodates more than one simultaneous user on multiple devices.
Although the monthly fee for these services has increased over time, until recently this model seemed both consumer-friendly and popular, as the number of subscribers for these platforms has grown substantially. However, competition in this space has made it more difficult for these independent platforms to maintain the same subscriber growth rate they enjoyed in the past. Now Netflix, along with its main competitors, has added alternative models that allow users free access to their platforms with advertising.
Amazon Prime, for example, provides options, including rent/buy options in addition to free with and without advertising.
Turning to the education market, buyers and users can encounter more than a dozen options for gaining access to digital content.
Here’s a line-up of the most common pricing models used by educational publishers and content providers that open the paywall to their proprietary and licensed content. Over time, we may see one or more of these models disappear with disuse while others may arise. Although the education market can charge a premium for specialized proprietary content, they are still subject to market forces.
Annual Fixed Price: Annual fixed-price models are common in any segment of the education market but are typically more popular for large populations of users, especially multi-building districts, states, or even countries. Publishers calculate the fixed price on an imputed price per user. This model applies best to enterprise product implementations and normally provides unlimited user access during the term of the license.
Per Building: Publishers commonly use price-per-building models for products that are relevant and accessible to all teachers and students in a stand-alone building, such as reference databases or e-book platforms.
Per Student: Using this model, the amount that a school district or building pays is based on the student enrollment at the start of the school year, or the school’s full-time equivalents, referred to as FTEs. Whether the student population grows or shrinks over the course of the school year, the price remains constant for the subscription term. In this model, teachers do not figure in the number of FTEs even though they would have full access to the product.
Per Classroom: This model applies to subject- and grade-specific online programs, e.g., grade seven STEM (science, technology, engineering, and math); teachers also gain access.
Per Teacher: A per-teacher price would apply to an online resource that a teacher might use to present materials to the class, like a lesson-plan database. The teacher FTE model covers the number of teachers at the start of the school year and is a common model for online professional development or training for all participating teachers and staff.
Price multiplied by the Number of Buildings: This model provides discounts based on the total number of buildings in a district. Percentage discounts increase with the number of buildings. This formula typically applies to large online implementations like core curriculum or e-book platforms.
Population Served: With this formula, a fraction of the total population that, for example, a public library serves, is the basis for calculating a price, under the assumption that not everyone in a geographic location uses the library. For example, let us say an estimated 5% out of a population of one million will use the library each year, and the product price per user is $1.00; the library would pay $50,000 to provide everyone with a library card free access for a year.
Per Use or Metered Usage: A price-per-use model gives library patrons access to a large database of content, but the library pays only for what its patrons access. This model is common for media websites, like movies or audiobooks, and usually limits users to a certain number of uses per month, or a limited amount of time on the site. The PPU model can include all or part of a book/movie. Day or hourly rates are becoming increasingly popular in public libraries.
Tiered Fixed Pricing: A tier model segments a market by population, like school districts or towns. Tiered pricing for an online package of, say, twenty different online courses could look something like this:
- Tier 1: for populations served < 100K (~$2,500)
- Tier 2: for populations served >100K and <500K (~$3,500)
- Tier 3: for populations served >500K and <1M (~$5,500)
- Tier 4: for populations served > 1M (~$6,500)
Digital content distributors adjust the tier parameters depending on the actual population served.
Annual or Monthly Fixed Price: Publishers use this model for online product offerings that periodically refresh, like newspapers, magazines, and streaming services.
Free with Advertising: An ad-based, or sponsored model, allows free access for all users. Sponsors have options for how they pay for ad space: e.g., a fixed price, CPM (cost per thousand impressions), CPC (cost per clicks), or CPA (cost per acquisition).
Rate/Time: This refers to fee-based online courses, webinars, or offerings that start on a given date and remain available for a period of anywhere from one week to months.
Rent: Consumers rent online products—e-books, language courses, for example, for a flat fee by downloading the files from aggregators or directly from the publisher for an established period, which has become a common model for cooking or do-it-yourself sites.