Pricing Digital Textbooks - MIT OpenCourseWare...Buy digital textbook, 4% Rent, 1%. Digital textbook...
Transcript of Pricing Digital Textbooks - MIT OpenCourseWare...Buy digital textbook, 4% Rent, 1%. Digital textbook...
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Pricing Digital
Textbooksfor growth and profits
Team Project15.567 Economics of InformationMIT Students
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Exponential growth forecast, but pricing is key
18.8%
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5.5%
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20142013201220112010
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Digital Textbook SalesFive-year projection
Image by MIT OpenCourseWare.
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Pricing in the ‘textbook’ category is less variable
Source: Amazon.com
Fiction TextbooksPrice
Sample #0 10 20 30 40 50 60
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Hypothesis
In a market with
• a well developed 2nd hand market1
• where goods do not degrade significantly through use
pricing will be less variable 2nd hand pricing indicate WTP for rental
1 50-60% of textbooks are purchased 2nd hand. Source: Survey of MIT Sloan students. 49 respondents.
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Data suggests WTP for rentals is ~30% of list price
Source: Amazon.com
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Sample #
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Survey confirms WTP for rentals ~30% of list price
Source: Survey of MIT Sloan students. 49 respondents.
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Q: At what discount rate do you expect to sell your books at the end of the semester?
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Many versions exist in the current market
Source: Survey of MIT Sloan students. 49 respondents.
Buy-new-to-
keep, 25%
Buy-new-to-
resell, 10%
Buy-used-to-
keep, 26%
Buy-used-to-
resell, 34%
Buy digital textbook,
4%
Rent, 1%
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Digital textbook limited to one version: Purchase at ~20% discount
Source: Amazon.com
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Current price point fails to maximize growth & profits
• 29% willing to pay full price to own
– But currently purchase at 20% discount
• 44% would not buy digital as buying and reselling print is better value
– Slows growth in digital textbook sales
– Printing + shipping costs reduce profits
• 30% of new and 55% of used books purchased will be resold
– No value captured on these transactions
Source: Survey of MIT Sloan students. 49 respondents.
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Hypothesis II
Enabling resale of digital textbooks would create a 2nd
hand market and increase growth and profits
• Buy-to-own
• Buy-to-maybe-own
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Resell fee controls size of 2nd hand market
Source: Amazon.com
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Next: Use survey data to establish supply curve and optimal fee
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Current conclusions
• 2nd hand textbook market enables us to establish the value of temporary ownership and hence WTP for rentals
• Enabling resale of digital textbooks, whilst controlling the size of 2nd hand market through resale fees, would increase profits
Could this help maintain higher price points for other digital goods?
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Pricing Digital
Textbooksfor growth and profits
Team Project15.567 Economics of InformationMIT Students
![Page 14: Pricing Digital Textbooks - MIT OpenCourseWare...Buy digital textbook, 4% Rent, 1%. Digital textbook limited to one version: Purchase at ~20% discount Source: Amazon.com 0 20 40 60](https://reader033.fdocuments.net/reader033/viewer/2022050120/5f503787a608d869df1d61f9/html5/thumbnails/14.jpg)
MIT OpenCourseWarehttp://ocw.mit.edu
15.567 The Economics of Information: Strategy, Structure and Pricing
Fall 2010
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