In the essay, “Post-Medium Publishing,” Paul Graham claims that consumers never pay for content. He begins with the observation that publishers set prices based on the cost of production and distribution of the format. The essay offers some consideration about the future of book publishing.

Do consumers pay for content?

I have never heard of a consumer paying for unwanted content.

Let us assume the consumer wants the content, and that the essay does not infer that consumers are unwilling to pay for content, simply chasing after the cheapest form of the content, otherwise libraries would have put bookstores out of business years ago. The consumer wants the content and is willing to pay. But does the consumer actually pay for the content?

Consider this question from the essay:

If audiences were willing to pay more for better content, why wasn’t anyone already selling it to them? There was no reason you couldn’t have done that in the era of physical media. So were the print media and the music labels simply overlooking this opportunity?

Art is subjective. Not everyone agrees on what makes good content. Many titles target an audience. Even the experts can’t always explain why a certain title sells as much as it does.

The reason publishers set prices by cost of production is profit. Graham points out that the idea is to sell the content as cheap as possible. Competition forces a publisher to keep the price as low as possible earning profit in number of sales.

Publishers take chances on unknown artists often losing money from sales too few to cover production and distribution. Sales of popular titles cover the losses. This results in poor selling titles priced too high. Consumer are more likely to purchase better content reflected in number of sales.

Some titles are priced too high for the content, and consumers are less willing to pay the asking price.

New release prices are nearly the same for a format, but look at older titles. Prices tend to fall as a title ages, faster for some mediums. Video game prices fall after a few months, the most popular titles remaining at their initial price for over a year. Look at releases from October 2008: Fallout still sells for initial release price (as of today: $50 for the PC download) while Fable 2, Dead Space, and Golden Axe have fallen in price.

Popular content maintains higher value.

Consumers may purchase entire video games without any physical media. Additionally, they may purchase downloadable content (DLC.) While some DLC adds more length to a game, others are there merely for aesthetics such as additional costumes for characters including LittleBigPlanet, or the Horse Armor for Elder Scrolls: Oblivion. Pure content; nothing physical, and consumers pay.

Graham states that free copies online compete with the publisher’s distribution. This is not true given that titles are available online for free. Consider classics available at Project Gutenberg, and many consumers still purchase the physical books. Some authors give away stories for free while selling physical and digital copies on Amazon. Will this change in the future?

Neil Gaiman pointed out on Twitter (here and here) that his novel, The Graveyard Book remains on the New York Times “Best Sellers” (Chapter books, #8) after a year even though a free copy is available online. Take a look at his blog post on this topic.

Graham claims that prices will continue to fall once writers realize they don’t need publishers. This is not entirely true. Publishers need to change since writers will still need marketing, editors, and all the little things that sell stories. Authors may choose between self-publishing and a digital publisher. Prices will fall.

Amazon is already driving prices down by selling many of the big new releases at a loss trying to increase Kindle adoption (read more: Beliefnet.) However, publishers may combat this by delaying eBook release after hardcover much like they do for paperbacks. Since the cost of production and distribution of an eBook is lower than the printed book, we see a greater range in price. An eBook by an unknown author may sell for $1 or $2 while new release eBooks by established authors go for $10 on Amazon. Will the cheaper eBook titles force prices of titles by established authors down?

Graham calls iTunes a “tollbooth”, a gateway to the iPod. Apple’s iTunes is a software product. The iTunes Store is a store. No tollbooth here. The consumer doesn’t need the iTunes Store. Audiophiles and prefer using iTunes as a tool to push uncompressed original CD tracks into their iPods. Consumers may also choose other stores for their music purchases. Apple’s store is popular because it’s a good, convenient store. If it was all about getting content as cheap as possible, everyone would download pirated copies.

Graham implies that businesses pay for software due to laws. This is not true.

Software applications are tools like hammers and wrenches. Tools may include content, but tools are not content. Workers use the best tool for the job. Photoshop CS4 allows the user to edit images. Gimp, an open source product, also edits images for free. A graphic artist may choose to pay for Photoshop CS4 for productivity and special needs not available in Gimp. Commercial software may also come with services. Consumers want to pay for quality tools that help them get the job done. Otherwise everyone would pick free open source software putting Microsoft and Adobe out of business.

Consider this point from the essay:

What happens to publishing if you can’t sell content? You have two choices: give it away and make money from it indirectly, or find ways to embody it in things people will pay for.

The music business struggles in the transition to digital delivery, trying to sell content. They have gone after iTunes Store demanding performance fees for the 30 second samples (read more: cnet.)

Benefits to giving away content:

Piracy is not an issue. Increase awareness about the artist. Drive demand for products. These benefits may convince artists and publishers to give away books and music to make money indirectly from concerts, merchandise, and future distributions of content yet to come.

Some books are overpriced for their content, and consumers choose to pay for better content. Popular content maintains value selling at higher prices. Consumers pay for games without physical media, DLC, and music from iTunes Store. Therefore, consumers pay for content.

The future may bring new forms of storytelling (read more: The Huffington Post), and the stories we know today may be given away free. Better AI may bring video games and storytelling closer. Imagine the idea behind Storybird blossoming into some new forms of interactive storytelling.

Whatever the future brings, consumers will pay for the content.