Pricing Product Lines of Digital Content: A Model Using Online Choice Experiment

With the rapid penetration of broadband technologies, content sellers have become one of the fastest growing businesses on the Internet. With content being made available in many forms and formats, these firms are grappling with the problem of pricing their product line appropriately. In this paper, we examine this problem in the context of a publisher who sells books in print and PDF forms online. At the time of this study, the publisher was already selling books in print form online and was contemplating the launch of PDF forms of these books. However, it was not clear how these forms were to be priced relative to each other. This decision depended on the relative preferences of customers for these different forms, their willingness to pay for these forms and the trade offs involved. On the one hand, the PDF form could be priced low enough relative to the print form to stimulate market expansion for content, while on the other hand a low priced PDF form could cannibalize the print form resulting in lower revenues. In order to examine these issues, a novel choice experiment was conducted online at the publisher's Web site, and a model was developed to analyze the data and provide pricing recommendations. The paper describes the choice experiment, the model and the results. It provides useful insights into how online content providers can develop pricing models for their content.