Challenging notions of “free” February 11, 2009
Overview • • • •
Why revisit “free”? Approach What we found What next?
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“Free” is not “new” … • A long and successful history • Galleys, ARCs, blads, sample chapters • Digital sampling on the rise • … but only a small set of experiments using fully “free” content
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Why look at this now? • Growing sophistication of ebook readers • Proliferation of digital content • Ongoing debate about the true impact of free • Perceptions of a piracy threat
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Why O’Reilly and Random House? O’Reilly M edia
Pioneered discussion of the distribution of free content Active in promoting widespread access to its content Perceived as vulnerable to a piracy threat
Random H ouse
Largest U.S. publisher A wide range of book types reaching a variety of audiences Engaged in a number of experiments with “free”
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Book marketing: growing content discovery and access H igh D iscover y
Appear an ce on Opr ah
L ow Access Ov
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th bo s se s e a cce r a c in nd , a e
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e ov c is
Coop M ar k et in g
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Amazon Pr omotio n M useum Stor es
H igh Access
Catalog & BEA
Cor por ate Web Site L ow D iscover y
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Options to focus marketing Cultivate r elationsh ips to dr ive sales
Build or extend an individual br and M ar k et costeffectively acr oss a content niche 7
Our approach • • • • •
Document and assess prior work Address data quality Analyze and share results Assess implications Develop and propose next steps The research is data-driven, open (without compromising publisher data) and structured to share knowledge. 8
Overall findings • Not binary • Measures must evolve • Does not appear to parallel other media • P2P “threat” may be overstated – Low incidence – Significant lag – Technical skills are not commonly held 9
Proposing a more nuanced model “White ” market • Print sales • DRMprotected digital sales • “Trialware”
“Gray” market
• Unprotected digital sales • Galleys, ARCs • “Free” promotions
“Back channe l” • Unauthorize d duplication • Pirated content 10
Overall findings • Not binary • Measures must evolve • Does not appear to parallel other media • P2P “threat” may be overstated – Low incidence – Significant lag – Technical skills are not commonly held 11
There is value in structured testing • • • •
Track a robust set of variables Provide appropriate segmentation Capture content characteristics Test hypotheses (validated or refined)
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The sample matrix (illustrated)
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An initial look at sales impact T esting fr ee (Random H ouse)
8 titles, 12 formats tested in the first half of 2008 Sales up 19.1% during promotional period Sales up 6.5% during promotional and postpromotional periods Ranged from 155% up to 74% down
M onitor ing P2P (O’Reilly)
8 titles that were posted O’Reilly front list in 4Q 2008 Average post-seed sales were 6.5% higher in the four weeks after Ranged from 18.2% up to 33.1% down Low seed and leech volume Average first seeds appeared 20 weeks after publication date 14
We tested the results in a few ways • Did pre-sale volume matter (i.e., would sales lift be greater for a previously popular book)? • Is there a relation between immediate (during promotion) and post-promotion lift? • To create comparability, we used “average sales” for each period (pre-, during and post-) 15
Promotion and post-promotion sales not correlated with prior sales volume
Correlation coefficient = 0.03
Promotional sales also not strongly correlated to prior sales volume
Correlation coefficient = 0.12 17
What does this tell us about “free”? • Average results in a small sample were “up” • A range of possible outcomes exist • No correlation with prior sales, even when isolating print sales as a channel • Important to collect more results and We took similar approach grow theasample size to testing the data collected on pirated O’Reilly titles…
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It’s not clear if prior sales volume changes the impact of pirated content
Correlation coefficient = 0.67 (-0.30 if outlier is excluded) 19
The number of seeds is correlated with growth in print sales
Correlation coefficient = 0.35 (0.74 if outlier is excluded) 20
The number of seeds peaks quickly
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The number of leeches peaks immediately and quickly declines
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Lag time before seeding varies Average = 20 weeks
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Some research surprises… • Number and range of “under the radar” free experiments available for analysis • Strong interest among trade publishers • Some strongly positive correlations • Low volume of P2P incidence • Lag time on P2P seeding 24
The work will continue … • Matrix offers 20 possible options (and even more permutations) • 16 covered in this first pass, but several with only a limited set of data points • More promising opportunities to test – Young adult – Backlist, especially for series – Trade nonfiction 25
Three useful cautions • Correlation isn’t causality • Larger samples may uncover an existing skew • What works today may not work as well at some future date
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Next steps • Additional Random House tests queued • Continued P2P monitoring • More publishers can help fill in the test matrix • Gathering feedback • Refining the analysis 27
For more information • “Rough Cut” research paper coming soon – Includes research covered here – Also provides background on free and P2P
• brian.oleary@magellanmediapartners.co • mac@oreilly.com
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