I must admit that I have no idea why the pricing of the new Vogue archive is interesting me so much. I guess it was Matt Yglesias’s post that described the whole endeavour as tragic that got my attention. Having noted that an individual subscription will cost $1,575 per annum, Yglesias wrote:
I don’t care even a little bit about fashion and I’ve never bought an issue of Vogue, but I bet I could have a ton of fun with this …. But think of the deadweight loss! The cost to Vogue of adding a new subscriber is tiny. If there’s somewhat out there who’d gladly pay $1,000 a year for these archives but won’t pony up the extra $575 that represents a huge loss of utility to the users and a huge loss of revenue for Vogue.
We actually have a little more information on that. I think we can safely say that the cost to Vogue of an additional subscriber is, in fact, zero. I know there is bandwidth and server maintenance but even if you try, we are approaching zero. That means that a price of $1,575 identifies the point on the demand curve where the price elasticity of demand is -1. That means a 0.1% price drop will cause a 0.1% increase in subscription numbers, leaving revenue the same. As Felix Salmon points out, this is targeting the professional segment of Vogue’s demand and given what they get the price sounds reasonable especially since it is difficult for Vogue to work out individual’s willingnesses-to-pay.
And what do they get? From the demo video, they get a very nice curated search of Vogue’s archives. Users can search on relevant terms, save information and even print it and share with colleagues. This isn’t Google. This is useful to the core. Google gets you to pages that might have relevant information. Because the uses of Vogue can be envisaged, this product appears to get you precisely what you want. It would have taken some investment to get there but we should be clear about one thing: this is not mere indexing. This is a way of making the information useful by making it quickly retrievable. My guess is that it was actually designed by users. I kept thinking: if only scholarly academic works could be disaggregated and tagged in this way. My point is that there is real innovation here.
Now Yglesias’s point is that Conde Nast (who own Vogue) could be somewhat more innovative in their pricing and scrape some more revenue out of those who are not professionals. He would like to play around and surely Vogue could give him a sandpit for an hour for say $5 — after which he would probably get bored and go elsewhere. But for students and other low ability to pay fashion connoisseurs, things are trickier. But actually, delving a bit deeper Vogue are practicing price discrimination. They already have a free but limited search product. And for the main product, while an individual subscription price is set, a corporate one is not. For University libraries — especially at design schools — Vogue will negotiate a deal. That sounds like a move towards perfect price discrimination to me or at least a bona fide attempt to avoid deadweight losses.