I was reading NewTeeVee recently and their weekend question caught my attention: How Much is a Movie Worth? The standard now seems to be $.99 rental, $4.99 old release, $9.99 new release. I love feature films, but I have yet to purchase a single one digitally. In this on-coming era of digital distribution, I can’t help but feel that short films have a second chance here (I’ve purchased a number of short films from iTunes for $1.99——some I’ve even watched more than once!). All of us——filmmakers, fans, producers——need to focus on the challenges out there if we hope to lead the way.

The worth of something is a relative thing

There are many things that I would tell you I’’d never buy—like a leaf blower. Now many people do purchase leaf blowers and no doubt make good use of them, but I just find them ridiculous and have no need for one. But, you know, if the price of that leaf blower dropped low enough to, say $5, I just might buy it. But of course, it wouldn’’t make sense for a leaf blower maker to sell it to me for such a low price because the cost of manufacturing alone is well over $5. However, once we start talking about digital distribution, where the price of selling a copy of your product is next to nothing, that model changes. Now any sale at any price is a plus.

Why are we still setting prices on digital products the way we set them for physical products? Many people have a difficult time justifying the purchase of a digital “thing”. This isn’t only the tech-slow who don’t trust the longevity of digital content but also the uber-tech who feel it’s worth the time and risk to copy, rip, or torrent the content illegally. Even the rest of us who fall in between these groups haven’t jumped aboard the digital bandwagon gleefully. Little did we know until now just how important the physical artifact of a vinyl record, DVD, or paperback book was to the enjoyment of our favorite stories. But we are all motivated by both emotion and reason. If the emotional element is lacking in our digital content, surely the reasonable part can make up for it.

Distributors have taken note of this and set their prices for digital content slightly lower than their physical counterparts. Kindle books are marked $9.99 down from the $16-18 of a new release. iTunes albums are $9.99, down from the typical $14.99 of a CD. iTunes movies are $9.99 (see a common thread here?), down from the $15-20 of a new DVD. Valiant efforts by the distributors, but this isn’t working. Digital content hasn’t caught on the way it should, and the distributors are sitting there tearing their hair out saying, “We’re giving it to you for less money, it’s more convenient, and you can watch it instantly! Why the hell aren’t you buying this!” People seem to have different expectations about pricing.

Different Folks, Different Strokes

Would it really be so bad to say there could be different prices for different people? That’s what the seller in Cambodia does when she sees a foreigner walk up and ask the price on a wall hanging of elaborately-decorated yet out-dated currency. “Thirteen dollars,” she says. No thanks. But as I begin to walk away, she asks, “How much would you pay?” I examine it a bit more, then say, five dollars. And after a bit more bargaining, I eventually do get it for just the five bones——which is probably a great deal more than it’s worth (the face value of the currency itself was well under a dollar, I found out later). But I purchased it for its beauty, and we both walked away pleased.

I’m sure I paid more than a local Cambodian would have paid. But that doesn’t bother me. I got exactly what I asked for. The goal of the seller is to negotiate the highest price possible for each buyer. And like the wall-hanging, digital content costs next to nothing, so they make sure to make a sale regardless of how small the offer. If I’m only willing to pay $3 for a new iTunes movie, why NOT sell it to me?

Conclusion? Not Exactly.

I don’’t know where all this leads, but I can imagine two paths worth exploring. The first, a model where prices are set by consumer. Where products that are valued more by the general public also carry a higher price tag. There are simple supply and demand curves that enable distributors to predict what price will bring the greatest profits. Traditionally, this is done once in a great while. But what if this happened dynamically over time, changing as frequently as the top sellers list by tapping into immediate consumer actions?

The second, a model where every price is “negotiated”. Amazon and Netflix know my tastes and interests better than the checker at Best Buy, so why not use that knowledge to negotiate a better price? Or why not treat digital media as a commodity that individuals can buy and sell at their own negotiated prices (check out the lending site, Prosper, where interest rates are negotiated by community members). Now obviously, there’s a social factor here that can crumble the seller’s negotiation power. But, there’s also the demand factor. Digital distributors have to throw out the idea that there’s one set price for everyone, everywhere, all the time.

As one example, a few restaurants like London’s Little Bay have instituted a “pay as you wish” menu. However, they’ve learned it’s critical the transaction be made face-to-face with the restaurant owner. Sometimes we simply need to see the implications of our transactions to be a bit more honest. And that is something digital content has yet to overcome.

Imagine if you could sell your digital media license the same way you can sell a used DVD today. I have no doubt you’d see a fast uprising of digital distribution innovation. People auctioning off their copy of Chinatown eBay-style, stay-at-home dads making a living buying and selling in bulk, and everyone striving to offer you the quickest delivery at the lowest price. Sounds great for consumers. Content providers just need to regulate the value of their product. But I have a strong feeling that no one on the content side is really looking at this digital “thing” all that seriously.

There is market potential in the power of the well-connected consumer that has not yet been tapped.