I don’t know if any area uses this business model already?
That sounds like the threshold pledge system, which is fairly common in the nonprofit world and has been applied to a few media projects that I’m aware of. Kickstarter is probably the most famous service to use the model.
I am not an economist, but I wouldn’t expect it to generate the funds of sale by unit if widely adopted. There’s a basic information asymmetry there which I’d expect to make people averse—and justifiably so—to letting go their money.
Readers have more information about the quality of a new book in a business model where the book exists publicly and can be browsed in a bookstore, borrowed from friends, etc. than in a business model where the book has no public existence until bought and paid for. This can be diluted somewhat by giving out sample chapters, advance copies for reviewers (but they’d better be trusted reviewers), et cetera, but nonetheless I’d expect it to push willingness to pay down at the margins. Especially taking hyperbolic discounting into account—readers will generally pay more for a book today than a book to be published at some indefinite point in the future.
The marginal cost of producing new digital copies of a book is miniscule, so it might still end up being favorable to an (established) author relative to dead-tree publishing—but compared to self-published digital media sold per copy, I’d expect it to come out to a loss. There are other piracy-friendly business models out there, though—I’m rather fond of Baen’s Free Library, for all that their books are unabashed pulp.
That sounds like the threshold pledge system, which is fairly common in the nonprofit world and has been applied to a few media projects that I’m aware of. Kickstarter is probably the most famous service to use the model.
I am not an economist, but I wouldn’t expect it to generate the funds of sale by unit if widely adopted. There’s a basic information asymmetry there which I’d expect to make people averse—and justifiably so—to letting go their money.
What asymmetry?
I can think of two problems (context being writers and books):
first book by a new writer pretty much has to be free. No one trusts him.
a famous (trusted) writer writes crap book or no book, but gets money anyway. He loses trust. (“Trust” becomes new world currency?)
In a way, the relationship writer—readers becomes more similar to that of employee—employer.
Readers have more information about the quality of a new book in a business model where the book exists publicly and can be browsed in a bookstore, borrowed from friends, etc. than in a business model where the book has no public existence until bought and paid for. This can be diluted somewhat by giving out sample chapters, advance copies for reviewers (but they’d better be trusted reviewers), et cetera, but nonetheless I’d expect it to push willingness to pay down at the margins. Especially taking hyperbolic discounting into account—readers will generally pay more for a book today than a book to be published at some indefinite point in the future.
The marginal cost of producing new digital copies of a book is miniscule, so it might still end up being favorable to an (established) author relative to dead-tree publishing—but compared to self-published digital media sold per copy, I’d expect it to come out to a loss. There are other piracy-friendly business models out there, though—I’m rather fond of Baen’s Free Library, for all that their books are unabashed pulp.
There’s also government contracting, which is a similar situation, but with lowest bidder instead.