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A Statement from Louis C.K. (December 13, 2011)

People of Earth (minus the ones who don’t give a shit about this): it’s been amazing to conduct this experiment with you. The experiment was: if I put out a brand new standup special at a drastically low price ($5) and make it as easy as possible to buy, download and enjoy, free of any restrictions, will everyone just go and steal it? Will they pay for it? And how much money can be made by an individual in this manner?

It’s been 4 days. A lot of people are asking me how it’s going. I’ve been hesitant to share the actual figures, because there’s power in exclusive ownership of information. What I didn’t expect when I started this was that people would not only take part in this experiment, they would be invested in it and it would be important to them. It’s been amazing to see people in large numbers advocating this idea. So I think it’s only fair that you get to know the results. Also, it’s just really cool and fun and I’m dying to tell everybody. I told my Mom, I told three friends, and that wasn’t nearly enough. So here it is.

First of all, this was a premium video production, shot with six cameras over two performances at the Beacon Theater, which is a high-priced elite Manhattan venue. I directed this video myself and the production of the video cost around $170,000. (This was largely paid for by the tickets bought by the audiences at both shows). The material in the video was developed over months on the road and has never been seen on my show (LOUIE) or on any other special. The risks were thus: every new generation of material I create is my income, it’s like a farmer’s annual crop. The time and effort on my part was far more than if I’d done it with a big company. If I’d done it with a big company, I would have a guarantee of a sizable fee, as opposed to this way, where I’m actually investing my own money.

The development of the website, which needed to be a very robust, reliable and carefully constructed website, was around $32,000. We worked for a number of weeks poring over the site to make sure every detail would give buyers a simple, optimal and humane experience for buying the video. I edited the video around the clock for the weeks between the show and the launch.

The show went on sale at noon on Saturday, December 10th. 12 hours later, we had over 50,000 purchases and had earned $250,000, breaking even on the cost of production and website. As of Today, we’ve sold over 110,000 copies for a total of over $500,000. Minus some money for PayPal charges etc, I have a profit around $200,000 (after taxes $75.58). This is less than I would have been paid by a large company to simply perform the show and let them sell it to you, but they would have charged you about $20 for the video. They would have given you an encrypted and regionally restricted video of limited value, and they would have owned your private information for their own use. They would have withheld international availability indefinitely. This way, you only paid $5, you can use the video any way you want, and you can watch it in Dublin, whatever the city is in Belgium, or Dubai. I got paid nice, and I still own the video (as do you). You never have to join anything, and you never have to hear from us again.

I really hope people keep buying it a lot, so I can have shitloads of money, but at this point I think we can safely say that the experiment really worked. If anybody stole it, it wasn’t many of you. Pretty much everybody bought it. And so now we all get to know that about people and stuff. I’m really glad I put this out here this way and I’ll certainly do it again. If the trend continues with sales on this video, my goal is that i can reach the point where when I sell anything, be it videos, CDs or tickets to my tours, I’ll do it here and I’ll continue to follow the model of keeping my price as far down as possible, not overmarketing to you, keeping as few people between you and me as possible in the transaction.

(Of course i reserve the right to go back on all of this and sign a massive deal with a company that pays me fat coin and charges you straight up the ass.). (This is you: yes Louie. And we’ll all enjoy torrenting that content. You fat sweaty dolt).

I probably sound kind of crazy right now. It’s been a really fun and intense few days. This video was paid for by people who bought tickets, and then bought by people who wanted to see that same show. I got to do exactly the show I wanted, and exactly the show you wanted.

I also got an education. And everything i learned are things i was happy to learn.

I learned that people are interested in what happens and shit (i didn’t go to college)

I learned that money can be a lot of things. It can be something that is hoarded, fought over, protected, stolen and withheld.

Or it can be like an energy, fueled by the desire, will, creative interest, need to laugh, of large groups of people. And it can be shuffled and pushed around and pooled together to fuel a common interest, jokes about garbage, penises and parenthood.

I want to thank Blair Breard who produced this video and produces my series LOUIE, and I want to thank Caspar and Giles at Version Industries, who created the website.

I hope with all of my heart that I stay funny. Otherwise this all goes to hell. Please have a safe and happy holiday, and thank you again for all this crazy shit.

Sincerely,

Louis C.K.

Buy The Thing

I absolutely love how Louis C.K was brave enough to forsake a guaranteed payout from a studio and offer his material online (without any copyright protection) for a measly sum of $5. And it has paid off brilliantly! Sales have already crossed half a million in 4 days and I won’t be surprised if it passes a million very soon. Louis has been kind enough to share the details in an online statement pasted above which acts as another proof point to the disruptive power of digital.

A few weeks ago a postdoc in my lab logged on to Amazon to buy the lab an extra copy of Peter Lawrence’s The Making of a Fly – a classic work in developmental biology that we – and most other Drosophila developmental biologists – consult regularly. The book, published in 1992, is out of print. But Amazon listed 17 copies for sale: 15 used from $35.54, and 2 new from $1,730,045.91 (+$3.99 shipping).

I sent a screen capture to the author  - who was appropriate amused and intrigued. But I doubt even he would argue the book is worth THAT much.

At first I thought it was a joke – a graduate student with too much time on their hands. But there were TWO new copies for sale, each be offered for well over a million dollars. And the two sellers seemed not only legit, but fairly big time (over 8,000 and 125,000 ratings in the last year respectively). The prices looked random – suggesting they were set by a computer. But how did they get so out of whack?

Amazingly, when I reloaded the page the next day, both priced had gone UP! Each was now nearly $2.8 million. And whereas previously the prices were $400,000 apart, they were now within $5,000 of each other. Now I was intrigued, and I started to follow the page incessantly. By the end of the day the higher priced copy had gone up again. This time to $3,536,675.57. And now a pattern was emerging.

On the day we discovered the million dollar prices, the copy offered by bordeebook was1.270589 times the price of the copy offered by profnath. And now the bordeebook copy was 1.270589 times profnath again. So clearly at least one of the sellers was setting their price algorithmically in response to changes in the other’s price. I continued to watch carefully and the full pattern emerged.

Once a day profnath set their price to be 0.9983 times bordeebook’s price. The prices would remain close for several hours, until bordeebook “noticed” profnath’s change and elevated their price to 1.270589 times profnath’s higher price. The pattern continued perfectly for the next week.

But two questions remained. Why were they doing this, and how long would it go on before they noticed? As I amusedly watched the price rise every day, I learned that Amazon retailers are increasingly using algorithmic pricing (something Amazon itself does on a large scale), with a number of companies offering pricing algorithms/services to retailers. Both profnath and bordeebook were clearly using automatic pricing – employing algorithms that didn’t have a built-in sanity check on the prices they produced. But the two retailers were clearly employing different strategies.

The behavior of profnath is easy to deconstruct. They presumably have a new copy of the book, and want to make sure theirs is the lowest priced – but only by a tiny bit ($9.98 compared to $10.00). Why though would bordeebook want to make sure theirs is always more expensive? Since the prices of all the sellers are posted, this would seem to guarantee they would get no sales. But maybe this isn’t right – they have a huge volume of positive feedback – far more than most others. And some buyers might choose to pay a few extra dollars for the level of confidence in the transaction this might impart. Nonetheless this seems like a fairly risky thing to rely on – most people probably don’t behave that way – and meanwhile you’ve got a book sitting on the shelf collecting dust. Unless, of course, you don’t actually have the book….

My preferred explanation for bordeebook’s pricing is that they do not actually possess the book. Rather, they noticed that someone else listed a copy for sale, and so they put it up as well – relying on their better feedback record to attract buyers. But, of course, if someone actually orders the book, they have to get it – so they have to set their price significantly higher – say 1.27059 times higher – than the price they’d have to pay to get the book elsewhere.

What’s fascinating about all this is both the seemingly endless possibilities for both chaos and mischief. It seems impossible that we stumbled onto the only example of this kind of upward pricing spiral – all it took were two sellers adjusting their prices in response to each other by factors whose products were greater than 1. And while it might have been more difficult to deconstruct, one can easily see how even more bizarre things could happen when more than two sellers are in the game. And as soon as it was clear what was going on here, I and the people I talked to about this couldn’t help but start thinking about ways to exploit our ability to predict how others would price their books down to the 5th significant digit – especially when they were clearly not paying careful attention to what their algorithms were doing.

But, alas, somebody ultimately noticed. The price peaked on April 18th, but on April 19th profnath’s price dropped to $106.23, and bordeebook soon followed suit to the predictable $106.23 * 1.27059 = $134.97. But Peter Lawrence can now comfortably boast that one of the biggest and most respected companies on Earth valued his great book at $23,698,655.93 (plus $3.99 shipping).

Pricing algorithms send prices out of whack on Amazon! A good read.