A reader writes:
What I find particularly brilliant about the Rob Thomas/Veronica Mars Kickstarter project is that the producers of a good have found a way to exploit certain consumers’ higher willingness-to-pay for that good as a means of financing the good’s production. I’m sure most of your readers have at least a vague recollection from Econ 101 of intersecting supply and demand curves, and the notion that customers towards the left of the demand curve were willing to pay more for that good than the market-clearing price. Until now, there hasn’t really been a way to charge $50 a ticket, or $500 a ticket, to the people who really value the movie that much, while only $10 a ticket to the customer whose interest in the movie is only marginal. But then you dangle the carrot that the movie will only exist if the customers with high willingness-to-pay step up … and suddenly you’ve found a way to tap into that enthusiasm.
Another crunches some numbers:
The project currently has about 46,500 backers to a tune of 2.79 million dollars. That means everyone gave on average 60 dollars each, which is far more than a ticket price of 10 dollars. That also means that without a Kickstarter model, if those 46,500 people simply went to see the movie, it would make only 465,000 dollars – a pittance, not worth Warner Brothers’ time.
Similarly, if the Dish had not allowed readers to set their own price, the current subscriber base of 23,644 would be yielding $472,644 in revenue rather than the current total of $641,944 – which translates to an average price of $27.15, or 36% more than the required minimum of $19.99.
But one big difference between the Dish model and the Kickstarter model is that the latter takes the safer approach of not spending any money on the project until a critical mass of supporters pledge the minimum amount needed to fund the project. The Dish, on the other hand, was leaving the Beast and spending the necessary start-up capital – my savings, if worse came to worse – regardless of whether any readers signed up. Thankfully that wasn’t the case; we jumped off the fiscal cliff and you caught us. But if we had not generated enough subscriptions to fund the Dish for the first year, it would have disappeared. And technically, if enough current subscribers decide not to renew for next year, or the year after that, the Dish could still end.