Adamant Entertainment recently made a bold announcement. They're changing their PDF pricing model so that every single product is now $1. No typo. Everything for a buck. Referred to as "App Pricing," it's a nod to the market success of inexpensive applications that are purchased in great numbers for platforms like the iPhone or Android. It's an interesting decision, and possibly a risky one, but I suspect it may ultimately prove to be a smart one.
We'll know more in a year or so, but in the absence of real data (inasmuch as a single publisher's success or failure will qualify as data) there's a lot to look at here. Some of it points to why this is a good idea, some points to the dangers, and most importantly, a lot of it informs upon the more important question: whether or not this is a good idea for you.
Speaking entirely hypothetically, the math behind such a price change is pretty transparent - the proposition is that the lower the cost, the more of a widget you will sell. If you could sell 100 at $3 apiece, but 500 at $1, the advantage is clear. What's not clear, of course, is where the sweet spot lies. Reducing price will almost certainly increase sales, but it's reasonable to wonder whether the increase in sales offsets the loss in per-unit pricing. No one can really know for sure, but it's only by taking risks like this that you find out.
That said, Adamant is not jumping blindly into this - part of the motivation for this has been noted on Gareth's blog. On each occasion he's sold his products at a drastic discount (roughly comparable to app pricing) he's profited greatly by it. Switching that over to a standard model has a certain amount of logic.
This seems like such a good match is that Adamant has a pretty deep catalog, over 200 items. That puts them in a position to benefit vertically (if a single title becomes a runaway hit) or horizontally (from small purchases inspiring other small purchases, so someone who wouldn't buy a $5 item might by 5 $1 items) and to generally have more product to draw in eyeballs. A smaller publisher with less of a critical mass it going to have a harder time - they might get lucky with a big hit, but they're less likely to pick up ambient sales.
One interesting choice is to go with flat pricing, rather than a mixed bag (where 'premium' product might go for two, three or even five dollars). The reasoning is straightforward enough - removing price confusion and comparison removes some of the friction to buy - but I'm not entirely sold on the idea. I hope it does well by Adamant, but were I in that position, I'd be more likely to use a mixed model.
It's easy to look at the immediate situation surrounding this decision, it's also important to take the long view. The electronic product market is trending upwards, for good (more sales! Yay!) or ill (more competition and noise! Boo!) but a pricing scheme like this is a bet not the market continuing to improve, not only in terms of popularity, but also in terms of ease of use. The barriers to purchasing and using PDFs are much less than they used to be, but they're still non-trivial. As they lower, the rising tide lifts all boats.
I actually think that's a good bet. Optimistic, sure, but it's the bet I'd make. But there's another factor, on that might be a much deeper problem.
When you make a purchase with a credit card or with a service like paypal, the merchant is charged some money. If this was just a percentage of the cost, it would be no problem - it could simply scale with the cost. Unfortunately, part of the cost is also a flat fee, and that's a real problem for low cost goods. It is entirely possible that the flat rate and the fees means the merchant will actually lose money on the purchase.
This is not a new problem. If you've ever heard the term "micropayments", this is what has really kept it from ever becoming much more than a buzzword. There are ways around it - apple tries to bundle your purchases together when you buy apps, but just sucks the cost when it can't - but they're not solutions that work very well on the scale of the RPG industry. One common solution is the minimum purchase (you've probably seen this at small shops). I believe rpgnow used to have such a policy (to keep themselves from losing money) but I don't know if it's still in place or not. Whatever the state of it, if it's not worth a merchant's while to sell things for a buck, sooner or later he will stop. Is this unsurmountable? Probably not, but it's an unpleasant reality to be wrestled with.
Bottom line, I would be hesitant to propose that anyone with a smaller catalog take a similar plunge, but all the same I would suggest people keep an eye on this. If successful, this is not only going to suggest a path, it's also going to exert some pressure to bring pdf prices down. This latter point is maybe dangerous - there's a danger of a race to the bottom that is mostly held in check solely by the payment issues - but it may also just be a herald of change.
Anyway, I applaud this effort, and will be watching it curiously. And if you're also curious, you should definitely pick up a few games at this price. I'd definitely suggest Icons.
EDIT: I just checked RPGnow, and it looks like thing have bumped up to $1.99, so perhaps the micro payments issue has been addressed. To this I say, hooray!