I will pay $20 for this hard cover book today. (Yes or No)

Just because an individual purchases an item at an auction for X price, doesn’t mean that he can turn around and sell it for that price or more… So is the value of that item, the purchase price or can it really only be determined at its next point of sale, with the last purchase prices as a reference point?

On a side note, you might find the pricing model of Amie Street interesting. All mp3s sold there start at a certain low price. As people buy a particular song, its price slowly increases until either sales slow or a certain maximum price is reached. I would speculate that the low price is indicative of costs incurred in running the site, buying the rights to songs, and whatever else it takes to offer music for people to buy.

For example, take any TV series. Unless it’s winning its time slot, or pulling in a certain threshold of viewers, its distributing channel may consider it a failure. Critically-acclaimed series are canceled all the time. In those cases, despite the theoretical “value” of the superior programming, the market didn’t find it compelling enough to watch (as compared to competing programs).

But whose fault is the “failure” of the show? Was it aired at an inopportune time? Was it a matter of pacing, or acting? Could the producers have tweaked a specific element and rejuvenated the entire series? We rarely get a chance to find out, because anything short of segment dominance results in cancellation, regardless of (and usually absent of) any more specific understanding of what went “wrong.”

Then there’s the matter of the “market” itself. On TV, a show has to hope that its producers and distributors can market it to the right audience at the right time. (Yes, I know, we have TiVo now; there’s still only so much time in the day to watch TV, even by our own rules.) What if the show was perfectly fine, but its audience couldn’t find it among the white noise? Or, more elitist of me: why should allegedly “good” shows suffer at the hands of a market that only wants to watch reality TV? Does letting the market decide price necessitate letting the market decide what “good” really is?

Finally, there’s the potential variance in price among similar content. When they’re released on DVD, some TV shows and movies command top dollar, while others are priced well below. But what if I don’t think Show X is worth top dollar? What if I’d be willing to pay less but still watch it, or to pay more to help support a show I know needs the validation in the eyes of its distributors? When the market cannot renegotiate the price of a product based on their nuanced judgment, it’s at the mercy of what someone else thinks that product is worth — and if they’re wrong, the end result might not be repricing but simple cancellation.

After all, they can always wipe away the mistakes and throw something else at the wall to see what sticks — even if those mistakes could survive and thrive if the market were managed differently.

You can try to justify a price for a work based on any number of arguments, but at bottom, it’s a negotiation. You offer the work and ask a price you feel is fair. If I think it’s worth it to me, I’ll pay it. There. You now know its value. As time goes on, its value may become greater or lesser based on any number of variables. But the point is, all the theories about what a work is worth are only good as a starting point, an opening bid, if you will. Products find their own value over time, either overtly or on the black market.

That many works are not paid for now doesn’t mean they won’t be or can’t be in the future. We are in a transitional period between an old capital-intensive, top-down control model dominated by one-way broadcast, to a talent-intensive, bottom-up model dominated by n-way conversations.

It’s anyone’s guess how it will work out. But there is no question that people cannot and will not work for nothing. Content does have value. The market determines what content is worth. And someway, somehow people need to make a living, to be compensated for their work and talent. How much will that compensation be? Will it be comparable to what “stars” make today? Who knows?

I do know, though, that a new market for content will emerge, must emerge. An equilibrium will be found, revenue will flow. We just need to keep experimenting with different things until we find ones that work. And we can’t approach it with the idea that it has to work for everyone on the planet right now. That’s old-media thinking. Maybe if you can make it work with a small number of the right people now, that model may gain traction with more people. Just because your Grandma won’t use it now doesn’t mean a future Grandma who is only 40 now won’t use it 20 years from now.

It isn’t worth theorizing too much about these questions. It’s better to keep throwing things at the wall until something sticks, and then refine that idea. Remember, all the justification in the world of what you want to charge only reaches as far as the first person who won’t pay that price.

But, more broadly, the price Stephen King should charge is the price at which he can maximize his profit. This is simple economics. If he can “get away with” charging $5 more without sacrificing too many sales, he should do so.

And, then there are pricing segmentation issues. Different people will value the exact same thing differently. The trick is to figure out what groups exist that value the content differently, and maximize your pricing accordingly for each group (when you can).

Rafi Mohammed wrote a good and useful book on pricing issues called “Pricing for Profit”

I think the broader question is whether certain kinds of content have been commoditized, which makes it much harder to make a profit. Clearly Stephen King’s novels are not a commodity.