Envato is extending their Author Driven Pricing (ADP) program to WordPress themes on ThemeForest and plugins on CodeCanyon next week.
Since inception, Envato has established pricing for the items on their marketplace. They would categorize the theme or plugin and establish a price for the author.
In 2012, they toyed with allowing elite authors (a status achieved once certain sales benchmarks have been met) to tweak their prices, but that was temporary and later removed. For a fun aside, that change was after a brilliant editorial by Mike McAlister, way back in the dinosaur age: 2011.
Envato established the new iteration of Author Driven Pricing in November 2015 for GraphicRiver, and extended it to some non-WordPress categories of ThemeForest in April of this year. With the ADP experiment so far, they’ve seen more price increases than decreases, and sales have remained steady.
To understand the implications of this change, it’s important to understand how pricing on Envato works. Let’s use the example of a $60 WordPress theme on ThemeForest.
Current pricing method
- List price: $60
- “Buyer fee” is built into the list price: 20% of list
- “Author fee” is built on a scale, based on exclusivity and sales level: 12.5% – 55%
- 6 months of support is built in
- Additional support can be purchased, typically as a one year upgrade, or during support period, or upon renewal: Priced on a scale, 37.5% – 87.5% of item price.
The author fee scale is massive, mostly due to exclusivity and benchmark adjustments. None exclusive authors give up 55% no matter what. But for exclusive authors, Envato takes 12.5% from elite authors with over $75,000 in total sales, 37.5% for brand new authors, and somewhere in-between for those first $75,000 in sales.
So our elite author would take home $42 of that $60 sale, in this scenario. Specifically, here’s how that works:
- $60 x 20% buyer fee = $12 ($48 remaining)
- $48 remaining x 12.5% author fee = $6
- $42 remains for the author. Envato makes $18.
New pricing method
Support plans will not change, but will remain as a percentage of the item price. So for authors that choose to change the Envato-set price, their support prices will go up as part of that.
The change is in the buyer fee. Instead of 20% of the list price, it’s a flat $12. That’s why I used the $60 price, because that’s the intersection for Envato’s cut between the old pricing and new pricing — assuming our author is already “elite”.
So items priced above $60 will mean Envato earns less and the author earns more than before. For items priced below $60, Envato will earn more and authors will earn less.
Let’s adjust our item price to $100:
Old pricing for $100 item
- $100 x 20% buyer fee = $20 ($80 remaining)
- $80 remaining x 12.5% author fee = $10
- $70 remains for the author. Envato makes $30.
New pricing for $100 item
- $100 – $12 buyer fee = $88
- $88 remaining x 12.5% author fee = $11
- $77 remains for the author. Envato makes $23.
The downside for authors is when the item is cheaper. Let’s adjust our item price to $40:
Old pricing for $100 item
- $40 x 20% buyer fee = $8 ($32 remaining)
- $32 remaining x 12.5% author fee = $4
- $28 remains for the author. Envato makes $12.
New pricing for $100 item
- $40 – $12 buyer fee = $28
- $28 remaining x 12.5% author fee = $3.5
- $24.50 remains for the author. Envato makes $15.50.
CodeCanyon is different
So, the ADP fixed buyer fee is $12 on ThemeForest. But remember, it is categorical, and therefore it is different on CodeCanyon. For WordPress plugins on CodeCanyon, it’s only $4.
To be fair, popular CodeCanyon items are considerably cheaper than popular ThemeForest themes, so the ratio is relatively similar. But for plugin authors that choose to price their work at a high price on CodeCanyon, the earning potential is considerably higher.
Let’s use our $100 price again, applied to CodeCanyon:
Old pricing for $100 item
- $100 x 20% buyer fee = $20 ($80 remaining)
- $80 remaining x 12.5% author fee = $10
- $70 remains for the author. Envato makes $30.
New pricing for $100 item
- $100 – $4 buyer fee = $96
- $96 remaining x 12.5% author fee = $12
- $84 remains for the author. Envato makes $16.
So you can list a $100 item on CodeCanyon and take home $84, if you are an elite author. That’s pretty good. To be fair though, $100 is four times the price of most of the stuff on CodeCanyon, but with a considerably lower buyer fee, it could make for interesting changes over there.
What the price changes mean
For the most part, I think these price changes are well executed, with some potential fallback.
CodeCanyon is a considerably smaller marketplace than ThemeForest, and while it may have a lot of opportunity, changes there are simply less consequential than on ThemeForest. Also, the variety of items on CodeCanyon is vast — because they are plugins and not themes — and therefore price variances will have less impact than they will on ThemeForest.
As long as the market does okay, and there is not a price war, then ThemeForest authors win. As long as they price above $60, they’ll make more money under the new scheme. The $12 flat buyer fee helps establish a floor to incentivize authors to price their items higher, to get a bigger chunk of the pie.
But if the market goes south in any way, or if someone starts a price war and it works, then it could pose trouble. If the market shifts pricing to sub-$60 prices, Envato will make their $12 cut from buyers, but authors will have a smaller piece of the pie left because it’s a static fee and not a linear adjustment.
ThemeForest authors have long wanted flexibility with their prices, and Envato has created a pretty clever method to allow it. There’s a chance it could devolve and require adjustments, but that’s also why they tested this model on smaller categories.
As long as authors are remotely disciplined, it should be a good net gain for authors.
