Font Company Can't Come Up With Good Business Model; Punishes Customers

from the yeah,-that'll-work dept

Tyler Hellard writes in to alert us to the bizarre and self-destructive plan of a company called Letterhead that sells different fonts. The super paranoid company apparently includes the name, email and account ID of each purchaser with the font itself. One font buyer shared the font with a company making a sign for him (which seems reasonable enough) and that company ended up sharing the font on a file sharing network. That's the point at which Letterhead went ballistic. It claimed that every single download was "stolen" (which, of course, it was not) and then sent the original purchaser a bill for $944 for all of those downloads (Update: Apparently the folks at Letterhead aren't happy about this post -- they've blocked anyone coming from this site, so if you want to see the article, you need to copy and paste the URL, rather than just clicking the link. Apparently, they don't deal with criticism well.). How many downloads were there? A whopping 32 copies. But Letterhead falsely assumes that all 32 would have purchased the font (no, they would not have) and then thinks it can change its original deal with the guy so that they can charge him for those downloads. The company also published his name and his contact info (which would appear to be a violation of a customer's privacy).

Then, to make things even more ridiculous, Letterhead decided to punish all its own customers for its own inability to put in place a business model that recognizes basic supply and demand. So, along with publishing the story and this guy's name, it's significantly raised the price of the font from $30 to $40 -- saying that it will keep the price up until the full $944 is paid off. This is doubly stupid. Not only are they making it even less likely that anyone will buy the font, they're now competing with the fact that this font is already out there available for free. That's not the time at which you raise prices. Obviously, they're trying to shame the guy into paying $944 -- but the real problem is the company doesn't understand its own market or the products its selling.

In fact, it goes out of its way to admit that it doesn't understand digital goods by claiming:
"Fonts are tangible goods around here and will forever be treated as such. Theft always affects the price of fonts and there are some costs that must be recouped. (1) The time that Duncan Wilkie spent in creating the fonts (2) The time Letterhead Fonts spent in helping Duncan to refine his fonts (3) The time and advertising dollars Letterhead Fonts spent to promote LHF Garner (4) The time Letterhead Fonts spends removing LHF Garner from the file-sharing websites."
This shows a fatal lack of understanding of basic economics. First, fonts are not tangible goods. They never have been, and to say that the company will always consider them to be suggests that it will probably go out of business well before businesses that understand what they're actually selling. Then, claiming that there are specific costs that need to be recouped, again is a misunderstanding of economics. Yes, costs need to be recouped, but that's the responsibility of those setting up the business model -- not the customers. Furthermore, the company falsely includes fixed costs with the marginal costs in figuring out how to "price" the fonts, again insuring that other companies will be able to create much more reasonable business models.

Basically, the company is advertising its ignorance of basic economics and its own products and market, while punishing customers for its own incompetence. It may think it's going to shame one of its customers into paying, but all it's really doing is convincing a lot of folks never to buy anything from Letterhead fonts in the future.

Filed Under: downloads, economics, fonts, punishing customers, tangible goods

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  1. identicon
    LewisB, 2 Jul 2008 @ 6:41am

    Brilliant response James and I think you've added a new valuable response in suggesting that Letterhead maybe try to reap what they can from this loss and live and learn to adapt their business to whatever challenges an industry throws at them.

    I have noticed within 'Step Inside Design' magazine, Letterhead have placed an advert with a discount code for the readers. I don't know much about the company history and it's advertising strategy but maybe this is a new tact to clean out this stigmata they now have and look forwards?

    As a keen typography student I am always reading articles about the industry as a whole and have noticed a common theme throughout with both industry representatives and new-generation hopefuls: design IS business.

    Therefore if you want to stay as an artist (validating work for self-expression rather than income as currency) but also see that you could make money from whatever you produce, simply employ a direction of thorough business education so you know and can hopefully prevent pitfalls like Letterhead have imbued. Even if you don't think you have the head for it, employ a separate business team to handle such things so you can concentrate on the art which, you may value more so over the currency gain, but still realise bills need to get paid.

    None of this is directed personally at anybody, just a message I've realised I need to take on board as a design hopefully and feel it may resound with other aspiring designers too.

    (As a side-note, some fonts can take months to produce because as well as the regular alphabet and numerics some fonts employ another 26 set of characters as 'alternates' and various other characters such as glyphs, swashes, ligatures etc. Of course, some designers can still do this in a manner of weeks/days.)

    I have -hands raised- downloaded pirates of a font by Letterhead I was looking to use. I was going to take my first step towards being a professional designer also after sampling whether it would work within my work and buy the licence (British commenter here!) respecting all parties and artists within. Chuck or whomever has successfully raided many of the files and changed a few characters so that the files do not contain a correct full font as would be purchased. Even if the files were correct and in full working order I would have still purchased the font needed from Letterhead but I am now put off because of this whole ordeal and the impression it has left on the company (what I personally deem as negative for passing on loss costs to new customers like myself).

    I now actually am looking elsewhere for a font of similar calibre or may even just make my own from scratch, which as a lesson in business shows that one potential customer has thus resided to other options of that than simply choosing to buy a Letterhead product.

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