Free! Why $0.00 Is the Future of Business

[Liviu_5]

This one is not directly about e-books per se, but it touches on so many things discussed here (from digital business models to micro payments...) and it's very interesting. Here:

http://www.wired.com/techbiz/it/maga...urrentPage=all

[Steven Lyle Jordan]

A very good article indeed. Despite the suggestion of the title and opening, it takes its time getting around to the fact that nothing's really free... someone, somewhere, is going to pay for it... it just might not be the person who gets the product.

It does a nice job of covering many of the ways that e-books could be sold for cheap to free. Shifting from direct payment to subsidization, by either an advertiser or other institution, or by another product or service, makes a lot of sense. It still puts the burden on the producer to find their subsidizing entity or product, so it doesn't allow everyone to automatically profit from just being on the web. But as more and more web-based producers compete for subsidization, it might be interesting to see how that market will develop over time.

[Gudy]

Interesting. Perhaps a bit overly optimistic in places, but the core of the analysis seems sound. There certainly are bits and pieces to squabble over: E.g. in his Taxonomy of Free, I can't really see the difference between "Zero marginal cost" and "Gift economy" (there is one, he just doesn't make it clear), and in both cases he completely ignores the existence and role of tip jars. Sure, tip jars are kinda similar to the paying customer in the "Freemium" model. Still, it's not the same as that money buys you no additional service, and it would certainly have been worth mentioning.

[Steven Lyle Jordan]

Originally Posted by Gudy

...and in both cases he completely ignores the existence and role of tip jars...

It may be he doesn't see them as contributing enough to a product's subsidizing/support. Depending on consumer donations is very unreliable compared to other methods of subsidization. In most cases, tip jars have been demonstrated to be inadequate to provide reasonable compensation to the producer. (I emphasize "most"... there are always exceptions to every rule.)

[Greg Anos]

I believe that the disconnection between getting a product and paying for a product is one of the major underlying causes of piracy. For example, I can watch a TV show (over the airwaves) for free. But the show is NOT free, a group of advertizers paid for the show, and provide it for me to watch free in order to get me to watch their commercials and buy their product. The result is generations of people used to getting "free" entertainment. From their viewpoint (and I am <not> endorsing it, just describing it.), they have developed a philosophical problem. Why pay for things they are used to getting for free? To make it worse, they have the technical capabilites to get it free, even when it was only designed for a pay model. Hence piracy.

"Free" has been limited to "broadcast" technologies, but those cover most mass-produced entertainments (books being the glaring exception. I have always wondered why books and other print media always charged something for their product, rather than using the advertising subsidy model, even when advertising paid for the vast majority of their costs. I guess it has to do with the use of a physical wrapper, versus the invisible airwaves.)

This is the point of the "free" model. Find some other economic model to pay for the content and give it away for free (subsidy, advertising, et.al.), rather that fighting the generations of canalization for getting entertainment "free".

(This does not include "event entertainment" (concerts, sporting events, theaters, ect.). There has been a steady market for these entertainments (for a fee) despite "free" entertainment. )

[Gudy]

Originally Posted by Steve Jordan

It may be he doesn't see them as contributing enough to a product's subsidizing/support. Depending on consumer donations is very unreliable compared to other methods of subsidization. In most cases, tip jars have been demonstrated to be inadequate to provide reasonable compensation to the producer. (I emphasize "most"... there are always exceptions to every rule.)

Hmm, yes, that might be it. Not being in that business myself, I have no idea how well tip jars work, although I do know one author who quit her day job in November and so far seems to be doing well making a living from site ads (as something of a steady base income) and tip jars (to the tune of $150 - 200 a week or thereabouts), and she's only starting on seriously growing her readership. (Yes, I know the difference between anecdote and data, this is just to illustrate where I am coming from.)

[Steven Lyle Jordan]

Originally Posted by Ralph Sir Edward

I have always wondered why books and other print media always charged something for their product, rather than using the advertising subsidy model, even when advertising paid for the vast majority of their costs. I guess it has to do with the use of a physical wrapper, versus the invisible airwaves.)

Pretty much. The difference in dynamic between radio and TV (lots of eyes see one produced product) versus print (one set of eyes sees each product), is such that even though TV and radio cost more to produce one product, they still spend less per person for each product.

[JSWolf]

But that free TV show is not free. Someone has to have paid for the TV set used to watch the show.

[moz]

Originally Posted by JSWolf

But that free TV show is not free. Someone has to have paid for the TV set used to watch the show.

By that rationale my free ebooks are not free either - I had to pay for the bandwidth and the lissoose.

The point is more that the content is not actually free, someone has to create it. Once you leave hobbiests behind there's a need to support the creators. Personally I am happy to seek out and pay creators directly for the most part. That's what friends are for. I also frequent live gigs and review sites for the same reason.

[Gaurnim]

Originally Posted by Ralph Sir Edward

For example, I can watch a TV show (over the airwaves) for free. But the show is NOT free, a group of advertizers paid for the show, and provide it for me to watch free in order to get me to watch their commercials and buy their product.

I don't think we can call this free, because of the advertisements.
I wouldn't say that the ads are paying for the shows, but rather that the shows are providing suitable spots for the ads.
A french TV executive said his job was to provide "available brain time for ads".

[HappyMartin]

I love the comparison between the "free TV" model and magazines and books. Its obvious I suppose but I never picked it up.

I buy books and magazines, also music, but don't watch TV. I can page past adds in print and the music I buy has no adds. I do buy DVD's and even TV series. I like them but cannot watch TV because of the adds. I would pay to watch TV if it would ensure freedom from adds. I listen to the radio in the morning for news and traffic and kill it the moment the second add blares to life.

Now I'm not sure but I don't believe I am that unusual. A business model that supplies free content and so on but pays for it by shoving adds down my face horrifies me. I would rather go without quite frankly.

[Richard Herley]

Originally Posted by moz

The point is more that the content is not actually free, someone has to create it. Once you leave hobbiests behind there's a need to support the creators.

I agree. The example in the article of the band that gives away CDs to promote its live shows is fine, but what about intellectual "product" (like ebooks) that may not generate any other revenue stream? It's always possible that a widely distributed ebook could attract interest from paper-based publishers, film companies, or whatever, but then we're back to the old model.

As long as the bills keep dropping through your letterbox (or arriving in your inbox), and as long as you have to pay money to get out of the supermarket with your bags full, you can't afford professional activity without some form of remuneration. People understand this, because it applies to them too.

[Liviu_5]

Originally Posted by moz

The point is more that the content is not actually free, someone has to create it. Once you leave hobbiests behind there's a need to support the creators.

I do not think that is the issue. The main thrust of the article is that the marginal cost of distributing digital content is going to zero and businesses need to adapt, pointing out ways in which this could be done.

Of course one way to respond is to fight the trend either by lawsuits and laws (music) or by not releasing the content digitally (books). The problem with lawsuits/laws is that outside of turning off the internet that is not going to work. Look at the big fuss over Comcast and p2p...

Not releasing your products digitally works to some extent, but you lose revenue, market, have to contend with those that do release their wares digitally. The jury is still out on that tactic in my opinion, but I think it's a slow suicide.

So the question still remains: how to generate enough revenue from digital content and the article addresses some ideas, which may all work in some cases since personally I think that will be answer - it depends - and the uniformity of earlier times (buy a book, pay for it...) is gone

[plantedbypiggies]

believe that the disconnection between getting a product and paying for a product is one of the major underlying causes of piracy. For example, I can watch a TV show (over the airwaves) for free. But the show is NOT free, a group of advertizers paid for the show, and provide it for me to watch free in order to get me to watch their commercials and buy their product. The result is generations of people used to getting "free" entertainment. From their viewpoint (and I am <not> endorsing it, just describing it.), they have developed a philosophical problem. Why pay for things they are used to getting for free? To make it worse, they have the technical capabilites to get it free, even when it was only designed for a pay model. Hence piracy.

I understand what you're saying here, but I don't feel that it is a good metaphor. The reason for this is that a large majority of people (at least here in the states) use cable or digital satellite. By default, they're paying a good chunk of money to get extra content. However, they're also using cable to receive content that they could get over the airwaves. Without the use of cable, terrestrial UHF stations would have no real chance of survival because the fidelity of their signal is so atrocious.

Also, there's the issue of February 17th, 2009. By American law, all broadcast signals have to switch over to a digital signal. This means that everyone will either need to buy a digital television (if they don't have one already) or a converter box. Therefore, the consumer will have to pay more for a product they already get.

A better metaphor would be terrestrial radio. The stations put out a product that is subsidized by advertising or underwriting (for public radio). The consumer chooses to listen to a highly targeted station that will release advertisements custom tailored for that particular demographic. So, for example, John Deere will advertise on a country station and a imported cheese shop may underwrite the local NPR affiliate. This is stereotyping, I know, but that's how the game is played.

Now I'm not sure but I don't believe I am that unusual. A business model that supplies free content and so on but pays for it by shoving adds down my face horrifies me. I would rather go without quite frankly.

As someone who works in radio, I have to disagree. Of course my paycheck is provided by money generated by advertisements, but I think about it in a more direct way. If the advertisments are not directly on the surface, then they're more deeply embedded through product placement. A perfect example of this is the movie Transformers. The movie felt to me like a huge endorsement of GM products. Also, there was the not-so-subtle usage of Macintosh computers in the Pentagon's analysis room. While I prefer macs, I find it unlikely that the government would use such a computer on that wide a scale.

I just prefer my indoctrination to be at the surface rather than the subconscious. ;-)

[Steven Lyle Jordan]

Originally Posted by plantedbypiggies

I understand what you're saying here, but I don't feel that it is a good metaphor. The reason for this is that a large majority of people (at least here in the states) use cable or digital satellite...

Also, there's the issue of February 17th, 2009...

TV is still a good metaphor, because although a lot of Americans buy cable or satellite service, most of them don't have to. They choose to pay for more content than they would get without the box. And as far as the digital switch, after you buy the converter box, you can still do without cable or satellite if you want to... it's a one-time upgrade of your hardware. Your radio metaphor works too, of course.

Originally Posted by plantedbypiggies

If the advertisments are not directly on the surface, then they're more deeply embedded through product placement.

Some of us have discussed product placement elsewhere. I agree that PP can be okay, if it's not too obvious or distracting. Your mention of Transformers' use of GM cars parallels my notice of nothing but Fords in Knight Rider, and those aren't the only movies or TV shows that any of us could cite. OTOH, the James Bond movies have effectively used product placement... it's not impossible. Bottom line, I am okay with proper product placement, but if there is no effective way to do this, pay with advertisements.