Free! Why $0.00 Is the Future of Business

[Steven Lyle Jordan]

Originally Posted by Ralph Sir Edward

Will the free model win? Certainly, over time, but there will always be pocket of non-free in the mix. This is a wrenching readjustment for everyone used to the old model. The one thing I can guarantee is, there's no going back. The world is not going to destroy digital technology.

What is purposefully given away free today? Generally, gifts (which usually have to be paid for by the giver, even if only with their time--I suppose you can argue that they are trying to get your affection, another form of compensation), and things designed to get you to pay for something else, like a subscription or another product. If a product isn't paid for by something, it won't last... if, for no other reason, because most people will stop creating things they will not be compensated for. (Or, they'll keep creating, but they won't offer it to anyone... for the consumer, same thing.) If anyone thinks that this world will be as rich as it is now, if no one will be compensated for their creative works, they have another think coming.

I think that calling this oft-discussed model "free" is inaccurate, and what causes much of this discussion to get overly-heated at times. A "free" product is not sustainable. In the examples discussed above, e.g., Neil and Cory and the article, a "free" product is actually a "subsidized" product, enticing you to buy something else (or inducing someone to invest in them).

Direct payment or subsidization is sustainable, and ultimately, all content will be offered in one method or the other. Which one depends on the content. In terms of digital media, subsidization will probably win out in almost every case.

[Trenien]

Originally Posted by Steve Jordan

The thing about the "free" argument that doesn't work for me (as it doesn't work for a lot of people), is that it always breaks down to things people could do... not what they will do. In other words, they could tell their friends, who may decide to pay for a book, and maybe the right freeloader will contact the right publisher for you, etc, etc.

And while I wait out these maybes, I don't get any compensation for my work... just a lot of comments on the web that go, "Whoo-Hoo! Steve is great for giving his stuff away for free! I hope he becomes a big success!" Mm-hmm.

Well, there may be a lot of free content out there, but no one is making a living off of it. They're making a living off of selling something, even if it's not the actual book, but something that the book lures you to, like a subscription site, or a product page, or a printed version of the book you just read.

That's why I see the patronage or subsidizing model to be a good one: It allows you to give the e-books away, but you still get compensated, even given all the "coulds" and "maybes." And again, it's a method that's worked for TV and radio for a few years now, so I'd call it a proven model.

And it allows an e-book to exist as a product on its own, not simply as a shill's hook to get you to a detergent site.

I understand your point of view. The problem with it is that if you get to the point where you're famous enough to consider your books becoming your only source of income, that'll mean anybody who wants any or all for free will be able to get them.

That's what I mean when I say there's a need to offer something more than just the ebook.

[kilofox]

"There is no free lunch." Milton Friedman US economist (1912 - 2006)

[Trenien]

Originally Posted by kilofox

"There is no free lunch." Milton Friedman US economist (1912 - 2006)

Tread carefuly, there.

Mr Friedman was a very vocal proponent of the "Free Market Economy" model. Economics 101 will tell you that Free Market needs regulations to avoid monopolies if you want to it to work.
By its very nature, the current model for creative works is monopolistic: IP is monopoly on the rights to distribute. No monopoly would mean no IP, i.e. anybody can use any work relevant to IP (as we think now) in any way they please.

That includes reselling copies, derivative works and so on. I doubt Steve Jordan (or Cory Doctorow) would like that.

[Greg Anos]

By "free". I mean the subidised model(s) as described in Wired. Please note, in those model(s) creative peoples are still getting paid, just not by the end consumer. Hence the "free" tag. It's "free" to the end consumer. Just wanted to be explicit.

[Steven Lyle Jordan]

Trenian: Though that may be true, the idea of my current sales "experiment" is to find the price point at which the majority of people consider it a fair value for the book, and therefore do not have a problem paying for it.

The trick for the producer is to figure out which model gives you more people who think the model is fair than those who think it unfair. When you strike that balance, you make more than you lose, and you have a profitable venture. This is the way mankind has traded for goods and services, all the way back to when goods and services were first conceived. It lasts, because it works for both sides, and I refuse to believe even the internet will change that.

When people feel they are being treated fairly, they are more inclined to give something for the thing of value they get. Any child will demonstrate that. In fact, many primates observed in the wild have demonstrated an understanding of that. Any adult who will not abide by that is simply being selfish (and criminal), and they will not be supported by those who feel that the product is fairly offered. Sure, there will be thievery, but the only result of that will be removing the goods from a market that has more losses than are acceptable. If that means, someday, I'll have to publish in some other format than e-books to survive, that's probably what I'll do. Which is why it behooves people who are interested in good, fair e-book products to shun those who pirate e-books and risk taking that market permanently away from the rest of us.

As far as offering something else... that would not be necessary under the subsidization/patron model. Under the advertising model, you would be doing exactly that: Selling the expectation that X percent of people, out of the number who sees a commercial tied to your product, will go out and buy the advertised product.

[kilofox]

"Radiohead isn't talking numbers, but Trent Reznor is. After producing Saul Williams' The Inevitable Rise and Liberation of Niggy Tardust and offering it to fans online, Reznor yesterday laid out the numbers from his experiment. Saying that it's easy for artists to know "what NOT to do these days, but less obvious to know what's right," Reznor found that 18.3 percent of users who grabbed the album paid $5 for it; the rest paid nothing. Is this what success looks like?"

More of the article here.....

[Steven Lyle Jordan]

As Stephen King (The Plant) discovered before Radiohead, depending on people to pay when you make it optional is clearly a sucker's bet. If a stable income depends on your product, you need a stable payment method (whether it is the consumer, or a third party).

[Trenien]

Actually it's Nine InchNails (to Steve)

Originally Posted by kilofox

"Radiohead isn't talking numbers, but Trent Reznor is. After producing Saul Williams' The Inevitable Rise and Liberation of Niggy Tardust and offering it to fans online, Reznor yesterday laid out the numbers from his experiment. Saying that it's easy for artists to know "what NOT to do these days, but less obvious to know what's right," Reznor found that 18.3 percent of users who grabbed the album paid $5 for it; the rest paid nothing. Is this what success looks like?"

More of the article here.....

This article is misleading (willingly I think).
The album's name was Ghosts I - IV, and only part of the tracks were released for free. the $5 download included those and the rest of the album. Furthermore, it wasn't the only way it was sold: there were (are) cd box with prices being $10, $75 and $300 (the super deluxe package). Interestingly, that last one sold out in a couple of days (gross: $750000, that's 2500 boxes).
The previous album sold 34000 CDs. Of this new one, 28000 bought the downloadable version. Numbers for the $10 and $75 packs haven't been released, but I'd be very surprised if they were lower than the $300 pack.
NIN considers the experiment a success.
Sources:
Here, here and here.

I stand by my points:
1- One unpaid download does not equate one lost sale
2- Whatever form it takes, it's the perceived added value that will make people fork out money. In this case, the $5 version added value is the mix of convenience to download and paying a reasonable price to the author - an easy feelgood action (out of curiosity, I went and did a search for the album on mininova. Within the first 10 result you can download a high quality version of the complete albums. Anybody wants to get it for free, it's easy and fast).

[tompe]

Originally Posted by Steve Jordan

As Stephen King (The Plant) discovered before Radiohead, depending on people to pay when you make it optional is clearly a sucker's bet. If a stable income depends on your product, you need a stable payment method (whether it is the consumer, or a third party).

So you have found some scientific study about Stephen King's release of an E-book chapter by chapter with no promise of it being finished? If it showed anything I would have thought it was that people do not want to pay for half a book or they want to read a book in one sitting. Or maybe something else.

[Steven Lyle Jordan]

Originally Posted by tompe

So you have found some scientific study about Stephen King's release of an E-book chapter by chapter with no promise of it being finished? If it showed anything I would have thought it was that people do not want to pay for half a book or they want to read a book in one sitting. Or maybe something else.

Based on articles about the "Plant" experiment, I have these observations:

People were buying the book chapter by chapter, as they came out. As chapters came out, fewer paid, including those who continued to download. Sure, some people dropped out of succeeding chapters, but the experiment was never about how many downloaded... just about how many downloaders paid. That indicates that downloaders wanted the book, but they believed they had paid enough after 3-4 chapters and refused to pay more, suggesting a pricing issue (the cost was a bit high, equivalent to new hardback pricing, for an e-book).

There was also the issue of the number of people who had to pay, to continue the project. Downloaders knew the project's success depended on a minimum percentage of downloaders paying per chapter, but how many of them simply stopped paying and hoped everyone else would pick up the slack? Did the site have a running count going, so non-payers would have fair warning to get their payment in? I don't know, having never seen the site. Would it have worked? I don't know that either.

But the raw numbers say it all: People downloaded, but they didn't want to pay for it, and by the established rules of the experiment, the project was halted. And I don't believe King saw an increased response after the end, with a significant number of non-payers finally ponying up and begging for him to continue. They were done. They did not respond to the voluntary payment method... they cheated, they skimped, and they lost.

I expect that to be the eventual outcome of most voluntary payment systems, even for those famous and popular out there, as long as they are looking for a significant percentage of paying responses. If, however, the system is based on threshold amounts of paying responses, so the only pressure is getting enough exposure to reach your critical mass and get the rent paid, those systems have a better chance of succeeding, depending on popularity. And in all cases, fair pricing will have a huge impact in any project's success or failure.

[kilofox]

Originally Posted by Trenien

Actually it's Nine InchNails (to Steve)



This article is misleading (willingly I think).
.

I think you are confused maybe? We are talking two different albums here... Reznor was the producer of the William's album prior to NIN's Ghosts. The whole album was released for download, not just a partial as with NIN's Ghosts Album.

Reznor learned from the William's release that you can not rely on the customer to pay you out of conscience. 18% paid for the Williams album, the other 82% just took it. With Ghosts, Reznor improved the model, by offering some for free and is inciting the customer to pay for more value after sampling the free tracks. I think he and NIN are onto something here.

Here is a interview with CNET about the Williams album.

[tompe]

Originally Posted by Steve Jordan

Based on articles about the "Plant" experiment, I have these observations:

People were buying the book chapter by chapter, as they came out. As chapters came out, fewer paid, including those who continued to download. Sure, some people dropped out of succeeding chapters, but the experiment was never about how many downloaded... just about how many downloaders paid. That indicates that downloaders wanted the book, but they believed they had paid enough after 3-4 chapters and refused to pay more, suggesting a pricing issue (the cost was a bit high, equivalent to new hardback pricing, for an e-book).

People download things just because they can be downloaded. Just because something is downloaded does not mean that it is read.

But the raw numbers say it all: People downloaded, but they didn't want to pay for it, and by the established rules of the experiment, the project was halted. And I don't believe King saw an increased response after the end, with a significant number of non-payers finally ponying up and begging for him to continue. They were done. They did not respond to the voluntary payment method... they cheated, they skimped, and they lost.

And they were right not to pay. Of course they do not want to pay for a book that is not finished. I think the whole setup was stupid and no valid conclusions can be drawn.

The comment from http://news.zdnet.co.uk/internet/0,1...2082851,00.htm was interesting:

Although The Plant was a significant experiment within the publishing industry, analysts said the test was not earth shattering.

"I think that whole motto of sort of nickel-and-diming people of this per chapter basis was a mistake," said Forrester analyst Dan O'Brien. "Every chapter was another test of whether people would pay the threshold that [King] determined. I thought it got in the way of the relationship between the writer and audience -- it was too mercantile."

O'Brien said that an alternative model could have been used, such as one similar to a magazine subscription. Readers would pay up front and receive 12 issues or 24 issues through a contract between the publisher and reader.

"I think a writer who had a track record and reputation and a fan base could reasonable try that," O'Brien said. "Give me $15, and I will write a book in chapters -- but that's not what Stephen King did."

That the relationship was to mercantile is what I think also. A reader also spends his time so the relationship between a reader and a writer is not a simple producer/consumer-relationship.

[Steven Lyle Jordan]

Originally Posted by tompe

People download things just because they can be downloaded. Just because something is downloaded does not mean that it is read.

If people are going to waste their time downloading things they don't want, that's their problem. But it's an even bigger problem if they keep doing it...

Originally Posted by tompe

And they were right not to pay. Of course they do not want to pay for a book that is not finished. I think the whole setup was stupid and no valid conclusions can be drawn.

One thing that can be concluded from that comment: Lots of people will repeatedly do stupid things. If they knew the book was not finished, but they downloaded it a chapter at a time anyway... then did not pay, knowing that too few payments would kill the project... whose fault is it for not getting the whole book? And whose time did they waste? Their own. I'll bet King isn't losing sleep over dim bulbs like that.

Granted, paying for an unfinished book chapter by chapter isn't my idea of selling a book. (If it was finished, maybe. And certainly at a lower price.) But you can only say one thing about people who thought it was a stupid idea, and participated anyway, in such a way as to guarantee its failure...

[igorsk]

I mentioned it before but I think it's worth repeating.
Sharon Lee and Steve Miller did something similar with their novels Fledgling and now Saltation. However, there are some key differences with King's approach:
1) You are free to donate (not "pay") once, twice, or not at all.
2) Every chapter is posted once a week (with some exceptions) if the authors have $300 in contributions for it.
3) Every reader that donates $25 or more will get a paperback of the novel in case it gets published.
It seems to have worked wonderfully (e.g. they posted six chapters of Saltation but have donations enough for up to 15th).