The theory, reality and promise of something for nothing
There’s a fascinating discussion raging about the commercial value of free. It's sparked by a new book, Free: The Future of a Radical Price, by Wired magazine’s editor, Chris Anderson.
His theory is that companies who give away some products gain a competitive advantage in selling other products. His examples are as old as free cookbooks to introduce Jello and as new as fre distribution of intellectual property on sites like Hulu. You can hear him talking about in this interview with Business Week.
About 5 minutes 45 seconds into the interview, he's asked about newspapers. The sad truth (though he doesn't seem very sad about it) is that the NY Times and the Wall Street Journal will probably be able to create enough premium content to stay in business; the rest can forget it.
Anderson's thinking about Free (always with a capital F in his book) has been challenged by the Great Explainer, Malcolm Gladwell, and by Dallas Mavericks owner Mark Cuban, among others.
In his July 6 New Yorker review, http://www.newyorker.com/arts/critics/books/2009/07/06/090706crbo_books_gladwell Gladwell summarizes:
There are four strands of argument here: a technological claim (digital infrastructure is effectively Free), a psychological claim (consumers love free), a procedural claim (Free means never having to make a judgment), and a commercial claim (the market created by the technological Free and the psychological Free can make you a lot of money). The only problem is that in the middle of laying out what he sees as the new business model of the digital age Anderson is forced to admit that one of his main case studies, YouTube, “has so far failed to make any money for Google.”
Why is that? Because of the very principles of Free that Anderson so energetically celebrates. When you let people upload and download as many videos as they want, lots of them will take you up on the offer.
That’s the magic of Free psychology: an estimated seventy-five billion videos will be served up by YouTube this year. Although the magic of Free technology means that the cost of serving up each video is “close enough to free to round down,” “close enough to free” multiplied by seventy-five billion is still a very large number. A recent report by Credit Suisse estimates that YouTube’s bandwidth costs in 2009 will be three hundred and sixty million dollars. In the case of YouTube, the effects of technological Free and psychological Free work against each other.
Cuban, who was a successful Internet entrepreneur before he became the bad boy of the NBA, has three disdainful posts about Free -- the adjective formerly known as free -- on http://blogmaverick.com/. He deals with some of the same objections as Gladwell, about production and distribution costs and competition, and concludes, "if you live by free, you die by free."
Recently, new data from security solutions company
A barrage of conflicting and completely unreliable information is coming out about 
Comments [0]