stories filed under: "free"
Recapping The Free Summit
from the lots-to-discuss dept
On Monday, with the help of the folks at SageScape who came up with the idea and put the whole event together (and did all the hard work), we helped put on the very first Free! Summit -- an attempt to dig into this question of how "free" economics impacts business models. As mentioned, a core component of this was recognizing, as we started, that free doesn't mean no business model, but that you needed to understand how "free" works in order to properly design your own business models.We had two separate keynote talks (one in the morning and one in the afternoon) from the author of the upcoming book on Free, Chris Anderson, which I think really helped frame the discussion and certainly provided many of the important points around which many of the other discussions revolved. Not surprisingly, Anderson's book is likely to be required reading for many -- and, yes, there will be free versions available. A key takeaway for me during his talks was the idea that when you have abundance, it's not just that waste can occur, but that you almost have a moral obligation to waste, because that waste creates value that expands a market.
The rest of the morning focused on real world examples -- with three quick case studies of companies (Ooma, YouSendIt and Practice Fusion) who are embracing free as a part of their business models in very different ways. What struck me as most interesting was that all three companies have extremely different business models, but all face some similar issues. Ooma sells hardware and then offers service (VoIP) for free. YouSendIt has a variety of business models, most of which fall into the "freemium" mode, whereby you can pay for advanced features. Practice Fusion has stayed away from the freemium model for its totally free high-end e-healthcare records solution, and focused on alternative models, including advertising and revenue sharing deals with partners.
Yet... the one similarity that all three found? Free is sometimes a barrier to adoption. That is, all three often found themselves needing to explain and educate their customers or communities why they were offering things for free, because many people who come from a world of scarcity rather than abundance intrinsically distrust free. They assume there's a catch or that the service is somehow of lesser quality. This is an interesting point that deserves more exploration -- though, a part of me wonders if it's really generational and will fade over time.
After that, we brought back the Techdirt Greenhouse Idea Workshop -- where we had four companies (ISleptThroughClass.com, Justin.TV, Ad-Village and PhoneVite) all do short 5 minute presentations not just about what they do, but about the biggest challenge they face in continuing to grow their free-based business models. From there we broke out into smaller groups and each room discussed the challenge presented by one of the four presenters over lunch. I was able to float between the rooms and heard some really great discussions. As we've seen in previous Techdirt Greenhouse events, this sort of interactivity really gets people involved and thinking and generates some fantastic ideas.
After lunch, we got back together to discuss the results, and what struck me was how many of the discussions went towards traditional marketing issues: customer segmentation and positioning were two things that seemed to come up in every workshop discussion -- which only reinforces the idea that once you get past the "fear" of free and start to understand its benefits, the challenges that come up are ordinary business challenges, rather than some totally new world of upside down economics, as some have implied.
In the afternoon, we heard a somewhat dissenting view from Alex Iskold, who talked about the the "dangers" of free, in how it could be used by companies to drive others out of business, potentially dampening innovation. This kicked off a good and vibrant discussion including (not surprisingly) me challenging Alex on why some of this was actually bad. For example, he stated that if Google started offering free cars, everyone would agree that this would be a bad thing that needed to be stopped. However, I thought exactly the opposite. If a company (Google or not) can come up with a reasonable business model that subsidizes free cars, that could actually be quite valuable in a variety of ways.
We also had two industry specific panels -- both of which sparked a lot of discussion (way more than we had time for). The first, on the music industry involved myself, Gigi Sohn of Public Knowledge and Dave Allen from Nemo and a founding member of the band Gang of Four. Dave provided examples of how bands are embracing free models and doing quite well, while Gigi talked about the lengths to which the incumbent entertainment companies were going to use political and legal maneuvers to limit how effective those upstart business models could be. While the audience raised a good point, noting that the legacy guys were going to die off eventually anyway, so why focus on them, Gigi correctly noted that the fear is that while they die, they can do a tremendous amount of damage to creativity and to consumer rights. She also noted, in passing, the importance of paying attention to the Cablevision remote DVR lawsuit, which is currently being appealed to the Supreme Court. If the Supreme Court reverse the appeals court decision, it would be a massive blow for all sorts of innovative online services that could enable unique business models.
The final panel, moderated by the always entertaining Kara Swisher, focused on the media industry, and included Dan Gillmor presenting a discussion on new models for news and journalism that were up and coming, which matched up well with MIT/BU professor Marshall Van Alstyne discussing the business models related to these new forms of journalism. Playing more of a skeptic's role was Alan Mutter, who worried about where the journalism world was heading -- though (thankfully) he wasn't about to blame anyone but the folks who run the newspapers themselves.
All in all, there was a lot to talk about -- too much in fact. Due to the massive amount of content, it all too often felt like we were cutting fascinating (and sometimes contentious) discussions short, before we had a real chance to dig into some unique and insightful points. It's always a challenge with events like this, but hopefully some of the discussions will live on in a variety of ways, from the connections made at the event to future posts here on Techdirt and on other sites as well. In the future, though, we'd love to try to create more such gatherings, and will do our best to structure them in a way that allows for even more discussion and participation. Hopefully SageScape agrees and decides to do more such events (and invites us to participate as well). Thanks to everyone who came and to everyone who helped make the event possible.
Filed Under: business models, economics, free, free summit
Don't Newspapers Owe Google Money For Helping Them Research Stories For Free?
from the of-course-not... dept
Last month, we parodied the mainstream press' criticism that everyone else "owed" them money because they were the original creators of a story, by noting that the press never paid the newsmakers for creating the story in the first place. Danny Sullivan has now taken a more serious look at this, noting that for all the talk about how Google is "stealing" from news publications, those same publications never seem willing to admit how much they rely on Google for their jobs these days -- and perhaps one could make an argument that these publications actually owe Google for helping make them more productive. After all, the newspapers claim they want a "fair share" of the money Google makes since it's using their content for "free." But, the same argument works in reverse. If it's "fair," then shouldn't Google get a share of the money the news publications make, since its reporters use Google's tools "for free"?Obviously, the real point is that both sides benefit, and each is responsible for putting in place business models that work. Google has done that successfully. Many news publications have not. But no one should be claiming its "unfair" or that someone else owes them money.
Meanwhile, Sullivan's piece also goes into great detail about how a random AP story he found was written after an AP reporter found some stories on some blogs, and used them to do more research and publish his story. But were the blogs on which he found the story credited? Of course not. Did they get "their fair share"? Of course not. Hell, unlike Google linking to publications' stories, these bloggers didn't even get any traffic or attention from the AP reporter, who simply wants to pretend he came up with the story from nothing.
And the AP wants to claim that it's being treated unfairly?
Filed Under: business models, danny sullivan, fairness, free, journalism, newspapers, research
Free Gone Wrong... Or Free Done Wrong
from the it-happens dept
One of the session's at today's The Free Summit is going to be by Alex Iskold, talking about the "dangers" of free -- a subject he has written on in the past. While I starkly disagree with his position, it is one worth thinking about, and I'm looking forward to his talk. His position (in that article, at least) is that free has consequences, and those consequences can be quite negative. Personally, I find the whole "good or bad" debate to be meaningless when it comes to economics, because economics tends not to care. It's describing what is happening, and I'd rather focus on how to get the best out of that, rather than complaining about why it's somehow bad. But, that said, Alex has a good point that we should at least understand the consequences. We just disagree on how to view those consequences.Along those lines, our keynote speaker of the day, Chris Anderson, recently posted a story of "free gone horribly wrong" written by Jon Lund, the head of the Danish Internet Advertising Bureau. It's a fascinating and worthwhile read, all about a sudden influx of "free newspapers" in Denmark that weren't just free on street corners, but were freely delivered to homes. Basically, it created a bubble, with everyone getting overwhelmed with multiple free newspapers delivered to their doors every day. The market was overly saturated and it hurt everyone and the whole thing collapsed.
It's definitely an interesting tale -- and one that I think fits with some of what Alex will say. But, I tend to wonder if this is really a case of free gone wrong or free done wrong. First, I'm always a bit skeptical of "free" business models that rely on a "free" scarcity (such as physical newspapers). While it can work in some cases, it's much more difficult. You're not leveraging an infinite good -- you're putting yourself in a big hole that you have to be able to climb out of. Second, in some ways the model that was set up was a static one where everyone focused on the "free" part, and no one looked at leapfrogging the others by providing additional value where money could be made. The trick with free is you need to leverage the free part to increase the value of something that is scarce and that you control, which is not easily copied. That wasn't the case here. Everyone just copied each other, rather than trying to offer something different and better.
Still, it's an important point that bears repeating. Free, by itself, is meaningless. Free, with a bad business model, isn't helpful either. The real trick is figuring out how to properly combine free with a good business model, and then you can succeed.
Filed Under: business models, dangers of free, economics, free, newspapers
Free Does Not Mean No Business Model
from the repeat-after-me... dept
As we get ready for The Free Summit, I was thinking about some of the recent posts here on Techdirt, and realizing a really common fallacy that seems to destroy all debates around "free." It's the implicit assumption that "free" means no business model. We saw it with law professor Justin Hughes' defense of copyright in The Economist debate over copyright, where he states:What we have now is a mixed economy for expression in which some expression is produced under a patronage model (foundation grants, universities), some expression is produced under the open source model (Linux, blogs), and some expression is produced under a profit/incentive model of copyright.And we see it when David Simon goes to Congress and says:
It costs money to do the finest kind of journalism. And how anyone can believe that the industry can fund that kind of expense by giving its product away online to aggregators and bloggers is a source of endless fascination to me. A freshman marketing major at any community college can tell you that if you don't have a product for which you can charge people, you don't actually have a product.Both of those statements are based on the implicit assumption that "free" means "non-profit" or "not a business." Yet, nothing is further from the truth. Free has always been a part of many business models, and when most supporters of "free" are talking about isn't that content creation and journalism go to an "all amateur/all non-profit" model. No one is saying that at all. We're saying that they need to learn to embrace other business models rather than rely on copyright as a kind of crutch.
When you've been relying on that crutch for so long, you forget that you have two legs of your own and can make do without the crutch. We're seeing it all the time, with content based business models that don't rely on copyright which have been shown to be more successful than the old copyright crutch business models. There are lots of ways to make money that involve "free" as a part of the business model.
So, from now on, whenever you see someone arguing against free, and implicitly assuming that "free" means there is no business model, correct them. Let them know that they're arguing against a total strawman. No one says the professional class of content creators or journalists is about to go away. We're saying that they'll earn their money in a different way, and it won't rely on charging directly for their content, but on other goods that their content makes much more valuable.
Filed Under: business models, free
Coldplay Giving Away Free CD At Shows And Free Downloads
from the that-evil-free-stuff dept
A bunch of folks have sent in the news that Coldplay is doing a promotion whereby they'll be giving away a free CD at every live show and will also make the tracks available for free download on the band's website. The album itself is live tracks recorded during the current tour. As the band notes:"Playing live is what we love. This album is a thank you to our fans - the people who give us a reason to do it and make it happen."It's great to see another well-known band learn that "free" can have quite a bit of value, though this does seem a bit more gimmicky than any well-thought-out strategy. Giving away a physical product is nice, but expensive, and unlikely to be a difference maker for those going to shows. Still, it is nice to see a band not freaking out about free and looking for more ways to actually connect with and reward their fans, rather than trying to punish them like some others.
Filed Under: cds, coldplay, connect with fans, free, music, shows
Author Offers Free Copy Of His Book To Anyone Who Writes An Amazon Review
from the free-books dept
It's pretty common for book publishers to send out free copies of their books to book reviewers and publications. It's part of the publicity effort that any new book tends to go through. However, in this day and age, pretty much everyone is a book reviewer thanks to blogs or Amazon... and one author is responding accordingly. ChurchHatesTucker alerts us to the news that author Charlie Finlay is offering a free copy of his book to anyone who promises to review it on Amazon. Basically, he knows that the best way to build buzz around the book is to actually get people to read it, and giving away the book to people who will provide that buzz is probably a cost effective way to get some attention. Now, some might question whether the reviewers will be "fair" because they received the book for free -- but that's true of most professional book reviewers already.Filed Under: books, charlie finlay, free, reviews
Companies: amazon
That Whole Free Food Trend...
from the interesting,-but... dept
Over the past few months there have been a variety of stories about restaurant chains offering special "free" promotions and people keep submitting them -- such as this one about Denny's recent experiences with free food promotions. I haven't been posting such stories, because the economics of free food is very different than the economics of free content -- and I'm not sure there's really that much to learn from the restaurant examples. For the chains that have done this, it's been somewhat successful (Denny's especially, for leading the way). The free food has ended up bringing in more paying customers in addition to the "free riders," so it's paid off. However, it does seem a bit riskier than using "free content" in a business model. The marginal cost of offering up free content is nothing. The marginal cost of free food, however, can be substantial. So, while it's an interesting model to look at -- and the success of the experiments so far shows how "free" can absolutely work as a promotion -- I'm not sure the free food promotions really teach us all that much about the use of free in the digital realm.Filed Under: business models, food, free, restaurants
Nettwerk Testing Its 'Pay On The Way Out' Concerts
from the be-interested-in-seeing-how-that-works-out... dept
Terry McBride, of Nettwerk, an interesting label based in Canada, has been running a whole series of interesting experiments that show how a modern record label can still be useful. When I saw McBride speak at Midem earlier this year, he mentioned an experiment he was running, which I never really wrote about. However, Nancy Baym points out that it's starting to get some press. The idea is a free concert to attend... where you're asked to pay what you think it was worth on the way out. Nettwerk artist k-os is doing this, setting up a "Karma table" where you can also get a free copy of k-os' "fan-mixed" album. This was the other experiment Nettwerk is running: rather than letting fans remix the album, they released all the stems so that fans could mix the album itself -- and then they're releasing both the best fan-mixed versions and the professionally mixed versions.It's an interesting experiment, and it will be worth watching (especially if McBride is willing share any of the actual results). It does seem like a risky move, because you're taking on the whole upfront cost of putting on the event -- giving away a scarcity, rather than an infinite good. However, depending on how the rest of it is structured they could end up making some decent money out of it. I'm just not sure it's really the best model, since giving away the scarcity for free gets much costlier much faster.
Filed Under: business models, concerts, experiments, free, k-os, terry mcbride
Companies: nettwerk
Bad Business Advice: Always Look To Charge For Content
from the if-you-want-to-fail... dept
A few people have sent in the NY Times story supposedly about the "free vs. paid" debate that quotes some business school professors giving what appears to me to be awful advice:Eric J. Johnson, a professor at Columbia Business School, said he had been amazed by media companies repeatedly adding free online services, like on-demand video. "Before you add something to your site, you should say that if consumers really want it, that should be part of a package that you could charge for."That's looking only at one side of the equation and is doing so in a dangerously short-sighted way. Rather than saying "hey, if people want this, we should charge for it," why not actually look at the larger ecosystem? Why not recognize the added value that can be added if it is free and how that can enable other business models? The problem is that professors like Johnson are basically pushing the idea that a media company is a "content company," rather than a company that's building a community. It focuses on the belief that the content is the final product. It's not. It's never been the final product. If you have open and available content, that allows users to make it more valuable by sharing it, spreading it, annotating it, commenting on it and building off of it. You can't do that when you put it behind a paywall. Content behind a paywall is less valuable to most people. So why would people pay for content that is less valuable?
The problem is focusing so much on the product rather than on the real benefit. Having the content free enables so much else. And if you focus on charging, all it does is open up an opportunity for others to step in and provide that value, and sap away the "paying" users. Focusing just on the pay question and ignoring the value side of the equation is a recipe for trouble.
So, rather than the NY Times "debate," perhaps check out what the site Hypebot did, which was note that the "debate" is already over. It's not about whether or not there should be "free" content, but that the economics and the market are clear: it will be free. So, with that in mind, it put together a whole series of thoughts from different folks about ways to embrace "free" as a part of larger business models. There's plenty of good stuff to read there.
Glenn Peoples, at Billboard, also picked up on the discussion, which is great, though I'd like to challenge one thing he wrote, complaining about Chris Anderson's take on "free":
Anderson did not draw enough distinction between marginal cost -- which in the case of digital distribution is zero -- and average cost. When Anderson writes that "the marginal cost of digital information comes closer to nothing," what he means is the marginal cost of distributing that digital information. There are significant costs in recording music. The cost of creating a brand and inducing awareness, other considerations Anderson understates, are both unavoidable and considerable. An insignificant cost of creating and distributing one more digital file does not reflect the amount of investment to be recouped.While I don't want to speak for Chris, he and I have certainly talked about these things, and I believe that Peoples is misstating Chris' point on all of this. As we've discussed here before, no one is ignoring the cost of creation or the cost of those other things. We're simply stating the economic fact that none of those things matter in terms of final price. This isn't how we want things to be. It's how economics works. Price is influenced by marginal cost. That's it. Price is not influenced by fixed costs (or average costs). That's not because of what Chris says or what I say. It's how a market works, no matter how anyone thinks things should be.
That doesn't mean you ignore the fixed costs or the average costs. Obviously, you do need to pay attention to those for the sake of making sure there's an ROI where you need it. But that's where you look at your overall offering rather than focusing so narrowly on just the content. So if you can take the content (as you can) and make it free, and use that to drive up interest and value in other scarce products you can sell, then that's where it matters. And, as for the question of "the costs in recording music," we (here at Techdirt) have certainly addressed that at great length: the creation of content is in fact a scarce good. And you can charge for it -- and many have. Jill Sobule is a perfect example of this, getting people to pay to create a new album. Other models work as well, including having brands help pay for the creation of music. There are lots of models that work -- and they don't conflict with or negate the fact (not opinion) that the content itself will have its price driven towards free.
Filed Under: business, business models, charging, content, economics, free
