Apparently A Debate: Would Twitter Benefit If Users Had To Pay To Use It?

from the easy-answer dept

According to Mathew Ingram at GigaOM, there is apparently a raging debate over whether or not Twitter would actually benefit as a service if users had to pay to use it. I'll admit to being a little bit surprised when I saw this, but digging into the details brought what I think is a wonderful conclusion as to why the answer is definitively "no".

This all more or less started (or at least really took off) when Dalton Caldwell, who founded Imeem, announced he wanted to create a for-pay service similar to Twitter. Caldwell states that services like Twitter don't realize their full potential in what he deems an "advertising-supported monoculture".

"All of these services are essentially in the same business: vying for the opportunity to sell you/your clickstream to advertisers. … I have no interest in completely opting out of the social Web. But please, I want a real alternative to advertising hell. I would gladly pay for a service that treats me better."

It's a concept that I think many people might first agree with...but only if they don't think about it for more than thirty seconds. The first flaw in this line of thinking is that users paying for the service is somehow a firm requirement to avoid what Caldwell calls "advertising hell". I don't think they do; rather, I think that each new service that comes out can be built upon and each innovation can make each service better, including in the way users are impacted by advertisements. As an example, Caldwell could have penned something similar in the 90's, bemoaning a Myspace that had clearly become a musical and bloated hell, so obviously we need to make a social media site that is paid for by users.

Except that's not what we needed. We needed Facebook which, contrary to all the status updates you may have read, does not charge users.

The second flaw in Caldwell's statement is the assumption that advertising does now and always will make us want to bang our heads against the walls in frustration. Certainly advertisements can be annoying, but we've talked repeatedly about how advertising is simply more content, and it can be good or bad. As digital ads continue to get better and better, this "advertising hell" may become an "advertising heaven." Or at least an "advertising purgatory," where the annoyance factor is minimal. In any case, if ads were wanted, then Caldwell's service loses out.

But perhaps that most articulate reason why a service like Twitter should not charge users to join in is made by venture capitalist Fred Wilson:

"Wilson maintains that a free model is the only way to get the kind of network effects necessary for a large consumer business. He also argues that charging users is contrary to the rationale behind such services, since the content being monetized is coming from those same users:

'When scale matters, when network effects matter, when your users are creating the content and the value, free is the business model of choice. And I don’t think anything has changed to make that less true today. If anything, it is more true.'"

What Wilson notes about the content being created by the users is the key point to me. Twitter is a great stage, but those of us that use it are the stars (to varying degrees). To charge the people who are creating the content on your platform seems completely backwards, particularly considering the effect that will have on how your service scales. 

Consider the recent story we ran about how an Irish rail operator used Twitter to reunite a person and their dog: does that happen if you have to pay for the service, reducing its user base? I don't think it does.

Filed Under: business models, communications, free, pay, social media
Companies: twitter

Two-Cent Doughnuts Breed Decades Of Bad Blood: It's Not So Easy Going From Free To Paid

from the tough-to-shake-it dept

One of the things we regularly hear from people who are apparently allergic to any business model that leverages free to make more money elsewhere, is that content creators have to change their business model, stop giving stuff away for free, and start charging. This is seen in lots of places, including the mad dash by many newspapers to try putting up paywalls on their news. We've long argued that doing so can really piss off readers, not just because of the cost, but because taking something that was once free and making it now cost money often changes how people look at the product itself.

The folks over at Planet Money have yet another brilliant podcast where they give an amazing example of this, showing how the impact can be incredibly long lasting as well. It's the story of why so many US veterans hate the Red Cross. Apparently, for a period of time during World War II, the Red Cross stopped giving doughnuts away to service members for free, and started charging $0.02 per doughnut. And, to this day -- seventy years later, many WWII veterans (and many who came after them) have a distaste for the Red Cross, and nothing will shake it.

The whole podcast is worth listening to, as it actually explains why the Red Cross did this (apparently, it didn't want to, but officials put pressure on them when the US entered WWII, because Allied soldiers paid for their snacks, and were annoyed that the Americans were getting free doughnuts). And for decades now, the Red Cross has tried to make up for this -- often showing up at places where veterans are with tons of free doughnuts -- but to little avail.

The program works through a few theories on why this simple change has resulted in so much animosity. They conclude that it was much more than just a "price" change, but a "category change."

Chalk it up to something called categorical change, says Uri Simonsohn, a University of Pennsylvania business professor. Price changes, people can adjust to. But this was different.

"Imagine, for Thanksgiving, you go to your parents' for dinner and after a nice dinner they say, 'That's going to be $10 per person,' " Simonsohn says. "You would be upset."

The problem isn't the price — $10 for a good turkey dinner might not be such a bad deal — but that you're being charged in the first place. It changes the relationship. For the veterans, the Red Cross went from being a little like Mom, to being the corner store

That is, these are things that people, inherently, don't think they should be charged for. Switching those things from free to fee isn't just about the price, but about the concept itself. Now, some will argue that this doesn't necessarily apply to things like newspaper paywalls, since people are already used to paying for newspapers. But, I do wonder if that's really true -- especially for the younger generation. They're not defining a newspaper website as a newspaper website, but rather as "information online." And, to them, that information is free. Period. It's going to be pretty damn difficult to get over that "category shift."

Filed Under: doughnuts, economics, free, red cross, veterans

Pirate Party ALMOST Ejected From Festival For Giving Out Free Waffles After Vendors Selling Waffles Complained (Updated)

from the waffle-waffle dept

Update: Correcting this post as I misread how the situation ended, in which they were allowed to stay after they were almost ejected. I apologize for that wholeheartedly. The "tweets" in the middle were a little confusing and I read them to mean that they had been removed, but as many people in the comments pointed out that was incorrect. I'm sorry for the error, and, as always, strive to fix any such mistakes as quickly as possible.

One of the key things that we find in story after story around here is that those who have a particular business model seem to think that any disruption of that business model must be illegal (or, worse, immoral). Sometimes instances of this come from strange places. For example, the Swedish Young Pirates officially set up shop at a local municipal festival, where they had permission to make food and give it to attendees. They started making waffles and giving them away for free. What they didn't realize was that others at the festival were trying to sell waffles, and they complained. The end result? Almost bye bye, young pirates (see update above). Yes, they got were almost evicted from the festival not for breaking any rules -- but for annoying the existing waffle-sellers by disrupting their business models. Thankfully, they called the police, and were allowed to stay after first having to stop making waffles while everything was sorted out. It is, in many ways, the same story we write about all the time, just in a different context. Disrupting someone else's business model is not a crime -- and often (as in this case) makes things better for consumers. It's just too bad so many "officials" kowtow to the legacy players and seek to shut down any and all innovation... though, sometimes, in the end, they come through and fix things.

Filed Under: business models, disruption, free, free waffles, pirate party, sweden

The Role Of 'Perceived Value' In Music Is Small And Fading Fast

from the music-aint-gucci dept

anothercultland points us to a post over at Digital Music News (obnoxiously entitled "Want More People to Care About Your Music? Then Charge for It…") which, though massively overstated and oversimplified, actually gets at a point I've been thinking about for a while now. The basic premise is that the power of "perceived value" can make charging for music a better proposition than giving it away for free, based largely on a comment from an indie artist:

The music industry isn't the best at studying pricing (that's for sure), but there's evidence that price tags actually increase overall interest and demand for your music - whether that results in a paid transaction or not. Here's a comment from a seriously DIY artist in the trenches, Steady Fingers, who experienced something unexpected.

"But it's funny that even when I used to give away [my music] for free, there wasn't much traffic nor many downloads, almost nothing. Then we decided that we should put it up for sale so that we might be able to recoup some of the money spent on making the music videos (when it's your brother making the videos, I still consider it DIY.) Anyway, as soon as people saw that the music was up for sale, the website and other related social media gizmos received much more attention. Also, people began looking for ways to download it for free, which isn't always a bad sign."

Welcome to the strange world of 'perceived value,' a murky science that enables all sorts of obscene markups - whether at Starbucks, Gucci, or the Apple Store. But the basic idea is this: the simple presence of an elevated price tag - or a price tag at all - is often enough to convince someone that this product has worth.

There is actually some truth to this idea, but only under specific circumstances and with a whole lot of caveats. Perceived value is a real thing, and it can be pretty powerful—but there are significant limitations on how it can be applied to an infinite good like digital content. A good (non-musical) example is self-published Kindle novels: for an author just starting out, it's actually probably a good idea to charge $0.99 instead of making it free, because of the way Amazon separates the lists of free and paid books. Of course, as authors like Joe Konrath have discovered, books at $0.99 make a lot more money than books at $2.99—so the limitations of perceived value come into force quite quickly. In app stores, paid apps may once have held some clout over free ones—but now many of the top grossing apps are free and ad-supported, and the perceived value of a price tag to download has all but disappeared.

And it's disappearing everywhere, as the lines between professional and amateur get weaker all across the media spectrum. I buy a lot of $5 and $10 albums on Bandcamp, and I also download a lot more free ones—and I can't really remember which is which. For indie music, price is a poor indicator of quality. Besides, pretty much all music can be streamed first in a "try before you buy" fashion now, so any perceived value is quickly supplanted by an actual evaluation of the product. Just as with books in the Kindle store, there may be certain venues in which adding a price tag offers some advantage, but that can only go so far and it could always disappear in an instant.

Beyond that, and perhaps most importantly, there is nothing that says you can't charge for your music and also give it away for free. Or, at the very least, charge for it but accept (or better yet embrace) piracy. When payment becomes optional for fans and prospective fans, then they see it as an affirmative choice to support the artist, and many will make that choice. Dan Bull sold enough copies of his Sharing is Caring single to hit the pop charts, and a lot of the attention came not from the fact that he was charging money, but from the fact that he was also giving it away for free (as he does with all of his music). By offering an option to buy and an option to download for free, you get the best of both worlds: the power of perceived value in those few cases where it counts, and the attention of the growing number of people who don't view content that way anymore.

Filed Under: free, kindle, perceived value, price

Economist: Copyright Is An Antiquated Relic That Has No Place In The Digital Age

from the modern-mercantilism dept

For many years I've been pointing out the basics of economics concerning concepts like "free" and the importance of marginal cost to pricing in an efficient market. After one such recent post, I got an angry email from a college professor who has worked in the entertainment industry for many years, telling me that clearly I had never taken an economics class. That, of course, is not true. I took a great many economics classes, and learned the economics I talk about here on the site from some of the best economists around. Either way, I do wonder what this same individual would say upon reading well known (and greatly respected) economist Dean Baker's latest column about how The Pirate Party has got it right on copyright:

Near the top of the list of the Pirate Party's demons is copyright protection, and rightly so. Copyright protection is an antiquated relic of the late Middle Ages that has no place in the digital era. It is debatable whether such government-granted monopolies were ever the best way to finance the production of creative and artistic work, but now that the internet will allow this material to be instantly transferred at zero cost anywhere in the world, copyrights are clearly a counter-productive restraint on technology.

As every graduate of an introductory economics class knows, the market works best when items sell at their marginal cost. That means we maximize efficiency when recorded music, movies, video games and software are available to users at zero cost. The fees that the government allows copyright holders to impose create economic distortions in the same way that tariffs on imported cars or clothes lead to economic distortions.

The major difference is that the distortions from copyright protection are much larger. While tariffs on cars or clothes would rarely exceed 20-30 per cent, the additional cost imposed by copyright protection is the price of the product. Movies that would be free in a world without copyright protection can cost $20-$30. The same is true of video games, and the price of copyrighted software can run into the thousands of dollars.

Baker goes on to suggest some alternative means to fund such creative works in a world without copyright, including ideas like "artistic freedom vouchers" that would give people a refundable tax credit on supporting creativity, on the condition that any of the creativity funded by such money would not be able to protect it with copyright for a period of time. I find such program interesting, though I do wonder if they'd even be necessary. As we've been seeing over and over again, all sorts of interesting new business models are springing up that have nothing to do with copyright. As there is demand for creativity, I fully expect more and more such models to continue to show up as well. What I fear is that the focus by those who benefit excessively from the monopoly rents and protectionism of copyright, will lead to cutting off innovation or killing off interesting and more efficient business models, before they have a chance to evolve.

Contrary to what some like to say about me, I am not convinced that copyright should be done away with completely. I do think that it needs significant reform. I just want that reform to be based on actual evidence and understanding of basic economics rather than faith and the demands of those who have benefited excessively from it, over those who have been held back because of it.

Filed Under: dean baker, economics, free, marginal cost, pirate party

Kevin Smith's Approach To Competing With Piracy: Give Away A Ton, Then Sell Stuff That Can't Be Pirated

from the voila dept

We've written about filmmaker/entertainer/podcaster/author Kevin Smith quite a bit here on Techdirt -- and for a very good reason. He seems to absolutely understand how to adapt to the modern internet era -- and thrive in doing so. As he likes to say, he's much more focused on being where the puck is going, rather than where it is (or where it's been). Along those lines, we've mentioned in the past that he's publicly stated that he believes piracy leads to converts, and those new fans are likely to support him down the road.

Recently he expanded a bit on how he "competes" with piracy. In a all around awesome AMA on Reddit the inevitable question came up about his thoughts on piracy and he busted out a simple explanation for how to "compete" with piracy (even if compete is the wrong word here): he connects with fans by giving away a ton of stuff for free, and then gives them a reason to buy by making things that he wants to sell special, unique experiences that you really can't pirate.

Here's my approach...

I try to give away as much as possible. At SModcast.com, we've got thousands of hours of my best work, as well as the funniest shit you'll ever hear: My true life's work. And we give it away free.

Tomorrow, we celebrate the First Birthday of S.I.R. - SModCo Internet Radio. http://smodcast.com. To celebrate, we'll be launching S.I.T. on YouTube - SModCo Internet Television. All of it is free.

So when I do present my audience with something that requires payment? I try to make it more special. That's why I toured with Red State, rather than simply stick the movie out there in theaters alone. Anyone can access any movie digitally once it's in theaters; I accept that. But they can't digitally access me unless they're in the room.

Instead of trying to fight change, I like to adapt and figure out how to thrive in an ever-changing global economy. And as much as I like to head where the puck is going, you sometimes have to play the ball where it lays.

Having followed Kevin's career for quite some time, it's pretty clear that he's completely internalized these concepts. It comes natural to him, and it's great to see.

Of course, we've been preaching from the same basic book for years, with the point being that you can use free to your advantage. It does not mean (as some people falsely accuse) that we think "everything should be free!" It's all about understanding what things are useful when they're free, and what things you can reasonably charge for. There are a large and growing number of artists who have figured this out -- with Kevin Smith being a great example. It's just too bad that some others are so freaked out by this that they seek to ruin it for everyone else.

Filed Under: free, kevin smith, red state, smodcast
Companies: smodco internet radio

Bonus Sunday Post: Help Dan Bull Get His New Freely Distributed Song On The Charts

from the help-him-out dept

Check it out: a rare bonus Sunday post. Dan Bull, the independent UK musician who we've written about quite frequently for his songs about topics near and dear to our hearts, has come out with another awesome new song, Sharing is Caring. However, there is one thing different this time around: he wants to see if he can get his freely available song on the music charts. To that end, he's using the Promo Bay, having The Pirate Bay promote his song to its millions of users, and also posting the fun videos (yes, multiple videos) of the song on YouTube.

Traditionally, the major labels tend to get their hits to chart by "buying" their way onto the list. In some cases, this was a literal situation, where labels would effectively scam the Soundscan system to get their albums/songs listed. That's become more difficult these days, but still a major label release will also include millions of dollars spent on marketing to get it on the charts. Dan, however, is wondering if support from the folks at The Pirate Bay might be enough to get his song to chart and to make a pretty powerful point:

The singles charts are worthless as an indicator of quality, and artists needn't strive for the validation of reaching them.

However, by taking a free song by an unsigned artist to the echelons normally reserved for the industry elite, I want to smash the glass ceiling and show that there is another way of doing things.

There are ten different versions of the song—one each focused on Facebook, Twitter and Google+, several remixes, and a selection of instrumental and acapella tracks for other musicians to build upon. You can download all ten from the Pirate Bay (of course, if you're in the Netherlands, too bad), and you can support Dan's shot at the charts as much or as little as you want by buying some or all of them individually from iTunes, Amazon or Play. There is a convenient list of direct store links on Dan's website.

So check out the video for the first version of Sharing is Caring here, and if you'd like to help show the old guard that it is possible to release music freely on sites like The Pirate Bay, and still have that music "sell" well, purchase the track at your favorite online retailer.

Filed Under: charts, dan bull, free, promo bay, sharing is caring
Companies: the pirate bay

We Don't Want Everything For Free. We Just Want Everything

from the kids-today dept

Recently, I gave a Sita Sings the Blues talk to a roomful of 15-to-17-year-olds. Near the end I explained Free Culture and my stance against copyright, which led to some interesting discussion. Turns out most of them are manga fans, and familiar with publishers’ complaints about scanned and translated manga shared freely online. They all read them anyway (except one, who prefers to read entire manga in the bookstore). I asked them how they would choose to support artists they liked (once they had some disposable income) and they said:

1. Donate buttons – with the qualification that they want to know as much as possible about where the donation is going. They said honesty and transparency are important.
2. Kickstarter – They all knew about it (which was notable because none of them had heard of Flattr) and valued pitch videos that explained how the money would be used.
3. Custom drawings
4. Merch
5. Physical copies
6. Live Shared Experiences, including ballet, museum exhibits, and concerts. The event aspect was important; they wanted to be able to say, “Remember that one time when that awesome show was here…” They agreed seeing things in person is a more powerful experience than seeing things online, and worth spending more on. One said she would buy CD at a live show because “it reminds you of the show.”
7. One said he would support artists by promoting their work to his friends.

Semi-related, I took an informal poll of how many would prefer to read a book on paper vs. an e-reader. The vast majority said paper, but what they really seemed to want was dual formats: paper copies to read comfortably and collect, and digital copies to search and reference. Makes sense to me. Only two of them had iPads, and none used them for “enhanced eBooks.”

My favorite quote of the afternoon, from a 15-year-old girl:

“We don’t want everything for free. We just want everything.

crossposted from ninapaley.com

 

Filed Under: artists, copyright, culture, free, honest, support, teens, transparency