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Is “Free” really the future?

I just saw an interesting article by Seth (Malcolm is Wrong), and figured I’ll put in my opinion as well. So, I’m going to comment on an article by Seth Godin where he comments on a review by Malcolm Gladwell on a book by Chris Anderson. Still here after that? Ok, let’s carry on then – This gets less confusing (I think).

The debate so far

Essentially, Chris claims in his book “Free” that often businesses can profit more from giving things away than they can by charging for them. He argues that giving away things for free is more that a promotional strategy, and that it will be key to the survival of your business in the future. He argues that because cost of storage, bandwidth and processing power has been reduced to a number small enough to zero, that information tends to go in the same direction and wants to be free.

Malcolm’s opinion

Now that you have the basics, lets start with Malcolms opinion. And you should really read his article, it is quite interesting (Priced to sell). In a nutshell, Malcolm believes that Chris ignores the fact that other infrastructure and the creation of that info will still cost money.

I don’t know if it was intentional, but Malcolm also seems to hint at the fact that humans are usually greedy, so companies will generally do their utmost to resist this trend.

Seth’s Reply

Seth starts out by stating that we are asking the wrong questions. We ask whether free should be the future, when that doesn’t matter, because it is already, what we feel is irrelevant. And we ask how this will support the world as we know it, which is even more absurd.  Since it is happening, the world will have to change. Now this reminds me of the media companies trying to get the betamax/VHS banned (I forget which), because it could be used to pirate their movies… Eventually those companies had to change their world to accommodate the new technology, and ultimately that made them a lot of money (Now think about their current fight against P2P sites and you may start to see a trend).

Now essentially, Seth is arguing that because of low barriers to entry and the fact that anybody can produce information will mean that people can provide that information for less (or even free), either because they can still make a profit, or because they just love what they do and don’t care about a profit. Because of this, for businesses to compete, they will have to be able to offer information for free as well.

So, essentially, free is here to stay because somebody will always provide free information. You’d still be able to sell information by packaging it differently or selling it as a kind of souvenir, People will always pay for something tangible if they love the topic enough. Although there is a lot of confusion right now, there are also a lot of opportunities for the brave.

Ok, so much for the history lesson. You can follow the debate here.

Free makes me think of piracy – How do we link this to The Pirate Bay?

I thought this was interesting in light of the recent Pirate Bay trial, subsequent guilty verdict and then sale of The Pirate Bay to Global Gaming Factory.  Now while the trial was an interesting study in exactly how much power the media companies have and exactly how little regards for the law or the judicial system they have, that is not what this post is about.

What this is about is Global Gaming Factory’s vision of what they want to do with The Pirate Bay.  Essentially, their reasoning is that they are buying the 20 million or so users that already use The Pirate Bay, and then they can use that as a seed group to launch a business using a strategy that has never been tried before.

Global Gaming Factory’s vision for The Pirate Bay

Essentially, Global Gaming Factory wants to license the content on The Pirate Bay with the various media companies and pay them their royalties for every download. To do this, they now obviously need to sell this content to the users. Then where they get clever, and I think this is the first business model that could successfully make use of file sharers, Is that they will pay users for uploading and sharing the files they bought with other users that paid for that file. This means that media companies are now getting their customers to pay for the bandwidth and storage and giving the customers less money for doing that than they would have paid for it themselves.

Global Gaming Factory will also put filters in place to try and stop illegal uploads, and they have bought Peerialism who was busy building an upgrade to the Bittorrent protocol that would try to download from peers that are geographically closer to you, maximising download speeds and minimising costs to ISP’s. They even suggest that ISP’s would buy this upgrade from them to manage their traffic and minimize costs internally.

Why this can never work

Now this all sounds viable, and I definately think this could be a model that we’ll see a lot of in future, but, I also think that Global Gaming Factory has just wasted $8 million.

They assume that a significant percentage of the 20 million pirate bay users that has been downloading for free for the last several years will start paying for their downloads now. Even though Global Gaming Factory will pay for their uploads, it obviously has to be less money than the content will cost in the first place, otherwise media companies are paying you to download their content (And for some reason they are opposed to that idea).

I think the model is viable, but you need to pitch the idea at people that are willing to pay, not the people that have been pirating your stuff for the last decade…

Update (29 July 2009):  You can now download free versions of various digital formats here:
http://www.longtail.com/the_long_tail/2009/07/free-for-free-first-ebook-and-audiobook-versions-released.html

Apparently the unabridged audio will always be free. The other versions will only be free for a while (based on sales).