Can't Compete With Free, Or Just Won't?

from the lack-of-effort dept

One of entertainment executives' favorite clichés is that "you can't compete with free", a comment that's little more than a cop-out. Rather than evolve their business models to compete with piracy, they just utter the line and throw their hands up. The statement's not only frustrating, it's also wrong, because whether they like it or not, they're already competing with free -- and, in many ways, succeeding. Every time somebody buys a movie ticket or a CD, the studios and labels have successfully competed with free. The challenge for these companies then becomes figuring out how to make money from those people who want their content, but don't want to pay for it in the current market. While groups like the RIAA, IFPI and MPAA try to resist the changing market through the courts or other brute-force means, some companies are actually embracing it. For instance, Electronic Arts didn't think that it would be able to sell many copies of its latest FIFA soccer video game in South Korea due to piracy, so it gave the game away, choosing instead to sell small enhancements to the game for small amounts of money. It's since sold 700,000 of the add-ons. Advertising offers another avenue for media companies -- even some record labels are licensing their libraries to companies hoping to build ad-supported subscription services. While many (or even most) of these efforts will fail, they'll lay the groundwork for the future of the entertainment and content business -- a future that doesn't revolve strictly around the direct sale of content. So just remember, the next time a big-media bigshot says "you can't compete with free", they really mean "I can't be bothered to try competing with free".


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    Chronno S. Trigger, Jan 19th, 2007 @ 5:38am

    Hay, I got a good one

    Can't compete with free? I think you can. Here's the best example ever. Microsoft Vs Linux. Linux can be downloaded free. I know I have several different versions. Windows is anywhere from $200-$600. Who has 95% of the market?

     

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  2.  
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    Angry Rivethead, Jan 19th, 2007 @ 6:23am

    Re: Hay, I got a good one

    Microsoft has 95% of the market due to the fact, they had thier foot in the door first and have used some serious tactics to stay at 95%.

    For the home user and about 70% of the business user...open office is just ducky...but what comes stock on most computers? MS Works. What gets installed anyway on most corporate computers wether its needed or not? MS Office.

    ...hmmmm...

     

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  3.  
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    Rational Thought, Jan 19th, 2007 @ 6:32am

    Why compete?

    No one competes unless they are forced to. Brute force and territorial domination are inherent in our genetic code. EA only gave away their games because they have no way to enforce pay-per-piece business model in South Korea. They wouldn't have if they weren't forced to do so.

     

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  4.  
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    Anonymous Coward, Jan 19th, 2007 @ 6:33am

    What Microsoft does is perfectly legitimate for a competitor to do... it doesn't seem to have actually caused real harm to the competition... so what tactics?

     

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  5.  
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    Chronno S. Trigger, Jan 19th, 2007 @ 6:45am

    You guys are missing the point

    The record industry had there foot in the door before piracy. LP's. they were definitely dominant before piracy over the Internet was big.

    Microsoft is not only competing against Linix and cheaper than itself operating systems but also piracy. They made there billions on windows even when people were copying it. The trick is that they have better marketing, support, and the money to pay off the correct people. I guess they realised that those things won't work with XP and Vista so they had to implement the activation. and they did all these things while not making the customer feel like a criminal. (Excluding XP and Vista.)

     

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  6.  
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    ScytheNoire, Jan 19th, 2007 @ 6:53am

    it's a fight for survival

    the RIAA and MPAA are just past the point of them being needed. they are no longer needed in today's internet society.

    take the RIAA, and music labels. you can now distribute music easily via the internet, bands can produce their own music with computer software. so really, they only need to spend the money for studio time to record it, then can do the rest themselves. take comedian Dane Cook who became a top seller simply from viral internet marketing. bands can do this all themselves now also. so the RIAA is useless.

    the MPAA is also becoming useless. any one can get DVD's made, and movies can be distributed online with broadband. now to make a big budget movie is still costly, but, a smart film maker, like George Lucas was, would go to private investors and get back, such as banks and lending firms, and then make their movie the way they want to, with their own financing. upcoming film makers would get backing from their mentors, such as already successful film makers. much better movies would get made, that's for sure, and budgets wouldn't be wasted on big names like Tom Cruise, Mel Gibson and Lindsey Lohan who only end up embarrassing the movie studios. With digital camera's, all the "film" can be edited on computers, cut, and sent off for print, all digitally.

    so the RIAA and MPAA aren't fighting against piracy, they are fighting for their own survival. they realize they aren't needed any more, that their business model is dying quickly, and they are scared as hell. just like actors were protesting against reality tv stars, because they felt they were becoming unneeded, so are the RIAA and MPAA fighting against the new digitally connected world.

    so the only reason the RIAA and MPAA have been screaming so loudly lately is because they are trying to survive, they are screaming for help, and they are just waiting for the public to put them out of their misery. so please, help them out, go shoot an RIAA or MPAA executive today.

     

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  7.  
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    Anonymous Coward, Jan 19th, 2007 @ 7:20am

    Linux distributions compete well with free

    I see a world in the not so distant future were drm is in the trash can and all IP is distributed via the same model as linux IP. RedHat is doing quite well at building brandname and releasing their IP(source code format) for other's who don't wish to pay a fee and you don't here them complaining. why should MPAA care that people are downloading Xvid dvd rips drm free, when they only offer others who can pay, worst quality at a non-free price. They only act like they are competing, until they offer a format that people actually want, they can't complain about losing sales to content that is provided for free of charge in a prefered format, which is drm free.

     

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  8.  
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    Right as Rain, Jan 19th, 2007 @ 7:31am

    " WORD "

     

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  9.  
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    Lewis Salem, Jan 19th, 2007 @ 7:48am

    Re: it's a fight for survival

    ScytheNoire,

    You are completely correct.

    You would think that the MPAA and RIAA would scramble to buy up successful web based music services, but no. Perhaps they have had a monopoly over entertainment distribution for so long that they don't even know how to compete!

     

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  10.  
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    Grammer Nazi, Jan 19th, 2007 @ 8:04am

    Hay is for horses

    Literally...

     

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  11.  
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    Michael Long, Jan 19th, 2007 @ 8:37am

    Can't compete

    Or acknowledging the fact that quite a few of the ways to "compete" with free don't scale. Many work simply because of their novelty value, and would fail the second everyone started doing it. This company may have become a succes with giving this game away for free (remember Doom?), but sooner or later people need to pay for it.

    Once eveyone embraces the same model you're back to square one. The advertising value goes away, you're competing with everyone else, and all of the users start feeling nickle-and-dimed by every game at every turn. At which point a pirate market in "add-ons" appears.

    Rant against it all you want, but I tend to LIKE the current system, whereby tens of thousands of people create content for me on spec, after which I and others can evaluate it before deciding to buy it, and then obtain it by paying for a miniscule fraction of the developmental cost.

    Too many of the other schemes assume that I don't want the content and need a t-shirt instead to "support" the band. Wrong. I want the content, don't wear t-shirts, and prefer to pay for value received.

     

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  12.  
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    Unknowledgeable Geek, Jan 19th, 2007 @ 9:05am

    Re: Re: Hay, I got a good one

    And what was first in the music industry? Free stuff, i think not. Thus, their feet should be pretty big, right?

     

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  13.  
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    Anonymous Coward, Jan 19th, 2007 @ 9:10am

    i may be an anonymous coward, but boy is that sore

     

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  14.  
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    nipsey, Jan 19th, 2007 @ 9:12am

    frees

    cant compete with free?? i always laugh when i hear that because i am usually holding a bottle of water in my hand at the time. a bottle of water that cost me over a dollar in my cafeteria...which is further away than a 100% free tap. why? quality and convenience. gee, i can think of quite a few ways for record and movie companies can compete with piracy based on those two parameters.
    i guess the difference is that water companies came along after the free offering and thus knew they had to offer something on top of what you get for free (no matter how much of it is pure marketing)

     

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  15.  
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    nipsey, Jan 19th, 2007 @ 9:16am

    sorry meant to say that one way you can NEVER compete with free is to offer a less valuable option than the free option. as long as DRM exists, you're right, you CANT compete with free!
    sorry, your fault, record companies, not mines

     

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  16.  
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    SeamusOk, Jan 19th, 2007 @ 9:18am

    Re: it's a fight for survival

    First of all, the RIAA and MPAA are trade associations, acting on behalf of their members. To be specific, it's the large entertainment companies we're talking about.

    These companies actually serve a purpose: they finance and market entertainment. To the extent that these functions become cheaper to deliver, they are easier to compete with. But these functions will never be free, because they intrinsically take human effort. Ditto for the product itself. It can't be free if the director, actor, musicians etc. want to get paid for their work.

    Some bands can market themselves, but Kelly Clarkson couldn't do the job they did for her (I'm not talking quality, I'm talking money). They package, promote, and ram it down our throats. I don't like it (I'd never acquire any Kelly Clarkson, even for free), but it makes a boatload of money.

    George Lucas can self-finance because he's already made about 5 of the most profitable movies in history. Why do Cruise and Gibson get paid? Because the investment in their salaries is returned many times over in increased ticket sales.

    They marketing machine works because too many people don't have the time to search it out themselves. Financially, it is too risky to invest in any one entertainment project. They cost a lot, and 19 will lose money. The 20th will make up for them all.

     

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  17.  
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    TheDock22, Jan 19th, 2007 @ 9:43am

    Re: frees

    I agree with you nipsey. With the internet today, why not offer a service that is fast and convenient. I would be more willing to pay the ticket price or more for a movie if I could have it sent directly to my television (By TiVo or some other device). I HATE going to the theater. I think the movie industry needs to stop complaining about pirating and start being a little more innovative.

     

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  18.  
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    macbook, Jan 19th, 2007 @ 10:09am

    iTunes

    That was exactly the argument against iTunes when it was first announced. "Who is going to pay .99 cents for a song you can download for free?"

    2 billion and counting :p

     

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  19.  
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    Nick D (profile), Jan 19th, 2007 @ 10:48am

    For the movie theater experience, I want free popcorn. The theater may need to get a bigger cut of the ticket sales, becuase this is how the teathers make money.

    For the CD experience, I want (in the regular release, not the special ones) extensive notes on the production, maybe a DVD with videos or the studio sessions, interviews with the artists, producers, and engineers. Hell, I would even buy CDs I already have if this was offered (and no, not just a remaster, I have bought these remastered CDs and the expereice fell short for the price). Also, maybe more pushing the benefits of joining a fan club to get advanced info on concerts. I think the labels don't put the marketing power into this because that is not how they make their money. The artist can go an make really cool websites, but this is just to push the sales of CDs or downloads. What if the model was turned around so that the music was free but access to the artists, notes about production, songwriting, etc was through a website behind a pay wall?

    You already see extras on standard DVD releases (directors cut, comentary, trailer, behind the scenes, etc). The music industry needs to catch up to this extended experience.

     

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  20.  
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    ScytheNoire, Jan 19th, 2007 @ 10:56am

    Re: Re: it's a fight for survival

    Actually George Lucas, when he made the first Star Wars movies, had no money and got financial backing from outside the movie industry. He only used Fox for distribution, but he owned the movie, because he got the backing for it. That's why Lucas is so damn rich, because he didn't allow the MPAA corporations to own his movie, he did it himself. So no, the movie industry is not needed, and there are a whole crap load of non-industry companies that do marketing.

    The problem today is that companies get big and huge and then spend their money on lawyers trying to keep control while not providing the public the service they desire.

    There are plenty of great movies out there that didn't pay their actors $20 million for their services. In fact, in the long run, that money hurts their cause, that of the movie studios. The public see's these people get paid insane amounts of money only to piss all over the public at large, thus, turning the public away from these huge stars. It's an old way that's dying off, because you can get great, new talent that doesn't cost that much, and can do the job just as well, if not better. The problem is that they forgot how to market things properly, or just make good movies.

    As for downloaded music, the reason why free is still winning is because it's still easier. With DRM, the music you download for purchase just doesn't always work, and can (and will) eventually become useless data because of DRM. DRM cripples content too much, it makes all legit users suffer, while those who download illegally, have no DRM, and can use the media without problems.

    Until the give the customer what they want, in the form and delivery system they want, the customers will continue to look elsewhere.

     

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  21.  
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    Overcast, Jan 19th, 2007 @ 11:13am

    Using my hand to wipe my tail after using the toilet is free. Using Charmin is not.

    Guess it all depends on what type of quality you want in life :)

     

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  22.  
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    PixelPusher, Jan 19th, 2007 @ 2:39pm

    MS has to play by different rules

    When you are a monopoly, many 'tactics' that are legal for true competitors aren't allowed anymore.

    the DOJ decision, flawed though it was, is proof even the gov't agreed MS wasn't behaving properly.

     

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  23.  
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    Jake, Jan 19th, 2007 @ 3:53pm

    The Ultimate Proof You Can Compete With Free

    Bottled Water.

    Next?

     

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  24.  
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    Brandon, Feb 26th, 2007 @ 12:17am

    finally, someone else had the balls to say what I had to say all along. The RIAA is suing only because it knows it's that much harder to compete with free songs. They know that people are sick and tired of having to go to the goddamn music store to pay $15 for a compilation of a bunch of crappy songs with 1 or 2 good songs. Singles are almost impossible to find, and they're just as expensive. Plus, Singles are only for songs that have music videos, so it's pointless to try to find a single that isn't on MTV or VH1 or the radio. I am ashamed that a big corporate group like the RIAA or the recording industry, with its billions in profits, can't be bothered to compete against napster. Instead, they have to protect their profits by suing and retaining a monopoly over music.

    It is truly pitiful. They just use "copyright infringement" as a code phrase. We know what the real problem is, and it's not legal ramifications. It's their inability to compete in a market that's becoming more and more consumer-based. We, the people, are more and more in control everyday thanks to the Internet. New technology is allowing us to shape the market, and we're finally getting a voice in this so-called free market. I don't see why I shouldn't be allowed to give away free or costly copies of something I already own. It's bullshit. That FBI warning on all vhs and dvds can go to hell! Why shouldn't I be able to compete and make my own tapes? Copyrights are stupid and archaic in this day and age. We need to repeal laws like the DMCA. They stifle creativity and free expression. They allow the idiots at Youtube to take your videos off the site simply b/c corporate assholes bitched and complained. It's censorship.

    And don't let anyone else tell you otherwise.

     

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