Once Again: No One Says That 'Free' By Itself Pays The Bills

from the can-we-ditch-this-myth? dept

The head of Nemertes Research, most recently in the news for its controversial report about the internet running into capacity problems, has a somewhat bizarre and poorly reasoned column at Network World trying to make the claim that "free" isn't a business model, as a way to say that while she finds it annoying, the DMCA is probably a good thing. Her evidence is pretty weak. She uses the fact that Radiohead stopped offering downloads of In Rainbows as proof that free doesn't work, and says: "the free kind doesn't pay the mortgage." Except... that's wrong. Estimates on how much Radiohead made from the experiment already are in the $6 to $10 million range. That'll pay for quite the mortgage. Furthermore, that doesn't even take into account how the publicity from the offering got more people interested in Radiohead and interested in purchasing scarce goods from Radiohead, such as CDs or concert tickets. Even Thom Yorke from Radiohead has discussed how successful the promotion was.

The real problem is that people keep incorrectly thinking that when folks like myself talk about the importance of "free" that we're saying "give away everything for free and that's that." That's never been the case at all. What we (and plenty of others) have merely pointed out is that you should use "free" as a part of your business model -- and the trick is just figuring out which parts should be free and which you should charge for. Though, if you understand the economics, it's usually not that hard to figure out which is which. You would think that the head of a research firm would understand this -- especially since the column complaining that free doesn't pay the bills is available (whoops) for free online. Does Nemertes Research believe that there's no business model in television broadcasting? After all, TV shows are available for free, and I understand that some TV execs have very nice mortgages that they can pay. The fact is that just about every business model has some free components and some paid components. Getting so focused on the free components seems to blind some people to the possibility of paid components, apparently.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    TEA-Time, Dec 26th, 2007 @ 10:32pm

    Explain this, Johna!

     

    reply to this | link to this | view in thread ]

  2.  
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    PaulT (profile), Dec 27th, 2007 @ 2:39am

    Re: Explain this, Johna!

    Nice, tip thanks! Unfortunately, the radiohead.tv site is blocked for me at work - does anyone know what time this concert will start?

     

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  3.  
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    PaulT (profile), Dec 27th, 2007 @ 3:47am

    Re: Re: Explain this, Johna!

    Meh, looks like it will be midnight according to the BBC website. Dumb idea - I'll be out getting drunk somewhere...

     

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  4.  
    identicon
    Vincent Clement, Dec 27th, 2007 @ 4:46am

    Free Is Not New

    Companies have been giving away things for free for years. They call them samples. Everytime I go Costco, they are giving all sorts of samples for free. I know that I have bought a few things because of those sample. Free has been around for a very long time. It's nothing new.

     

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  5.  
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    cb, Dec 27th, 2007 @ 6:25am

    Radiohead who ? Until their "free" promotion, I had never heard of them. Did it work ? I would say so. I bought some of their music.

     

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  6.  
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    Shawn, Dec 27th, 2007 @ 6:27am

    I began to think about how much free is around. The frist thing which comes to mind is the FREE wireless internet you can find damn near anywhere now. Then there are bars that offer FREE pool (on Tuesdays) to get busisness going. I've even been to a bar that served FREE pizza, popcorn, and peanuts every night.

    I'm sure I'm preaching to the choir. But it was somewhat fun to stop and think about how my decisions are affected when I think I'll be getting something for FREE.

     

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  7.  
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    Gary Storm, Dec 27th, 2007 @ 4:10pm

    At last

    At last, someone speaks sense. My wife is a musician who's album is coming out next year on a small new label, and there's no way in the world she could give her music away for free... we wouldn't be able to feed ourselves or our two babies at all. She doesn't have a problem giving some of the songs away for free though, as it will hopefully help spread the word. Three of the songs from the album will be free mp3s (256kbps/drm-free) when it's released in February.

    Artists like Radiohead can give away everything because they have a fan-base big enough to justify it. New artists don't, and still need to pay the bills (not just the recording bills either). I think sellaband.com have the right model... crowd-fund the best artists, record great albums and give away 3 tracks for free.

    I really hope all the people who say music should be free, wake up and think about it. If it was free there would be next to no music made anymore... it costs time/talent/money. Advertising wouldn't bring in enough to cover it, even for the big bands websites. Subscription models may be an answer, but again, only for big artists already established.
    To promote new music, it has to be paid for. Simple as that.

    So free should be a part of the business, not all of it.

     

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  8.  
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    sam, Dec 28th, 2007 @ 10:27am

    mike...

    simple question... if the radiohead experiement was such a huge success, then why not continue it.

    why is radiohead no longer giving the album away for free, and is now charging for it.

    if my goal is to make $$$, then i'd think the objective would be to implement stratagies to maximize the results...

    or, could it be that while radiohead did make/generate $$$ from the experiment, they realized that the bulk of the "paying" people who would pay for the "free" album, where pretty much already exhausted. so it now makes sense to charge anybody who now wants the album...

    in which case, the 'free' could be looked upon as a successful marketing approach...

    but again.. only time will tell...

     

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  9.  
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    Zo, Dec 28th, 2007 @ 6:06pm

    Free?

    This makes no sense at all. Forget Radiohead, forget that this worked once. Once is not a model. Radiohead is not a model - okay, maybe for huge bands. And Prince.

    But we are talking about artists and musicians and writers and craftspersons just trying to make it, make a living (ha) ... and there, quite simply, your whole model falls apart.

    Talking about music puts a false and narrow lens on the whole issue. The manner in which creative goods are distributed and sold--with the exception of the music industry--conveys important information to the consumer. I don't waste my time on self-published books; I do read the NYT Book Review in a sense of general trust that the value is there. Capiche?

    Interesting discussion. Pogue's column was ... terrifying.

     

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  10.  
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    Mike (profile), Dec 28th, 2007 @ 6:11pm

    Re: Free?

    This makes no sense at all. Forget Radiohead, forget that this worked once. Once is not a model. Radiohead is not a model - okay, maybe for huge bands. And Prince.

    But we are talking about artists and musicians and writers and craftspersons just trying to make it, make a living (ha) ... and there, quite simply, your whole model falls apart.


    No. No, it does not fall apart. Not at all.

    http://www.techdirt.com/articles/20071002/013951.shtml

    We've given numerous examples of smaller artists that it's worked quite well for.

    Talking about music puts a false and narrow lens on the whole issue.

    I'm guessing you're new around here. We don't just talk about music. I've been talking about the economics of information and infinite goods well beyond music for over a decade.

    The manner in which creative goods are distributed and sold--with the exception of the music industry--conveys important information to the consumer. I don't waste my time on self-published books; I do read the NYT Book Review in a sense of general trust that the value is there. Capiche?

    I'm not sure how that has anything to do with the point we were making here. Yes, the manner conveys important information to the consumer. We don't deny that. But that doesn't change the basic economics. I'm not sure why you think that because free is an important part of a business model all books suddenly become self-published or the NYT book review ceases to exist.

    Care to explain?

     

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  11.  
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    Chuck Norris' Enemy (deceased), Dec 31st, 2007 @ 7:07am

    Re: At last

    I didn't know Britney got married again. Congrats!

     

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  12.  
    identicon
    Bill St Arnaud, Jan 3rd, 2008 @ 11:58am

    Free fiber to the home

    In fact we have been arguing for some time (and hope to demonstrate shortly) that "free" is the only way of delivering broadband to the home

    http://free-fiber-to-the-home.blogspot.com/

    or

    http://green-broadband.blogspot.com

    Bill

     

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  13.  
    identicon
    Phillip, May 24th, 2008 @ 12:16am

    free content from artists - obscurity is the enemy not lack of $

    To my mind the problem with most artists isn't getting paid for the art but rather obscurity. As content producer I'd rather give away million of copies than earn a few dollars on a few downloads.

    Any artists can male a living by various distribution models - but the access to those distribution model is determined by the size of your audience. If 'free' increases my audience so do the business opportunities.

     

    reply to this | link to this | view in thread ]


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