You Don't Need To Make Money From Every Person Who Enjoys Your Product

from the it's-called-advertising dept

One of the points of contention we sometimes have with those who disagree with us about the role of free in a business model, is how you deal with the issue of "freeloaders." People often respond to our posts on business models that use free to point out that many people who get the content will never pay, and thus the business model is somehow a failure. Amusingly (and, perhaps, tellingly), most often these sorts of comments come from individuals who insist that they, themselves would never pay -- and basically suggest that copyright and artificial scarcity is necessary to protect artists from folks like themselves. But that's missing the point, entirely. The point isn't to get everyone to pay. In fact, it need not be to get the majority of folks to pay -- it's to build up your audience so that it's big enough that when you offer a scarce good of value, enough people do pay for that good. In such a world, the "freeloaders" aren't a problem -- they're simply providing free advertising.

Another way to think about it is that BMW creates some entertaining advertisements -- and plenty of people enjoy those ads without ever buying a BMW. Yet, those same people don't complain that folks who watch BMW ads without buying a BMW are "freeloading" off of BMW -- despite the fact that they are. Instead, they understand the nature of advertising is that not everyone buys the product that's actually for sale. In fact, a very small number of people may actually buy the product, but that's okay. It's not freeloading, it's just the nature of a promotion.

Cory Doctorow has taken this concept a step further in explaining yet another reason why micropayments aren't the solution for content online:
I don't care about making sure that everyone who gets a copy of my books pays me for them -- what I care about is ensuring that the everyone who would pay me decent money for a book has the opportunity to do so. I don't want to hold 13-year-olds by the ankles and shake them until their allowance falls out of their pockets, but I do want to be sure that when their parents are thinking about a gift for them, the first thing that springs to mind is my latest $20-$25 hardcover.
We've long pointed out plenty of reasons why micropayments aren't a real solution for the "online business model" question surrounding content, with most of the focus being on the mental transaction costs, and the fact that competitors will always beat micropayment solutions by eventually embracing business models using free, but Doctorow makes another good point about the failure of micropayments. Beyond the reasons we've discussed in the past, micropayments also focus too much on shaking the pennies from every passing individual, rather than recognizing the real win is in getting someone else to spend more on a bigger scarce product down the road.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
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    Ajax 4Hire, Sep 9th, 2008 @ 9:35am

    Excellent example, public advertising...

    Advertising on network TV, Radio, newspapers, magazines, outdoor signs all are free for the viewing, yet none of the advertisers require you to pay for the advertisement to enjoy it.

    In fact, how much do you pay for over-the-air TV and Radio?

    Do the Radio and TV stations, Internet Web sites force you to pay for viewing?

    How does Google become so successful giving away its content?

     

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  2.  
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    Anonymous Coward, Sep 9th, 2008 @ 10:00am

    "Amusingly (and, perhaps, tellingly), most often these sorts of comments come from individuals who insist that they, themselves would never pay..."

    I thought techdirt poured scorn on those who make up silly statistics to support their position that have no actual basis in reality.

     

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  3.  
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    Anonymous Coward, Sep 9th, 2008 @ 10:04am

    Mike,

    Just out of curiosity what do you think of video games that charge monthly fees for online access? Should it be free since you already paid for the video game?

     

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  4.  
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    Anonymous Coward, Sep 9th, 2008 @ 10:06am

    What I hate is...

    What I hate is when you go to a website that is a professional, sells a service, and yet is packed with ads.

    To me you make your choice of making money off your wares or off your advertising.

    Yes, I do realize there are ads in newpapers and magizines; but those are normally somewhat tasteful and don't just "pop-up" when you hover over them for a second.

    When I go to a free site, I can accept ads. But when going to a site where I pay say $3.00 a month / $36.00 a year. Think about this, with only 10,000 paid subscribers that is $360,000 per year. Can you find a way to live without a little extra money and instead go after paid memberships?

    So, if you want to do ads, stick to free. Otherwise stick to ad-free.

     

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  5.  
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    Nick, Sep 9th, 2008 @ 10:07am

    BMW Comparison

    Clearly BMW does have a problem with the freeloader as they took those cool videos off their site years ago.

     

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  6.  
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    Anonymous Coward, Sep 9th, 2008 @ 10:08am

    Re:

    I think that you should only pay the monthly amount and not pay the up front fee for the game. Or have the game fee cover the first 3 months or something to assure that you are pre-paid for the game for a given amount of time to offset development costs.

     

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  7.  
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    Michial, Sep 9th, 2008 @ 10:15am

    Always talking free let's put it to the test

    Mike;

    Your always talking about how free is so good for "everyone" I challenge you to put it to the test, help me build a business model around my software that uses free and makes it work...

    Contact me directly off line and I will share the specifics with you and I will gladly attempt to incorporate it if we can find common ground.

    The you will have a real world model to prove your babble works.

     

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  8.  
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    AnyMouse, Sep 9th, 2008 @ 10:17am

    Help subsidize

    I think that you should pay the monthly amount, and NOT play the game. Help subsidize the company!

     

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  9.  
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    Anonymous Coward, Sep 9th, 2008 @ 10:27am

    Re:

    The sofware should be free, and the service (the subsciption) should be how the company makes it's money.

     

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  10.  
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    Anonymous Coward, Sep 9th, 2008 @ 10:28am

    Re: Always talking free let's put it to the test

    See also: RedHat/Fedora

     

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  11.  
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    snowburn14, Sep 9th, 2008 @ 10:38am

    Flawed analogy

    The trouble here is, in your analogy to BMW ads, the musicians aren't the BMW dealers/manufacturers. They're the ad agency who produced the commercials. And you can bet your bottom dollar those guys got paid for (an approximation of) every person who saw the ad.

     

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  12.  
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    hegemon13, Sep 9th, 2008 @ 10:40am

    Re:

    There is no "should." They "can" charge whatever the market supports. The monthly fee pays for service, including upgrades, world expansions, special event story lines, server maintenance, etc. The upfront cost pays for the game engine. If people are willing to pay for both, there is nothing wrong with the game company charging for both.

    It would probably be smart to offer the upfront game free, as it lowers the barrier for entry and gets more players into the game. However, there is no "should," just smart business. Most online games are moving to the model of free game + monthly service charge.

     

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  13.  
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    hegemon13, Sep 9th, 2008 @ 10:43am

    Re: Flawed analogy

    "And you can bet your bottom dollar those guys got paid for (an approximation of) every person who saw the ad."

    Um, then you would lose your bottom dollar. Every ad agency I have ever seen works on a fixed upfront cost, not on royalties.

     

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  14.  
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    hegemon13, Sep 9th, 2008 @ 10:47am

    Re: Always talking free let's put it to the test

    Yeah, consultation is one of the scarce goods that Techdirt sells. This blog is part of their "free" model. When they have paying customers, why would they give their knowledge and advice (scarce resources) away to you?

     

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  15.  
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    Anonymous Coward, Sep 9th, 2008 @ 10:49am

    Re: Always talking free let's put it to the test

    Michial,

    You do realize that this entire website is free content with free advice on it all the time? If not then you probably don't realize that the content (free general advice) of techdirt is like the ads and the creation of a specific plan for a specific client is where the money is made. This site is the embodiment of the principles in this post. Why should Mike prove it works for your business without some incentive (since he's already proven through this site)?

     

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  16.  
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    hegemon13, Sep 9th, 2008 @ 10:56am

    This author is my hero

    I don't know anything about Cory Doctorow, but I will have to find out. I get so sick of the entitlement mentality prevalent among so many in the creative community. Why is it not enough to earn just a decent living from something you love? Lots of people struggle to do that with a job they hate. If I finally get a novel published (I am finally working hard and consistently to get it finished), I would be thrilled to make $30,000.00 off of it over it's lifetime. That is not a huge amount of money, but I estimate that it will take me a little over a year to finish and polish. That is when I am working on it alongside a full time job, and $30K is not a bad supplemental income for a part-time job that I enjoy more than my leisure time.

    Would it be nice to have a huge bestseller and make a ton of money? Sure. But if I can make even a meager supplemental income off of an activity I do in my spare time, anyway, I would be perfectly happy with that. And even if 95% of my readers read pirated copies, I will be glad to have my work so widespread. A hundred-thousand pirated copies is not a 800,000.00 loss (based on loss of paperback sales). Rather, it is a hundred thousand people who know your name, and that leads to more contracts, speaking engagements, book signings, etc.

     

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  17.  
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    PaulT (profile), Sep 9th, 2008 @ 11:01am

    Re:

    In those cases, you're not paying for the game but for access to the servers, updates and community.

     

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  18.  
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    chris (profile), Sep 9th, 2008 @ 11:03am

    i love doctorow's writing

    both fiction and non. his speeches and blogs are always great and i highly recommend them.

    a bunch of his essays are available in a new book called "content" which is available for free here:
    http://craphound.com/content

     

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  19.  
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    Anonymous Coward, Sep 9th, 2008 @ 11:12am

    Re: What I hate is...

    So for every 10,000 subscribers, they can employ, what, 4 or 5 people? And make zero profit? And then pay maintenance costs? I can see why they might want to run ads. If you were paying $15-$20/mo I can see you complaining, maybe, but $3?

     

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  20.  
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    Michial, Sep 9th, 2008 @ 11:16am

    Re: Re: Always talking free let's put it to the test

    I see this site as little more than a non stop rant about how current copyright and patent laws are "hurting" everyone, and how the music industry is hurting musicians and how their business model is outdated etc...

    I don't see content on here that anyone would be willing to pay for let alone be worth anything other than a laugh.

    ----

    As far as his incentive, gee he makes a non stop babling rant about how all this works but only offers up an occassional success at free, and in my opinion even those are rarely a true success, but rather only a success because the artist is willing to settle for much less than the true value of their work.

     

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  21.  
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    Anonymous Coward, Sep 9th, 2008 @ 11:18am

    Re: Re:

    The way I look at it, when you pay to play online you are A) paying to support the servers and B) paying for future content.

    In regards to A I think your fees should go for the servers you play on the most first.

    I consider it like with games such as Counter Strike. Most of those servers ARE supported by "donators" who usually get special status. On top of that, some allow you to pay monthly for reserved slots.

    Those are games that are "free to play" online, but still have monthly fees hidden in there if you play regularly. Either for the convenience of being able to play when you want, or to ensure you have a social environment you will want to play in.


    In regards to B, I get that development costs money. GW showed that you could add content without having an expansion, and then add BIG content in an expansion.

    The only thing I wish, was that the server code was easier to GET for some of these MMO's but I understand why its not.

     

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  22.  
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    Anonymous Coward, Sep 9th, 2008 @ 11:25am

    Mike certainly you aren't so naive to believe that BMW ever intended to make money off of the "content". The commercials are promotional materials used to sell VEHICLES. You are comparing apples to oranges, musicians, programmers, and visual product producers MANUFACTURE content, not physical objects. As a programmer I don't care what means a person uses to load my program I am only concerned that they pay to use the program.

    The business model you so frequently cite involves musicians not not making money from their music but instead making money for their performance. But what about musicians who are unwilling or unable to perform? I don't have a problem with the idea of your business model, it obviously works for many artists. I have a problem with you using that business model as an excuse to defend pirating.

    If I produce the content I should have the ability to determine how it is marketed and what business model I will use to generate revenue - not the consumer - it's content that I created that would not exist otherwise.

    If I ever read another comment alluding to the fact that "content" is not a scare good I will NEVER come back to this site. You have regurgitated that non-sense repeatedly. Just because we have many sources of music does not mean we have an unlimited supply of GOOD music. Stop undermining the contributions that the artists make by implying that they are a dime-a-dozen. Everytime you say something that stupid you lose more respect from your audience.

     

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  23.  
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    Overcast, Sep 9th, 2008 @ 11:27am

    Just out of curiosity what do you think of video games that charge monthly fees for online access? Should it be free since you already paid for the video game?

    Actually, if you flip it...

    Just this last week, I signed up for a 'free' game - well, the initial install was free along with the expansions, but there's a monthly fee for the game itself - so they are now getting paid for me using the service. As a matter of fact, if the original 'media' to install the game wasn't 'free', I would have elected to wait on Warhammer to come out, but since Sony was in fact offering EQ2 'free', I am paying for that, and not EA's new upcoming game.

    In your example - Google 'Guildwars' - they do just that - they sell the game, but after that the service is 'free'.

    There are a host of other 'free' MMO's out there - that don't charge for the service or the game itself, and sell items within the game.

    Second Life, while I can't stand it myself is 'free'; yet many choose to pay for it.

    And yeah, each time you turn on the radio - do you need to pay for it? I suspect that the station broadcasting is in fact making money - very good money in some cases.

     

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  24.  
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    Joe, Sep 9th, 2008 @ 11:28am

    My issue with micro payments...

    they are over priced. You get the rights to interact with/listen to or read a digital piece of software, you dont' physically own anything. So why are costs the same? Look at ibooks, or content on xbox live arcade, none of those costs seem in line.

     

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  25.  
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    Anonymous Coward, Sep 9th, 2008 @ 11:30am

    Re: Re: Re: Always talking free let's put it to the test

    I understand, you choose to view this site as a non stop rant about copyrights and patents. Well I choose to see your requirement for personal proof as an attempt for a freebie in business strategy... Do you see where I'm going with this? They are both logical fallacies (straw man I believe?). Just because you think its so doesn't make it.

    And since you don't see content worth paying for you want a freebie! ;) (Still a logical fallacy but also amusing since that would fall into the post's assertion about people who oppose the free system are the ones who would take advantage of it.)

    Honestly, if you aren't willing to pay for it then you must not rate the information very highly. Which implies you're making an insincere gesture that Mike can help prove it to you (since you won't take the advice Mike would give anyway as you don't place a high value on it).

     

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  26.  
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    Michial, Sep 9th, 2008 @ 11:32am

    Re: Help subsidize

    There are only a limited number of cases where it makes sense for software to be free, and those are in products that have millions of potential customers.

    MOST software products in the market place are virticle markets with finite and limited numbers of customers. Take my Software for example, it is for Law Enforcement, and more specifically County Jails. There are aproximately 3500 County Jails inside the US. I chose the Software as a Service business model because it works for me.

    There is no way in this small of a market anyone could be successful with a free product. There are not enough potential customers to make a long term living.

    My software has over 7000 hours invested into it's development, how could I ever justify that amount of labor for free?

     

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  27.  
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    Mark Murphy, Sep 9th, 2008 @ 11:39am

    Re: Re: Re: Always talking free let's put it to the test

    I see this site as little more than a non stop rant about how current copyright and patent laws are "hurting" everyone, and how the music industry is hurting musicians and how their business model is outdated etc...

    If you think this blog is a rant, try the Bile Blog (http://www.bileblog.org/). In other words, I think you need to reset what you consider to qualify as a "rant".

    I don't see content on here that anyone would be willing to pay for let alone be worth anything other than a laugh.

    You are certainly entitled to your opinion. It's a big Internet, and presumably there are other places that are more in line with what you would prefer to read.

    However, Mr. Masnick is fairly well-regarded. I see him quoted and linked to from quite a few blogs and sites that I read. He's been cited by everyone from PBS to BusinessWeek, appears at conferences, and so forth. By comparison, you and I are nobodies. So, while he may not be your cup o' tea, please understand that there are a fair number of people who disagree with you.

    As far as his incentive, gee he makes a non stop babling rant about how all this works but only offers up an occassional success at free, and in my opinion even those are rarely a true success, but rather only a success because the artist is willing to settle for much less than the true value of their work.

    And as soon as you find the galactic taxi meter that indicates "the true value of their work", be sure to let us know! I, for one, would relish the ability to absolutely and indisputably know the value of a book, article, or whatnot just by pulling a lever. Most of us are limited to just finding out the value we are able to extract by the means we choose to extract it, without the benefit of your precise and true calculations.

     

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  28.  
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    Overcast, Sep 9th, 2008 @ 11:41am

    MOST software products in the market place are virticle markets with finite and limited numbers of customers. Take my Software for example, it is for Law Enforcement, and more specifically County Jails. There are aproximately 3500 County Jails inside the US. I chose the Software as a Service business model because it works for me.

    There is no way in this small of a market anyone could be successful with a free product. There are not enough potential customers to make a long term living.

    My software has over 7000 hours invested into it's development, how could I ever justify that amount of labor for free?


    Actually - the county paid for it, I'm sure - true - but doesn't each inmate get a benefit for 'free' from the software or does each one pay you directly? Or say if the jail's workers each use the software is there individual license fees or just the single charge to the county?

    Like Microsoft - Internet Explorer's free, along with the OS itself.

    Free is kinda 'relative' really.

    Kinda depends on how one looks at that.

     

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  29.  
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    Michial, Sep 9th, 2008 @ 11:45am

    Re: Re: Re: Re: Always talking free let's put it to the test

    I never said I would not pay Mike if I incorporated his Business model into my business. I said that if we found common ground which I assume would have a monetary incentive as part of that.

    There is little on here that I would pay for. There are no banner ads that are of intrest to me, and not a single product advertisment that is needed for me. If I saw a banner ad for a product I needed I would click on it and Mike would get his pennies for that action.

    I keep coming back in hopes that someone will convince me I am wrong. But all I find is ranting about the music industry.

    I agree with the posts that the RIAA and MPAA are doing way more damage than good, I agree that the music industry has not kept up with technology, but I do not agree that there is even the vaguest argument that music should be made available for free. I will never agree that software should be free and "services sold"

    There are a limited number of software products that would benefit at all from a free distribution system. 90% or more of the software industry are products designed for a specific purpose and have limited customer bases.

    Software such as Operating systems, database servers, Accounting packages etc would have an aftermarket where customizations and services exist. Software such as Word Processors and Spread sheets have markets for books and documentations so they would work. These are a limited and very small section of the software industry.

    As software becomes more specialized it has a smaller customer base and depending on the market that it's intended for may not have any need or use for aftermarket services making the only source of revenue the initial sale for the author.

    No author should work for free unless it's their choice, there is no such thing as being better for the masses when the performer is starving to death.

     

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  30.  
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    Isaac K (profile), Sep 9th, 2008 @ 11:48am

    Re:

    I personally don't buy those games, good though they may be.
    Aside from the "micropayment" issue, monthly access games are a form of rent seeking to maximize profit pulled from the consumer:
    Charge the maximum the market will allow for the initial good.
    Continue to charge "access" for a good - I have no problem when the access charge is needed for production - like phone line maintainence or the electrical system. But here Blizzard is [brilliantly] exploiting market mechanics to squeeze the most out of the consumers.

    Not interested.
    [btw; this isn't a judgement upon anyone who values the games enough to pay access fees, I just don't - why not make the game available offline or something for those who would rather sandbox on their own...]

     

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    Overcast, Sep 9th, 2008 @ 11:53am

    No author should work for free unless it's their choice, there is no such thing as being better for the masses when the performer is starving to death.

    Yeah, I'd agree 100% too - people do need compensated for their work. Problem with the RIAA and MPAA specifically is that - well, over the last 50+ years music has been 'free' over the radio. True enough, there was advertising; like on this site - you may not be interested in the products advertised here, but the continued existance of this site proves that somewhere, that business model is working, to a degree. I don't have a need for Techdirt's services directly, but they do have some tactful ads, that on occasion I will check out. Intent to buy or just out of curiosity; I might click on them.

    Like the BMW commercial - I may watch it out of curiosity, but buying one isn't something I'll do anytime soon.

    I do think the current model with music online needs some innovation alright - it won't work either way it exists now. First off, if it's all free; who's going to devote time to starting a band, much less making music. Unless it's out of sheer personal desire - even then, we'll end up with a LOT less content.

    But on the flip side - people know how much of a rip-off a CD is, there's an alternative now.

    But in the end - the RIAA is simply *not* doing it's job - it's job; I suspect is to work for the best interest of the artists - that's one thing they are not doing; they are working to keep an obsolete business model viable. Maybe - what the RIAA *REALLY* needs - is some new management and new blood, the artists should demand it. Obviously, in it's current form - it's fighting a loosing war and doing nothing to change it's strategy.

     

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  32.  
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    Michial, Sep 9th, 2008 @ 11:54am

    Re:

    Overcast;

    The county pays for the software obviously...

    And I believe I do understand the business models where people talk about giving the software away for free, and selling services to make money.

    The point I am trying to make is that in the average software market you could not give the software away for free and then offer services around that software that would pay for me to stay in business. The number of potential customers is too small to support that structure.

    People hear software and they instantly think Windows or Word or Excell, thos products are a very very small portion of the software market, they just happen to have huge customer bases because of how generic they are.

     

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  33.  
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    Jim, Sep 9th, 2008 @ 11:58am

    Re: Re: Re: Re: Re: Always talking free let's put it to the test

    Poor Mike. He can't just simply respond by calling you an idiot. He has to either take the time and effort to politely make a point or not respond at all. That would give me an ulcer.

     

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    Isaac K (profile), Sep 9th, 2008 @ 11:59am

    Re: Re: Help subsidize

    Ever thought about giving county jails a "free trial?" That is exactly what mike is talking about. As you are dealing with a smaller market segment [and a governmental one at that] the fear of piracy is slim to none. Instead, enable a pilot of the system in a highly visible locality so everyone can see how well it works.

    If the company [jail] benefits from the software, you have gained a valuable advertising resource on the market - refer other institutions to the trial jail. Otherwise, your product isn't as beneficial as you thought it was or the market isn't ready for the product, so trying to sell it may not be warrented - there could be little demand.

    How is that for using "free" as a tool for limited market software advertising?

     

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  35.  
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    Anonymous Coward, Sep 9th, 2008 @ 12:07pm

    Re: Re: Help subsidize

    You can choose to charge a lot and sell licenses one by one. Or maybe you could only charge for integration, training, updates, etc. Unless your software is already perfect there is probably a lot of work that could be done with it.

    If a free business model with paid follow on services is such a bad idea, then why not just continue to sell your software as you probably are already trying to? Are you already having huge successes with the "old business model"? Great - congrats! Post the details and prove Mike wrong!

     

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  36.  
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    Twinrova, Sep 9th, 2008 @ 12:09pm

    Free doesn't always work, Mike

    "Yet, those same people don't complain that folks who watch BMW ads without buying a BMW are "freeloading" off of BMW -- despite the fact that they are."

    Wrong. We're freeloading off the consumers who purchase BMWs, Mike, because they're the ones paying for the "free" content.

    BMW doesn't make software. It makes automobiles. The "free" model only appears to be free but you can bet if the advertising costs increase, we'll see one of two things:
    1) Less ads by BMW
    2) Increased prices of tangible goods

    NO BUSINESS will ever survive if the money spent exceeds the money earned. That's just common sense. To think "free" exists is absent minded because nothing is free. It's made up somewhere.

    Your examples of musicians giving away free music is proof of this. Give away the music for free, but make up the costs in concerts, tshirts, CDs, and any other tangible "scarce" product. This restores the revenue lost on the "free" content.

    What you fail to target is the digital media industry. Programmers, developers, graphic artists, and others struggle to find a market without overcharging consumers to remain competitive. It's truly disheartening seeing your hard work being "freely" distributed on the web. Each application shared is one less meal on the table. One less gallon of gas. One less necessity to keep the business going.

    Digital designers often create freeware to help get customers to purchase other items, usually at or below production costs to remain competitive. It's how they advertise (and keeps the costs down).

    If you think for one second digital designers are going to sell tshirts to make up for the loss of these damn thieves, you're not thinking clearly. Why should digital designers have to invest in tangible goods because an idiot is distributing the software/item for free?

    That's just wrong. If you rip a CD for yourself, knock yourself out. But the moment you put it up for others to get for free, you're an asshole who deserves to be shot in the head.

    Digital designers can't afford to put everything they do on the web for free because there are no tangible products to make up for the freeloaders who think it doesn't hurt anyone.

    I'm sorry I don't agree with your free business model, Mike. I've been there. I've tried it. It failed in the long term because people always prefer 0 cost to paying, even if asking politely to contribute any amount for future upgrades and other applications.

    Maybe if I had sold tshirts on the side, eh?

    Free doesn't exist and when you get this through your head, you'll understand completely why so many businesses are out to protect their IP.

     

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  37.  
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    mobiGeek, Sep 9th, 2008 @ 12:10pm

    Re: Re: Help subsidize

    There are only a limited number of cases where it makes sense for software to be free

    I completely disagree with that statement.

    There are a number of ways in which software can be distributed at no cost, and yet the producer is paid for the cost of production plus a reasonable profit. Red Hat is a great example, but so are internal corporate developers; they build software for just ONE customer and that customer pays nothing for the software besides the price of support (in the way of paying the developer salaries).

    There are two major ways that most people fall down in looking at the "free" model. The first is that they either are looking for payment AFTER the work has been produced, thus fighting their customers and the natural trend of digital information (software) to reproduce itself. The second is that they are looking for "big profit" akin to the Oracle's and Microsoft's of the world; the VAST MAJORITY of software is not produced by developers working for name-brand (and high profit seeking) companies, but by small contractors and in-house developers.

    So rather than being halfway down the path of producing a package under the auspices of a licensing model and trying to sprinkle "free" on your approach, you need to rethink your entire process. Free is not a mid-game strategy; it is the whole game.

     

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  38.  
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    Michial, Sep 9th, 2008 @ 12:10pm

    Re: Re: Re: Help subsidize

    Isaaac;

    Mike is not talking about a "trial" of anything, he talks of free music and selling "scarce goods."

    As for my software, I actually do offer a free product to jails, and any jail is welcome to use it for ever for free. It's just a stripped down version of my overall product. I have about 7% of my customers on this product. The thing is that this 7% will NEVER be able to pay for it, there is no budget for them in any way shape of form. I chose to give it to them for free because them using my software benefits my other customers.

    Evaluation products are not the same thing as free, they expire and as a result their only function is for the user to decide if the product is right for them.

     

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  39.  
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    Matt, Sep 9th, 2008 @ 12:20pm

    Re: Always talking free let's put it to the test

    You might be better off talking to John Carmack and the people at ID who did exactly what you are asking ohhh.. about 15 years ago?

     

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  40.  
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    Anonymous Coward, Sep 9th, 2008 @ 12:20pm

    Re: Re:

    In the future - maybe you shouldn't make software unless you are commissioned in advance to produce it. In that instance you are getting paid for your services, not your product.

    Why would anyone want to hire you? Well, if you give away the software you currently have you may become a major name for counties in need of software across the country.

    If you don't think all those jails would have bought your software anyway - then you really aren't out all that much. They won't pay you up front, but they probably wouldn't have paid you anyway. Just make sure that you market yourself well while giving: you are available for similar software or updates to what you just gave away (for a fee).

     

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  41.  
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    Mike (profile), Sep 9th, 2008 @ 12:36pm

    Re: Always talking free let's put it to the test

    Your always talking about how free is so good for "everyone" I challenge you to put it to the test, help me build a business model around my software that uses free and makes it work...

    There are plenty of examples on the site already. If you would like to hire Techdirt to help work on your particular business model, the process is described above.

    The you will have a real world model to prove your babble works.

    Again, we've been chronicling real world success stories for years, and that helps drive new business to us, helping companies implement business models.

    See, that demonstrates the model right there (we put out own model into practice). We provide plenty of free content and insight right here on the site, but if a company wants help with their specific problem, then they pay for our scarce good (our time/attention) to help them work out a specific plan.

     

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  42.  
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    Mike (profile), Sep 9th, 2008 @ 12:39pm

    Re:


    Just out of curiosity what do you think of video games that charge monthly fees for online access? Should it be free since you already paid for the video game?


    As plenty of others have pointed out, paying for ongoing service (access/server time/etc.) is a perfectly reasonable business model -- though, it may make sense to offer up a certain amount for free to get people into the game. Those are the scarce goods that the gaming company controls. But the initial software should most likely be given away for free, as that increases incentive for people to pay for those scarce goods.

     

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  43.  
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    Rose M. Welch, Sep 9th, 2008 @ 12:45pm

    Re: This author is my hero

    Oh, my God, thank you! Somebody else finally said it!

     

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  44.  
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    Mark K, Sep 9th, 2008 @ 12:45pm

    Spending down the road

    From the article: "Beyond the reasons we've discussed in the past, micropayments also focus too much on shaking the pennies from every passing individual, rather than recognizing the real win is in getting someone else to spend more on a bigger scarce product down the road. "

    I like the 'free' business model. But there are holes in my understanding that keep me from fully embracing it. My main question would be what do you do in the meantime? How do you support the cost of running a business while you are waiting for the 'down the road' to happen?

     

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  45.  
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    Mike (profile), Sep 9th, 2008 @ 12:49pm

    Re:

    Mike certainly you aren't so naive to believe that BMW ever intended to make money off of the "content".

    I never suggested anything else. Why do you think I did?

    The commercials are promotional materials used to sell VEHICLES. You are comparing apples to oranges, musicians, programmers, and visual product producers MANUFACTURE content, not physical objects. As a programmer I don't care what means a person uses to load my program I am only concerned that they pay to use the program.

    No. It's not apples to oranges. The very point is that the infinite goods are ALWAYS promotional materials to sell some scarce goods. BMW has the model correct: using entertaining videos to sell cars. Many musicians, programmers, etc. have the model wrong: trying to sell the promotional materials instead of the scarce goods.

    The business model you so frequently cite involves musicians not not making money from their music but instead making money for their performance.

    No, that is incorrect. It's difficult to respond when you clearly have not read what I have written. The model I have described involves musicians making money from their scarce goods. Performance is *A* scarce good, but hardly the only one. Trent Reznor made millions from selling a scarce good (limited edition, signed box sets) that has nothing to do with touring, even though the music was given away free. Jill Sobule made plenty of money with a model that didn't focus on selling the music or touring, but on getting people to pay her to create the music.

    Touring is *one* of many possible scarcities that a musician has.

    But what about musicians who are unwilling or unable to perform?

    As I pointed out (and have pointed out repeatedly in the past) there are many other models.

    Also, while there are plenty of other business models available for those who choose not to tour, there is a part of your question that could be read the same as: "But what about the guy who doesn't want to work? How is he supposed to make money?"

    If I produce the content I should have the ability to determine how it is marketed and what business model I will use to generate revenue - not the consumer - it's content that I created that would not exist otherwise.

    I would suggest that you learn a little bit about how capitalism and markets work. It's the market that decides what business models work. Not the producer alone.

    If I ever read another comment alluding to the fact that "content" is not a scare good I will NEVER come back to this site.

    Stating that you wish to be willfully ignorant is kind of odd, don't you think? I can't not write about something that's true, just because you want to stick your fingers in your ears and pretend it's not true.

    Just because we have many sources of music does not mean we have an unlimited supply of GOOD music.

    And again, you have shown that you have not actually read what I wrote.

    I never said that there was an unlimited supply of good music. I said that a song, by itself, is an infinite resource, and there are business models to take advantage of that. While I can see how you might read that quickly and mistakenly assume that means what you wrote, it's clearly a misinterpretation.

    Stop undermining the contributions that the artists make by implying that they are a dime-a-dozen.

    I would NEVER suggest such a thing. Good musicians are few and far between. That's why I'm trying to HELP them by explaining the basic economics of the marketplace, so that they can do better by them.

    Everytime you say something that stupid you lose more respect from your audience.

    Well, most of the audience seems to disagree with you -- in part, because they seem to have actually read what I wrote, rather than the strawman you seem to want to knock down.

     

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  46.  
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    Rose M. Welch, Sep 9th, 2008 @ 12:51pm

    Re: Re: Re: Re: Help subsidize

    That's not true. Alot of evaluation software is a stripped-down version of the overall product (just like your free evaluation version) and sometimes it's the real thing operating on the honor system. Do people sometimes not pay? Sure, tons of them don't. But people like me do. In the end, it all adds up, especially because those who would never pay will probably tell other people about the product, thereby upping the odds of the creators being paid over and over again. This model, like any other, will not work for everyone, but that doesn't mean it won't work for anyone.

     

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  47.  
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    Mike (profile), Sep 9th, 2008 @ 12:54pm

    Re: Re: Help subsidize

    There are only a limited number of cases where it makes sense for software to be free, and those are in products that have millions of potential customers.

    That's simply untrue. What you are saying, basically, is that fundamental economics only applies to a small segment of the software market? I find that difficult to believe, and would suggest that some serious proof would be needed to support your contention that most of the software industry is immune to basic economic forces.

    MOST software products in the market place are virticle markets with finite and limited numbers of customers.

    That doesn't change the nature of the software, or the fact that there are business models around that software that would be better off with free software.

    Take my Software for example, it is for Law Enforcement, and more specifically County Jails. There are aproximately 3500 County Jails inside the US. I chose the Software as a Service business model because it works for me.

    Software as a service is a reasonable business model, if the company is actually paying for service. That *service* is a scarce good. So you're already understanding the business model.


    There is no way in this small of a market anyone could be successful with a free product. There are not enough potential customers to make a long term living.


    Well, let's see. What if a company that sells some other product -- say computer hardware and devices to law enforcement and county jails realizes that if it gives away free software on all of its machines, it will make those machines a lot more attractive than competitors' machines.

    Then, boom, you've got a nice business model that uses free software to make a company have a very nice business model for scarce goods (computers/devices).

    My software has over 7000 hours invested into it's development, how could I ever justify that amount of labor for free?

    By putting in place a business model that takes advantage of all that labor to make scarce goods more valuable.

     

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  48.  
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    hegemon13, Sep 9th, 2008 @ 12:56pm

    Re:

    Better pack your bags for another blog, because I guarantee you will see it again.

    There is no undermining going on, simply a statement of fact. The fact is that the content itself is infinite through digital distribution. Even if there were only 1 good song in the world, that song would not be scarce, but infinite, due to digital distribution. Thus, we would have an unlimited supply of that song. You are, unfortunately, confusing Mike's statement of fact with a statement about the value of the music. Or, you are misconstruing statements about existing content, which is infinite, with the creation of new content, which is scarce. No one is undervaluing the music itself, but rather saying that the business models should focus on scarcities, such as collectibles or the creation of new content (such as being commissioned up front to create something, the way most artists worked many years ago).

    "If I produce the content I should have the ability to determine how it is marketed and what business model I will use to generate revenue - not the consumer - it's content that I created that would not exist otherwise."

    There's that entitlement mentality coming out again. No, you shouldn't. There, I said it. You have created something. Good for you. Now, you can choose to control it by sticking it in a desk drawer or burning it. OR, you can release it to the public and profit from it. When you do the latter, you release control, like it or not, there is no "should" or "shouldn't" about it. That is simply a fact. You can cry about it or accept the fact that the more people like your content, the more they will do to get more. If people are flocking to pirate something you made, then get off your ass and give them something more to flock to, or don't gripe when you can't rest on your laurels.

     

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  49.  
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    Anonymous Coward, Sep 9th, 2008 @ 1:01pm

    Re: Free doesn't always work, Mike

    Might want to get into another market...for your own mental health.

    Shooting people in the head for sharing music...yikes!

     

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  50.  
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    Rose M. Welch, Sep 9th, 2008 @ 1:04pm

    Re: Spending down the road

    The same way that all starter business do. Get a loan or investors and cross your fingers for five years. And in the end, you probably fail. Statistically, one-thirds of starter business fail in the first two years and two-thirds of the remaining businesses fail in the first four years.

     

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  51.  
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    Mike (profile), Sep 9th, 2008 @ 1:08pm

    Re: Free doesn't always work, Mike

    NO BUSINESS will ever survive if the money spent exceeds the money earned. That's just common sense.

    Have I ever said otherwise? The point is to use these business models to make more money. That IS common sense.

    To think "free" exists is absent minded because nothing is free. It's made up somewhere.

    Indeed. As I've always said, free, by itself isn't a business model, but free can be a major part of a business model:

    http://www.techdirt.com/articles/20071214/034002.shtml

    So don't say that I'm saying free alone is the business model. I never said that.

    What you fail to target is the digital media industry.

    Not at all. I've talked about how this applies to almost any industry.

    Programmers, developers, graphic artists, and others struggle to find a market without overcharging consumers to remain competitive.

    Tell that to Google, which made quite a business out of free software. And IBM. And Red Hat. And MySQL. Should I go on?

    All of them figured out ways to make software free and make plenty of money while doing so.

    It's truly disheartening seeing your hard work being "freely" distributed on the web.

    It's not at all disheartening if you have the right business model, where each of those "free" copies acts as advertising and promotes your real business model.

    If you think for one second digital designers are going to sell tshirts to make up for the loss of these damn thieves, you're not thinking clearly.

    Who ever suggested that? Why do you assume that t-shirts are the best scarce good? That's ridiculous.

    Please, please, please, stop putting words in my mouth and take the time to understand the actual model.

    Scarce goods involve lots of things, including the developers time, resources and attention. Or it could involve hardware. Or it could involve ongoing support. There are lots of scarcities around software.

    Digital designers can't afford to put everything they do on the web for free because there are no tangible products to make up for the freeloaders who think it doesn't hurt anyone.

    Stop mixing up "tangible" as the only "scarce" good. Google doesn't sell anything "tangible" but it makes a TON of money giving its software away for free.

    I'm sorry I don't agree with your free business model, Mike. I've been there. I've tried it. It failed in the long term because people always prefer 0 cost to paying, even if asking politely to contribute any amount for future upgrades and other applications.

    Then you put in place the wrong business model. That's not my fault.

     

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  52.  
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    Keith Jolie, Sep 9th, 2008 @ 1:34pm

    Re: Flawed analogy

    hello? is anyone awake here - the biggest trouble with the analogy is that if you actually want to drive a bmw you have to either buy it or rent it or....steal it..(you might get to test drive it, but not without some creepy guy from the dealership right beside you)

    Musician = BMW - the car company
    Song = blue print for the car
    Recorded Music = the car
    Record label (if the artist has one) = sales organization (dealer association for instance)

     

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  53.  
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    Anonymous Software Developer, Sep 9th, 2008 @ 1:37pm

    Re:

    good. go away. content is not a scarce good.


    but NEW content is. once someone makes a song into an MP3 it costs nearly nothing for it to get copied hundreds of millions of times into every single house. it is just a tiny bit of electricity over a wire, simple as that. but, people putting song into mp3 format in the first place is a Scarce good.

    you claim you are a programmer, look at the Linux movement. Many of the successful Free an Open Source movements have "donation" or "bounty" systems to get certain programs or features. The developer gets paid for creating something the people want, then everyone can get it for free. turning that back into music, people might pay to have their favorite band create another album that would then get released for free to get more people who want another album.

    so, Content is a scarce good, get a clue on what that means or leave.

     

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  54.  
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    Anonymous Software Developer, Sep 9th, 2008 @ 1:43pm

    Re: Re: Help subsidize

    you talk to the jails, tell them how you can improve your software, and how much you will charge to develop that feature. if they find the feature useful, they pay you to make it, the you give it away free in your next version of the program.

    you get paid to do the programming, not do the programming "at a loss" and then try to "recoup your losses" by selling the program. so yes, you can make a profit without actually selling your software, many people and companies have.

     

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  55.  
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    Anonymous Software Developer, Sep 9th, 2008 @ 1:55pm

    Re: Re: Re: Re: Re: Always talking free let's put it to the test

    No author should work for free unless it's their choice, there is no such thing as being better for the masses when the performer is starving to death.

    the problem is that, unless they work for a company, most programmers DO work for free. they work for free and then Sell the end result for ever. what is suggested instead is that you get someone to PAY you to work (make the program) and then give away the program to anyone, you could still accept donations too.

     

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  56.  
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    Mark K, Sep 9th, 2008 @ 1:55pm

    Re: Re: Re: Help subsidize

    'they pay you to make it, the you give it away free'

    That doesn't seem fair to the people who paid for it. It now seems that they are the ones who are carrying the burden of the freeloaders. Granted, once the software is made, there is really no burden for duplication, but it doesn't seem fair to make a few customers pay for the benefit of all the other customers.

     

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  57.  
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    Anonymous Software Developer, Sep 9th, 2008 @ 2:13pm

    Re: Re: Re: Re: Help subsidize

    you may choose to look at it that way, but I put forward that the people who pay to have a feature they desire implemented are happy to have it, those that didn't pay are the ones that didn't really care about the feature and are probably the same ones who would not pay for the next version that comes out because their old version "already does everything they need"

    how many people do you know who don't want to upgrade to the newest Microsoft office because their old copy does the job? would those people pay for you to make the new features? most likely not. but how about those that are raving about the new features? if you put out saying that if you get paid X amount you will implement X features it is likely the ones who buy the new version would be willing to donate to the bounty.

    the Government supports many free software programs (I'll use the GCC as an example) because they want certain features or work of some kind to continue. but lots of programmer who use GCC never pay (or donate) a cent for the program.

     

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  58.  
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    Mike (profile), Sep 9th, 2008 @ 2:15pm

    Re: Re: Flawed analogy

    Musician = BMW - the car company
    Song = blue print for the car
    Recorded Music = the car
    Record label (if the artist has one) = sales organization (dealer association for instance)


    That's only true if you misunderstand the model.

    The actual model should be:

    Song = Ad for car
    Scarce music good (creating new songs, concerts, etc) = car

     

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  59.  
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    Mark K, Sep 9th, 2008 @ 2:29pm

    Re: Re: Re: Re: Re: Help subsidize

    Ok, so lets say I've got Alcatraz interested in the jail software. They offer to pay me for a new feature. Folsom calls me up and offers to pay for the same feature. Do I charge them both? Split the cost in half between them? What if I've already started working on the project, and then someone else says they want to pay for the feature?

    I realize I'm probably making this overly complicated, but again, I'm just trying to understand the details of the 'free' business model.

     

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  60.  
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    Keith Jolie, Sep 9th, 2008 @ 2:32pm

    Re: Re: Free doesn't always work, Mike

    Not at all. I've talked about how this applies to almost any industry.

    Actually what you've done is used a lot of rhetoric, but you've never once described a business model that would work (and let's just stick with the music industry to keep it simple) for the majority of musicians.

    Tell that to Google, which made quite a business out of free software. And IBM. And Red Hat. And MySQL. Should I go on?

    Google makes it's money on advertising (like you do I assume) - If every musician sold it's music by placing ads on their website, then soon ads on websites would no longer be a scarce good - they'd be screwed and your income would drop as well. Advertising is not a business model that works for everyone. IBM, well they've sold just about everything - and they definitely don't give away their software...not sure where you were going with that. Red Hat and MySQL sell software support - when's the last time you needed support to play your music? I can't think of a meaningful parallel to a musician.

    All of them figured out ways to make software free and make plenty of money while doing so.

    Technically only two of them (Red Hat and MySQL give away software for free) The others plain don't.

    It's not at all disheartening if you have the right business model, where each of those "free" copies acts as advertising and promotes your real business model.

    Using this analogy - BMW dealerships should be happy if most people stole their cars in the hopes that they would get their oil changed at the dealership.


    Who ever suggested that? Why do you assume that t-shirts are the best scarce good? That's ridiculous.

    Actually you did use that as one example a while back...

    Stop mixing up "tangible" as the only "scarce" good. Google doesn't sell anything "tangible" but it makes a TON of money giving its software away for free.

    Google doesn't give away software - if you could download all of Google's applications to your local machine their business model would fail - they let you use their web applications for a fee (viewing the ads on their site)

    Then you put in place the wrong business model. That's not my fault.

    No - but your arguments in this vein have been heavy on rhetoric and shy of working examples.

    You have mentioned musicians (Jill and Trent) that have tried alternative ways of making money, but they are well known artists that have a dedicated fan base in place already. They have sold their music, and made a profit, in the traditional way and now they are using these business models as a way to drum up publicity. But do you see the rest of the musicians in the world saying "wow...hey...we had it wrong." nope...in fact I'm curious to see if Trent releases another album pay as you like, or free.

    The most creative way you make money on this site (and I love the model by the way...genius..I might steal it) is selling the expertise of a number of people in the readership and inside circle of this site - what if there was unfettered access to the group? what if I found a way to hack into your systems and get free advice from your contributors? I'd just be breaking the DRM on your site. What if I then took that information and published a free ebook that gave that advice to anyone that was in a similar situation for free? Then I might say to you that your business model was flawed.

    intellectual property, created concepts, books, music - they all have value to society. The issue isn't so much to do with business models and correct models vs. incorrect models. It's about the future of art and culture and creativity. Ideas if you will.

    should ideas have merit and worth or not - and how should we pay for them.

     

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  61.  
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    PaulT (profile), Sep 9th, 2008 @ 2:40pm

    Re: Re: Re: Re: Re: Re: Help subsidize

    Maybe that means you need to hire more staff?

    There isn't "a" free business model. Look at Red Hat, Canonical, IBM, Sun, ID Software, Novell, MySQL, the Mozilla, Blender and GIMP foundations, Mandriva and many, many other companies large and small, old and new who have business models built around free software. All different in many ways but mostly successful.

    Hint: they all have something to sell other than the code and don't have a single person working on the project.

     

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  62.  
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    Anonymous Software Developer, Sep 9th, 2008 @ 2:54pm

    Re: Re: Re: Re: Re: Re: Help subsidize

    honestly at that point it is your choice and partly depends on how you have it set up.

    for example, some software has bounty programs for certain features. the Developer lists what the current bounty is at for each feature and devotes his time to fixing the top X features. in this model people can "bid" on features and even the lesser features should be finished eventually. perhaps if a lesser feature has a low bounty, but is really quick to do it the developer would take a day to do that feature in the middle of doing the feature that takes weeks to implement.

    on the other hand, perhaps you have a basic plug in based software. it has some basic features that everyone would find useful and then each individual jail would commission you to create a custom version that is unique for that jail.

    so there are many ways you could do it. once you have multiple people paying you to add a feature or design the system from scratch it is up to you to decide what you think is ethical and creates a profit.

     

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  63.  
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    Isaac K (profile), Sep 9th, 2008 @ 3:13pm

    Re: Re: Re: Free doesn't always work, Mike

    You completely missed the boat.
    And failed to read any more than you wanted to.
    And built up the straw man.

    Uhmn, there are multiple articles on this site about small time bands who owe their entire existence and revenue to pirating as a form of advertising.
    so it works for the small bands as well. this is a refrain we've talked about. It seems to work for everyone that's appropriately implemented it, but it isn't enough for you...
    again, thhe t-shirt is only ONE example of a scarce good. please. stop idiot-trolling mike just because you can't be bothered to read and understand.

    heck, releasing the advice they gather would garner them even MORE publicity, and make their tailored advice even MORE valuable. good going - try it, they'll enjoy it.

    and again, the product being sold isn't the digital music, its the limited goods - collectors items, public appearances, etc. so no.

     

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  64.  
    identicon
    Keith Jolie, Sep 9th, 2008 @ 3:15pm

    Re: Re: Re: Flawed analogy

    Geze...I was giving throwing you a bone with the song being the blueprint and not the actual car.

    Great, so as a musician you would have me record and release free music until there are enough people that are willing to pay a certain amount of money to subsidize the recording of the next song (which I then distribute for free I would presume).

    Human nature being what it is... at some point the people that contribute money to my recordings are going to say "hey...this sucks...I keep giving my money to this guy, and he then gives it to everyone else for free!"

    But they come to my concerts. great. What if there are 500,000 fans but no more than 5 fans in one city?

    I'm curious about the etc...

     

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  65.  
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    bowerbird, Sep 9th, 2008 @ 3:33pm

    let's not confuse micropayments with tipjars.

    if you charge a small fee, it's a micropayment,
    especially if it's _required_ before delivery.
    and yes, that's a huge step away from free,
    even when the charge is a very small amount.
    it also reinforces the current "must-pay" model.

    but that's different from being _willing_
    to accept very small "tips" from your fans,
    _after_ you provide something to them freely.

    that is a "gift-exchange" model, because the
    act is completely voluntary in both directions.

    if one million people are _willing_ to "gift" you
    a penny every month, it's foolish not to take it.

    (it's also foolish to say "wait until it accumulates
    into an amount making it 'worth' the transaction."
    even after 3 years, that'd only be 36 cents/person.
    but yet it adds up to a monthly chunk of $10,000.)

    that's the reason we need a micropayment system,
    so you can collect one penny from a million fans.

    (it's easier to get a million people to give a penny
    than to get 1,000 "true fans" to give you much more.)

    cory might be able to turn up his nose at those
    very small donations because he has enough people
    who are willing to give him much bigger donations.

    (and make no mistake about it, he is _very_ eager
    to accept, and encourage, those bigger donations.)

    but i'd much prefer to "spread the wealth" _wider_,
    rather than concentrating it in "bigger" donations.
    so i'd rather give a penny apiece to _2,000_ artists
    than spend $20.00 buying cory's book for a library.

    we can turn our society into a gift-exchange model,
    one that fertilizes a broad diversity of artists, but
    we need to give people a way to gift small amounts.

    -bowerbird

     

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  66.  
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    Mike (profile), Sep 9th, 2008 @ 3:51pm

    Re: Re: Re: Free doesn't always work, Mike

    Actually what you've done is used a lot of rhetoric, but you've never once described a business model that would work (and let's just stick with the music industry to keep it simple) for the majority of musicians.

    Um, what? We've gone into great detail to explain the economics of the model, how it works, AND shown examples of musician, small big and large putting it into practice.

    How can you possibly say that it wouldn't work for the majority of musicians?!? I'm stumped.

    Google makes it's money on advertising (like you do I assume)

    No, actually, we don't, but nice try.

    Google using an infinite good (information) to sell a scarce good (reader's attention). Their software is free to use.

    If every musician sold it's music by placing ads on their website, then soon ads on websites would no longer be a scarce good

    Huh? I never said to put ads on their website. I said use the infinite good (the music) to sell the scarce good (access, concerts, the creation of new music, etc.).

    Seriously. It's difficult to respond to you when you seem to not be responding to what we actually wrote.

    Advertising is not a business model that works for everyone.

    I never said it did. I said the business model is using infinite goods to make scarce goods more valuable and selling those scarce goods. That can be advertising, but it need not be.

    IBM, well they've sold just about everything - and they definitely don't give away their software...not sure where you were going with that.

    IBM has been one of the biggest contributors to Linux and open source software, and uses it (infinite good) to help make its scarce goods (services and consulting) more valuable.

    Red Hat and MySQL sell software support

    Red Hat and MySQL use infinite goods (the software) to make their scarce goods (support) more valuable.

    Notice the pattern yet?

    I can't think of a meaningful parallel to a musician.

    Then you're not thinking very hard. All of those business models involving freeing up an infinite good to make a scarce good more valuable. Musicians have both infinite and scarce goods.

    Technically only two of them (Red Hat and MySQL give away software for free) The others plain don't.

    When's the last time you paid Google to do a search? Oh right.

    IBM has contributed a ton to Linux.

    You are simply wrong here.

    Using this analogy - BMW dealerships should be happy if most people stole their cars in the hopes that they would get their oil changed at the dealership.

    Ok. Seriously. Think before you type. The focus is on INFINITE goods and SCARCE goods. A car is a scarce good. Taking that is stealing. But spreading an INFINITE good acts as ADVERTISING. Learn the difference.

    Actually you did use that as one example a while back...

    Read what I wrote. I said why would you think t-shirts are the BEST model. T-shirts are ONE SMALL aspect that CAN be used as a PART of a larger business model. It's idiotic to assume that the business model I'm talking about is that you should just sell t-shirts.

    Did you not see the "best" in what I wrote, or are you being willfully blind?

    Google doesn't give away software

    And you PAY to do Google searches? Really?

    No one said the model is that they have to make their CODE available. The question is about are they using FREE in their model. And they are.

    No - but your arguments in this vein have been heavy on rhetoric and shy of working examples.

    Must I list out all the working examples we've seen? Just a few off the top of my head that we've talked about. Trent Reznor. Radiohead. String Cheese Incident. Jill Sobule. Kristen Hersh. Maria Schneider. Bob Schneider. Marillion. And that's without even looking. Honestly, how many *working examples" backed up with a complete framework do you need before you're convinced?

    You have mentioned musicians (Jill and Trent) that have tried alternative ways of making money, but they are well known artists that have a dedicated fan base in place already.

    Jill wasn't all that well known actually. And what about Maria Schneider? She wasn't well known, but she used this model to produce an album and win a Grammy.

    But do you see the rest of the musicians in the world saying "wow...hey...we had it wrong." nope...

    Tell that to all the musicians using ArtistShare, Sellaband, MySpace and others...

    The most creative way you make money on this site (and I love the model by the way...genius..I might steal it) is selling the expertise of a number of people in the readership and inside circle of this site - what if there was unfettered access to the group? what if I found a way to hack into your systems and get free advice from your contributors?

    How would you possibly do that, considering that the Insight Community only contributes insight when it's asked for. How would you "steal" the free advice, when our model is based on what we preach -- which is that we pay the people to *create* the insight. So you couldn't steal the insights, because they're not yet written. As for the content that is written, we leave that up to the individuals to do what they want with it. We don't "own" any of it.

    What if I then took that information and published a free ebook that gave that advice to anyone that was in a similar situation for free? Then I might say to you that your business model was flawed.

    Go right ahead. Again, our model is based on GENERATING new insights. If you published an ebook using our content, you'd only help advertise our system. In fact, Dow Jones, one of our customers recently DID exactly what you said. They had used the Insight Community to generate some content for a conference, and then later decided to publish a free eBook around that content. That was great. It helped advertise the Insight Community. Fantastic.

    See? You can build a business model where "theft" isn't a problem. It's an advertisement.

    intellectual property, created concepts, books, music - they all have value to society. The issue isn't so much to do with business models and correct models vs. incorrect models. It's about the future of art and culture and creativity. Ideas if you will.

    Yes, and the idea is that by UNDERSTANDING the economics behind the business models, you can create BETTER business models that allow for MORE ART and MORE CULTURE and MORE CREATIVITY. What an idea.

    should ideas have merit and worth or not - and how should we pay for them.

    You are confusing value and price. Take an economics class and then try again.

     

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  67.  
    identicon
    Rose M. Welch, Sep 9th, 2008 @ 3:54pm

    Re: Re: What I hate is...

    Are you kidding me? More like, you can employ twelve people and if those people are the only shareholders, their salary was thier profit. In fact, that's a terrific idea, esp. since my local paper is a crappy days-old AP-extension.

     

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  68.  
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    Mike (profile), Sep 9th, 2008 @ 3:56pm

    Re: Re: Re: Re: Flawed analogy

    Great, so as a musician you would have me record and release free music until there are enough people that are willing to pay a certain amount of money to subsidize the recording of the next song (which I then distribute for free I would presume).

    How do you think most musicians work *today*? They come up with some songs and try to get some live gigs. They often will try to self record some songs, put them on MySpace, etc. SO they're ALREADY doing most of that.

    But then what we're saying is to put in place a BETTER business model on top of that.


    Human nature being what it is... at some point the people that contribute money to my recordings are going to say "hey...this sucks...I keep giving my money to this guy, and he then gives it to everyone else for free!"


    Well, if you understand real fandom, that wouldn't be an issue. What sort of fan are you if you're upset by something as ridiculous as others getting to enjoy the music you love? Bizarre.

    But, more to the point, the model isn't to give those fans nothing. It's to give them EXTRA VALUE that the non-paying fans can't get. Private concert. Early access to new music. Access to the musician. Signed CD. Whatever. Give them a REASON to pay, not just beg for payment.

    This isn't hard.

    But they come to my concerts. great. What if there are 500,000 fans but no more than 5 fans in one city?

    Then you do what Jonathan Coulton does. He keeps giving away free music until enough people in a single city agree to come out to a show -- and then he books a show there.

    Again. This isn't hard.

     

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  69.  
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    Mike (profile), Sep 9th, 2008 @ 4:00pm

    Re:

    (it's easier to get a million people to give a penny
    than to get 1,000 "true fans" to give you much more.)


    I have seen no evidence to support that, and plenty of evidence to suggest otherwise.

     

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  70.  
    identicon
    Anonymous Coward, Sep 9th, 2008 @ 4:42pm

    1) 30 sec. BMW ad does not equal novel, movie, or album

    2) BMW is selling cars and using the profit to pay the ad agency. Everyone's making money, and no one's doing anything for free.

    3) For this analogy to hold, you need to define who BMW is in terms of the ad agency. In other words, if ad agency = content creator (musician, writer, filmmaker, etc.), then BMW = ?

    What's your answer?

     

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  71.  
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    PaulT (profile), Sep 9th, 2008 @ 4:49pm

    Re:

    "2) BMW is selling cars and using the profit to pay the ad agency."

    I think you have that the wrong way round. They pay the ad agency, who charge BMW for making the advert. BMW then pay more money to TV stations and web marketers to get the ad shown.

    BMW get paid last, and only if the ad was effective in bringing in enough car buyers to recoup their costs in commissioning the ad in the first place...

    It's probably not a great analogy but the gist is that nobody pays to view the advert, and BMW use the advert to sell cars. They use the infinite good (the ad, which are usually meant to be entertaining in some way = free entertainment) to sell the scarce good (the car).

     

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  72.  
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    Mike (profile), Sep 9th, 2008 @ 5:05pm

    Re:

    1) 30 sec. BMW ad does not equal novel, movie, or album

    BMW films were very much short movies.

    2) BMW is selling cars and using the profit to pay the ad agency. Everyone's making money, and no one's doing anything for free.

    Nor am I suggesting anyone make no money either. I'm saying they make money in a different area though.

    3) For this analogy to hold, you need to define who BMW is in terms of the ad agency. In other words, if ad agency = content creator (musician, writer, filmmaker, etc.), then BMW = ?

    Sure, the ad agency = the content creator, and in the case, then BMW can be the concert hall. Or it can still be the musician as well if they're selling some other scarcity.

    The analogy holds perfectly if you just match up the infinite goods and scarce goods.

     

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  73.  
    identicon
    Keith Jolie, Sep 9th, 2008 @ 8:17pm

    Re: Re: Re: Re: Re: Flawed analogy

    Give them a reason to pay.....

    Listen, this comes down to pure ethics - Just because there's a way to steal something, doesn't make it right.

    The reason to pay - is because the artists asks. Simple as that. If you don't want to pay, no one is forcing you to listen to the music, no one is forcing you to pay. End of story. But you don't get to own the music if you don't pay. If you hear a song on the radio and want to hear it at home - buy it. If you don't want to buy it, wait until you hear it on the radio. But if you go onto the internet and simply download the song - that's stealing.

    Not one person that has responded to any post that has even remotely touched on this subject has disputed that taking something that isn't clearly labeled as freely available, is stealing. But the entire argument around scarce and infinite resources predisposes that the music files are just that...freely available - this is simply not legally the case. Right? Or did I miss something.

    By the way...just went to Jonathan Coulton's website...
    Here's a quote....
    -----------------------------------------------
    "All of the songs on this page are 192K MP3s - they are not copy protected in any way, so you can play them on whatever device you like. Songs that I wrote are licensed Creative Commons by-nc ... You can preview everything before you buy by clicking the little play button. .....
    You can pay with a credit card, Paypal or Google Checkout. After your payment goes through I’ll email you a link with some download instructions. If this seems too complicated to you, feel free to purchase through iTunes or whatever online music store you feel comfortable with. If you have any trouble with my store, you can send me an email.

    Already Stole It?

    No problem. If you’d like to donate some cash, you can do so through Amazon or Paypal."
    ------------------------------------------
    He has some sample songs available on his website...but it's pretty clear to me that he sells his music just like everyone else, and he even used the "stole" word.

     

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  74.  
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    Mike (profile), Sep 9th, 2008 @ 10:33pm

    Re: Re: Re: Re: Re: Re: Flawed analogy

    Give them a reason to pay.....

    Do you have a comment or are you somehow claiming that's a bad idea?

    Listen, this comes down to pure ethics - Just because there's a way to steal something, doesn't make it right.

    Ok. Clearly you're new around here, because I've discussed all of this.

    1. I NEVER said that it was okay to copy someone's music if they did not approve it. To suggest otherwise is wrong. PLEASE do not argue against what you seem to think I have said, rather than what I have actually said. I have made this clear:
    http://www.techdirt.com/articles/20061129/010043.shtml

    2. I am talking from the perspective of the content creator and why it makes more sense for THEM to give away their content and make use of a better business model. Read that link.

    3. It is NOT an issue of ethics. If the business model that involves free content makes everyone BETTER off, there is no ethical or moral question at all:
    http://www.techdirt.com/articles/20061115/020157.shtml

    Please, read those links and stop responding to something you think I said, rather than anything I actually said.

    The reason to pay - is because the artists asks.

    You can try that, but it's a dumb business model and it's unlikely to work, compared to other, better business models. That's a model that purposely shrinks the market and makes it harder to compete. I don't see why a content producer would want to do that.


    Simple as that. If you don't want to pay, no one is forcing you to listen to the music, no one is forcing you to pay. End of story

    Indeed. Except, it's not the end of the story. The point we're making (which you seem to stubbornly be missing) is that there are BETTER business models, where you give away the content to INCREASE the size of your market, and then use those business models to MAKE MORE MONEY.

    Why is that so hard for you to grasp?

    If you hear a song on the radio and want to hear it at home - buy it. If you don't want to buy it, wait until you hear it on the radio. But if you go onto the internet and simply download the song - that's stealing.

    *Sigh*

    Ok. Seriously. We NEVER said that it is okay to infringe on someone's copyright. This is FROM THE POINT OF VIEW OF THE CONTENT CREATOR, explaining to them why it's BETTER to EMBRACE free content, rather than whine.

    Finally, an important point: there is a major difference between COPYING a song and STEALING. If something is stolen then the original owner no longer has it. It may still be illegal. But it's INFRINGEMENT, not STEALING. Again, I'm not saying it's ok. I'm not saying it's legal. I don't know why you insist I am, because I have NOT said that. But it is quite different than stealing, and until you understand the difference, you will not be able to grasp what we are talking about.

    Not one person that has responded to any post that has even remotely touched on this subject has disputed that taking something that isn't clearly labeled as freely available, is stealing. But the entire argument around scarce and infinite resources predisposes that the music files are just that...freely available - this is simply not legally the case. Right? Or did I miss something.

    Um. Yeah, you missed pretty much everything. The entire argument around scare and infinite goods DOES NOT predispose that infringement is fine. It is directed AT THE CONTENT CREATOR and explains to them why it's BETTER for them to EMBRACE free content because it's a BETTER business model that can bring them MORE FANS and allow them to make MORE MONEY.

    Read this: http://www.techdirt.com/articles/20070503/012939.shtml

    Because otherwise you're responding to a phantom.

    By the way...just went to Jonathan Coulton's website...

    The example of Coulton was solely on the issue of concerts, which you had raised.

     

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  75.  
    identicon
    Anonymous Coward, Sep 10th, 2008 @ 3:53am

    Re: Re: Re: Re: Re: Re: Re: Flawed analogy

    wow...that was one of the most emotionally charged and weak responses I've seen from you - were you drinking?

     

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  76.  
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    PaulT (profile), Sep 10th, 2008 @ 3:55am

    Re: Re: Re: Re: Re: Re: Flawed analogy

    "The reason to pay - is because the artists asks. Simple as that. If you don't want to pay, no one is forcing you to listen to the music, no one is forcing you to pay. End of story. But you don't get to own the music if you don't pay. If you hear a song on the radio and want to hear it at home - buy it. If you don't want to buy it, wait until you hear it on the radio. But if you go onto the internet and simply download the song - that's stealing."

    There are numerous problems with this statement. First of all, everybody gets music for free (at no direct charge) all the time. Radio, TV, advertisements, playing in the background in a bar or restaurant, a free CD on the cover of a magazine or newspaper, a free podcast. People are simply used to consuming music without paying for it directly.

    To get a person to pay for music, you have to give them a reason to do so. This used to be by previewing some of the songs as singles (note, this makes your comment about "waiting for the song" a little silly - most songs don't play on the radio, only those selected as singles). That model has a major problem though - the singles are often not representative of the quality of the album, and in the physical music days you had no easy way of previewing the whole thing without buying it. So, people got fed up of buying the $20 CD only to find it had 2 good songs. So, now people insist on previewing the album via the easiest method - P2P.

    "Not one person that has responded to any post that has even remotely touched on this subject has disputed that taking something that isn't clearly labeled as freely available, is stealing."

    As is constantly pointed out here - no, it's not. It's copyright infringement, which is a totally different beast.

    "But the entire argument around scarce and infinite resources predisposes that the music files are just that...freely available - this is simply not legally the case. Right? Or did I miss something."

    Whether you like it or not, yes they are. Any digital file is infinitely copyable and therefore infinitely available. Whether or not that's legally true is irrelevant - the music industry's business model has to change to take account of the fact that recorded music is no longer a scarce good. Ignoring that fact for years, then trying to game the courts to force a return to the old days is exactly what's put the music industry in its current situation.

    //blathering about Jonathan Coulton//

    If you'd listened to any of Coulton's music, you'd know that he's a very humorous musician, and I have no doubt that the use of "stole" in this context was tongue-in-cheek. Besides, which is better? Offering a way to pay for music you've already downloaded, or suing the people who are downloading? Guess which one will gain you custom and which will lose it...

     

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  77.  
    identicon
    Twinrova, Sep 10th, 2008 @ 4:12am

    Re: Re: Free doesn't always work, Mike

    "Tell that to Google, which made quite a business out of free software. And IBM. And Red Hat. And MySQL. Should I go on?"
    Once again, you are missing the point. Each one of these companies has other venues which makes up the cost of giving away free software, Mike.

    IBM sells hardware. Red Hat sells expensive customer support and Sun also sells hardware. In this example of "free", the cost is made up elsewhere.

    You still haven't even touched base with the small business owner trying to offset the pirating out there who doesn't have much to spend on tangible goods.

    "Who ever suggested that? Why do you assume that t-shirts are the best scarce good? That's ridiculous.

    Please, please, please, stop putting words in my mouth and take the time to understand the actual model.

    Scarce goods involve lots of things, including the developers time, resources and attention. Or it could involve hardware. Or it could involve ongoing support. There are lots of scarcities around software."

    And this is where you fail to understand the digital side of a business, Mike. Developers time, resources, and attention are not things developers want to focus making money on. Why should we have to sit and ponder if our app isn't sufficient when it's much better to encompass an application for global use?

    Resources today are covered by a simple search engine called Google. The things developers can do can easily be found to modify by simply looking up a "how to" code snippet.

    "Stop mixing up "tangible" as the only "scarce" good. Google doesn't sell anything "tangible" but it makes a TON of money giving its software away for free."
    Mike, Google's tangible good is the advertising structure it's built to generate the revenues in order to give away the free software. Certainly you're not overlooking this, right?

    "Then you put in place the wrong business model. That's not my fault."
    This line actually made me laugh out loud. Mike, I don't blame you. I'm just trying to get you to understand your model doesn't apply for every line of business.

    Yet, you seem to think it does. By the way, re-read your blog regarding EA's decision to encompass DRM for "Spore" and tell me how this company will feel if everyone just stole the game especially after having to change its earnings forecast because their latest Harry Potter game had to be delayed.

    Can't be making the shareholders too happy.

     

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  78.  
    identicon
    Twinrova, Sep 10th, 2008 @ 4:31am

    Re: Re: Re: Re: Free doesn't always work, Mike

    "Uhmn, there are multiple articles on this site about small time bands who owe their entire existence and revenue to pirating as a form of advertising.
    so it works for the small bands as well. this is a refrain we've talked about. It seems to work for everyone that's appropriately implemented it, but it isn't enough for you...
    again, thhe t-shirt is only ONE example of a scarce good. please. stop idiot-trolling mike just because you can't be bothered to read and understand."

    First, I'm not idiot trolling Mike. My replies were pretty much on point.

    Second, the "free" model works well in the music industry if, and only if, the artist is well known enough to make revenue in other venues. The Little Mary Chainsaw Group*, starting out, isn't known enough to create tangible goods, so they're not a revenue generating business just yet. Sure, they'll have to give away their music in order to get started. Want to bet the band members have additional jobs to keep eating?
    *Made up name - used as example only.

    Third, I wasn't talking about the music industry and if you're going to accuse me of not reading, take your own advice. I'm talking about digital designers, not musicians.

    Most designers start out with themselves. Common sense. Most don't have a support team to pay in order to charge for customer support (which is the largest load of crap to do to your users to begin with). Most strive on getting a fair amount for the work put into the application knowing it'll return the cost in revenues for the business using the software.

    The problem is the freeloaders who want to circumvent spending a damn penny in lieu of free. Why do you think major corporations are turning on to Linux? Oh, because it's free, that's why (well, there are other benefits but the primary one is it's free).

    Bottom line here is that as a digital designer, it's much more difficult to generate revenue unless the focus is on specific platforms, which isn't good down the road as platforms change.

    You don't think I don't understand what Mike says and it's an incorrect assumption. From day one, I get his point and it does merit usefulness in businesses which can offset the free giveaway. But for other business ventures who rely on the sole product, giving it away for free isn't the solution. I'm sure he understands this, but if that product is digital, by the "free" model, another product must be created to remain in business.

    To summarize for you: If I wrote app "A" and gave away apps "B, C, and D" to get consumers to pay for "A", how do you think I'll stay in business when those very same people I gave "B, C, and D" to start pirating "A" from me?

    Think about that long and hard before you answer.

     

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  79.  
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    PaulT (profile), Sep 10th, 2008 @ 4:36am

    Re: Re: Re: Free doesn't always work, Mike

    "Each one of these companies has other venues which makes up the cost of giving away free software"

    Sadly you're the one missing the point. In today's market, the software itself in increasingly not the product. the people losing money are more often than not the ones that depend on keeping code secret and restricting its customers, while the ones flourishing are the ones that give away their code and offer other services.

    Of course the developers don't work for free, their wages are paid by profits elsewhere. This is how most jobs work - your wages are paid as a result of the company's success, not just your particular area. Any company with a sustainable business model offers more than one type of product. By the way, your comment about finding code in Google make no sense - are you saying you should be entitled to payment for the software, but that all you're really doing is modifying code that's available for free? Why should you expect special payment for that?

    As for your EA comments, that also makes no sense. If people avoid the game *specifically* because of the DRM and they make this known, then EA and its shareholders have nobody to blame but EA itself for putting such offensive restrictions on its products. If pirates are offering a better product than the company itself, they need to look at how they're doing business.

     

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  80.  
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    Mike (profile), Sep 10th, 2008 @ 4:40am

    Re: Re: Re: Re: Re: Re: Re: Re: Flawed analogy

    wow...that was one of the most emotionally charged and weak responses I've seen from you - were you drinking?

    Heh. When you can't respond to the actual points raised, resort to insults.

    Also go anonymous, but use the same IP address as before.

    So, um, did you want to actually respond to the points raised? Or should I take this response to be an admission that you accused us of saying a bunch of stuff we didn't say and now you don't want to admit you were wrong?

     

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  81.  
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    Mike (profile), Sep 10th, 2008 @ 4:50am

    Re: Re: Re: Free doesn't always work, Mike

    Once again, you are missing the point. Each one of these companies has other venues which makes up the cost of giving away free software, Mike.

    And, um, why do you assume that other businesses also don't have other venues?

    IBM sells hardware. Red Hat sells expensive customer support and Sun also sells hardware. In this example of "free", the cost is made up elsewhere.

    Yes. That's the WHOLE DAMN POINT. You make up the cost elsewhere.

    You still haven't even touched base with the small business owner trying to offset the pirating out there who doesn't have much to spend on tangible goods.

    Um. Sure I have. I've explained it over and over again. And it's NOT "tangible goods" it's SCARCE goods. There's a difference.

    And EVERY business has some scarce goods that are made more valuable by infinite goods. Above I gave a very specific example that I guess you chose not to read: http://www.techdirt.com/article.php?sid=20080908/0140212192#c629

    And this is where you fail to understand the digital side of a business, Mike. Developers time, resources, and attention are not things developers want to focus making money on. Why should we have to sit and ponder if our app isn't sufficient when it's much better to encompass an application for global use?

    Who said the developers have to focus on it? That's what business people are for.

    Mike, Google's tangible good is the advertising structure it's built to generate the revenues in order to give away the free software. Certainly you're not overlooking this, right?

    It's *scarce* not tangible. And, no, I'm not overlooking it. Again, it's the WHOLE POINT. I'm confused as to what point you think you're making, because this point AGREES with what I'm saying.

    By the way, re-read your blog regarding EA's decision to encompass DRM for "Spore" and tell me how this company will feel if everyone just stole the game especially after having to change its earnings forecast because their latest Harry Potter game had to be delayed.

    Can't be making the shareholders too happy.


    What shouldn't make the shareholders happy is EA making a braindead decision to be anti-consumer such that it would drive away a group of potential buyers. Look at the example of Stardock, which I linked to in that thread as well. It's ridiculous to think that EA can't make money if they got rid of the DRM. Stardock proves how ridiculous it is.

    So I'm not sure why you think that without DRM their shareholders would be upset. As long as they had a reasonable business model in place, their shareholders would be a lot happier -- because they'd be making more money and not having thousands of fans trashing the game online.

     

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  82.  
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    Mike (profile), Sep 10th, 2008 @ 4:56am

    Re: Re: Re: Re: Re: Free doesn't always work, Mike

    Second, the "free" model works well in the music industry if, and only if, the artist is well known enough to make revenue in other venues.

    Yeah, tell that to Maria Schneider, a virtual unknown who used the model to make plenty of money.

    And when I posted that story people said that the model might work for "unknowns" but would never work for big names.

    Now you claim the opposite? Huh!

    EVERY musician starts out unknown. How do they get attention? They promote their music?

    What's a good way to promote their music? Hey, give it away online! And then you build up a nice audience for all those ancillary markets you claim are impossible.

    You claim you're not trolling but to make a statement like that suggest you must be trolling.

    Sure, they'll have to give away their music in order to get started. Want to bet the band members have additional jobs to keep eating?

    Um. And this is different from how things work now how exactly?

    Except, with the "old" model, musicians couldn't leave their day jobs until they got signed to a big label with a big advance. With this model, it's much easier.

    So how is that a bad thing?

    Bottom line here is that as a digital designer, it's much more difficult to generate revenue unless the focus is on specific platforms, which isn't good down the road as platforms change.

    Yet there are more independent developers out there today than at any time in the past. Something doesn't add up in your statement.

    From day one, I get his point and it does merit usefulness in businesses which can offset the free giveaway. But for other business ventures who rely on the sole product, giving it away for free isn't the solution. I'm sure he understands this, but if that product is digital, by the "free" model, another product must be created to remain in business.

    You clearly do not understand what I have written, because this is completely wrong. If you think that the infinite good is the only thing that can be sold you are sorely mistaken, and it explains why you've had trouble in business before. You're selling the wrong thing.


    To summarize for you: If I wrote app "A" and gave away apps "B, C, and D" to get consumers to pay for "A", how do you think I'll stay in business when those very same people I gave "B, C, and D" to start pirating "A" from me?


    *sigh* Which part of give away the INFINITE goods and SELL the scarce goods did you note get?

    If A, B, C, and D are all infinite goods, then you're doing the business model wrong. Find the scarcities! It's not that hard unless you're being willfully blind.

     

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  83.  
    identicon
    Anonymous Coward, Sep 10th, 2008 @ 5:59am

    Re: Re:

    1) If you really think a BMW mini-movie/ad is equal to a feature film or novel, then I have nothing else to say to you and can no longer take you seriously.

    2) The problem is, BMW does something well: make cars. And that's what they sell. The ad agency does something well, too: make ads. And that's what they sell (to BMW). There's no loss in giving away the "ads" for "free," because they're doing exactly what they were designed to do: attract attention to BMW cars.

    Are you suggesting that a concert hall would pay musicians to perform there like BMW pays the ad agency to create the ads? Because my gut-level response is: HA!

     

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  84.  
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    Anonymous Software Developer, Sep 10th, 2008 @ 8:10am

    Re: Re: Re:

    you are very close to the actual Idea. let us look at each party involved:


    the ad agency uses other ads it has made (infinite goods) as a way get more people to pay them to MAKE a new ad (the creation of an ad is a scarce good)

    BMW uses the ad that the agency made (which is an infinite good now that it has been made) to get people to buy their cars (the scarce good)

    the TV network uses the shows and ratings it gets (infinite good) to get companies like BMW to pay for an ad to be shown (tv-time is a scarce good, especially during prime-time)

    that is the whole cycle for the car industry. here is the one for musicians

    a musician uses the music he has already made (infinite good) to gain attention and fans who are willing to pay to see them live, for memorabilia, or to write/record more music (all three are scarce goods)

    smaller venues (local pubs/bars) will pay a band to play to the audience (giving away a small amount of a scarce good) to get more people into the building to buy food and drinks.

    larger venues will get paid by the band (whether up front or by a percentage of the ticket) for the use of their hall ( good places for having a large crowd listen to you rock is a scarce good). Many venues handle the the advertising of the event themselves (once again, giving away a scarce good) and use the attendance from previous events to draw more groups to use their venue.


    see how it works? It is "easy" not every will succeed, but it is easier to break into the market than before and highlights the basics of the business model being discussed here.

     

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  85.  
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    Anonymous Coward, Sep 10th, 2008 @ 8:18am

    Re: Re: Re: Re: Re: Re: Free doesn't always work, Mike

    Maria Schneider wasn't an unknown in any sense of the word when she joined artistshare.

    She had 2 highly successful recordings under her belt, and was already an international recording and performing artist.

    (according to her bio anyway...)

     

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  86.  
    identicon
    Anonymous Software Developer, Sep 10th, 2008 @ 8:46am

    Re: Re: Re: Re: Re: Free doesn't always work, Mike

    Second, the "free" model works well in the music industry if, and only if, the artist is well known enough to make revenue in other venues. The Little Mary Chainsaw Group*, starting out, isn't known enough to create tangible goods, so they're not a revenue generating business just yet. Sure, they'll have to give away their music in order to get started. Want to bet the band members have additional jobs to keep eating?
    *Made up name - used as example only.


    as mentioned by mike, most musicians start out this way. but why would people want to buy it or local venues want to pay for them to come if they don't give away their music so people can hear them in the first place?


    Most designers start out with themselves. Common sense. Most don't have a support team to pay in order to charge for customer support (which is the largest load of crap to do to your users to begin with). Most strive on getting a fair amount for the work put into the application knowing it'll return the cost in revenues for the business using the software

    charging for customer support is NOT only one way people like me can make money. I get people to pay me to write the programs in the first place, or add features onto programs I wrote before. I then use my portfolio of programs that I'm willing to give away to attract more people who need my services as a developer. There are a LOT of scarce goods related to software development, many of them revolve around either the hardware involved or the time of the developer/support team.

    . I'm sure he understands this, but if that product is digital, by the "free" model, another product must be created to remain in business.

    yes that is correct. Many MMO games give their game (infinite good) away or sell at a reduced price in order to get people to pay for a subscription to their servers and regular content creation (both scarce goods)

    others focus on stuff that you get in addition to the game. collector's edition games are a good example. in the old days when you bought a game it came with a manual that was more likely than not set up to be in theme with the rest of the game. they would come with things that might be part of the game world, the newspaper or magazine bit was very common. they might also have key-rings, necklaces, cloth maps, or other things that set the tone of the game and draw a player more into the experience. these are also scarce goods, people can't just download a custom made manual that feels like a ravaged survival guide, all they can get is the text. they can't download the extra little trinkets either.

    look at Fallout 3, if you preorder that game from certain places you get a poster and a music CD that is designed to look exactly like an old record, it does a pretty convincing job. then if you buy the special edition you get a lunchbox, a bobblehead, and a hard-cover book of concept art. all of that is a scarce good either because of the material nature (lunchbox, bobblehead, book, poster) or because of the presentation or experience (music CD).

    many people out there are willing to buy a game instead of copy it just because it has these kind of things, some are willing to pay just because it has a high-quality manual that goes beyond just telling you how to play the game and attempts draws you into the world while telling you how to use the game

    if a software developer gives that kind of cool stuff away when a person buys their game less people will want to pirate it in the first place. where developers when wrong was getting rid of all that cool stuff (many even reducing it down to just the CD with only an electronic version of the manual) to get more shelf space.

    eventually it turns into people thinking of the game (infinite good) as free, but they are willing to pay for the cool merchandise and the experience that the creative documentation provides (scarce good). that is not to say that you can't still have a cheaper version without that stuff that people can buy, just that you are really selling the cool swag they get and that less people will care about just copying that game and then the small people who will pay, but don't care about the swag can get a cheaper version with just the disc or digital download. if you follow this style of model you can still "lose" some sales due to copying but because of word-of-mouth you can gain more sales from buying who see their friend play it and then want to pay for the game or all the cool swag.

    To summarize for you: If I wrote app "A" and gave away apps "B, C, and D" to get consumers to pay for "A", how do you think I'll stay in business when those very same people I gave "B, C, and D" to start pirating "A" from me?

    you're doing it wrong.

    if you don't want to deal with physical goods at all then you need to start marketing your services. it takes time to write a program. get people to pay you to write it. ask fans of their previous work what they would like to see in your new version or what kind of programs they would like to see. once you find out what the big ones are say something along the lines of "I can do that, but it will cost you X amount* for me to make/implement that". everyone has their nitpicks about software they use, many are willing to pay to have it fixed or be made optional. many people have dreams of a piece of software that will make their life easier. the job of an independent developer is to seek out those people and show proof by way of previous programs (infinite good) that they are competent and able to write the new program that is wanted (creation is a scarce good).

    *(either individually or collectively among all your clients is up to the developer)

     

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  87.  
    identicon
    You know who...., Sep 10th, 2008 @ 9:20am

    General response.

    Mike - I'm sorry for the drinking comment...not appropriate. That being said, I was surprised by a rather emotional reaction.

    Please understand that I'm sometimes playing devils advocate and looking for a debate rather than an argument.

    Here's the thing - I'm interested in the dialogue here, so I pose points and ideas and try to push the discussion deeper. What seems to happen in terms of responses on this forum however are emotional diatribes that insist that I'm just missing the point. I'm not - in fact I'm trying to take some of the ideas that you've posed and apply them to my own indie music ventures.

    What concerns me in these posts is clarity and logic - something I'm trying to push for in my questioning.

    For example I understand that it might be a good business model to distribute music files for free in order to gain more fans. But the question is - shouldn't the artist be able to choose if that's something they want to do? If I choose to pursue a different business model...isn't that my right (whether it's successful or not) - I think that's a debatable point.

    In general, file sharing, is like the mix tapes of old - I get that. People sharing music with friends and family and saying...you should listen to this...all very good for musicians. The challenge is that the mix tapes are now as good as the original - virtually indistinguishable if done right (right down to the packaging)

    But where is the dividing line between a "virtual mixed tape" and torrent sites that allow someone to download entire discographies? I think that's a debatable point.

    Sometimes I think that readers of this post confuse what Mike is suggesting in terms of a musician marketing themselves by encouraging free downloads of some of their music and passing it around to their friends, with out and out cheating the artists by simply snatching up files and never giving back (or maybe they are the ones that spend the most on concert tickets...who knows)

    At the end of the day - I'm interested in hearing and contributing to constructive dialogue, and I'd love to see more carefully considered approach to this forum.

    oh...and the bmw example...lousy ;o)

     

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  88.  
    identicon
    Anonymous Coward, Sep 10th, 2008 @ 9:52am

    Re: General response.

    For example I understand that it might be a good business model to distribute music files for free in order to gain more fans. But the question is - shouldn't the artist be able to choose if that's something they want to do? If I choose to pursue a different business model...isn't that my right (whether it's successful or not) - I think that's a debatable point.

    I don't think it is debatable at all. Yes it is your right to pursue different models. if they work for you good! if they don't, don't try and make laws that will support your failing model.

    Sometimes I think that readers of this post confuse what Mike is suggesting in terms of a musician marketing themselves by encouraging free downloads of some of their music and passing it around to their friends, with out and out cheating the artists by simply snatching up files and never giving back (or maybe they are the ones that spend the most on concert tickets...who knows)

    you can't look at the individual, look at the big picture. some people will just consume without giving back, others will spread the word, others will go out and pay. the idea is that when your fanbase is big enough even if a smaller percentage pay, it is still a larger number of people who know about your music and more money coming in. for example, before the internet it was nearly impossible to get international fame, now with a single fan telling someone in Japan about you you can potentially have a fan base in every country in the world. now if even a fourth paid you for something, that is still more money than if you get 75% of your state to buy the same things.

     

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  89.  
    identicon
    Anonymous Coward, Sep 10th, 2008 @ 10:20am

    Re: Re: Re: Re:

    BMW makes a scarce good that generates big profits. They use some of those profits to pay the ad agency to make and release the ads. "Fans" get ads for free, but not the car.

    The new model analogy has no true replacement for BMW and instead relies on the "fans" for all potential income.

    This is why it seems inferior to me.

     

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  90.  
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    chris (profile), Sep 10th, 2008 @ 10:34am

    Re: Re: Help subsidize

    My software has over 7000 hours invested into it's development, how could I ever justify that amount of labor for free?

    and if you had open sourced the code for it, other people could help you develop, test, and improve your product in far fewer hours. you would have the potential to get tons of product development help (bugs logged, patches submitted), and market research for free.

    then you charge for consulting services and support (scarce goods) and you have a great promotional tool: you wrote the software. that automatically makes you the best choice as a consultant, letting you charge more than your competitors.

     

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  91.  
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    chris (profile), Sep 10th, 2008 @ 10:40am

    Re: Re: Re: Re: Re: Always talking free let's put it to the test

    No author should work for free unless it's their choice, there is no such thing as being better for the masses when the performer is starving to death.

    obscurity is way more dangerous for writers and performers than piracy. the more a work gets played/seen/enjoyed, the more potential buyers it will reach. that is the why doctorow gives away digital versions of his work.

    think about it this way: if you had a choice between some people paying and no one paying, which one would you choose?

    you have to be careful that in your rush to get some people to pay you don't wind up alienating the ones that are already paying.

     

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  92.  
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    Mike (profile), Sep 10th, 2008 @ 10:57am

    Re: General response.

    Here's the thing - I'm interested in the dialogue here, so I pose points and ideas and try to push the discussion deeper. What seems to happen in terms of responses on this forum however are emotional diatribes that insist that I'm just missing the point.

    Please point to a single example where I did not back up the "you're missing the point" statement with either a more detailed logical explanation or a link to one.

    I'm all for a dialogue, but I find it tiresome to respond to a dialogue where someone shows up, argues that I said a bunch of stuff I didn't say, and clearly has not bothered to read what I have actually said.

    You ask for a dialogue? Fine. I'm more than willing to dialogue. But I'm not going to stand for you setting up a strawman mike and whacking him down. If you want a dialogue, first read what I actually wrote and respond to that.

    What concerns me in these posts is clarity and logic - something I'm trying to push for in my questioning.

    If that were the case, then you would have questioned the actual logic I used. Not some made up logic of a strawman.

    For example I understand that it might be a good business model to distribute music files for free in order to gain more fans. But the question is - shouldn't the artist be able to choose if that's something they want to do?

    I have never said otherwise. Again, you are implying I have.

    The musician is free to choose, but MY POINT is that the basic economics are clear, and if they choose the old way, it's not going to work. So I'm explaining why embracing these economics works to their advantage.

    Your retort is that I'm saying they don't have a choice. And, economically speaking, they don't. The economics and the market will determine that. But that's different than saying that it's okay to infringe on copyrights. I have not said that, and since it appears your entire retort is based on that, I have a hard time responding to this seriously.

    In general, file sharing, is like the mix tapes of old - I get that. People sharing music with friends and family and saying...you should listen to this...all very good for musicians. The challenge is that the mix tapes are now as good as the original - virtually indistinguishable if done right (right down to the packaging)

    Actually, file sharing is quite different than mixtapes of old -- and that's part of the point. Mixtapes weren't infinite. You're still missing the point if you're complaining that file sharing is as good as the original. Since it can be used as a FREE promotional good, that's exactly what the band should WANT.

    But where is the dividing line between a "virtual mixed tape" and torrent sites that allow someone to download entire discographies? I think that's a debatable point.

    Other than the fact that no one here is debating it. Again, you're shifting the entire discussion to one about unauthorized file sharing. Which is not what we're discussing. We're discussing business models for the content creators to embrace.

    Sometimes I think that readers of this post confuse what Mike is suggesting in terms of a musician marketing themselves by encouraging free downloads of some of their music and passing it around to their friends, with out and out cheating the artists by simply snatching up files and never giving back (or maybe they are the ones that spend the most on concert tickets...who knows)

    First of all, did you read this original post? The point is that it doesn't matter if some of the folks never give back.

    Second, why are you now blaming me for the fact that you and others seem to have misinterpreted what I said?

    oh...and the bmw example...lousy ;o)

    Yet, as noted by the commenter above, you still don't seem to understand the analogy. It's not lousy at all. Again, focus on the scarcities and the infinite goods and it lines up perfectly.

     

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  93.  
    identicon
    Keith Jolie, Sep 10th, 2008 @ 11:12am

    Re: Re: General response.

    I would say that based on the opinions expressed in this forum, copyright laws are already the subject of debate - which means there are people on both sides of the argument, and various positions on both sides. That's the nature of debate. Debate is the basis of democratic systems that employ laws to enforce a decision made by elected representatives of the public at large.

    If the law states that something is illegal - then it is. period. If you disagree with the law, then your legal recourse is to re-kindle the debate in hopes of having the law amended. Until such time as the law is amended - it's the law.

    So in a lot of countries - the US being one of them, it has been decided (or interpreted as it were, which is probably the root of this debate) that wholesale sharing of files without expressed consent of the copyright owner is illegal (fair use not withstanding, an issue that is also subject of much debate)

    Because of that law, musicians have the freedom to choose their business model.

    Without some sort of law that protects their content from free and unmitigated distribution - there is no real choice as it relates to this specific business model. Just because the sharing is happening in spite of the law, does not negate the law.

    And thank you for reiterating my agreement to the assertion that there is likely a very big upside to making some or all content freely available if the artist chooses.

    The other side of the coin is that the majority of musicians that are making any kind of a living through their art are doing so through various iterations of the traditional record selling channels (and I would include iTunes and other similar retailers in that group) - That model may or may not persist. I know you will assert that it won't, and you are most likely right since new developments and improvements in technology will probably make storing music content locally akin to having a water tower on your house. Some would argue it already is.

     

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  94.  
    identicon
    bowerbird, Sep 10th, 2008 @ 2:13pm

    > I have seen no evidence to support that,
    > and plenty of evidence to suggest otherwise.

    you will never see any evidence to support it
    unless a micropayment system is established...

    that's my point.

    -bowerbird

     

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  95.  
    icon
    Mike (profile), Sep 10th, 2008 @ 6:51pm

    Re:

    you will never see any evidence to support it
    unless a micropayment system is established...


    There have been at least a dozen micropayment solutions established. And all failed.

    That's because it's NOT easier to get a million people to pay a penny. It's quite difficult because of "the penny gap." The *mental transaction* of convincing someone that something is worth even a penny is quite large.

    And, it gets even worse when others in your industry put in place business models that rely on giving away the infinite good for free. Then, not only do you have the penny gap to contend with, but also competitors who don't even charge a penny.

    So, no, it's simply incorrect to say that it's easier to get a million people to pay a penny than to get a smaller number of people to pay a lot more for something scarce.

     

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  96.  
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    Mike (profile), Sep 10th, 2008 @ 6:58pm

    Re: Re: Re: General response.

    I would say that based on the opinions expressed in this forum, copyright laws are already the subject of debate - which means there are people on both sides of the argument, and various positions on both sides. That's the nature of debate. Debate is the basis of democratic systems that employ laws to enforce a decision made by elected representatives of the public at large.

    Huh? You very specifically claimed that I was encouraging people to download stuff for free. I don't see how now claiming it was just some rhetorical discussion helps your case.

    If the law states that something is illegal - then it is. period.

    And, not a single thing in this post had anything to do with an illegal action. It was all focused on using free to your advantage.

    If you disagree with the law, then your legal recourse is to re-kindle the debate in hopes of having the law amended. Until such time as the law is amended - it's the law.

    Indeed. And we have some of those discussions here as well, though not in this post. But you seem to be assuming, incorrectly, that because we may challenge a law elsewhere, that we are saying it's okay to break it.

    That's simply untrue.

    Because of that law, musicians have the freedom to choose their business model.

    That's like saying, because of gov't granted sugar monopolies, sugar plantation owners have the freedom to choose their business model. It leaves out all those hurt by this gov't granted monopoly.

    Adam Smith explains quite clearly why monopolies hurt -- and folks like yourself 225 years ago argued back that gov't granted monopolies were great because they enabled business models.

    But what they missed was what opportunities were foregone by the gov't, rather than the market, making that choice.

    When a gov't interferes in a market, the end result is less efficient. That means a smaller market for everyone.

    Without some sort of law that protects their content from free and unmitigated distribution - there is no real choice as it relates to this specific business model.

    No, there are tons of choices. We don't require a specific business model. We just explain the economics, which allows business models.

    You seem to think that as long as the gov't creates a business model then that doesn't have other unintended consequences. You should look at the history of every time the gov't gets into a market and regulates a business model. It distorts the market and harms consumers.

     

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  97.  
    identicon
    gsxr 750 Fairings, Dec 10th, 2008 @ 2:07pm

    Never thought how publicity work in that way. Money will not always come from users but for those who really need from us.

     

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  98.  
    identicon
    Mexican Breakfast Food, Mar 16th, 2009 @ 7:21am

    Good plan for advertising is the best way to earn money. it's already proven and it works.

     

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


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