The Misconceptions Of 'Free' Abound; Why Do Brains Stop At The Zero?

from the free-is-not-a-business-model dept

Jim Harper points us to a blog post by a guy named Richard Muscat, supposedly debunking the problems of "free" as it comes to business models. Frankly his post is pretty weak. It rehashes a bunch of arguments that have been debunked plenty of times before, but since we keep seeing these arguments made, I figured I'd use Muscat's piece to explore why it is that those who don't understand the concept of free are condemned to make such bad arguments against it.

The key problem, it seems, is that people who dislike the concept of free have this weird issue where they stop thinking once the big zero enters the equation. In the past, I've pointed out that it seems like some brains have a divide by zero error problem, where, once they see free as a part of the business model, they stop paying attention to the rest of the business model and just focus on the free part. But here's the thing, no one is claiming that "free" is the business model. People who discuss the value of free have always been talking about how you use it as a part of the business model. So arguing that "free" is not a business model is a strawman. No one is claiming that free, by itself, is a business model because that makes no sense. But Muscat takes things even further, by claiming that it's so bad that it's "harmful":
My contention is that “Free” as described and used in many contemporary web-based businesses is a non-business model that is not only broken, but actively harmful to entrepreneurship. Free rarely works, and all the times that it doesn’t, it undermines entrepreneurial creativity, destroys market value, delivers an inferior user experience and pumps hot air into financial bubbles.
Don't hold back.
Free does not push you to create something evocative that users and customers are willing to commit to in the long term.

Free absconds on the entrepreneur-customer commitment: by asking for nothing you also promise nothing. Both parties can walk away because there is no relationship. On the other hand by asking for money (or some other form of commitment), however large or small an amount, you create a self-imposed drive to produce creative and valuable products because not doing so would mean letting somebody down.
Because no one has committed to Google long-term. And before that no one committed to radio. Or broadcast TV. Huh? Having a product that is "free to the consumer" does not mean people won't commit to it at all. In fact, if you put together a smart business model, it could be the exact opposite. All of the examples here involve cases where companies use free to bring in people and then sell that attention to advertisers. In those cases, they very much have the incentive to create something that makes people commit, or they don't have the attention to sell. It's only if you stop at the zero and don't follow through that you could possibly claim that business models that use free don't get customers to commit.
As the title suggests, the book argues that software pricing shouldn’t be decided randomly. There are three big reasons for not doing this: first, you might be missing out on revenue; second, your product price says something about the quality and intended audience of your product; third, your price also sets an expectation of how much effort has gone into production and how much value a customer should expect.
Not sure what that has to do with anything. I don't think anyone is suggesting that people randomly choose free as a price either. In fact, we've been quite careful to explain that the whole point of understanding the economics of free is so that you can understand when it's appropriate to use free and when it's not. That many startups don't understand when it's appropriate to use free is not a condemnation of free as a price. It's a condemnation of people not understanding the larger economics and how to put together a good business model.
Choosing Free as your product price runs the risk of attracting entirely the wrong audience for your product or service.
Sure. But that's only an issue if you fail to plan out the rest of your business model. The implicit assumption that Muscat makes here, which is incorrect, is that the whole point of free is to attract an audience which might buy.
Although you may get tens of thousands of users, it is probable that those users are unlikely to ever consider paying you because by definition you have attracted people who are looking for free stuff. Reversing this decision later can be extremely painful: you will piss off your existing user base, potentially generating very negative publicity and you might need to start from scratch in terms of looking for the right audience.
Right, but that's not a criticism of "free," that's a criticism of a bad business model built around the idea that free is just a trick to get people to upgrade. If that's your business model, then he's right that it could be a bad business model (though some companies, such as Evernote, have found that it works for them). But that's not a problem with "free." That's a problem with the rest of the business model.
At some point or another you will realise that you do need to create a revenue stream. If you end up in the situation I just described above, i.e. encumbered with an audience of people unwilling to pay for what you’re providing, you will be faced with a dilemma: start over and risk the bad press or try to squeeze some pennies out of a reluctant user base.
Again we see the divide by zero issue, in which he implicitly assumes that free is implemented in place of a complete business model. That's not the fault of "free." That's the fault of a bad business model.
The latter is a slippery slidey slope that leads towards intrusive in-app advertising, pop-ups, link-baiting, shady affiliate marketing, email spam and a total lack of focus on user experience.
Indeed. Those would be bad decisions built on a bad business model. I'm not sure what that has to do with "free" however.
The idea that things can be free is behind a lot of financial bubbles. In the late nineties we thought that we could get distribution and infrastructure for free and we got the dot com bubble. A couple of years ago we thought we could get loans and bank credit for free and we got the property bubble. In both cases we left something very important out of the equation: delivery costs in the former and ability to repay mortgages in the latter.
That's an interesting and totally incorrect bit of historical revisionism. First, the dot-com bubble was a result of investors (and many dot-coms, themselves) having no real understanding of web-based business models. Early dot-com successes (some real, some imaginary) created a rush of investors eager to throw money at any company offering something on the web -- without ever looking at whether they even had a business model. And I've never seen a loan or credit -- or internet infrastructure, for that matter -- that was "free." Were there some companies that went to extremes during both bubbles? Yes. But there was no direct connection to "free."
If you’re putting together a business plan or a slide deck that claims there will be an initial period of “short-term loss” while you establish a user base which you will then monetise, just remember that that is exactly what most of the pre-2000 dot com business plans were like.
And, um, it was also the basic business plan of all sorts of successful businesses going back through history. It was clearly the plan of Google, Amazon, Facebook and Twitter, for example. So what? If you have a smart business model behind it, it can work. If you don't, it will fail. Claiming that it is inherently flawed is wrong. Also, it's the very basis of pretty much the entire venture capital industry. The whole reason why startups need venture capital is to fund that initial period in which there are short-term losses. It's called investing in growth. Intel had to build fabs. Apple had to build computers. Those involved "short-term losses" to build the product. That's how these things generally work.
Almost never. Somebody always pays. If healthcare is free, your taxes pay for it. If the flight is free, the extras aren’t. If the search is free, the advertiser is paying.
Um. That's the whole point of using free as a part of a business model. Of course someone pays. That's what we're describing here. It seems totally ridiculous to go on for paragraph after paragraph discussing how free is awful because no one pays... and then, at the very end, to throw in a "but someone pays!" Why didn't he consider those points earlier in the article?
The only time when Free can really work for you is if you set your sights on having a specific outcome: acquisition.
Yeah, just like Google. And Facebook. And Twitter. Good grief.

Look, if you understand the economics behind digital goods, you can quickly learn that there are places where free makes sense. It makes sense when, if you don't go free, your competitors will and you'll lose all of your business. But no one has ever suggested that free, by itself, is a business model and if your debunking of "free" is based on that, it just means you've stopped your analysis too soon. Free is an important part of many, many, many business models these days and that's been true for many years as well. Free isn't bad. It can be used badly, but to condemn it, based on that alone, suggests someone hasn't thought things through.


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    Richard (profile), Jun 30th, 2011 @ 9:39am

    Free isn't bad. It can be used badly, but to condemn it, based on that alone, suggests someone hasn't thought things through.

    It looks more like they started with the conclusion and then tried to find as many reasons for it as they could. Of course when you do that some of your arguments are likely to end up contradictory!

     

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    Joe Publius (profile), Jun 30th, 2011 @ 9:54am

    A bit simple, but to the point

    Let's boil this down for the tl:dr crowd.

    Free is a viable part of a business model when the following conditions are met.
    - You know what's being offered for free.
    - You know why you can offer it for free.
    - You know how to use the free product to encourage revenue from other products/services.

    Using Free as the whole of the model, aka "give away and pray", is difficult to implement and may indicate a lack of understanding or shortsightedness on the part of the owner.

     

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    out_of_the_blue, Jun 30th, 2011 @ 10:03am

    This version of "free" only applies for those selling advertising!

    As I've told you before, companies that make /physical/ products do not use this model and CANNOT. Don't again point to Wal-Mart giving out free manufacturers samples as supporting your notion, because it doesn't: http://www.techdirt.com/articles/20100727/10514810385.shtml
    -- So silly that I left it without comment.

    Your views only apply to "high level" and mass markets; they're not workable for a /whole/ economy. You flatter a variety of grifters who were most likely born rich and get richer off robbing working people of the products of labor.

     

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      :Lobo Santo (profile), Jun 30th, 2011 @ 10:09am

      Re: This version of "free" only applies for those selling advertising!

      Available today at your local Walmart:
      "Free Coupons"
      "Free coupon matching"

      Giving away things that have a definite (and high) cost to manufacture/distribute is stupid--are you? A manufacturer gives free sales quotes all the science-damned time; how far do you think they'd get if they charged for sales quotes?

      Seriously, you get a D- on your trolling. Try harder next time.

       

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        Anonymous Coward, Jun 30th, 2011 @ 10:42am

        Re: Re: This version of "free" only applies for those selling advertising!

        Free coupon matching isn't the same as "free". It is a promotion that takes the wind out of the sails of others, allowing them to distribute the coupons and then Walmart just matches them.

        There is no free product.

        Too many of the people who support free as a business model are those who fail to see the full cycle. They are dealing with their little piece of the universe, and don't understand that in the big picture, they are trading dollars for pennies. It's a short sighted business idea, judged to be a success by ignoring the larger implications and instead only focusing on short term results.

        Free isn't a short term loss, free is the ultimate tool that can change the public's perception of the market price (and to some extent value) of a product. If something can be obtained for nothing at all times (think of a pack of matches) it also can negatively effect how people value the product, because they can always get more for nothing.

        Free is the ultimate lazy marketing idea, it's the easiest, it's the one that eliminates almost all of the reasons for someone to say "no", but it is also rarely the most successful way to market. Yes, there will be examples where it works, but for the most part, it isn't the best way to do anything.

        The free revolution is thankfully grinding to a finish, as almost all of them rely on give it away and pray methods (give them music, pray they buy a t-shirt) which have proven to be not all the successful for most. Yes, there are rare examples of success, but even a broken watch tells the correct time twice a day. It doesn't make it right.

         

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          ChrisB (profile), Jun 30th, 2011 @ 11:13am

          Re: Re: Re: This version of "free" only applies for those selling advertising!

          > The free revolution is thankfully grinding to a finish,

          You obviously have no understanding of business. You ever heard of a "loss leader"? Lose money on one thing to gain money on another.

          My company _has_ gone through this. We have two products: the first can be automated so the customer enters info and gets a rough answer, the second requires an engineer to review and sign off on. My company was thinking about charging for both, which is crazy. One has a marginal cost of zero (even though the fixed cost of creating the website was a few weeks of work), and the second has a real marginal cost. Why not make the first free, which will act as free advertising for the second?

          It literally took me days to talk my management out of charging for the first. I kept telling them, if you charge for it, it won't be free (to us) anymore. Free stuff doesn't have to work right and doesn't need technical support. Once people have to pay, it better work perfectly everytime. If it doesn't, I don't care how cheap it is, they are leaving with a bad taste. Free avoids all that.

          Free, as a part of a business model, is going nowhere.

           

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          Chronno S. Trigger (profile), Jun 30th, 2011 @ 11:22am

          Re: Re: Re: This version of "free" only applies for those selling advertising!

          "The free revolution is thankfully grinding to a finish, as almost all of them rely on give it away and pray methods (give them music, pray they buy a t-shirt) which have proven to be not all the successful for most."

          They wouldn't be. But who was talking about "give it away and pray"? Richard Muscat may have been, but Mike wasn't.

          I'll give a few examples of using free as part of the business model. Sam's Club, Sheetz, WalMart, Microsoft, Google, VMware, Red Hat Linux. My company understands the value of free as part of the model.

           

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          dwg, Jul 1st, 2011 @ 9:34am

          Re: Re: Re: This version of "free" only applies for those selling advertising!

          "Free is the ultimate lazy marketing idea, it's the easiest"

          Actually no, but your view of it is the ultimate lazy analysis, and the easiest. You view free-as-marketing as "shit, I'll give out free shit and see if anyone comes back for the more expensive shit!" And that's not it at all. "Free" as marketing actually requires way more work for it to work well, and is one of the more difficult models...and most effective. As just one example, giving away GOOD, FREE products or services can build loyalty in a way that selling even well-made or well-done stuff ever could. Once you give you money over, and you're given what you bought, THEN the parties walk away--the relationship is closed at that point, absent some hook that keeps them coming back. Of course, the better purveyors will have more returners than the lesser ones, but the transaction is still a closed universe.

          On the other hand, a free transaction leaves open-ended whether the recipient of the free stuff wants to continue a relationship with the offeror--the recipient is left in a position of feeling something like "owing" to the offeror, and that feeling isn't one that then goes away if he or she returns for a single purchase--there's still an imbalance in the relationship, since the recipient (and now purchaser) has still retained a free benefit from the offeror. So that recipient is now more likely to either return for another purchase (assuming good goods/services) or do something beneficial for the offeror, like post a good review online or refer a friend. See that, how it creates a more lasting bond than the simple quid-pro-quo of a straight-up sale?

          Like most things, then, it's worth the work--but you have to do the work. Like, for example, how much better my analysis is than yours--mine was harder to come to and explain, but worth it. Yours kind of sucked.

           

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        out_of_the_blue, Jun 30th, 2011 @ 11:50am

        Re: Re: This version of "free" only applies for those selling advertising!

        SAMPLES of physical products are sheerly /advertising/. -- Does Intel give away their products? -- HELL NO.

         

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          The eejit (profile), Jun 30th, 2011 @ 1:52pm

          Re: Re: Re: This version of "free" only applies for those selling advertising!

          Actually, they DO - but only to select groups for testing purposes.

           

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      jjmsan (profile), Jun 30th, 2011 @ 10:21am

      Re: This version of "free" only applies for those selling advertising!

      How about Costco? They give out free samples. Wrigley gum? or are those people giving out free samples on the street real pirates? You have a great argument style, anything you can't deal with you simply say is silly so you don't have to consider it.

       

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        out_of_the_blue, Jun 30th, 2011 @ 11:52am

        Re: Re: This version of "free" only applies for those selling advertising!

        I repeat: SAMPLES don't prove your case; it's /not/ the product /nor/ the "business model".

         

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          Marcus Carab (profile), Jun 30th, 2011 @ 12:03pm

          Re: Re: Re: This version of "free" only applies for those selling advertising!

          Exactly. But it's a part of a business model. As in, "using free as part of a business model." As in, exactly what we are all talking about.

           

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          Any Mouse (profile), Jul 1st, 2011 @ 12:09am

          Re: Re: Re: This version of "free" only applies for those selling advertising!

          NO one claims that 'free' is the "business model" but people who don't understand 'free.' Apparently you fall into this category.

           

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        Anonymous Coward, Jun 30th, 2011 @ 9:19pm

        Re: Re: This version of "free" only applies for those selling advertising!

        The point of "free" is to give away an entire product line or category with the hope that it attracts enough interest to sell higher end, scarce goods.

        A freebie giveaway of a sample of chewing gum isn't the same at all. Now, if Wrigley gave away their gum all the time for free, endlessly, with the hope of selling Wrigley t-shirts, well, it would be a good example. But what they are doing is occassionally giving away a small amount of their product to encourage people to try and buy more of the same product. They don't keep givingt it away for free.

        Free as in free sample isn't new, it's as old as marketing itself. It's not unique to the online experience, nor is it the type of free that has been pushed on this site for years.

         

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      Anonymous Coward, Jun 30th, 2011 @ 10:32am

      Re: This version of "free" only applies for those selling advertising!

      People and businesses give out business cards, pamphlets, advice, and samples of product or service for free ALL THE TIME. All of those things cost money but are given away to bring in bigger money.

      Where have you been, man?

       

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      Nicedoggy, Jul 1st, 2011 @ 6:44am

      Re: This version of "free" only applies for those selling advertising!

      How do people offer free phones then?

      Quote:
      2009 Feb 25
      Free i-phone !!

      Softbank has announced that from Feb 27 to May 31 the 8-giga i-phone will cost zero yen !!
      (you must sign up to a two-year contract, which will cost a minimum of 23,040 yen over two years)
      The 16-giga will be discounted by a little over 10,000 yen.


      Source: http://www.japanesecellphones.com/news_update.html

      See there the cellphone will be free LoL
      WTF!

       

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      Nicedoggy, Jul 1st, 2011 @ 6:46am

      Re: This version of "free" only applies for those selling advertising!

      Quote:
      2009 Feb 5
      Docomo / AU / Softbank spring MNP campaigns

      All thee major carriers are offering 10,000 yen to customers who sign up for their services and currently have contracts with other carriers. Under MNP (My Number Portability) you can keep your number even when you change companies.
      Softbank is offering 10,000 yen of department store coupons - which you can exchange for cash at discount ticket shops (getting about 90% of face).
      AU is giving away post office cheque which you can cash at a post office.
      Docomo is offering 10,000 yen discount on phones (making most of last year's phone effectively free) Offers expire March 31


      Source: http://www.japanesecellphones.com/news_update.html

      WTF the competition is so fierce that companies pay customers to use them.

       

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    Anonymous Coward, Jun 30th, 2011 @ 10:10am

    If the guy was trying to debunk the "give it away and pray" business model, I think he made a good job, but that doesn't mean that "free" can't be used as part of a successful business model.

    Software companies have been doing it for aeons. Even Microsoft, the greedy software giant we all know and love/hate.

     

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    Anonymous Coward, Jun 30th, 2011 @ 10:12am

    There's no such thing as free in a buisness model, as stated someone always pays for it, otherwise its not a buisness.

     

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      DannyB (profile), Jun 30th, 2011 @ 12:28pm

      Re:

      There is such a thing as free in a business model.

      Our disagreement comes from whose perspective it is free.

      If Walmart gives me free coupons, it is free from my POV.
      If Google gives me free email, it is free from my POV.
      If the radio station gives me free music listening, it is free from my POV.

      Of course, somebody pays for it. But I don't.

       

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    Lord Binky, Jun 30th, 2011 @ 10:16am

    The problems all businesses have?

    Why are the "problems" that free causes or is a problem, are the problems with any New Business.
    Replace FREE with "New Business", it can be entertaining

    "(New Business) rarely works, and all the times that it doesn’t, it undermines entrepreneurial creativity, destroys market value, delivers an inferior user experience and pumps hot air into financial bubbles."

     

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    greg.fenton (profile), Jun 30th, 2011 @ 10:17am

    Sell out

    The only time when Free can really work for you is if you set your sights on having a specific outcome: acquisition.

    And who the hell wants to acquire a business that has a zero-revenues, all-expenses business model? (Rupert Murdoch can't buy them all...)

     

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    A.R.M. (profile), Jun 30th, 2011 @ 10:22am

    Does Richard Muscat plan on paying me for my time to read his rant?

    No? Well, then perhaps he re-evaluate what the definition of "free" is. My time's worth more than his... at the moment.

     

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    Anonymous Coward, Jun 30th, 2011 @ 10:30am

    So I guess Linux dosen't count?

    So then the success of Linux distros which are developed and distributed for free by the world community for no other reason then the love of software amount to nothing right?

     

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      :Lobo Santo (profile), Jun 30th, 2011 @ 10:33am

      Re: So I guess Linux dosen't count?

      Hell, I'd personally urinate on Steve Jobs or Bill Gates if it meant getting more & better Linux distros.

       

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      Mike42 (profile), Jun 30th, 2011 @ 10:46am

      Re: So I guess Linux dosen't count?

      Yeah, Red Hat has never turned a profit, right?

       

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        DannyB (profile), Jun 30th, 2011 @ 12:31pm

        Re: Re: So I guess Linux dosen't count?

        Red Hat may turn a profit, but you can still get the source code for free. (I'm assuming RH is in GPL compliance.)

         

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          The eejit (profile), Jun 30th, 2011 @ 1:58pm

          Re: Re: Re: So I guess Linux dosen't count?

          Yep. Their marketing is based on tech support. In a similar way Blizzard's in World of Warcraft. The client? Free. The game? A one-off fee, including a month's gametime. They've just gone free in the US for the first two expansions. What the person pays for is access to the servers.

           

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            Jay (profile), Jun 30th, 2011 @ 3:05pm

            Re: Re: Re: Re: So I guess Linux dosen't count?

            Uhm... Blizzard isn't all free...

            You still pay a monthly fee if you want to play the full game. You just don't have to pay for the first 20 levels.

             

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      DannyB (profile), Jun 30th, 2011 @ 12:36pm

      Re: So I guess Linux dosen't count?

      I would point out that FREE Linux has had success in far more than just distros.

      There are over 100 MILLION Android phones -- which runs on Linux. HP's WebOS, again Linux. TiVo. Cable company DVR's. Home and office WiFi routers. TVs and other products. Ebook readers (Kindle, Nook). GPS navigators (Tom Tom, Garmin). Just about anything with an embedded web server (eg, printers that offer browser based setup).

      Free Linux is everywhere.

      Lots of companies have built business on it, and spend money and manpower to contribute resources to it.

       

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    Anonymous Coward, Jun 30th, 2011 @ 10:34am

    Oh now I get it!

    He means free as in when companies use freely available recourses (public domain, orphan works, developers who work for others) or when they just outright STEAL works from others for profit kind of 'free' right?

     

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    Anonymous Coward, Jun 30th, 2011 @ 10:41am

    Why bother arguing this point?

    Would you argue with someone about whether the world was flat? What about whether heavier-than-air objects fall when you drop them? I doubt it, and that's because there's overwhelming evidence to support these facts when one looks at the world around them. At this point, anyone that argues free cannot be part of a successful business model does not deserve intelligent people's attention. Just walk away. Seriously. When you truly know you're right, you don't have to prove it. That's the privilege of being right and knowing it.

    If you simply want to have some fun with an idiot, tell him/her to live a year without anything free and report back to you. No ad-supported radio, TV, or other media, no free web sites, etc. If they want to "make an argument" against free, they'll have to do it without using Google, Yahoo, or whatever MS is calling their search engine right now.

     

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      Anonymous Coward, Jun 30th, 2011 @ 10:55am

      Re: Why bother arguing this point?

      You said: " No ad-supported radio, TV, or other media, no free web sites, etc"

      Me: none of those are free, and everyone knows it. They don't give away the product and hope you buy a t-shirt or a concert ticket from them, they sell advertising space. Trust me, their advertising isn't free.

      The programming isn't free either, you pay for it with your attention to the ads, even if you claim to skip them. You still go product placements, you are still paying.

      So your argument is empty, because all of your examples aren't free, only not appearing to have direct cost. That is entirely different.

      Put another way, if 100% of online users blocked advertising, most of these sites would disappear because they are not free.

       

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        Marcus Carab (profile), Jun 30th, 2011 @ 11:11am

        Re: Re: Why bother arguing this point?

        Uh, that's exactly the point. "Free" means "free to the user" in this context - like TV, radio, Google, Facebook, etc.

        OF COURSE they make up that money from other sources. That's literally the entire premise of this post. "Free" does not mean "makes no money anywhere" - that's exactly the fallacy that the post is combatting.

         

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          Hephaestus (profile), Jun 30th, 2011 @ 12:42pm

          Re: Re: Re: Why bother arguing this point?

          I keep saying that all content will be free to the consumer in less than ten years. I always use the words "to the consumer" because I know that the creation must be monetized. The problem content companies have with this is, their will be a huge drop in profits as they will have to rely on advertising alone as a revenue source.

           

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            Marcus Carab (profile), Jun 30th, 2011 @ 4:16pm

            Re: Re: Re: Re: Why bother arguing this point?

            The problem content companies have with this is, their will be a huge drop in profits as they will have to rely on advertising alone as a revenue source.

            Meh, that's just laziness on their part. In all cases, the lost profit from paid content is offset by the ever-decreasing costs of delivering content. Digital content is virtually free, and these industries are coming from CDs/DVDs/books/newspapers - all of which are extremely expensive to produce and distribute. Add to that the fact that technology now allows for much more effective advertising. In time, as analytics and targeting technologies develop, advertising will no longer be seen as an automatic nuisance, but as a convenient way to find products and services you actually want and need.

            Content creators are in a better position than they have ever been. It's just the middlemen, who have invested in physical media, who are in trouble (but not if they are smart enough to separate their useful skills from their obsolete ones).

             

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              Hephaestus (profile), Jun 30th, 2011 @ 5:00pm

              Re: Re: Re: Re: Re: Why bother arguing this point?

              "Meh, that's just laziness on their part."

              It's alot more than that. It's the lack of efficiency in how they do things. In the case of newspapers its the huge debt load, a huge amount of monthly payments for the facilities they utilize and call home. In the case of Hollywood its 100 million dollars for a movie, the sheer size of the staff per movie, the cost of the actors, the huge cost for props, sets, and CGI. The TV and Movie studios are going to run up against the next craigslist in the next few years. Pads with free Video editting software, 1080p cameras, free special effects software, virtual sets, and groupware. Which means better videos of peoples stupid pet tricks on youtube and perhaps the occasional great movie.

              You are right in thinking that the middle men are boned, and the content creators are in a great place at this point. I do not see any way to save the record labels, newspapers, or tv-movie studios.

              The distribution piece is already in place. For Theater based movies the projectors have already gone digital. Meaning there is no cost to produce and transport reels of cellulose. For music and TV shows the same has occured.

              Forcasting out, the promotion piece will be figured out in the next 2-5 years, at which time the record labels and studios will have no real value for any director or musician.

               

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                Marcus Carab (profile), Jun 30th, 2011 @ 6:53pm

                Re: Re: Re: Re: Re: Re: Why bother arguing this point?

                Yup, we're right on the same page here Heph. Though I maintain that record labels, newspapers and studios stand a chance if they focus on what they are good at (marketing, quality control, ad sales, investment, etc.). Obviously they all face major hurdles though, and the majority won't be able to leap them. The ones that do will still probably have to take short-term losses, or simply scale down permanently and become more nimble, in order to survive. But they all have something to offer and that means all hope is not lost.

                 

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                  Hephaestus (profile), Jul 1st, 2011 @ 10:53am

                  Re: Re: Re: Re: Re: Re: Re: Why bother arguing this point?

                  Two things ...

                  I was wrong before when I said they only have the promotion piece left to them. They also have their back catalogs. As time marches forward those will become less relevent.

                  Where we differ is you giving the labels a chance. If you have ever met any label execs, they are pompass, think $100,000 USD owed to arists is a rounding error, pay lip service to the artists that make them money, and think people owe them a living.

                  The labels and studios have set up rules, laws, and contracts that make them incapable of changing course. Bring you kids favorite US bought DVD on vaction and try and play it in europe, you end up with a screaming child and really pissed off. Pay for a music streaming service in europe and come to the states ... oops it doesn't work. These contractual fiefdoms they have set up will also play a huge role in their downfall. It causes in fighting and inflexibility.

                  The mentality mixed with rules and laws trap they have built for themselves, make them incapable of changing anything. I am normally an up beat person that sees the upside and potential in situations. But in this case I have to differ with you on this one point, they really do not stand a chance.

                   

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                    Marcus Carab (profile), Jul 3rd, 2011 @ 10:55am

                    Re: Re: Re: Re: Re: Re: Re: Re: Why bother arguing this point?

                    Perhaps you are right about labels. I don't have much experience working with them. My attitude of "the old guard has a chance" actually comes from newspapers - and certainly I'm a bit biased because that's the industry I work in. But I must say that, contrary to your experiences with record labels, my experience with some (not all) newspapers has been that they are full of people who really do get it, and who are being pretty innovative in coming up with ways to modernize their business and stay relevant. For them, at least, I see lots of possibilities still open - and I was kind of extrapolating that into other industries.

                     

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        Anonymous Coward, Jun 30th, 2011 @ 11:15am

        Re: Re: Why bother arguing this point?

        "It's not free because I'm going to continuously change the definition of free to suit my argument."

         

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        Anonymous Coward, Jun 30th, 2011 @ 11:18am

        Re: Re: Why bother arguing this point?

        I can't believe I'm bothering to respond to this, but here goes...

        If a business decides to "give away the product and hope you buy a t-shirt or a concert ticket from them," then "the product(s)" are t-shirts and concert tickets rather than whatever you seem to *think* their product is. In the case of ad-supported radio, TV, or other media, "the product" is not the freely available media--it's the media consumers' attention spans (i.e., "you are the product they're selling"). They're not "giving away their product," they're creating the product by building an audience.

        If you ever find yourself thinking "but company X isn't *really* giving away their product because they're making money in another way," then you have finally realized what company X's *actual product* is as well as what makes "free as part of a business model" work. That means you now agree with the rest of us whether you like it or not, so stop and think about this paragraph very carefully. If company Y is giving their product away and NOT making money in another way, then, by definition, that doesn't even qualify as a business model:

        http://dictionary.reference.com/browse/business%20model

        If that needs discussion for you to understand, then you'll need to find someone else to waste their time making the point. I'm walking away.

         

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        Chosen Reject (profile), Jun 30th, 2011 @ 11:40am

        Re: Re: Why bother arguing this point?

        They don't give away the product and hope you buy a t-shirt or a concert ticket from them


        This just goes to show that you have stopped thinking. Giving away your music in the hopes that someone will buy a t-shirt or a concert ticket or some other merchandise, is nothing more than advertising. Did you think that all those ads were created and displayed for free? It's the same exact thing. They create something (that costs money, often bucket loads more than it costs to create a song) and give it away hoping that someone will buy the product.

        And this is no different than writing a song and giving it away hoping that someone will pay in other ways. Forsooth, it's probably more effective, as the content (which is advertising and vice versa) is much more engaging.

         

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          Greevar (profile), Jun 30th, 2011 @ 1:08pm

          Re: Re: Re: Why bother arguing this point?

          He stopped thinking because of the belief that the recorded music is the thing that should be paid for. That's their error in thinking. Once they start to realize that content's value is in it's ability to grab a mind-share, they can finally let go of this compulsion to extract payment on non-exclusive/non-rivalrous goods and find things to monetize that to make the abundant good valuable enough to the consumer that they decide to open up their wallet. Yes, it's work and it requires some divergent thinking (people struggle with this a lot), but it will work out better than trying to defy reality with one-sided laws that only serve the rights holder and not the public it was intended for.

           

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        Anonymous Coward, Jun 30th, 2011 @ 1:35pm

        Re: Re: Why bother arguing this point?

        Hey, that means pirates don't want things for free, because it takes time and mouse clicks.

         

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          Ed C., Jun 30th, 2011 @ 5:41pm

          Re: Re: Re: Why bother arguing this point?

          I think you unintentionally made a good point--how to compete against piracy. When you have to take into account that time/convenience and quality can have a monetary value, you can begin to see that piracy is not a free proposition for most users. First, you have to find the out where to get the desired item without getting malware from the website. Then, you have to get a copy of the item that is not itself infected with malware. If you actually plan to use the item rather than pack-rat it away on a TB external drive somewhere, you check the quality of the copy. If it's a very poor copy, you then have to start the process all over again. Once you obtain a good copy, the filename, meta tags, etc. have to be fixed. As you can see, there's not only the cost of time, but the risk of malware that would cost more time, or even actual cash, to fix. Yep, that's piracy. If you can't compete with that, then you really don't deserve to be in business.

          So why would anyone go through all of the trouble to pirate? Well, people really do enjoy content, and will either pay with money or time. Copyright owners, however, mistakenly focus only on the price, often leaving the time/convenience part of of the equation. Then, they either price the item far above the market value, or don't even sell at all! It's hard to claim that you lost to piracy when you're not even in the market. If people in that country can afford a good enough internet connection to download it, then there's a market for it. Considering that even Russia has faster cheaper connections than the US, there's not much of an excuse.

          Further, copyright holders think that just having it on the market, regardless of form or restriction, is enough, but that, of course, hasn't been true for a long time now. I don't know how many times I've heard someone ask "why can't I do this? I PAID for the damn thing!", when the only answer was "the copyright holder doesn't what you to." The problem is that if you don't get it to them, that time or money will go to someone else. Again, if you're not selling to the market, then you really can't claim that you're losing to piracy.

          The best way to compete against piracy is to find a profitable balance between the price, time/convenience, and quality that provides a better proposition for the user. Considering that piracy is mostly competing on price, and sometimes quality, it's not all that hard to make a better deal. People, however, place different values on convenience or quality, so there is NO silver bullet. Convenience is fairly easy to achieve on the web, downloads or streams can be had with just a search and a few clicks. Services such as Amazon, Apple, Netflix, and Hulu are are obvious examples. (In fact, the only ones that stand in the way of even more successful services are the old gatekeepers, who want most of the profits while offloading all the storage distribution cost.) Throw in compelling balance of quality and cost, and you largely can beat piracy.

           

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            Anonymous Coward, Jun 30th, 2011 @ 8:47pm

            Re: Re: Re: Re: Why bother arguing this point?

            Your entire post basically captures the most egregious aspect of the vast majority of Copyrighted material: the fact that the illegal, underground content is vastly superior to the official material in almost all aspects. Cheaper (of course), but less inconvenient, less limited, less restricted, no annoying ads, no required legal forms...

            Is it any surprise that people are turning to the illegal sources, or just turning away altogether?

             

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        Nicedoggy, Jul 1st, 2011 @ 6:56am

        Re: Re: Why bother arguing this point?

        But it is free for the consumer of those tV Channels or radio stations, if it wasn't they wouldn't be able to sell ads.

         

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    txpatriot, Jun 30th, 2011 @ 11:04am

    Free for one =/= free for all

    I don't have a problem with any content creator (book author, movie producer, software developer, etc.) using "free" as part of their business model. The problem of "free" is NOT on the creation side. It's on the distribution side.

    Namely, that pirates think it is THEIR "right" to obtain something for "free" regardless of the cost or effort that went into actually creating the "stuff" that the pirates obtain for free.

    Look, if ONE content creator wants to give stuff away for free as a means to introduce him or herself to a market, that's great, and it's solely their decision to do so.

    But when a pirate decides to obtain the content of OTHERS for free, just because someone else made theirs available for free, that's where I draw the line.

    The pirate has no inherent right to decide on his or her own that "free" is the distribution model that should apply to whoever created the content the pirate has chosen to obtain.

    Only the content creator can make that decision, not the pirate. And that's the problem I have with "free".

     

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      MrWilson, Jun 30th, 2011 @ 11:35am

      Re: Free for one =/= free for all

      But on the other side of things, a group of middle men who should be competing against each other for the benefit of the consumer should not be colluding to keep prices artificially high.

      Piracy is a symptom of artificially high prices and anti-consumer practices (that existed long before digital "piracy"). The middle men (who are not themselves actually content creators) should not have a say in what the consumer pays for the product. The market should. Consumer demand is a significant factor in the market. If the middle men ignore this and disrupt the market with their greed and collusion, don't be surprised if the consumer ignores the market altogether as well.

      But beyond that, I doubt pirates are taking stuff for free simply because some content creators give away their stuff for free. Pirates pirate because the price is too high or the product is otherwise unobtainable or because the pirate values the product at a price point of no greater than zero (or a price point at which the consumer's valuation of the product decreases if it gets any higher).

       

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        txpatriot, Jul 1st, 2011 @ 4:06pm

        Re: Re: Free for one =/= free for all

        "I doubt pirates are taking stuff for free simply because some content creators give away their stuff for free". Agreed -- that wasn't the point I was trying to make. I didn't articulate it very clearly.

        Trying again: once an author (or other creator) decides that free is part of their business model, people like Masnick jump on that and say "see there -- it works for him. Now if EVERYONE would only see the light, THEN piracy would no longer be an issue" blah blah

        Masnick isn't the only one; there are many others who take that position. My response is: it's a logical non-sequiter that just because one person does it then everyone should do it.

        I hope I made my point better.

         

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          Nicedoggy, Jul 1st, 2011 @ 4:13pm

          Re: Re: Re: Free for one =/= free for all

          If you don't want to do it that is also fine just don't complain about the results though.

           

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      Joe Publius (profile), Jun 30th, 2011 @ 11:46am

      Re: Free for one =/= free for all

      Isn't that a digression? No one here is really talking about piracy. Then again, it never hurts to look at this discussion in a broader sense.

      While I think most pirates are not really potential customers in the first place, some may be. In reality their piracy has just opened the door for you to find them something else to sell to them that can't easily be copied; things like service, personal availabilty and connection, physical collectables, any variety of things that will always be scarce.

      In the end, Free can be great pirate insulation.

       

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      RadialSkid (profile), Jun 30th, 2011 @ 11:48am

      Re: Free for one =/= free for all

      BUT PIRACY!

       

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    Beta (profile), Jun 30th, 2011 @ 11:15am

    it's not for everyone

    ...software pricing shouldn’t be decided randomly... first, you might be missing out on revenue; second, your product price says something about the quality and intended audience of your product; third, your price also sets an expectation of how much effort has gone into production and how much value a customer should expect..."

    The "second" and "third" look the same to me (and the "first" is always true), but here goes.

    First comes the ideal free market of rational agents, wherein better goods cost more. Lower the price and more people will buy.

    Then comes the market of lazy ignorant people who use price as a guide to quality (like me when I'm buying wine). More people will buy if you raise the price.

    Then comes the market of knowledgeable buyers who are not fooled by the marketing tricks of the second market (like me when I'm buying tea). This pretty much takes you back to the first market, but with a lot more room for idiomatic appeal to niche markets.

    If you are set squarely in the second market, and can't see anything else, then the argument above makes sense-- if you give something away, people will think it's worthless. But by that same argument there's no need for me to worry about competitors who do that; they don't cut into my business, they don't "distort the market", people will walk past their "FREE STUFF" to stand in line at my boutique.

     

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    trish, Jun 30th, 2011 @ 11:48am

    he should read

    he should read that book you wrote about, zero, the history of a dangerous idea, good reading.

     

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    taoareyou (profile), Jun 30th, 2011 @ 12:03pm

    Two Words: Angry Birds

    You can go to iTunes and download a free version of Angry Birds. It's basically a free preview. If you like it, you can buy the "full" game and get all the levels.

    So they give something away free, which lets people experience the product and generate sales.

    Not only that, I was at an amusement park recently and saw big stuffed versions for sale and as prizes for the various skill games.

    They made a game with cute characters, gave a limited version away that was still enjoyable enough for people to want more and were willing to pay for more. Then they license other products based on their characters. Characters that became hugely popular because of the freely available lite version of the game.

     

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    Anonymous Coward, Jun 30th, 2011 @ 12:03pm

    He wants to force people to commit to handing over their money to a monopolist that sits around and does nothing for a living.

     

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    out_of_the_blue, Jun 30th, 2011 @ 12:20pm

    This is subheaded "free-is-not-a-business-model"

    NOTE that the word "part" is nowhere in that subhead. Mike and you others then go on as if "part" or "whole" are the same thing. -- And Mike casually conflates start-up capital for physical products with "free" as in letting someone download an MP3. -- No one is saying that "part" free as in giving away samples or other advertising isn't worthwhile, never been done before the internet, or whatever absolute it'd take to get you ninnies OFF that conflation. You are ONLY looking at special cases where the giveaway item is low or zero cost. But "free" does not pay the bills. Nor is anyone saying that /other/ products can't be the /real/ product. But if there isn't a /real/ product, then it's called "eating up your seed corn", and if you don't have enough to hold out before the new crop comes in, you starve.

    Intel, and Apple DO NOT GIVE AWAY THEIR PRODUCTS! -- I DARE anyone to say that they do.

    'But no one has ever suggested that free, by itself, is a business model and if your debunking of "free" is based on that, it just means you've stopped your analysis too soon.'

    OH, YES, /YOU/ HAVE, MIKE! Take the link. You previously referred me to Wal-Mart's free samples (not even theirs, manufacturer's), which are utterly insignificant beside Wal-Mart's tens or hundreds of MILLIONS revenue every day. That's more than dodging my point; it's deliberately deceitful, doubly so after your quote from this piece.

    Continue to follow this guru and his notions of "free" if that's all you can manage, but it just ain't the way business works, and the real sharks know this is baloney.

     

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      Chronno S. Trigger (profile), Jun 30th, 2011 @ 12:26pm

      Re: This is subheaded "free-is-not-a-business-model"

      "That's more than dodging my point; it's deliberately deceitful, doubly so after your quote from this piece. "

      Then what the fuck is your point? You never do make that clear.

       

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        Anonymous Poster, Jun 30th, 2011 @ 12:32pm

        Re: Re: This is subheaded "free-is-not-a-business-model"

        "Freetards suck" is what I gather his point was trying to be.

         

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      Mike Masnick (profile), Jun 30th, 2011 @ 2:00pm

      Re: This is subheaded "free-is-not-a-business-model"

      NOTE that the word "part" is nowhere in that subhead. Mike and you others then go on as if "part" or "whole" are the same thing. -- And Mike casually conflates start-up capital for physical products with "free" as in letting someone download an MP3.

      Almost nothing you state above is true. Care to try again?

      Intel, and Apple DO NOT GIVE AWAY THEIR PRODUCTS! -- I DARE anyone to say that they do.


      I dunno. I use iTunes. I never paid for it.

      But, really, what does that have to do with anything? The whole point is learning when to use free and when not to. When selling physical products, it usually doesn't make as much sense to use free. There are some cases where it can work, but in general, we're focused on digital objects.

      OH, YES, /YOU/ HAVE, MIKE! Take the link. You previously referred me to Wal-Mart's free samples (not even theirs, manufacturer's), which are utterly insignificant beside Wal-Mart's tens or hundreds of MILLIONS revenue every day. That's more than dodging my point; it's deliberately deceitful, doubly so after your quote from this piece.

      You claimed WalMart didn't use free. I showed how they did. You were wrong. I didn't dodge anything. Nor have I ever implied that Walmart did or should use free as a key part of their business strategy.

      Why pretend I did?

      The only one being deceitful here is you.

       

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        out_of_the_blue, Jun 30th, 2011 @ 3:46pm

        Re: Re: This is subheaded "free-is-not-a-business-model"

        "Intel, and Apple DO NOT GIVE AWAY THEIR PRODUCTS! -- I DARE anyone to say that they do."

        You DO NOT take the dare, only dodge:

        "I dunno. I use iTunes. I never paid for it."


        And, NO, specifically, in the linked piece, I say:

        "But... FREE only works if products are duplicable at trivial cost.
        out_of_the_blue, Jul 27th, 2010 @ 1:01pm
        Wal-Mart doesn't use this notion. Neither does the MTA."

        You then pointed me to a web page offering free samples not from Wal-Mart, but manufacturers. As I point out above, that's no answer for the tens of millions in revenue they get every day. "FREE" is NOT their "business model". It won't work for them. You just deny and dodge, fine.

         

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          Mike Masnick (profile), Jun 30th, 2011 @ 4:35pm

          Re: Re: Re: This is subheaded "free-is-not-a-business-model"

          You DO NOT take the dare, only dodge:


          Accurately answering the question is not a dodge.

          You then pointed me to a web page offering free samples not from Wal-Mart, but manufacturers. As I point out above, that's no answer for the tens of millions in revenue they get every day. "FREE" is NOT their "business model". It won't work for them. You just deny and dodge, fine.

          Um. You are making my point. No one said that free is the business model. You seem to be arguing -- falsely -- that someone said it was the business model.

          What we said was that they, like everyone else, uses free where it's appropriate as a part of a business model.

          You're wrong. It's okay to admit it.

           

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            out_of_the_blue, Jun 30th, 2011 @ 5:44pm

            Re: Re: Re: Re: This is subheaded "free-is-not-a-business-model"

            Wait, think I've got it: when you say "free" it's either a lie or a lure to get people in for /advertisers/ to pay the freight. -- While accusing others of hanging up on the word "zero", you hang up on the word "free"! You know that "free" is simply not true, yet you continue to use it at times without the qualifier of "part". But okay, I get what you mean now: LIE AND LURE.

            There ain't no such thing as a free lunch, but you /say/ that there is to lure the rubes in for wall to wall product placement. Details are of course a problem: that's where your advice is needed.

            You're starting a Newspeak dictionary, right? Because above, you definitely mention venture capital for start-ups and mingle it with your "free". So, venture capital equals "free" too. I'll make note of these, but since I find the words on your "About" page nearly meaningless (how do you analyze with a "framework"?), and certainly not strictly followed of late, I'm just going to be a stickler and continue to use the dictionary definition of "free". Therefore, even getting advertisers to pay the costs isn't "free", it's just the way advertising is done.

            If your big innovation of "free" is merely loss leaders and other advertising, do you think that new? Here's what I see as your formula: Get or make a low-cost widget that everyone wants, then find someone who'll pay you for advertising somewhere associated with it; or minor version, get someone to directly buy a real product somehow associated with some widget that you can give away at low or zero cost; that being the National Public Radio "model" using a guilt trip. The big obstacle is to get noticed, then you can snowball. That's what I've said several times now, and it's all that you say though more baldly stated. -- Your low-cost widget here is to do a bit of rewrite on stories found online, and you have 13 parasites on the page to pay the costs. Got it. Infinite products that you don't create can be used to bring actual income. -- I think "grifting" is apt: you don't even pretend to create or increase, just figure out ways to scrape some of the fixed pie your way.

            So all the college was just to learn how to conceal and put a new face on the same old methods that started with patent medicine shows and radio. Whee. The brave new world of online grifting.

             

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              Dave, Jun 30th, 2011 @ 8:48pm

              Re: Re: Re: Re: Re: This is subheaded "free-is-not-a-business-model"

              Wow. Mike is totally right! I thought he was just exaggerating, but really your brain has literally (from my perspective) SHUT OFF. You actually cannot process anything once your brain hits the word 'free'. Back off for a minute and just acknowledge that there are successful companies that give things away for free. Please, for your own sanity, look at *reality* and let it sink in.

              I would give some examples here, but given your extremely well built reality distortion field, I don't think it will do any good. Simply read back through the comments and look at all the others.

               

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              Mike Masnick (profile), Jun 30th, 2011 @ 11:49pm

              Re: Re: Re: Re: Re: This is subheaded "free-is-not-a-business-model"

              Wait, think I've got it: when you say "free" it's either a lie or a lure to get people in for /advertisers/ to pay the freight. -- While accusing others of hanging up on the word "zero", you hang up on the word "free"! You know that "free" is simply not true, yet you continue to use it at times without the qualifier of "part". But okay, I get what you mean now: LIE AND LURE.

              If that's what you got out of my writings, you really should recalibrate your reading comprehension sensors.

              You're starting a Newspeak dictionary, right? Because above, you definitely mention venture capital for start-ups and mingle it with your "free". So, venture capital equals "free" too.

              Dude. What?

              If your big innovation of "free" is merely loss leaders and other advertising, do you think that new?

              Nope. Never said anything in what I discuss is new. What I have said is that the digitization of many things has very much increased where such things can be applied.

              Here's what I see as your formula: Get or make a low-cost widget that everyone wants, then find someone who'll pay you for advertising somewhere associated with it; or minor version, get someone to directly buy a real product somehow associated with some widget that you can give away at low or zero cost

              Nope, not at all. Seriously, why make up shit?

               

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            out_of_the_blue, Jun 30th, 2011 @ 5:59pm

            Re: Re: Re: Re: This is subheaded "free-is-not-a-business-model"

            "You DO NOT take the dare, only dodge:

            Accurately answering the question is not a dodge."

            I'm going to be petty and quibble with this new dodge, though in more words: First, wasn't a question: you mischaracterize. Second, "I dunno" means you don't know, so you're kind of stuck now to maintain that you /do/ know. -- Third, NOT TAKING the dare means you agree that Intel and Apple do not give their products away. I DOUBLE-DOG DARE YOU to say that they do.

             

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              Anonymous Coward, Jun 30th, 2011 @ 8:53pm

              Re: Re: Re: Re: Re: This is subheaded "free-is-not-a-business-model"

              Are you trying to convince anyone except yourself? Because your incoherent ranting is equal parts missing the entire point, and starting some petty spat with Mike.

               

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      Nicedoggy, Jul 1st, 2011 @ 7:02am

      Re: This is subheaded "free-is-not-a-business-model"

      Quote:
      Intel, and Apple DO NOT GIVE AWAY THEIR PRODUCTS! -- I DARE anyone to say that they do.


      I hope you have lubricant this will hurt a bit.

      Quote:
      2009 Feb 25
      Free i-phone !!

      Softbank has announced that from Feb 27 to May 31 the 8-giga i-phone will cost zero yen !!
      (you must sign up to a two-year contract, which will cost a minimum of 23,040 yen over two years)
      The 16-giga will be discounted by a little over 10,000 yen.


      Source: http://www.japanesecellphones.com/news_update.html

      I think Apple doesn't give free phones to Americans because to the Japanese they are giving it, and apparently for years now LoL

       

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        mischab1, Jul 5th, 2011 @ 5:19pm

        Re: Re: This is subheaded "free-is-not-a-business-model"

        I don't think this counts. Apple isn't giving the iPhone away for free, Softbank is.

        On the other hand, Apple is giving away iTunes for free.

         

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    Greevar (profile), Jun 30th, 2011 @ 12:35pm

    Muscat is confused

    Of course you're going to think that "free" doesn't make sense when you believe the thing you're giving away is the thing you should asking money for. What you should be doing is building products or services around that free thing. Cononical (Ubuntu Linux) is a good example. They give their software away for free. They can do that, because it lowers the barrier to entry for their software (anyone can have it) and then they call sell their tech support services to their users.

    Free is the hook that snags the fish or the snare that grabs the prey. It catches the customer, brings them in, and puts them in a situation where they are more inclined to patronize the product/service side of your business. You can give them something they want for free and then sell them something that adds value to that thing they got for free. Or perhaps League of Legends has it wrong?

     

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    chuck, Jun 30th, 2011 @ 12:51pm

    I like Free
    Free Shipping gets my business some times
    Free Trials work for me too (Try then Buy FTW)
    The ONLY Free stuff I do not like is
    Free Advice

     

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    Austin (profile), Jun 30th, 2011 @ 1:16pm

    Price as a measure of quality?

    Mike covers most of what I'd like to say, but I thought I'd add one counter-argument Mike seems to have overlooked:

    "There are three big reasons for not doing this: first, ... second, your product price says something about the quality and intended audience of your product"

    Stop. Just stop right there. Anyone who has ever paid $549 for Microsoft Office, then tried OpenOffice knows good and well this is sugar-coated BS on a stick. Price is NEVER a mark of quality. In some specific markets - which does NOT include software - cost can be used as a measure of quality. However, Price isn't Cost. Cost is a measure of the resources the company puts into a product, which should sometimes be an accurate measure of what they get out of it. Price is a measure of what the average idiot is willing to pay for it. Price is a measure of greed, and the stupidity of the consumer. Price can even be seen as an indicator of how well the overall global Economy is doing at any given point in time. However, price is never, NEVER an indicator of quality. To confuse price with cost is a grave mistake.

    This is important because Mr. Muscat doesn't seem to understand the difference. If he did, he'd know that software development has an incredibly low resource cost when compared to virtually every other industry. Basically, power and an internet connection. This is how Google was still serving over 12,000 hits per minute before they finally moved it out of Larry Page's garage. The primary cost of software development (including web software) is time. Virtually every language can be developed for FOR FREE. You could spend $2,000 on Visual Studio, but you could also use Eclipse for free. However, no matter how hard you work, how much code you can pump out, and how skilled you are, you gotta sleep eventually. To that end, the real cost of software development, barring something on a massive scale like Google, is time, electricity, and an internet connection. That's all.

    When your startup cost is under $1,000/month, you can go work at McDonald's for $7/hour and code it in your free time. The concept that you must charge your users $19.95/month before you ever get off the ground is kinda crazy.

    Also, I love the way that Mr. Muscat is giving away his work - writings, which cost him no money, no raw materials, only his time - for free, supported by ads. Yes, I realize this is to help sell books but...oh wait, that's right, he's giving away some of the product for free in an effort to sell the rest of the product for money. Like a free trial, or a premium version upgrade to software, or something like that. Well done Mr. Muscat. You just proved the very point you're trying to disprove...

     

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    mosaic user, Jun 30th, 2011 @ 1:55pm

    which side of Free?

    Figuratively speaking, I was going to skip this class in Techdirt Academy. Then I decided to audit the comments to see just how far the readership had progressed.What I mean in Richard Muscat's premises have been addressed here long ago. The discussion is a Business Concepts 101 class around here. The average response shows most of this crowd understands it quite well. However, I began to wonder how much destruction is created on society as a whole when scarce and abundant resources are confused by those wishing to sell one type disguised as the other? Not just folk tales taken from the public domain and re-branded as new content, but products like Credit Default Swaps and CDO's that were basically created from whole cloth? Obviously, the power players who pitched those "products" knew they were highly leveraged (LOL),but accepted that those items were basically "free goods" in creation. How many more examples are there? Extended Warranties,for sure.What about Market Value of stocks? It's real money created and destroyed when the stock prices go up and down, but when it is controlled by insider trading,how is that variable value,that"free" portion, taken as profit, any different from an MP3 or Limited play game? I feel it's connected,but how can one be so seriously hidden ? Is it the transaction environment?

     

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    out_of_the_blue, Jun 30th, 2011 @ 7:46pm

    Okay, think I gave you a fair shot, went and READ:

    Okay, I went and READ: http://www.techdirt.com/articles/20070215/002923.shtml

    And to save you time, Mike, it's total raw sewage: your fixed costs are magically already successfully laid out, you consider only marginal costs. But since others might want to actually LOOK at what this person writes:

    >>> 'To explain this, it helps to go back to your basic economics class and recognize that, in a competitive market, the price of a good is always going to get pushed towards its marginal cost.'

    Er, "a competitive market" is an abstraction that you can't instance in the real world, where "the price of a good" is /always/ pushed to whatever fools can be coaxed or coerced into paying.

    >>> 'That actually makes a lot of sense. As competition continues, it puts pressure on profits, but producers aren't willing (or can't for very long) keep selling goods at a direct loss. Sunk (or fixed) costs don't matter, because they've already been paid...'

    By magic, presumably. This is just sheer fantasy, the way villains in movies are already well established with an efficient organization. In Real Life, many businesses fail to meet payments on the "sunk costs", and truly SINK.

    >>> '-- so everything gets pushed to marginal cost. That's pretty well accepted by most folks -- but it's still misinterpreted by many.'

    No, it's a sitution "accepted" only by those who inherited, say, dad's $500M publishing empire!

    >>> 'They tend to look at it and say that if price equals marginal cost, then no one would ever produce anything. That's a misconception that is at the heart of this whole debate.'

    Er, since this is a pivotal assertion, I'll have to ask who ever said that. Myself and folks I know are well up on selling at a higher price than was paid, PLUS overhead.

    >>> 'The problem is that they don't add in the element of time, and the idea that what drives innovation is the constant efforts by the producers in the space to add fleeting competitive advantages (what some economists have annoyingly called "monopolistic competition," a name that I think is misleading). In other words, companies look to add some value to the goods that makes their goods better than the competition in some way -- and that unique value helps them command a profit. But, the nature of the competitive market is that it's always shifting, so that everyone needs to keep on innovating, or any innovation will be matched (and usually surpassed) by competitors. That's good for everyone. It keeps a market dynamic and growing and helps out everyone.'

    WELL, GOSH, Pollyanna! -- The world where I live, products are constantly /cheapened/ and workers pressured to accept less pay, factories moved to around the world if feasible. -- And apparently you've never heard of slavery, the "company store", mercantilism, the struggle for labor unions, the Pinkerton agency murdering strikers, sweatshops -- for you, Capitalism emerged pristine and pure from the void, and has only perfected itself since. -- GOOD GOD. Do you expect ME to believe that YOU even believe what you write there?

    >>> 'So, let's go back to the "can't compete with free" statement. Anyone who says that is effectively saying that they can't figure out a way to add value that will make someone buy something above marginal cost -- but it's no different if the good is free or at a cost.'

    AHAH. You aren't talking about manufacturing /here/, but retailing. FIRST, show me where I can find people who cover my "sunk costs", or since I'm not that into manufacturing, just where I can /get/ these free widgets from manufacturers who've already recovered their own "sunk costs". -- BUT THEN you casually glide into /manufacturing/ these magical zero-cost widgets:

    >>> 'Let's take a simple example. Say I own a factory that cost me $100 million to build (fixed cost) and it produces cars that each cost $20,000 to build (marginal cost). If the market is perfectly competitive, then eventually I'm going to be forced to sell those cars at $20,000 -- leaving no profit.'

    NO, SOONER than "eventually", you're $100 million SHORT! And at /that/ point you try to sell your products /at cost/! This may be why you're so optimistic: you state fixed costs and then /forget/ them! I can only suppose that you'll backtrack and say there was profit BEFORE the market reached this theoretical "perfectly competitive". -- YOU CANNOT MAKE THIS NOTION WORK WITHOUT ASSUMING PRIOR SUCCESS. -- In which case, why are you changing such good practices? "Market forces" suddenly bearing down on you? But didn't affect you before?

    >>> 'Now, let's look at a different situation. Let's say that I want to make a movie. It costs me $100 million to make the movie (fixed cost) and copies of that movie each cost me $0 (marginal cost -- assuming digital distribution and that bandwidth and computing power are also fixed costs). Now, again, if the market is competitive and I'm forced to price at marginal cost, ...'

    This is never the case. Prices are always above costs (or to try and recover costs) or the business fails.

    >>> '... then the scenario is identical to the automobile factory. My net outlay is $100 million.'

    WAIT A SECOND. WHERE THE HELL DID YOU GET THAT $100M? No interest or other capital costs? It's a crucial point and inquiring minds want to know.

    >>> 'My profit is zero. Every new item I make brings back in cash exactly what it costs to make the copy -- so the net result is the same. It's no different that the good is priced at $0 or $20,000 -- so long as the market is competitive.'

    EXACTLY. YOUR PROFIT IS ZERO. You've proven that "free" can't work.

    How the hell did this bafflegab ever pass the laugh test?

     

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      Anonymous Coward, Jun 30th, 2011 @ 9:08pm

      Re: Okay, think I gave you a fair shot, went and READ:

      Wow, the amount of cluelessness here is astounding...

      The "perfect market" scenario is where everything will head in a competitive environment. The entire point of the article is to show that business have been staying above the $0 profit margin because there are many factors which stop competitors from continuously undercutting prices until they hit rock bottom.

      Apparently you think you've made a point, but all you've done is failed basic reading comprehension, and made it clear that you would fail a basic economics course.

      Thankfully, nothing you ever write ever seems to pass the laugh test.

       

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      Any Mouse (profile), Jul 1st, 2011 @ 12:25am

      Re: Okay, think I gave you a fair shot, went and READ:

      My advice to you? Finish reading the article. You might learn something.

       

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      Mike Masnick (profile), Jul 1st, 2011 @ 4:02am

      Re: Okay, think I gave you a fair shot, went and READ:

      EXACTLY. YOUR PROFIT IS ZERO. You've proven that "free" can't work.


      Your inability to comprehend simple topics is impressive.

      How the hell did this bafflegab ever pass the laugh test?


      Try learning economics. Then let's discuss again. Until then...

       

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        out_of_the_blue, Jul 1st, 2011 @ 4:43am

        Re: Re: Okay, think I gave you a fair shot, went and READ:

        Oh, appeal to authority.

        Just tell me, from your movie example, WHERE THE $100M CAME FROM, and how marginal cost in then zero. Without explaining that, you're just lying about the rest.

         

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    Lawrence D'Oliveiro, Jun 30th, 2011 @ 8:19pm

    So, In Summary ...

    Side A: “You can’t make money by giving away free stuff.”

    Side B: “Giving away free stuff can mean you sell more for-pay stuff.”

    Side A: “In that case, ‘free’ isn’t really free.”

    Side B: “So what is it, then?”

     

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    out_of_the_blue, Jul 1st, 2011 @ 7:04am

    Mike's example is of making a movie for $100M.

    He then says that his marginal cost is zero for each copy of the film. -- See what's left out there? He doesn't account for the $100M! Neither in how he got it in the first place, OR in how it's been paid off so that the marginal cost is THEN zero. That $100M somehow just disappears. This ain't rocket science. Mike has not accounted for start-up costs, because it's ONLY an example that serves his purpose of showing what'd happen IF marginal cost was zero.

    >>> How do people offer free phones then?

    ARF! On services sold later. But MIke nowhere mentions any re-payment of start-up capital. Indeed, above, he mentions that without any /hint/ that it might have to be included in marginal costs; it's just "losses":

    "The whole reason why startups need venture capital is to fund that initial period in which there are short-term losses. It's called investing in growth. Intel had to build fabs. Apple had to build computers. Those involved "short-term losses" to build the product. That's how these things generally work."

    That's where MIke's ZERO marginal cost comes from. But in the real world, investors don't just forget what they've lent.

     

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      Nicedoggy, Jul 1st, 2011 @ 7:21am

      Re: Mike's example is of making a movie for $100M.

      So where the money from movies come from?

      Theaters, merchandise?

      If you give free movies to people and increases sales and attendance is that not a good thing?

      Wolverine was the most pirated movie of the year and made money accordingly.

      And it was not just Wolverine every other movie that gets at the top of the pirates radar makes loads of money for some strange reason why?

       

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      Nicedoggy, Jul 1st, 2011 @ 7:23am

      Re: Mike's example is of making a movie for $100M.

      According to you free could never pay for a movie and still, people having free access to the movie earlier did not seem to affect attendance or sales for some reason, would you care to explain why?

       

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      Anonymous Coward, Jul 1st, 2011 @ 7:33am

      Re: Mike's example is of making a movie for $100M.

      The focusing of the discussion on marginal costs while ignoring sunk costs or ongoing costs (such as administration) tends to be a bit misleading. If you ignore the elephant and the rhino behind the curtain, the marginal cost argument works. It is basic economics, when you eliminate all of the other driving factors.

      It also doesn't address the control of the creation of the good to start with. Nobody will intentionally make an infinite number of anything if they expect to make money at it. Basic economics says that you look for a sweet spot between supply and demand and attempt to keep your production in line with demand, so that you can obtain a good return for your products. Flooding your own market would be incredibly silly.

      It also doesn't address who is in control of the creation. Yes, the digital universe allows for illegal replication of certain goods, and that does create a market issue. But that issue only exists as long as you are willing to tolerate widespread illegal activities. It isn't the producer companies who are playing the infinite market card, it's the pirates and such that are driving this destructive trend.

      Infinite distribution always fails because, like almost any system, when you push it to it's absolute limits, something breaks. In this case, it breaks the full business model of sunk costs, ongoing expenses, and retained value of the original product or design. An infinite number of copies makes the original product effectively worthless, because while people may value you it in some intrinsic way, they aren't going to pay anything for it because they already have an infinite number of them available to them.

      The example is movies: They make X money in the theaters, Y money in the PPV / cable market, and Z in the netflix, retail, and other markets. They also make the long tail money, being used as filler for Spike TV on a Saturday night 10 years later, and so on. But if you start to eliminate markets because people already all have a copy of the movie, you eliminate income sources. The infinite doesn't just hurt one segment, it pretty much blows them all away.

      Yes, people may pay some money for the theater experience, in the same manner that some people may feel paying $200 for a steak dinner is a good way to spend their money. But that is a very narrow market, and one unlikely to be large enough to pay for what everyone else is getting for free.

      The other assumption is that there is always something else you can sell: Give away the movie, sell popcorn and t-shirts is the logic. Use your infinite product to leverage other businesses. This one also fails, because it implies high enough margins on these other goods to make up for what is lost. But we all know that this goes against the basic supply and demand situation, where people will not pay higher prices just because they got something for free. It is also likely that competition comes into the market place and undersells your high margin recovery product, leaving you in the dust.

      The problem of infinite distribution and free is that, in terms of thesis or undergrad study, it appears to be workable. But the real world says otherwise, there is no magic creation of wealth, there are no massive new markets opening up, and there certainly isn't any more money kicking around the movie or music industries than there was even a few years ago as a result. In fact, without 3D, the movie industry would absolutely be on it's ass, with ticket sales down significantly. Only the increase because of 3D manages to hide the slide for now.

      You are right too, investors look at the overall package, not some narrow part of the process. They put 100M in, they want at least 120M out. Giving the product away because you have the potential for infinite distribution just doesn't seem to lead to them getting their money back, does it?

       

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        Nicedoggy, Jul 1st, 2011 @ 7:39am

        Re: Re: Mike's example is of making a movie for $100M.

        Assuming of course that the free digital is the only way that exist to make money from it.

        Which is silly, we all know that there are other revenue streams and you actually didn't answer why is that in a matter of fact people already have free access to those movies and apparently the most pirate are also the ones that make more money, so your assumptions are probably not based on factual observation of the market but suppositions, am I right or what?

        :)

         

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          Anonymous Coward, Jul 1st, 2011 @ 9:36am

          Re: Re: Re: Mike's example is of making a movie for $100M.

          I think you have it sort of backwards. The ones that make money are also heavily pirated. It isn't the reverse. The piracy doesn't cause them to make money, it's the making money (being popular) that makes them targets for piracy.

          One has to wonder what type of money they would be making without piracy. I am suspecting much more, not less.

          You said: " your assumptions are probably not based on factual observation of the market but suppositions, am I right or what?"

          Me: because the economy and market place cannot be stopped, pulled apart, and inspected, we all have to work at a certain from from suppositions. We have to observe what is going on, and draw conclusions.

          My opinion is that you (and many others here) make the mistake of confusing the cause and the effect. Piracy isn't making movies popular, movies are pirated because they are popular. You don't see huge amounts of file trading in Nina Paley's epic failures, but you do see plenty of people wanting the latest transformers movie.

          If a product is desirable, the people will work whatever paths are good for them to get it. Piracy provides a zero cost option that more and more people are taking. Piracy doesn't suddenly create people wanting to go see the same movie in the theater just because they saw it at home.

          The popularity of the movie isn't caused by piracy, the piracy is caused by the popularity of the movie. If you can't get that simple concept straight, it's pretty each to get confused. The tail does not wag the dog.

           

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            Nicedoggy, Jul 1st, 2011 @ 4:41pm

            Re: Re: Re: Re: Mike's example is of making a movie for $100M.

            Quote:
            I think you have it sort of backwards. The ones that make money are also heavily pirated. It isn't the reverse. The piracy doesn't cause them to make money, it's the making money (being popular) that makes them targets for piracy.

            And the end result is the same, record sales with or without piracy, that is strange isn't, it suggests piracy has no bearing on sales.

            Quote:
            One has to wonder what type of money they would be making without piracy. I am suspecting much more, not less.


            I suspect you could be wrong, there is a finite pool of money out there and since even before this crazy talk about piracy people nowhere made the kind of money made today in the movie business I highly doubt that they would be doing any better.

            Even though you are wrong, because we all know that promotion is key to good sales and even studies have shown that the exposure piracy brings have an positive effect on sales.

            Quote:
            because the economy and market place cannot be stopped, pulled apart, and inspected, we all have to work at a certain from from suppositions. We have to observe what is going on, and draw conclusions.

            So why you ignore facts?
            Piracy has no apparent effect on sales of movies apparently since according to the industry they are having record earnings year after year. Even studies conducted by government agencies around the world have noticed that piracy can actually improve sales.

            Quote:
            My opinion is that you (and many others here) make the mistake of confusing the cause and the effect. Piracy isn't making movies popular, movies are pirated because they are popular. You don't see huge amounts of file trading in Nina Paley's epic failures, but you do see plenty of people wanting the latest transformers movie.

            We also see record profits accordingly to popularity in pirate sites, how can you say something is bad if you can't show any losses?

            Quote:
            The popularity of the movie isn't caused by piracy, the piracy is caused by the popularity of the movie. If you can't get that simple concept straight, it's pretty each to get confused. The tail does not wag the dog.

            You be wrong you can almost predict how a movie is going to do in the box office by the traffic generate on pirate sites and buzz in social networks, so I have to disagree, what drives people to buy things is their positive experience with something, if that was not true people wouldn't buy anything after going to the theater would they?
            I mean they already saw the movie why expend money "buying" the DVD? why do people go multiple times to the theater?

            Also there is the powerful force of culture how many people got to see a movie so they can understand comments made about it by others?

             

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              out_of_the_blue, Jul 1st, 2011 @ 5:46pm

              Re: Re: Re: Re: Re: Mike's example is of making a movie for $100M.

              "And the end result is the same, record sales with or without piracy, that is strange isn't, it suggests piracy has no bearing on sales."

              That's an appealing but pernicious linkage. Look, from the "content industry" view, they don't want /anyone/ viewing or hearing without paying up. My objection to that notion is the prices they want to gouge and the degree of arbitrary control they want to exert, plus that they pervert "law enforcement" to funnel money into their pockets, besides that making entertainment TOO cheap simply ruins morality through wasting of time. -- Now, that somewhat aside, if "sales" were the total of viewings, without any of what they or you wrongly term "piracy", it'd almost certainly increase their profits. Since, as Mike holds like any good "capitalist", the sole /goal/ is to increase profit margin, that surely can only increase profits, and so the industry necessarily and logically pursues their "outdated" model. -- The more I read here, the more I'm driven by logic to reverse my notions and adopt the industry view! -- Up to a point: I wish to see much more of the revenue actually going to performers, and not so much of it, and not merely to a few at the top, either.

              At this point, I can only renew prior advice that one simply produce one's own entertainment (with as little copying as possible) and avoid all these vexing questions.

               

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      Mike Masnick (profile), Jul 1st, 2011 @ 10:38am

      Re: Mike's example is of making a movie for $100M.

      He then says that his marginal cost is zero for each copy of the film. -- See what's left out there? He doesn't account for the $100M! Neither in how he got it in the first place, OR in how it's been paid off so that the marginal cost is THEN zero. That $100M somehow just disappears. This ain't rocket science. Mike has not accounted for start-up costs, because it's ONLY an example that serves his purpose of showing what'd happen IF marginal cost was zero.


      *sigh*

      Look, this is why it's important for you to at least learn some basic economics so you don't look like a fool.

      (1) I am not ignoring the fixed costs. I am pointing out that they do not matter in *pricing*. That's factual. You cannot debate that unless you want to be wrong.

      (2) I am merely talking about pricing decisions.

      (3) Obviously you have to look at the fixed costs in determining whether or not it's worth the investment and if you can recoup it.

      (4) Nowhere do I say that you price *EVERYTHING* at marginal cost. You only price the things at marginal cost if there's a competitive market -- and with digital goods where there are infinite perfect copies, then you do have that situation.

      (5) The whole point of what I'm talking about is that you focus on the areas where there IS NOT an infinite supply/perfect competition, and you price those *ABOVE* marginal cost, so you can make money.

      (6) And from that you figure out how to cover your fixed costs. But it's not in the *pricing*. That's made in the initial go/no-go analysis.

      ARF! On services sold later. But MIke nowhere mentions any re-payment of start-up capital

      Because repayment of startup capital is meaningless in *pricing* decisions. I do cover it, but it's a separate question from pricing.

      Here, let me give you a simple example that you will ignore or misunderstand: If I took $100 million from a VC and my competitor took nothing, and we each have identical products, and I tell you you have to pay $10 for mine because I need to pay back my VC, and my competitor offers his for $1. Which are you going to buy? You're going to buy his.

      The fixed costs DO NOT MATTER in pricing decisions.

      They matter in the overall business model, and of course the goal is to cover the fixed costs, but you have to do that by pricing the goods you *CAN* charge more than marginal cost for, rather than pretending that you can jack up the price on something the competition will kill you on.

       

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    out_of_the_blue, Jul 1st, 2011 @ 7:35am

    @ankle-biter: Investors are nowhere repaid in Mike's example.

    Mike's "simple" example (from the "can't compete with free" page) is blatantly incomplete. He writes that he makes a movie for $100M, but specific cost is irrelevant: could be a hundred dollars or a hundred billion as the figure never comes up again. He just goes on that he has a movie in hand and his marginal cost to duplicate it is effectively zero. -- NO, until he's accounted for all costs, mentions some way that those have been repaid, maybe the "angel" as stage and movie types call suckers just forgets about it, his marginal cost for the first copy to be sold is $100M. It's not arguable. Only by disappearing that figure can he claim a marginal cost of zero. Introducing any repaying of that first figure just evaporates his own example.

    Without investors being repaid, it's not even "capitalism", just hucksterism. Mel Brooks made his mark with the same (criminal) premise as Mike uses: "The Producers".

     

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    out_of_the_blue, Jul 1st, 2011 @ 8:00am

    @Nicedoggy: You're filling in the blanks that Mike left.

    As he no doubt intends. It's /his/ example. He /nowhere/ mentions that investors have been repaid. There's some blather prior about "sunk costs" just being /gone/, and that's it.

    Show me where Mike has investors repaid.

     

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    out_of_the_blue, Jul 1st, 2011 @ 1:31pm

    "The fixed costs DO NOT MATTER in pricing decisions."

    The HELL they don't! -- As I've said, your notions only apply to a very narrow range of established businesses who have widgets on hand, a complete staff, reputation, and so on. You /are/ simply dismissing all overhead as "sunk costs"; here you only repeat the notion.

    You picked a movie example. They're not necessarily a commodity the competition can kill you on.

    In this very piece, you casually lump in start-ups, saying they'll take "short-term losses". It's just plain no good to brush that aside in /your/ example and say it doesn't matter.

    "1) I am not ignoring the fixed costs. I am pointing out that they do not matter in *pricing*. That's factual. You cannot debate that unless you want to be wrong."

    I don't accept your assertions. In the movie example from the other piece, you plainly ignore the fixed costs. And to say that fixed costs don't matter in pricing, then just a bit later say they do for /other/ items, that's just double-talk and double think. -- WHAT YOU MEAN is that you take a widget from nowhere and keep it in isolation, proclaim that it has zero cost, is completely without connection to the business, and /that/ proves "free" works as a business model.

     

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      Mike Masnick (profile), Jul 1st, 2011 @ 3:08pm

      Re: "The fixed costs DO NOT MATTER in pricing decisions."

      I don't accept your assertions. In the movie example from the other piece, you plainly ignore the fixed costs. And to say that fixed costs don't matter in pricing, then just a bit later say they do for /other/ items, that's just double-talk and double think.

      Dude. Seriously. Stop posting until you learn something.

      I did NOT say that fixed costs matter in pricing. They don't. They matter solely in the investment decision.

      Again this is fundamental BASIC economics.

      WHAT YOU MEAN is that you take a widget from nowhere and keep it in isolation, proclaim that it has zero cost, is completely without connection to the business, and /that/ proves "free" works as a business model

      No. I don't mean that at all, and I've never said that, because I've never said that "free" is a business model at all.

      Seriously dude. Stop digging yourself a deeper hole. You look foolish.

       

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    out_of_the_blue, Jul 1st, 2011 @ 4:03pm

    Your assertions only stand up when not questioned.

    Thanks for showing your /phony/ concern for my rep. It's a common tactic of confidence men, along with dimunition and assertions of authority. You may have noticed doesn't work on me. Nor does simply quoting my points and then rambling, it's just non-responsive. Common tactic of politicians.

    Since this is /so/ simple, why not answer it directly? -- Where /is/ the prior profit in your movie example by which marginal costs are reduced to zero? All you do is say that "sunk costs" don't matter. Try telling that to the various kinds of sharks who loan money. A business has to meet those fixed costs all the time, not just when they feel like it.

    And again, you're trying to distinguish this from loss leaders and other advertising, but it ain't visibly, only by bafflegab assertions.

    I'm also waiting to see the promised explanation of how those "sunk costs" can nearly always be recovered. At least point me to it.

    You can't just brush off the crucial stages of /start-up/ with a mere mention: "Also, it's the very basis of pretty much the entire venture capital industry. The whole reason why startups need venture capital is to fund that initial period in which there are short-term losses. It's called investing in growth. Intel had to build fabs. Apple had to build computers. Those involved "short-term losses" to build the product." -- You brush that aside when /inconvenient/ so that your example works. And you won't even say that Intel and Apple do not give away their products. When you won't concede the obvious, there's a reason.

    But my main question on /start-ups/, even your movie example, is why is change needed if they've recovered fixed costs? Seems to me they should do more of same.

    Now, prices aren't at all influenced by "fixed costs", eh? Even kids running a lemonade stand grasp that if you don't get more for the drinks than you paid for the ingredients, it's a loser, and they price accordingly. Sure, they get Mom and Pop to PAY for ingredients -- as your site may be paid for -- but it's obvious. They may have a bad location, make bad lemonade, get rained out, or get greedy and run the price up beyond what anyone will pay, but that's the lesson in economics. But in NO likely case do even kids act as you suggest and just disappear those costs as "sunk". In the business world, people who do ignore costs used to wind up in jail, but now they just go to the gov't for a bailout from taxpayers. Perhaps that's the types you're familiar with.

     

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      Mike Masnick (profile), Jul 1st, 2011 @ 4:27pm

      Re: Your assertions only stand up when not questioned.

      Thanks for showing your /phony/ concern for my rep

      Not phony at all. You're coming off as completely clueless. I would guess that you would prefer to look clueful.

      It's a common tactic of confidence men, along with dimunition and assertions of authority.

      And making statements like that is a tactic of assholes.

      Since this is /so/ simple, why not answer it directly?

      I did answer you directly. And you misrepresented what I said every time.

      Where /is/ the prior profit in your movie example by which marginal costs are reduced to zero?

      The profits are in selling the *scarcities* over which there is not competition. As I stated (contrary to your assertion). You SELL the scarcity at a higher price and that's where the profits are.

      All you do is say that "sunk costs" don't matter. Try telling that to the various kinds of sharks who loan money. A business has to meet those fixed costs all the time, not just when they feel like it.


      You really come off as incredibly dense when you make statements like that. I explained, CLEARLY, that fixed costs (not the same as sunk costs) do matter for overall investment, but DO NOT MATTER IN PRICING.

      For loansharks, money lent out is a marginal cost. So not sure your point, other than to prove your own cluelessness.

      And yes, of course a business has to cover their fixed costs. That's WHAT I SAID. It's just that that doesn't play into PRICING, but it plays into strategy and the investment decision.

      And again, you're trying to distinguish this from loss leaders and other advertising, but it ain't visibly, only by bafflegab assertions.


      WTF is "bagglegab"? Made up words make you sound so smart.

      I'm not trying to distinguish anything from loss leaders and advertising. In some cases (though not all) those are both perfectly good examples of the economics I'm talking about.

      I'm also waiting to see the promised explanation of how those "sunk costs" can nearly always be recovered. At least point me to it.

      Fixed, not sunk, costs are recovered by figuring out what scarcities were made more valuable and then selling those scarcities.

      You can't just brush off the crucial stages of /start-up/ with a mere mention: "Also, it's the very basis of pretty much the entire venture capital industry. The whole reason why startups need venture capital is to fund that initial period in which there are short-term losses. It's called investing in growth. Intel had to build fabs. Apple had to build computers. Those involved "short-term losses" to build the product." -- You brush that aside when /inconvenient/ so that your example works. And you won't even say that Intel and Apple do not give away their products. When you won't concede the obvious, there's a reason.


      Once again, you are conflating multiple things. I've never brushed anything aside. Of course, startup investment is important. But what does that have to do with anything? How much someone invested in you does not matter in pricing. I described that above, which you totally ignored. Why? I can't fathom.

      And I *DID* say that Apple and Intel don't give away *all* of their products. But they do give away some. And that's the point I've made from the beginning. I've never suggested that anyone give away all of their products. Why do you pretend I have?

      But my main question on /start-ups/, even your movie example, is why is change needed if they've recovered fixed costs? Seems to me they should do more of same

      Because the *market* is changing such that there's more competition. You can't do more of the same when the market has shifted.

      Now, prices aren't at all influenced by "fixed costs", eh? Even kids running a lemonade stand grasp that if you don't get more for the drinks than you paid for the ingredients, it's a loser, and they price accordingly

      Um. DUDE. Price of ingredients is the MARGINAL cost. Not the fixed cost.

      Seriously. Learn at least a the very basic's of economics.

      But in NO likely case do even kids act as you suggest and just disappear those costs as "sunk".

      Sunk costs are not the same as fixed costs. Seriously. Learn the basics.

      Perhaps that's the types you're familiar with

      Being a total asshole is not helping you look less like a complete idiot here.

       

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      Nicedoggy, Jul 1st, 2011 @ 4:46pm

      Re: Your assertions only stand up when not questioned.

      And so is free, it is a risk like all other risks it doesn't guarantee you a return like pricing anything won't guarantee you a return, what would those kids do if every other kid on the neighborhood was using free lemonade to get others to pay them more for cutting the grass or washing cars?

      Would they try to sell lemonade in the same place? that is just dumb.

       

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    out_of_the_blue, Jul 1st, 2011 @ 4:51pm

    "Sunk (or fixed) costs don't matter,"

    THAT is copied from YOUR article "can't compete with free".

    HERE, you simply deny that those are synonymous, where that's clear THERE from context, the "or" makes them interchangeable, and in any case, as I return to that movie example: you say the fixed cost was $100M, and the marginal cost is zero, but you nowhere include -- I'll narrow it down here to /that/ example -- the wider context that completely invalidates the example. That ain't a minor oversight. As I've said, "sunk (or fixed) costs" could be 100 billion, and you say it doesn't matter.

    As for the lemonade stand, "FIXED" is correct as it's near always a one-time deal. That was in my mind, but I concede on your quibble, hope you're happy at progress.

    And I see you're now just trying to get me riled with vulgarisms, when the question is why you keep responding.

     

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      Mike Masnick (profile), Jul 1st, 2011 @ 5:41pm

      Re: "Sunk (or fixed) costs don't matter,"

      THAT is copied from YOUR article "can't compete with free".


      I will admit that it was inelegant wording. Sunk costs don't matter for certain things. Fixed costs don't matter for certain things. My mistake was implying they were the same. Sometimes they are, but they are often not -- such as in your example with the lemonade. Sunk costs there are not fixed costs.

      As I've said, "sunk (or fixed) costs" could be 100 billion, and you say it doesn't matter.

      They don't matter for pricing.

      And I see you're now just trying to get me riled with vulgarisms, when the question is why you keep responding.


      I keep responding because it's sometimes fun to respond to the totally clueless to keep me sharp. But enough of that. Good luck in life. You need the help.

       

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        out_of_the_blue, Jul 1st, 2011 @ 5:56pm

        Re: Re: "Sunk (or fixed) costs don't matter,"

        In contrast to you, I don't state other than what I believe. A maxim in law is "a lie in one thing, a lie in everything". I just plain don't believe that you wish me well at all, nor do I accept your lofty dismissal.

        I see you clearly since actually reading that and discovering your simplistic false premise.

         

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        out_of_the_blue, Jul 1st, 2011 @ 7:05pm

        "Sunk (or fixed) costs don't matter ... for pricing."

        Okay, having "won" through endurance, time to show I'm not a graceful "winner", either. Always interesting to prick a site owner and see how they jump. -- When and where you're wrong, I'll respond with what points I wish on this publicly accessible for "free", even encouraged to post, community bulletin board. When and where you're right, I'll crow that you're coming round to my views, as snarkily as my wit provides.

        Anyway. From right above, I just can't abide:
        'As I've said, "sunk (or fixed) costs" could be 100 billion, and you say it doesn't matter.

        They don't matter for pricing.'

        That ain't a common notion or common practice, and to say the least, I don't accept it as true. So bold and bald an assertion is remarkable from one who hedges so often. But the opposite has been admitted above -- I think it has, this has become scrambled and I ain't going back -- in any case here it is flatly stated as (I hope) parting shot.

        Now, I'm reasonably certain that nearly all businesses price their products or services /always/ with regard to their "sunk (or fixed) costs", even when those are LONG paid off because to get back into biz, it'd be a cost and they have a present value and maintenance and so on; prices are, in sum, vaguely gauged depending how many products they have and profit margin and other obvious variables. -- So that's what I believe to be absolute fact, and I'm sticking to it after what I view as total lack of explanation that yours is more than arbitrary definition that fits your example and various other notions. Since seems to be an absolute difference on a matter of fact and a crucial point, we may go round again.

        And as soon as some other corollary of your flawed premises strikes me, or the mood does, I'll post more, and certainly likely just to get in the last post here.

         

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          Lawrence D'Oliveiro, Jul 2nd, 2011 @ 2:41am

          Re: "Sunk (or fixed) costs don't matter ... for pricing."

          out_of_the_blue:

          ... I don't accept it as true.


          The truth is what’s true whether you “accept it as true” or not. Go take some lessons in basic economics, and then you can come back and try to open your mouth without looking like a fool.

           

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            out_of_the_blue, Jul 2nd, 2011 @ 5:23am

            Re: Re: "Sunk (or fixed) costs don't matter ... for pricing."

            Good heavens, sonny. I just chased Mike off his own thread, now /you/ think you can give an order and I'll obey? Have you petty autocrats NO self-awareness? Or even powers of observation? You make yourself a fool by just the attempt! Doubly so when I now tell you where to get off! This is /merely/ a web-site forum! You have NO known power over me -- though you evidently wish it -- and so I just invite you to /continue/ in the same vein, because I sure as hell don't want /you/ to shut up: makes for laughs and proves my points!

             

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              Lawrence D'Oliveiro, Jul 3rd, 2011 @ 5:38pm

              Re: "Sunk (or fixed) costs don't matter ... for pricing."

              Poor you. You sound a bit peeved. You thought you’d won the argument, only it turned out you didn’t know the first thing about the subject. Doesn’t matter how smart you think you are, sooner or later someone will come along who’s not only smarter, but can also point you at the references to prove it.

              Your best bet is to treat those references not as a threat, but as an opportunity to improve yourself.

               

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                out_of_the_blue, Jul 4th, 2011 @ 4:49am

                Re: Re: "Sunk (or fixed) costs don't matter ... for pricing."

                TRUTH is not definitions but reality. "Marginal costs" is a /definition/ that I'm not /forced/ to accept as a law of nature. Just because some or all "economists" use the notion to make a point in ivory tower discussions, I'm not bound by their definition here in reality any more than one is bound by the definitions found in other religions than yours.

                See my "Moon rocks cost nothing".

                 

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                  Jay (profile), Jul 4th, 2011 @ 10:42am

                  Re: Re: Re: "Sunk (or fixed) costs don't matter ... for pricing."

                  Moon rocks make you deathly, deathly ill. Especially when you grind them up and eat them. For Science.

                   

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    Johnny Shade (profile), Jul 1st, 2011 @ 5:21pm

    TANSTAAFL

    This is taken from Robert Heinlen's book "The Moon Is A Harsh Mistress" It stands for "There Ain't No Such Thing As A Free Lunch". Basically, for those of you that just seem to be floored by your internal "divide by Zero" error, here's an example of how it works. You offer a FREE Buffet (food) but the person MUST buy 2 drinks (liquid) to get the FREE buffett. The drinks are priced so as to cover the total cost of the drinks, themselves, AND the avergage cost of food that one customer eats along with a profit margin. The !!FOOD!! is free, you make your money off the "DRINKS". Apply this to your issues with "free" and "business models". hopefully this will get through to those who just don't seem to get it

     

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      out_of_the_blue, Jul 2nd, 2011 @ 5:37am

      Re: TANSTAAFL

      I think that an important point, just not the way you intend.

      "FREE" IS JUST A LIE used by commercial interests. They need to be held to strict definition: FREE means take all you want without any hidden TRICKS to actually get PAID for the giveaway. All they have to do is NOT LIE (including no fine print).

       

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    out_of_the_blue, Jul 2nd, 2011 @ 5:15am

    EAT CROW FOR BREAKFAST, MIKE.

    Hey, Mike, I didn't crow nearly enough over you EATING CROW on the phrase "sunk (or fixed) costs": after lecturing me so primly on using correct terms, YOU HAD TO ADMIT WAS YOUR OWN USAGE! YOU WERE BLATANTLY WRONG! And you forgot that your oeuvre is available for immediate reference; now that gaffe is on record forever. -- HA! -- Cute try to euphemize a major gaffe as "inelegant", but you then had to just tuck tail and slink off.

    So I'm enjoying a LAUGH this morning while you're still eating crow. YES, YOU ARE! You'd look yet more foolish responding now, may even dimly grasp that you should have just stopped much earlier, and can only vaguely hope that I'm seen as petty (which I'm happy to help by ranting here!). -- But I'M just labeled by a common phrase that I can change at will, have no "rep" to lose as you weirdly seem to think important. You just don't truly grasp that "teh internets" favors the petty in all ways, that's why the attempts to control it. -- The urge to dominate is irresistible to every petty autocrat with a web-site, which I'll point out is sub-text here!

    And in conclusion: HA!

     

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    out_of_the_blue, Jul 2nd, 2011 @ 7:23am

    Laid out as a cogent whole.

    I'll try to unscramble my case. Mike and others have done their best to obscure, in large part by repeating what I object to as if I just don't get it, and various other attempts to dodge answers and divert me from my theme. I put in a few bits of ornament that I shouldn't have, but characterizing is I think accurate; more importantly, I didn't have my case all at once, and that was BECAUSE I gave Mike a fair shot to convince me; so halfway along I READ his "can't compete" piece and THEN found a major LACK in its example premise -- so, starting with that:

    1) Mike keeps insisting that "sunk (or fixed) costs" don't matter for pricing decisions. I believe that they /do/, and that it's self-evidently so in practice.

    2) Specifically for his examples, to just ignore those as if already paid and widgets come into being out of the void, to ignore that merely for the organization to exist involves substantial costs and efforts, that just plainly has no relation to the real world.

    3) To simplify a "formula" (as I regard Mike's movie example to be /intended/) so that it actually has /NO/ input values is to just be WRONG; can't draw ANY conclusion from it. I've pointed out that his "sunk (or fixed) costs" do not at all figure into calculations, and he /agrees/ with that quite insistently! The trick he's using is to put out a specific figure to make it /appear/ as though there /is/ some linkage and a fixed formula! It's essential for his notions and that's why he defends the point so hotly.

    4) You people will just have to trust that I've GOT the point that marginal costs approach zero for /SOME/ kinds of products. -- That's one reason why I despise Microsoft and its obscene profits. Despise most corporations. -- But it's not generally true, and yet Mike casually lumps Intel and Apple /right here above/ into his case, though I see his text in larger context TOO. -- It's the /juxtaposition/ itself that I find irrelevant if not deceitful. Those are mostly hardware sellers -- don't bother to point out associated software, that's just /trying/ to obscure my point: "infinite" goods doesn't apply to physical items. I hope that's nailed down. Therefore, as I've said several times, "free" is narrowly targeted to digital streaming and online services.

    5) Now, the corruption of the word "free" has to be looked at. Several point out, approvingly, that it's used to lure in and hook on the /real/ products. I regard /that/ as a problem. It's a LIE AND A LURE. I object to it on philosophical and moral grounds.

    6) Nearly all of advertising is merely tricks, the whole field to be despised. I think that self-evident too.

    7) I object more to mis-use of "free" when it's commercial interests LYING to me out of greed. Corporations have no right to lie, though the legalistic claim that they do. I'm not a corporatist. Those are sheerly legal fictions that have gotten out of control and become a hazard to the people. Much of what's discussed here is exactly about corporations grabbing power.

    8) In line with above, there's doublethink where those selling to you or limiting what you can grab off the internet are evil, while Google and others (which perhaps you're "invested" in or allied with or simply deceived by), though having the same goal of maximizing profits, are good and pure. Argument is constrained to only /how/ to maximize corporate profits! I regard that as a fundamental problem. Corporations must be good for /we the people/, that's their /sole/ justification. -- Philosophical point, just outlining my views.

    9) Of course Mike doesn't like my picking at his example, claims I'm misrepresenting what he says. No, I rephrase and cast it as starkly as I can, but hold that it's accurate.

    So here's the summary:

    A) Mike's example in the "can't compete" piece is irrelevant at best.
    B) "Free" is used more for lie and lure than literally "free".
    C) So far as visible, Mike's schtick is mere narrowly targeted advertising.
    D) Mike's version of "free" doesn't apply to physcial goods, THOUGH he ALSO seems to write AS IF does; he's the one conflating those.

     

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    out_of_the_blue, Jul 2nd, 2011 @ 9:53am

    Occurs to me, you people don't even believe in free speech!

    Just look at the last: "then you can come back and try to open your mouth". As if he has the authority to order assigned reading! And he makes no argument, only assertions.

    Even Mike. Instead of letting me just write what I wish and being confident in his own writing as adequate statement, he too has only various ways of saying "SHUT THE HELL UP".

    Yot, you people pretend to be for freedom, but when it comes down to anyone expressing beliefs that oppose yours, you can't bear it being out there but reach for the nearest stick. -- That too, is one of the points I'm making here. It's a quite educational site.

     

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    out_of_the_blue, Jul 4th, 2011 @ 4:38am

    Moon rocks cost nothing.

    Moon rocks cost nothing. -- YES, ONCE YOU'RE ON THE MOON, THE ROCKS COST YOU NOTHING! -- Right, Mike? Since rockets and fuel to get there (and back) are what you term "sunk (or fixed) costs", those are utterly irrelevant to the "price" of moon rocks, right? -- Don't try to dodge that you're talking about pricing for sale, because that the product costs nothing is the key point, and you won't even admit to processing or delivery costs because that'd spoil your example. -- You've "simplified" the example until it's simply not true.

    "Marginal cost" is an /abstraction/. It's only useful for /relative/ comparisons, not absolute, when /all else is equal/ within a /narrow/ context. To strip costs of any product from the connected organization is fantasy, a theoretical construct that /never/ occurs in real life.

    The usage of "marginal cost" is: to find the "true" cost of an item, ignore all costs not /exclusively/ due to that one item. So "marginal costs" simply defines away all "sunk (or fixed) costs", and always approaches zero regardless how much it costs to get /into/ production so that you can produce even one item! It's a USELESS measure for the /whole/ business that needs to set prices simply to stay in business.

    And see how nicely circular the definition is? It's called a tautology: "a statement true by its logical form alone", and is an elementary logic flaw (or more frequently, a scurrilous trick). Tautologies are quite popular in ivory towers: we're here in this ivory tower, therefore we're immune to logic.

    Now you should see the flaws in Mike's insistence that '"sunk (or fixed) costs" have no effect on pricing'. It's logically TRUE, yet WRONG because of the FLAWED PREMISE that the /abstraction/ of "marginal costs" can be taken as an /absolute/.

    Though simple and obvious once explained, tautologies can catch you out by the fact that they're /true/! My first real brush with this breaktakingly brazen trick was in arguing with an Engineer whether a certain factor y could be ignored; he stated that if x/(x+y) was one to a good approximation, then it proved that y could be ignored! We were arguing whether it /was/ a good approximation, and he simply defined away even the /possibility/ of arguing! That's chutzpah. When used by anyone claiming years of trained technical and math expertise, it's simply a TRICK, can't even be excused as a mistake.

    By the way, I bet everyone, if were any, totally dropped off at the simple equation; too difficult for people nowadays, and that's why these simple tricks work. A tautology and the chutzpah to repeat it ever more insistently are about all that's needed to overwhelm the weak ignorant minds of today.

     

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    out_of_the_blue, Jul 5th, 2011 @ 3:54am

    Don't worry that I'm wasting my time, Mike.

    The "marginal cost" to me is zero. As in the Monty Python movie: You come from nothing, you go to nothing. What have you lost? Nothing!

     

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      Gwiz (profile), Jul 5th, 2011 @ 11:18am

      Re: Don't worry that I'm wasting my time, Mike.

      Dude. Get a girlfriend or a pet or a life or something.

       

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        out_of_the_blue, Jul 6th, 2011 @ 4:29am

        Re: Re: Don't worry that I'm wasting my time, Mike.

        So, Gwiz, all you've got is another version of "SHUT THE HELL UP"?

        You should actually be ashamed to make such a trivial comment without the least bit of on topic argument but I bet you think you really zinged me.

        Of course, Mike encourages such ankle-biting.

         

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          Gwiz (profile), Jul 6th, 2011 @ 9:12am

          Re: Re: Re: Don't worry that I'm wasting my time, Mike.

          So, Gwiz, all you've got is another version of "SHUT THE HELL UP"?

          Actually, it was a nice way of saying "What the fuck are you rambling on about now, because you make very little sense to me."

          You should actually be ashamed to make such a trivial comment without the least bit of on topic argument but I bet you think you really zinged me.

          Nope. Not a bit ashamed. I really do think you maybe need to get out more often and socialize with real life people now and then, though. As, for being off-topic, yes it was, but then again I can't really tell what topic you are on in the first place, so...

           

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            out_of_the_blue, Jul 7th, 2011 @ 4:16am

            Re: Re: Re: Re: Don't worry that I'm wasting my time, Mike.

            You confirm all that I wrote and add more without grasping what taking the bait reveals about you, particularly that you've the notion that if makes no sense to you, then it's "rambling".

             

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              Gwiz (profile), Jul 7th, 2011 @ 8:38am

              Re: Re: Re: Re: Re: Don't worry that I'm wasting my time, Mike.

              You confirm all that I wrote and add more without grasping what taking the bait reveals about you, particularly that you've the notion that if makes no sense to you, then it's "rambling".

              Heh. I didn't "confirm" anything. I didn't take your "bait" because I think your bug-fucking-crazy and I don't want to debate with you. Have a nice life.

               

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                out_of_the_blue, Jul 8th, 2011 @ 4:52am

                Re: Re: Re: Re: Re: Re: Don't worry that I'm wasting my time, Mike.

                Sonny, you took the bait again, and might yet another time. Then you wind up with a cliche lie of well-wishing.

                 

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                  Gwiz (profile), Jul 8th, 2011 @ 8:59am

                  Re: Re: Re: Re: Re: Re: Re: Don't worry that I'm wasting my time, Mike.

                  Not real sure of what your point is with all this and I said I was done with you, but there is one small detail I wanted to point out to. You called me "Sonny" and unless you are 65 years old or older, that label just doesn't work.

                   

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                    out_of_the_blue, Jul 8th, 2011 @ 6:20pm

                    Re: Re: Re: Re: Re: Re: Re: Re: Don't worry that I'm wasting my time, Mike.

                    All that's important between us is that you take the bait, sonny. Even when it's labeled "bait", and nothing but bait, you can't stop.

                     

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    out_of_the_blue, Jul 6th, 2011 @ 4:26am

    "Marginal costs" are a learned notion, not natural.

    You can't find the "marginal cost" without detailed calculations -- and of course, more importantly ignoring "sunk (or fixed) costs".

    And Mike can't make his case for a /whole/ business based on "free", so he plays it both ways: "free" means a giveaway when he pitches it to readers here as customers, but of course customers PAY the business in some other way for the "giveaway" item. SHEER TRICK, as is all of advertising.

    Which prefaces my NEW point here: ADVERTISING IS A TAX-DEDUCTIBLE EXPENSE. Never forget that dodging taxes is at the heart of corporatism. Accounting is a DULLEST but vital field, and "good" accountants are quite tricky: just look at the Enron collapse. Anything that can be put into the "advertising" category becomes less expensive when deducted -- not the product so much, costs are deductible too, but associated with a "giveaway" can be other items such that former profits are moved to the "loss" column. You get a multiplier effect with anything in "advertising", not only brings customers, but it's a black hole that can fund various projects, not least schmoozing with your pals at the topless bar while you discuss "business". So tax advantages are likely part of Mike's secrets -- if he has any.

     

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    out_of_the_blue, Jul 7th, 2011 @ 4:40am

    Yes, Mike, you're only advising how to better advertise.

    Today's point of emphasis:
    "All of the examples here involve cases where companies use free to bring in people and then sell that attention to advertisers."

    If you'd stop there, at mere advertising, you'd be okay.

    If you'd admit that "free" IS a trick, you'd be okay.

    But you don't stop, you go on to a general case that "free" can be part of a "business model" -- a term I'm getting sick of: it just means sell some stuff for more than you paid plus overhead, and "model" is particularly annoying because A MODEL IS NOT REALITY. Further, you mention but don't detail manufacturing: you know how to make widgets is all, and of course those are fictional.

    Above you mention Intel and Apple as general examples (I know you'll say you're responding there), but the juxtaposition of hardware companies is exactly the conflation that simply isn't true. Intel and Apple don't give away their hardware hoping to then sell services: it's been tried often and found simply not feasible.

    So first requirement is a cheap giveaway item. Movies are excellent for your case, and you use them. Yet in
    http://www.techdirt.com/articles/20110702/00271714940/theater-owners-still-oblivious-to-fact-tha t-they-can-compete-with-home-viewing.shtml
    you complain about theaters: "The food prices are ridiculous." But if your notions worked, they'd show the movies for free and make all their money on concessions! -- I suppose you'll say they're just not doing it right, but I think the obvious conclusion is that if no one is doing it, there's good reason.

     

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    out_of_the_blue, Jul 8th, 2011 @ 5:16am

    Going on with "free" meaning sneak support by advertising:

    Mike tacitly favors /enforcing/ the deal of advertisers supporting "free" television and radio, including the internet. Mike supports Google and from the list of parasites* to this site, Google supports him. But there's no other way to make advertising work than if people see it. Therefore, he must logically hold any means to dodge the advertisements as "stealing", or at best going to drive the advertiser and the broadcaster (or him) out of business. Same pattern of lying (if only by omission because they know people don't like to be so used and regarded) as "old media" companies use: hey, we provide "free" entertainment for you and you MUST watch it or it ENDS.

    I don't think that notion is going to hold up on "teh internets": there are ways around it (here, Noscript and a hosts file keep the site's ads off my screen, and also stops the hidden monitoring by Google and others through use of javascript). -- Computers allow advertising companies to be more SNEAKY than ever. But as knowledge spreads and resentment against all forms of online monitoring increases, the advertising supported notion can fall apart almost overnight through downloading Noscript and a simple hosts file. That seems likely to me, so "free" will fail to work.

    * Parasites is a useful witty term (not mine but adopted) for secondary sites, particularly those using javascript, to do mysterious metrics or annoying in-your-face advertising functions.

     

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      Anonymous Coward, Jul 8th, 2011 @ 10:48am

      Re: Going on with "free" meaning sneak support by advertising:

      > But there's no other way to make advertising work than if people see it. Therefore, he must logically hold any means to dodge the advertisements as "stealing", or at best going to drive the advertiser and the broadcaster (or him) out of business. Same pattern of lying (if only by omission because they know people don't like to be so used and regarded) as "old media" companies use: hey, we provide "free" entertainment for you and you MUST watch it or it ENDS.

      Funny, since Mike appears to say exactly the opposite of what you claim: http://www.techdirt.com/articles/20100306/1649198451.shtml

       

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      out_of_the_blue, Jul 8th, 2011 @ 6:35pm

      Re: Going on with "free" meaning sneak support by advertising:

      Semi on same point; Mike says above: "Because no one has committed to Google long-term." -- Surely those meant are those whom Google PAYS to host advertising. When Google stops paying, "commitment" will evaporate, even Mike's.

      By the way, I rarely respond to ACs whether agree or not, and especially I'm not taking an "assigned reading" link to spend my time when one could summarize it if relevant. If one can't at least pick a handle to establish a history, then it's likely only one of Mike's sock puppets, as for instance the one last year who took stabs using the phrase "keep digging that hole", as Mike used above in this thread.

       

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    out_of_the_blue, Jul 11th, 2011 @ 3:18am

    False premises = fantasy.

    I'm repeating, but it's important to see that in the movie example from the "can't compete" piece Mike sets up TWO false premises: a "perfectly competetive" market, and all "sunk (or fixed) costs" mysteriously paid off. Only after BOTH conditions are met, the first a fantasy of economists, the second a HUGE practical obstacle, can his example of zero marginal cost even start to be useful.

    Furthermore if the "sunk (or fixed) costs" have been paid off, it proves that Mike's notions aren't necessary! Just keep doing the same!

    So how does Mike suggest that we get to "perfectly competetive"? -- He doesn't say, that's a mere detail. -- But what he DOES in practice is to throw in with Google, who pay him, and I'm sure that like all libertarians, Mike doesn't worry about Google getting a monopoly, because it'd be a "natural" monopoly since Google is obviously the best because it's got a monopoly.

    If Mike does worry about monopolies, I can say definitely that it's rare, hasn't been evidenced in any of the several hundred of his re-writes that I've read. Though he frequently mentions corporate abuses of customers and illegal manipulation of politicians, it's merely put out as "news": he doesn't seem able to connect abuses with corporatism itself, in my view because he's an ivory tower idealist.

    And no, I'm not even getting off topic, just connecting up Mike's fantasy of postulating a "perfectly competitive" market in which to place his example with his other visible statements about corporations -- and lack of statements as to what he'd do about bad actors in a market. That's why his movie example of corporation and products each in isolation is so important: not at all realistic.

     

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    out_of_the_blue, Jul 12th, 2011 @ 5:51am

    "I dunno. I use iTunes. I never paid for it."

    Why does Mike even take on my "dare" as to whether Intel and Apple give away their products? -- Because it's a key point that he can't NOT answer and maintain any general applicability for his "free" notions.

    Why does Mike quote my dare, then write he "dunno"? -- Because he wants to appear as though he's addressed the point, but of course ANY actual answer exposes him as either a fool or wrecks his whole "free" premise.

    So he waffles and says he get Itunes for free. In sum, I find not answering except with "dunno" and then an irrelevant dodge is outright lying.

    I'd like readers to just ask yourselves WHY he didn't answer the dare in the obvious way: by "admitting" that Intel and Apple do not give away their products. WHO THE HELL WOULD SAY "DUNNO"!?

     

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    out_of_the_blue, Jul 13th, 2011 @ 6:18am

    "use free to bring in people and then sell that attention to advertisers"

    "[Google as example] use free to bring in people and then sell that attention to advertisers"

    I pick that sentence out of the squishy mess of his first three or four paragraphs as seems Mike's real point is selling advertising.

    First, he's made his own strawman argument: 'But here's the thing, no one is claiming that "free" is the business model.'

    I don't think one can reconcile those two statements. Google does appear to offer "free" services as its business model. That Google is paid behind the scenes by advertisers is simply hiding facts, as radio and television came to do, because people don't want to be regarded as economic units, mere "eyeballs" who reflexively buy products after exposure to a name brand. And at other times, Mike at least advises to feature the illusion of "free", as in musicians giving away MP3s and instead selling T-shirts: a notion that I doubt is generally applicable.

    The first requirement is a giveaway product that is nearly free. The second and inextricably linked requirement is that all financing and capital equipment have been paid for (somehow, an objection in itself: Mike dismisses those as "sunk (or fixed) costs"), so that the current product can be considered in isolation with only "marginal costs".

    So that's why I bear down the fact that Intel and Apple don't use even the appearance of giving away their main product: "free" doesn't work for hardware -- unless there's some "service" attached to it by contract, as for phones.

    If the field were restricted to advertising or near zero cost products, as a movie that's had a run in theaters, I'd have less objection to Mike's use of "free".

    But then we get back to that Mike wishes his notions to be (thought) generally applicable, and so he won't even admit that Intel and Apple don't use "free" beyond a few engineering samples and review products to friendly press who are supposed to consider them as PAY to write glowing advertising. That's the seamy underside to advertising: Mike is a Pollyanna libertarian who doesn't seem able to even conceive of bad actors or underhanded shennanigans: instead he postulates "perfectly competetive" and as if existing corporations won't use every bit of possible leverage that doesn't actually land them in jail to edge out competitors and especially upstarts. So I object that his views don't take payola into account, either. And where he's tacitly advocating "dog eat dog capitalism" while the gov't stands idly by instead of making the playing field fair, he's just plain ignoring the examples of history: only the few on top want that kind of "market".

    So, to sum up: Mike's examples are only for the field of advertising, relying on tricking the consumer with an illusion of free. Mike does, however, try to imply that Intel and Apple /could/ use "free" in a significant way.

    And by the way, from a recent piece, Mike is NOT AT ALL against those selling advertising: http://www.techdirt.com/articless/20110712/03450915054/copyright-as-censorship-newport-television-ab using-dmca-to-try-to-silence-criticism.shtm 'I don't think the panics about "media consolidation" are really that reasonable in this day and age. ... As far as I'm concerned, if dinosaur media organizations want to merge, let them.' So as a practical matter, Mike is FOR /current powers/ in the field to grow even larger and totally control all advertising outlets in a given area.

    And THEN Mike prattles about "perfectly competetive"! His TOTAL views just don't add up, people.

     

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    out_of_the_blue, Jul 14th, 2011 @ 7:26am

    On the lighter side:

    For today's exercise in use of this "free" web-site, I'll highlight Mike's revealing gaffes and frat boy vulgarisms.

    My point is that Mike, who claims to have a college degree, uses only a few cliched vulgarisms, and his method of argument soon gets down to simply ad hominem attacks. You're free to say I'm no better: that's another cliched ad hom which in no degree raises Mike from the mire. Mike /pretends/ that he's an erudite /authority/, but doesn't grasp how responding in kind reveals him to not be. So, "it's okay when Mike does it" isn't adequate. That he /does/ use mere ad hom rather than loftily ignoring is foolishness at best, and I'm happy that he's so clearly illuminated here.

    Examples from this thread. First and foremost is the tricky dodge of #52:

    ootb: Intel, and Apple DO NOT GIVE AWAY THEIR PRODUCTS! -- I DARE anyone to say that they do.

    mike: I dunno. I use iTunes. I never paid for it.

    Follow that point through to #60 because Mike's 2nd major gaffe was to "double down" and try to claim it answered:

    ootb: You DO NOT take the dare, only dodge ...

    mike: Accurately answering the question is not a dodge.

    3rd gaffe is in #69, the old quote-and-deny as if answered, then dismiss. My specific point here is that he introduces vulgarism in response to reason:

    ootb: Here's what I see as your formula: Get or make a low-cost widget that everyone wants, then find someone who'll pay you for advertising somewhere associated with it; or minor version, get someone to directly buy a real product somehow associated with some widget that you can give away at low or zero cost

    mike: Nope, not at all. Seriously, why make up shit?

    4th gaffe is at #72, to try dismissing from "authority", then to leave, but he'll resume...

    ootb: How the hell did this bafflegab ever pass the laugh test?

    mike: Try learning economics. Then let's discuss again. Until then...

    5th gaffe starts in #87, leads to his major flop here:

    mike: *sigh*

    Look, this is why it's important for you to at least learn some basic economics so you don't look like a fool.

    And #90, another attempt at asserting authority (stick with me, building to the funny):

    mike: Seriously dude. Stop digging yoourself a deeper hole. You look foolish.

    #94 has another doubling down that he's NOT lying when obviously IS:

    ootb: Thanks for showing your /phony/ concern for my rep.

    mike: Not phony at all. You're coming off as completely clueless. I would guess that you would prefer to look clueful.

    From same, a minor funny to note that Mike can't even copy and paste:

    ootb: And again, you're trying to disttinguish this from loss leaders and other advertising, but it ain't visibly, only by bafflegab assertions.

    mike: WTF is "bagglegab"? Made up words make you sound so smart.

    And here the promised frat boy vulgarism from Mike, his ONLY real weapon in a war of words and wit, dispelling his pretense of suave urban sophisticate:

    ootb: It's a common tactic of confidence men, along with dimunition and assertions of authority.

    mike: And making statements like that is a tactic of assholes.

    AND SO HERE WE ARE TO THE MAJOR GAFFE!

    ootb: But in NO likely case do even kids act as you suggest and just disappear those costs as "sunk".

    Mike: Sunk costs are not the same as fixed costs. Seriously. Learn the basics.

    LEADING TO:

    #99: Re: "Sunk (or fixed) costs don't matter," icon Mike Masnick (profile), Jul 1st, 2011 @ 5:41pm

    ootb: THAT is copied from YOUR article "can't compete with free".

    mike: I will admit that it was inelegant wording. Sunk costs don't matter for certain things. Fixed costs don't matter for certain things. My mistake was implying they were the same. Sometimes they are, but they are often not -- such as in your example with the lemonade. Sunk costs there are not fixed costs.

    Mike scolded and insulted me to learn terms, then HAD TO EAT CROW and slither out dismissing HIS gaffe as "inelegant"! HA! Still laughing, Mike, it's a CLASSIC of asserting authority only to be caught by own words!

    But Mike isn't yet done, can't resist another attempt at the last word:

    #114: Re: EAT CROW FOR BREAKFAST, MIKE. icon Mike Masnick (profile), Jul 4th, 2011 @ 11:01pm

    Keep digging, kiddo. This is hilarious.



    Now, here's a question that requires an answer: Is Mike lying? It can't be mere sarcasm at this point in contentious debate, and if he has a habit of writing opposite of what's meant, then he's a /frequent/ liar. -- BUT if he's not lying, then I've his encouragement to continue!

    Words have fixed meanings, Mike, and so does personal record. Your vulgarisms are now on permanent display, showing you missed most of academia.

    So Mike's last gaffe here was to make for himself a bad alternative (which I think /is/ the true case): he's either doubly lying about NOT lying or you can't take anything that he writes literally. Sure, those who support him can /say/ that he's merely mocking, but in fact it's as bald as I state. Casual lies are quite revealing of character, at the very least means that lying is too deeply ingrained to even consider how it /appears/ to unbiased judgment.

    Your lying is a big part of what I wished to elicit from you, Mike!

     

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    out_of_the_blue, Jul 15th, 2011 @ 4:04am

    A real world movie example.

    First, here's Mike's from: http://www.techdirt.com/articless/20070215/002923.shtml

    "Now, let's look at a different situation. Let's say that I want to make a movie. It costs me $100 million to make the movie (fixed cost) and copies of that movie each cost me $0 (marginal cost -- assuming digital distribution and that bandwidth and computing power are also fixed costs). Now, again, if the market is competitive and I'm forced to price at marginal cost, then the scenario is identical to the automobile factory."

    There are three major flawed premises:
    1) Ignoring fixed costs.
    2) Assuming distribution is also "fixed" and zero.
    3) A "competitive" market that forces to price at marginal cost.

    Those put conditions into fantasy, and he then "buttresses" it with his automobile factory example, implying both are then true! Yes, one fantasy proves the other. -- Just too fundamental of logic errors to NOT laugh at.



    Here's a real world example I ran across last night: The movie "Gigli", which annoyingly has a name that doesn't follow usual rules of pronunciation. It "stars" Ben Affleck and Jennifer Lopez. It's said to have cost $53 million to make, and to have gotten $6 million at the box office. It's so feeble and stupid a production that it ruined what little there was left to careers of both, besides that the director apparently hasn't made another film since.

    Now, how does Mike's nice neat example apply when this movie returned only a tiny fraction of its "sunk (or fixed) costs"? -- About the same, actually, because Mike would just IGNORE costs and go on to "prove" whatever he wishes. -- But how is he going to promote this turkey to get anything from it even with the mythical marginal costs of zero? -- Don't know. I'm not up on Mike's fantasy world: his economics are no more applicable to this world than those in "The Hobbit" fantasy world.

     

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    out_of_the_blue, Jul 18th, 2011 @ 4:57am

    Show me the money, Mike.

    Today hammers on that Mike's "free" is actually ONLY advertising:

    "[Masnick]: Having a product that is "free to the consumer" does not mean people won't commit to it at all. In fact, if you put together a smart business model, it could be the exact opposite. All of the examples here involve cases where companies use free to bring in people and then sell that attention to advertisers."

    ...[much elided]...

    "[Muscat]: Almost never. Somebody alwaays pays. If healthcare is free, your taxes pay for it. If the flight is free, the extras aren't. If the search is free, the advertiser is paying.

    Um. That's the whole point of using free as a part of a business model. Of course someone pays. That's what we're describing here. and then, at the very end, to throw in a "but someone pays!" Why didn't he consider those points earlier in the article?

    [Muscat]: The only time when Free can really work for you is if you set your sights on having a specific outcome: acquisition.

    Yeah, just like Google. And Facebook. And Twitter. Good grief."



    The key points are that "companies use free to bring in people and then sell that attention to advertisers", "just like Google. And Facebook. And Twitter."

    As I've already pointed out, Mike is simply saying that the ACTUAL version of "free" is a TRICK to get eyeballs for advertising. He speaks only to those looking for existing products by which to leverage tapping income streams, or in my term: GRIFTERS.

    Mike's argument technique here is to aggressively feature the advertising tie in -- since it can't be denied. But the ones he notes are the ONLY kind of "businesses" for which "free" can actually work. Google, Facebook, and Twitter have in common a lure that attracts large numbers of people in more or receptive mood: they get inundated with advertising visibly, and behind the scenes are tracked and collated by computers to create a personality profile to target them better. (Google's real business is tracking people.) That's the logical extension of the consumer society.

    (Relevant for the future: consumers should be upset over computerized monitoring, and WILL BE when its pervasive extent is generally known, and since by easy technical means they CAN avoid most advertising, the bottom may well drop out of the advertising biz, so that's another reason why I don't believe that "free" will work.)

    Note that Mike is ONLY concerned with this consumer society; when it comes to the practices of manufacturers and how they might use "free", he "dunno", as I elicited above.

    So Mike's version of "free" is useful only to advertisers able to target mass audiences. I'll consider that "FREE" MEANS SOLELY A LURE FOR ADVERTISING ESTABLISHED, as Mike affirms (yet tacitly denies because won't explicitly say that Intel and Apple don't give away their products), and go back yet again to his movie example from the "can't compete" piece:

    Let's say we do have a movie in hand for which marginal costs are effectively zero because ignoring "sunk (or fixed) costs", ignoring distribution costs and overhead of merely existing too. -- NOW, HOW EXACTLY CAN "FREE" WORK FOR THE MOVIE BIZ? Making a movie available online does not bring in a single cent. That's been one of my objections to that (falsely premised and incomplete) example all along, and it's nowhere explained where ANY income flows. Mike only suggests vaguely to find a "business model" where income IS connected up.

    But the movie biz is stubbornly set on the notion of direct connection between viewing and income, and as I've said, that old fashioned notion recovered the "sunk (or fixed) costs", so why should they change? -- Mike needs to show a "business model" in which a movie is given away free, and yet income flows in. It's a MAJOR POINT, and remember, the example is Mike's, so entirely up to him to make it practical. He's tried to patch that glaring flaw by saying the market has changed to "perfectly competitive", which doesn't explain anything and isn't true for movies, they're not interchangeable widgets.

    Paraphrasing Mike: It seems totally ridiculous to go on for paragraph after paragraph discussing how free is GREAT, but not show in his example how anyone PAYS.

    Summary: "free" only works when advertising is sneaked in, and the technical means to do that are what has changed. Mike's movie example has NO INCOME method even in outline, so it's EMPTY OF MEANING.

     

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    out_of_the_blue, Jul 19th, 2011 @ 4:15am

    A contrast in motives.

    At the risk of being interesting here: After a Nina Paley piece yesterday, and having looked round her site for what I might have missed -- why the heck she's so intent on getting her video UN-banned in Germany -- I'm today struck by a contrast in motives. Paley seems to want to make her video available everywhere for free -- motive beyond that is vague -- and if she actually paid to license music (for over $200,000 mentioned in one place!) then she wants that very much.

    But my point here is that philanthropy is not, as Mike seems to assume, a motive for /industries/. So "free" is never going to move them: let's just set idealism aside. It seems Mike is speaking to two audiences: idealistic "upstarts" who have few resources and are hoping for some fairly literally magic to catapult them into riches; the other audience SEEMS to be those intent on cornering advertising on the web, let's just say Google. Now, as above, Google is simply tricking and tracking its /apparent/ customers: its real customers are of course advertisers.

    So in unflattering terms: Mike targets idealistic simps and corporate globalists. There's no contradiction because the latter group would certainly use the former as cover while having zero intent of philanthropy.

     

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    identicon
    out_of_the_blue, Jul 20th, 2011 @ 4:05am

    Today: Mike's polemic style.

    First, disclaimer: this isn't in my view ad hominem because it's criticizing Mike's visible /product/, his writing, rather than indirect discrediting by way of "he kicks his dog, therefore everything he says is wrong". The latter tactic is common here on Techdirt, and certainly Mike isn't above it.



    Mike's first paragraph is typical, laden with pejoratives and diminutives:

    "Jim Harper points us to a blog post by a guy named Richard Muscat, supposedly debunking the problems of "free" as it comes to business models. Frankly his post is pretty weak. It rehashes a bunch of arguments that have been debunked plenty of times before, but since we keep seeing these arguments made, I figured I'd use Muscat's piece to explore why it is that those who don't understand the concept of free are condemned to make such bad arguments against it."

    Taking out the little bit of substance leaves MOST:

    "... a guy named ... supposedly debunking ... Frankly his post is pretty weak. It rehashes a bunch of arguments that have been debunked plenty of times before, but since we keep seeing these arguments made, I figured I'd use Muscat's piece to explore why it is that those who don't understand the concept of free are condemned to make such bad arguments against it."

    Mike makes no pretense at objectivity. Nor does he allow readers (preaching to the choir here, of course) any chance of reaching their own conclusion.

    Also note that if Muscat didn't write, then Mike wouldn't have anything to put here. Mike is variously a critic and a consumer, styling himself as highly cultured and therefore a measured authority. But his fondness for "remixes" and "mashups" is due to inability to create anything of his own: he's a second-hander. -- And that face grates on him, so in attempt to relieve it, he's developed a whole mythology to justify cultural and material grifting. (As do The Rich, styling themselves as the movers and shakers of society, when mostly parasites upon it.)

    With MY premises in mind, Mike's writing from second paragraph on is at best condescending, dripping with contempt. He's not even entertaining or original at that, just ineffective, like an ankle-biter dog. So you fail as a polemicist, Mike. Anyone who doesn't start with your views won't be convinced.

    Tomorrow's topic (to keep "Dark Helmet" trolling this thread): where ARE the "free" products?

     

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    out_of_the_blue, Jul 21st, 2011 @ 7:05am

    So, Mike, where ARE the "free" products?

    First, as I've said before, if you're merely repackaging the notion of cheap giveaway items, only /on the net/, then it's not worth the build-up you give it. Same old advertising.

    2nd, I consider to have demolished application of this to real hardware -- unless of course there's a service contract with it, obviously, and that's only another ancient technique. But in no other cicumstances does any manufacturer give away more than a few samples. (Again, Mike won't explicitly state that obvious fact and that's the /interesting/ point.)

    So that essentially leaves the digital realm of software and entertainment.

    I'll sum up the obvious concessions I need to make by emphasizing the /obvious/ that Google, Facebook, and Twitter are all selling advertising (as do some with it embedded in specific programs), as did Netzero and Juno.

    So that's WHERE "free" products ARE: only on the net. [There's no need to elaborate on the coming wonders of "cloud" computing, because it's the same, only with drawback of voluntarily exposing ALL of one's information to the host (plus gov't), besides the risk of relying on that host for crucial services. Since there's no /need/ for a "cloud" when everyone has a supercomputer on their desk, drawbacks prohibit its use for anyone with common sense.]

    Problem with all "free services" on the net is that can only be supported indirectly by advertising, yet exposure to advertising has to be explicitly accepted AND at least considered neutrally, otherwise won't be anyone buying. Anyone who merely endures the ads in order to get the free product isn't in the desired state of mind.

    So that leads to trying to be unobtrusive (or SNEAKY): first in hiding the "deal" that users look at advertisements, second in keeping the ads from being too annoying. When the "deal" becomes too noticeable, it loses effect as above.

    And when the company's true purpose is yet more hidden -- as for Google, Facebook, and Twitter -- of not only advertising but tracking and selling browsing habits to anyone with cash, including gov't, then that "deal" is almost certain to fall apart. I see that coming relatively soon. For instance, the NoScript add-on to Firefox (after removing Google from its whitelist) plus a "hosts" file simply cuts out most of Google's ability to track across the web and plant ads, so its "business model" could collapse overnight. Relying on the stupidity of targets has historically been a workable strategy, but this /is/ a new age on the net: information spreads rapidly, means to fight back are available, and so it's not difficult to undermine Google entirely.

    But, perhaps I'm overlooking something, Mike: this time, though, instead of a few samples, give me a regular source of FREE hardware products, meaning as much as I want, no hidden charges, including no shipping.

    [And now, the site's prime "Insider" troll, "Dark Helmet" will probably do his feeble one line...]

     

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      Dark Helmet (profile), Jul 21st, 2011 @ 7:48am

      Re: So, Mike, where ARE the "free" products?

      Mr. Gorbachev, tear down this wall!

       

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      •  
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        out_of_the_blue, Jul 22nd, 2011 @ 4:49am

        Re: Re: Tim Geigner exposes self.

        Well, well, well. Look what I recalled with Google.

        http://www.techdirt.com/articles/20100927/22032911187/our-own-dark-helmet-shares-lessons-from-cr owdfunding-experiment.shtml

        "It's Tim Geigner, whose name may not be that familiar to you, but his alter ego Dark Helmet has been one of, if not the most prolific commenters on Techdirt, where he tends to play the role of comment enforcer, keeping people (including me at times) in line, when he feels anyone has spoken without thinking."

        And yet Techdirt's "comment enforcer", Tim Geigner, aka "Dark Helmet", wrote in #46 above: "There are white people, then there are ...". -- That can only be taken as racist. I suppose he was reaching for the worst epithet of the few that he has. Reflects badly on the site. Scratch an "Insider" here, and out pops a vicious little weenie.

         

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          Dark Helmet (profile), Jul 22nd, 2011 @ 6:18am

          Re: Re: Re: Tim Geigner exposes self.

          "And yet Techdirt's "comment enforcer", Tim Geigner, aka "Dark Helmet", wrote in #46 above: "There are white people, then there are ..."."

          Dear lord you're dense. That's a quote from Barack Obama, moron. Haven't you noticed that I've been trolling you w/Presidential quotes these past couple of rounds?

          Read my lips. No new taxes....

           

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            out_of_the_blue, Jul 22nd, 2011 @ 11:38am

            Re: Re: Re: Re: Tim Geigner exposes self.

            None are in quote marks or attributed (as stated to be proper here on Techdirt), so you're either plagiarizing or those are your own words. Try to run away from them.

             

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              Dark Helmet (profile), Jul 22nd, 2011 @ 1:30pm

              Re: Re: Re: Re: Re: Tim Geigner exposes self.

              Dude, if you cannot recognize a well-known and oft-played soundbite from the sitting President of the United States, then there's no hope for you.

              You accused me of being racist. That was horribly, horribly wrong. Care to apologize?

               

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    out_of_the_blue, Jul 22nd, 2011 @ 4:46am

    So, Mike, where ARE the "free" products? Part 2.

    Elaborating.

    To be clear, I think it's the /advertising supported/ model itself that won't allow "free" to work for much longer. Remember that indirect income from advertising is KEY to Mike's notions. My conclusion is that he's actually still living in the 20th century, thinking audiences are captive and will put up with the "deal" that made "free" television and radio programs possible.

    BUT: 1) Advertising has gotten noticeably more annoying in the last decade or two; it's now a frequent topic in itself. Everyone knows the term "product placement", so when a brand name is shown prominently (more often, awkwardly) in a movie, it's probably a turn-OFF, especially if the movie stinks.

    2) Advertising is now /avoidable/ through at least the following ways:

    a) Remote TV controls that allow easy channel-hopping.

    b) Multiple sources of entertainment reduce numbers of viewers at any one spot.

    c) Various recording devices that enable skipping over commercials.

    d) DVD ripping software that delete trailers and other advertising. The little bit of time it takes to start ripping rather than direct play is well rewarded by time saved. -- Torrents are I think ALWAYS free of such.

    e) Torrents of current TV shows from which commercials have been edited out.

    f) The Firefox Noscript extension that turns off Javascript selectively. -- Note that Google PAYS to sneak itself onto Noscript's initial white list!

    g) A "hosts" file that simply and entirely prevents your computer from accessing listed domains: when those are ad servers, no ad images are seen.

    Focusing on Google because it's obnoxious, omnipresent, and most of its major purposes are invisible: Google greatly depends on NOT being seen as advertising (less true in current social network phase). The few paid ads visible on its search page are a tiny fraction of its income, yet a large part of perception. I think it significant that Google IS hiding its income sources (you can say it's incidental, doesn't affect conclusion): ADVERTISING IS HATED BY CONSUMERS.

    Advertising in the modern world is simply exhortations to buy silly luxuries that you don't need, a horrible materialism. Sheer consumerism has been the major focus of advertising since at least the 1950's. At present a "recession" or worse is coinciding with growing cognizance that gadgets don't satisfy, and growing perception that corporations are in cahoots with gov't driving us madly toward a high-tech police state (Google's tracking is a key part). The sum seems likely to result in anti-corporate backlash.

    ---------- And (yet again: I don't mind repeating), specifically to Mike, Google, and his views on advertising: Google PAYS him to have ads here. Since Mike wrote the below impeaching a certain anti-Google hack because PAID, I say that his own enthusiasm for Google is directly due to money received:

    "Cleland, as we've discussed in the past, is known throughout DC policy circles as the official attack dog of every anti-Google company out there. He's literally paid to make up attacks on Google, no matter how ridiculous."

    http://www.techdirt.com/articles/20100913/12231510990.shtml?threaded=true

    By the way, a bit more from me there: http://www.techdirt.com/articles/20100913/12231510990.shtml#c187

     

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    out_of_the_blue, Jul 25th, 2011 @ 7:34am

    Trolling necessitates REPEAT of previous post.

    Because of Tim Geigner -- aka "Dark Helmet", self-confessed troll, racist, who shows a disturbing mania for sexuality, darling acolyte of Mike -- this post simply repeats from above so that my SUBSTANCE doesn't get suppressed by Tim Geigner's mindless text. You see, kids, this is the computer age where it's just as easy for me to repeat ALL of what I write as for you to "comment" with inane one-liners. So as a practical fact, I can OUT-SHOUT you, Timmy, as often as necessary.

    And unlike Tim Geigner flinging pejoratives at random, all of the above tags are substantiated merely by skimming his Techdirt profile comment history. -- One might THINK that Tim Geigner wouldn't wish for his real name to be directly and often associated with "Dark Helmet" the vulgar puerile racist trolling this site with trivia, as easily found by a Google "vanity" search, but perhaps he believes any publicity is good publicity.

    I'm somewhat keen on the subject of trolling (actually, on how to ensure civil discourse isn't interred on the "inter-net", ha), and particularly in those who troll their own site; that occuring on Arse Technica (sic) is what led me here to Techdirt. I've written here extensively on the topic and give proposed rules (most easily computerized) to try and prevent trivial trolling such as Tim Geigner's vulgar one-liners in: http://techdirt.com/articles/20110412/1526158979.shtml

    Mike hasn't taken my advice, and no wonder! He regards Tim Geigner the self-confessed troll as "comment enforcer"! Also, as I complain of above, Mike Masnick himself trolls his own site with vulgarisms and overbearing assertions of "authority" to attempt to suppress dissent.

    Anyway, a decent respect for the opinion of mankind -- in the absence of the web-site owner making any effort to prevent Tim Geigner trolling with random insults and nonsense in attempt to suppress my on-topic substance -- makes this preface of defense necessary, but now back to the topic:



    Laid out as a cogent whole.

    From out_of_the_blue, Jul 2nd, 2011 @ 7:23am

    I'll try to unscramble my case. Mike and others have done their best to obscure, in large part by repeating what I object to as if I just don't get it, and various other attempts to dodge answers and divert me from my theme. I put in a few bits of ornament that I shouldn't have, but characterizing is I think accurate; more importantly, I didn't have my case all at once, and that was BECAUSE I gave Mike a fair shot to convince me; so halfway along I READ his "can't compete" piece and THEN found a major LACK in its example premise -- so, starting with that:

    1) Mike keeps insisting that "sunk (or fixed) costs" don't matter for pricing decisions. I believe that they /do/, and that it's self-evidently so in practice.

    2) Specifically for his examples, to just ignore those as if already paid and widgets come into being out of the void, to ignore that merely for the organization to exist involves substantial costs and efforts, that just plainly has no relation to the real world.

    3) To simplify a "formula" (as I regard Mike's movie example to be /intended/) so that it actually has /NO/ input values is to just be WRONG; can't draw ANY conclusion from it. I've pointed out that his "sunk (or fixed) costs" do not at all figure into calculations, and he /agrees/ with that quite insistently! The trick he's using is to put out a specific figure to make it /appear/ as though there /is/ some linkage and a fixed formula! It's essential for his notions and that's why he defends the point so hotly.

    4) You people will just have to trust that I've GOT the point that marginal costs approach zero for /SOME/ kinds of products. -- That's one reason why I despise Microsoft and its obscene profits. Despise most corporations. -- But it's not generally true, and yet Mike casually lumps Intel and Apple /right here above/ into his case, though I see his text in larger context TOO. -- It's the /juxtaposition/ itself that I find irrelevant if not deceitful. Those are mostly hardware sellers -- don't bother to point out associated software, that's just /trying/ to obscure my point: "infinite" goods doesn't apply to physical items. I hope that's nailed down. Therefore, as I've said several times, "free" is narrowly targeted to digital streaming and online services.

    5) Now, the corruption of the word "free" has to be looked at. Several point out, approvingly, that it's used to lure in and hook on the /real/ products. I regard /that/ as a problem. It's a LIE AND A LURE. I object to it on philosophical and moral grounds.

    6) Nearly all of advertising is merely tricks, the whole field to be despised. I think that self-evident too.

    7) I object more to mis-use of "free" when it's commercial interests LYING to me out of greed. Corporations have no right to lie, though the legalistic claim that they do. I'm not a corporatist. Those are sheerly legal fictions that have gotten out of control and become a hazard to the people. Much of what's discussed here is exactly about corporations grabbing power.

    8) In line with above, there's doublethink where those selling to you or limiting what you can grab off the internet are evil, while Google and others (which perhaps you're "invested" in or allied with or simply deceived by), though having the same goal of maximizing profits, are good and pure. Argument is constrained to only /how/ to maximize corporate profits! I regard that as a fundamental problem. Corporations must be good for /we the people/, that's their /sole/ justification. -- Philosophical point, just outlining my views.

    9) Of course Mike doesn't like my picking at his example, claims I'm misrepresenting what he says. No, I rephrase and cast it as starkly as I can, but hold that it's accurate.

    So here's the summary:

    A) Mike's example in the "can't compete" piece is irrelevant at best. B) "Free" is used more for lie and lure than literally "free". C) So far as visible, Mike's schtick is mere narrowly targeted advertising. D) Mike's version of "free" doesn't apply to physical goods, THOUGH he ALSO seems to write AS IF does; he's the one conflating those.

     

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      Dark Helmet (profile), Jul 25th, 2011 @ 8:21am

      Re: Trolling necessitates REPEAT of previous post.

      "Because of Tim Geigner -- aka "Dark Helmet", self-confessed troll, racist, who shows a disturbing mania for sexuality"

      Ok, seriously? This is dangerously close to libel. I'm a self-confessed RACIST!!??? Do you even realize what you're doing in trotting out such pejoratives? I may not like you, ootb, and I may have been having a bit of fun w/you on this old thread, but your response is to call ME out for flinging insults and then falsely state that I'm a SELF CONFESSED RACIST!!?? And sexual deviant?

      I'm going to ask you nicely to stop this. I'll not "troll" you anymore, as you've requested, but you MUST not lie about me any further, at least about such touchy and important subjects as racism. Frankly, that's just a low blow accusation. Please do not repeat it....

       

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        identicon
        out_of_the_blue, Jul 27th, 2011 @ 4:11am

        Re: Re: Trolling necessitates REPEAT of previous post.

        I take that line as directed to me and as racist (especially as confirmed by your post in the Kardashian piece). As I pointed out, it's not in quote marks or attributed. And no, I don't recognize it or others.

        I make no bargains, sonny, and I certainly don't wish you to stop trolling the site. You prove my points for me, besides lower the value of the site with your vulgarity. I noticed after my long absence that nearly all women and better writers have gone. Vulgarity drives people away, even today.

        By the way, I've also found this in your permanent record (and I'm only back to April or so -- it's a gold mine for a lawyer):
        "And you won't find all that much in the way of folks really crying about being called names around here, because no one really cares."

        You're simply not consistent -- at least not externally.

         

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  •  
    identicon
    out_of_the_blue, Jul 27th, 2011 @ 4:12am

    REPEAT OF On the lighter side:

    IF trolling has actually ceased here, and since I'm lazy this week, I'll just repeat some more so that I get in the last word:

    -----------------
    For today's exercise in use of this "free" web-site, I'll highlight Mike's revealing gaffes and frat boy vulgarisms.

    My point is that Mike, who claims to have a college degree, uses only a few cliched vulgarisms, and his method of argument soon gets down to simply ad hominem attacks. You're free to say I'm no better: that's another cliched ad hom which in no degree raises Mike from the mire. Mike /pretends/ that he's an erudite /authority/, but doesn't grasp how responding in kind reveals him to not be. So, "it's okay when Mike does it" isn't adequate. That he /does/ use mere ad hom rather than loftily ignoring is foolishness at best, and I'm happy that he's so clearly illuminated here.

    Examples from this thread. First and foremost is the tricky dodge of #52:

    ootb: Intel, and Apple DO NOT GIVE AWAY THEIR PRODUCTS! -- I DARE anyone to say that they do.

    mike: I dunno. I use iTunes. I never paid for it.

    Follow that point through to #60 because Mike's 2nd major gaffe was to "double down" and try to claim it answered:

    ootb: You DO NOT take the dare, only dodge ...

    mike: Accurately answering the question is not a dodge.

    3rd gaffe is in #69, the old quote-and-deny as if answered, then dismiss. My specific point here is that he introduces vulgarism in response to reason:

    ootb: Here's what I see as your formula: Get or make a low-cost widget that everyone wants, then find someone who'll pay you for advertising somewhere associated with it; or minor version, get someone to directly buy a real product somehow associated with some widget that you can give away at low or zero cost

    mike: Nope, not at all. Seriously, why make up shit?

    4th gaffe is at #72, to try dismissing from "authority", then to leave, but he'll resume...

    ootb: How the hell did this bafflegab ever pass the laugh test?

    mike: Try learning economics. Then let's discuss again. Until then...

    5th gaffe starts in #87, leads to his major flop here:

    mike: *sigh*

    Look, this is why it's important for you to at least learn some basic economics so you don't look like a fool.

    And #90, another attempt at asserting authority (stick with me, building to the funny):

    mike: Seriously dude. Stop digging yoourself a deeper hole. You look foolish.

    #94 has another doubling down that he's NOT lying when obviously IS:

    ootb: Thanks for showing your /phony/ concern for my rep.

    mike: Not phony at all. You're coming off as completely clueless. I would guess that you would prefer to look clueful.

    From same, a minor funny to note that Mike can't even copy and paste:

    ootb: And again, you're trying to disttinguish this from loss leaders and other advertising, but it ain't visibly, only by bafflegab assertions.

    mike: WTF is "bagglegab"? Made up words make you sound so smart.

    And here the promised frat boy vulgarism from Mike, his ONLY real weapon in a war of words and wit, dispelling his pretense of suave urban sophisticate:

    ootb: It's a common tactic of confidence men, along with dimunition and assertions of authority.

    mike: And making statements like that is a tactic of assholes.

    AND SO HERE WE ARE TO THE MAJOR GAFFE!

    ootb: But in NO likely case do even kids act as you suggest and just disappear those costs as "sunk".

    Mike: Sunk costs are not the same as fixed costs. Seriously. Learn the basics.

    LEADING TO:

    #99: Re: "Sunk (or fixed) costs don't matter," icon Mike Masnick (profile), Jul 1st, 2011 @ 5:41pm

    ootb: THAT is copied from YOUR article "can't compete with free".

    mike: I will admit that it was inelegant wording. Sunk costs don't matter for certain things. Fixed costs don't matter for certain things. My mistake was implying they were the same. Sometimes they are, but they are often not -- such as in your example with the lemonade. Sunk costs there are not fixed costs.

    Mike scolded and insulted me to learn terms, then HAD TO EAT CROW and slither out dismissing HIS gaffe as "inelegant"! HA! Still laughing, Mike, it's a CLASSIC of asserting authority only to be caught by own words!

    But Mike isn't yet done, can't resist another attempt at the last word:

    #114: Re: EAT CROW FOR BREAKFAST, MIKE. icon Mike Masnick (profile), Jul 4th, 2011 @ 11:01pm

    Keep digging, kiddo. This is hilarious.



    Now, here's a question that requires an answer: Is Mike lying? It can't be mere sarcasm at this point in contentious debate, and if he has a habit of writing opposite of what's meant, then he's a /frequent/ liar. -- BUT if he's not lying, then I've his encouragement to continue!

    Words have fixed meanings, Mike, and so does personal record. Your vulgarisms are now on permanent display, showing you missed most of academia.

    So Mike's last gaffe here was to make for himself a bad alternative (which I think /is/ the true case): he's either doubly lying about NOT lying or you can't take anything that he writes literally. Sure, those who support him can /say/ that he's merely mocking, but in fact it's as bald as I state. Casual lies are quite revealing of character, at the very least means that lying is too deeply ingrained to even consider how it /appears/ to unbiased judgment.

    Your lying is a big part of what I wished to elicit from you, Mike!

     

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      identicon
      Anonymous Coward, Mar 13th, 2013 @ 8:36pm

      Re: REPEAT OF On the lighter side:

      here, let me do it; You are a fucking idiot blueboy, a fucking douche bag idiot. Once in a blur moon you make a little sense in maybe one sentence on one post, then you do ignorant shit like this. I just don't understand your trollish mindset. You have a chip a mile wide on your shoulder and it baffles me.

       

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