Case Study: How TED Learned That 'Giving It Away' Increased Both Popularity And Revenue

from the cwf+rtb dept

LaRae Meadows was kind enough to send over her analysis of how the famed TED conference not only embraced the whole CwF+RtB concept, but also learned that giving away the infinite goods can massively increase the value of scarce goods. It’s actually a really great case study example. One of the complaints that we sometimes hear in response to arguments about giving away the infinite goods in order to increase the value of scarce goods, is the claim that content creators can already sell lots of scarce goods, so why should they also set the infinite goods free.

What they don’t realize, is that, when done properly, setting those infinite goods free helps increase both the popularity and value of the scarce goods. A simple version of this is that a band who isn’t that well known in a certain region, is unlikely to be able to book a larger venue, or charge very much for tickets (a scarce good). However, if that band is much more well known (and liked, of course!) then they can book larger venues and charge higher rates (within reason, of course).

And that’s exactly what TED figured out.

The amazingly exclusive conference used to be excessively secretive as well. Attendees, who paid thousands for the privilege (and who could only attend if they were “invited”), had to sign non-disclosure agreements, and no one was supposed to publicly discuss or show what the TED speakers talked about. If you think about this from a classical “scarcities-only” economics viewpoint, you can see why people would think this was smart. After all, that content is valuable, so the natural desire is to hoard it, with the classical thinking being that by hoarding it and putting up an artificial scarcity around the content, you make it more valuable.

But what TED has learned is that it appears the opposite is true. Once current TED curator Chris Anderson (not the Wired/Long Tail Chris Anderson) took over, and changed the system, part of the change was making every TED talk available for free online. And, of course, these days, the public TED talks site has become a hugely popular destination site.

Now, again, under the classical theory, this should have harmed the value of TED itself. After all, if you can see all the talks for free, why pay thousands of dollars to go in person. But, if you add back in the economics of abundance and infinite goods, you realize that doesn’t make any sense. The infinte goods (the content) can be widely distributed and shared for free, acting as a massive promotion for the scarce (the seats) and thereby increasing their value. And that’s exactly what’s happened:

Since the videos were released for free and shared with the world, the cost of a seat at TED Conference has gone up from $4,400 to $6,000 per seat. They found a wider audience by expanding the focus. TED moved from their home in Monterey, CA to Long Beach, CA to accommodate more attendees. TED spawned a sister conference, TEDGlobal which is held in a different country each year. TEDActive 2012 meets at the same time as the TED Conference and costs $3,750 to watch a live simulcast of the TED Conference, after which attendees are encouraged to discuss the talks. They also encouraged TEDx conferences were TED fans hold mini-TED conferences they host themselves. All this while increasing the quality of the production of their talks, sticking true to their goals, keeping their exceptional level of speakers, developing a loyal following, and becoming an award-winning Internet powerhouse.

By “giving away” the infinite for free, and helping to spread it and syndicate it as far and as wide as possible, TED was able to massively boost its brand awareness and interest, and increase the value of the seats. And that’s increased in almost every way. They moved the conference to handle more people and increased the price and introduced a (only slightly) cheaper “simulcast” conference and added additional events. And an awful lot of that is due to the publicity generated from the free TED talks. In the past, TED was well known only in very specific circles. But by opening up and freeing the infinite goods, it’s become massively well-known throughout the world… and it’s also made the event itself able to earn a lot more money (which it then uses to further the core mission of disseminating ‘ideas worth spreading.’)

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Comments on “Case Study: How TED Learned That 'Giving It Away' Increased Both Popularity And Revenue”

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40 Comments
Jay says:

Ethics question

Here’s something to consider as well. Where does the ethics debate come into the talk of abundant vs scarce goods? We’ve already discussed how the talks are more valuable as they are shared, but there’s also the ideas that somehow if you look at the lessons and learn from them, it’s equitable to stealing information (from the old view that TED had).

It seems that is also a question that should be answered so people can better understand why TED’s talks are more valuable when they are shared, making everyone better off.

Anonymous Coward says:

This blog makes no sense.

I still don’t understand what is wrong with selling downloads in the digital economy. Books do it. Porn does it. Music does it. Games do it. Apps do it. Software does it.

What’s the problem?

Why does this blog seem to believe everyone has to adopt the same business model (ie. sell physical goods and forfeit everything else)?

The digital download sales economy is growing, not shrinking. It’s foolish and incredibly backwards to suggest that should not be a massive part of the future digital economy.

Josef Anvil (profile) says:

Re: This blog makes no sense.

There is absolutely nothing wrong with selling DLs in the digital economy, but you want to know the problem, so here goes.

The problem is pricing. It’s VERY difficult for us, the consumers, to justify the pricing. I think ebooks are GREAT. When I look at the prices, I want to vomit. When I buy a paperback, I can rationalize that there is a definite cost in making the product, and I know that when Im done with it I can resell the book if I so choose. So it makes sense to me to pay the price for the book.

I can’t make that leap for ebooks. I’m being asked to buy a product that has almost no cost to make or distribute and I don’t really own it at the end of the day, nor can I resell it. So why does it cost almost exactly the same as the physical copy? With that said, if I can DL it for free, why wouldn’t I? Oh yeah, that’s illegal.

Now here’s the kicker… Am I a lost sale? At the inflated price, no. Because I wouldn’t have bought (so I become a criminal too). BUT…. If the price was something reasonable like 50% – 75% lower, I am no longer a lost sale or criminal.

Your last comment about the digital DL sales economy growing is a bit confusing. If everything is working fine, then why complain about a different opinion? Why is it backward thinking when some people figure out that they can increase their profit by giving away their infinite goods? Seems to me that if FREE infinite goods works better for some people it would be “incredibly backward” for them to choose the business model that results in less profit.

kyle clements (profile) says:

I would imagine that TED going free is also fantastic for the guests. While the speakers may be very well known in their own field, TED now exposes them to a huge new audience. I have purchased several great books after watching the author give a TED talk.

Not only are the seats at the event more valuable, but presenting at TED is now much more valuable for the speaker.

Chuck Norris' Enemy (deceased) (profile) says:

Re:

Hmmm…they greatly expanded their fan-base with the pay-what-you-want model in 2009. The new music isn’t free but comes with lots of options at different pricing levels. Free is still available if someone wanted to torrent the new album. The purchased downloads are drm-free (obviously…I mean what is the point of drm on music anymore) making it quite easy to replicate. And without EMI taking the lions share of music sales, I would say that Radiohead are going to make quite a bit of money.

What if $9 for the new album is the average price paid per song from In Rainbows in the pay-what-you-want experiment? The new album has 8 tracks so perhaps last time people paid $1.13 per track. They figured people would pay for it again. Of course, this is all speculation but just as good as your assumption.

Is it that they aren’t “giving it away” anymore that you have a problem with? I recall Mike stating the give it away and pray model is not that great of a business model. But they did that with the last album…now they are doing something else.

So you may want to wait a few months and see how the “give it away” thing worked for Radiohead.

Mike Masnick (profile) says:

This blog makes no sense.

This blog makes no sense.

Makes tons of sense if you take the time to understand.

I still don’t understand what is wrong with selling downloads in the digital economy. Books do it. Porn does it. Music does it. Games do it. Apps do it. Software does it.

Nothing’s wrong with it, if you can figure out a way to do it sustainably. But if you can be *better off* giving it away for free and making more money elsewhere (and if your competitors are going to do that), doesn’t it make sense to understand the economics at play?

What’s the problem?

Economics.

Why does this blog seem to believe everyone has to adopt the same business model (ie. sell physical goods and forfeit everything else)?

No one said anyone “has” to do anything. We’re just explaining the economics of how to do better. You don’t have to follow it, but if you don’t, you really shouldn’t complain if the business model choices you make don’t work.

The digital download sales economy is growing, not shrinking. It’s foolish and incredibly backwards to suggest that should not be a massive part of the future digital economy

And if the market based on giving the infinite away for free and selling the scarce is even bigger and growing faster, what’s wrong with that?

Anonymous Coward says:

Re:

.they greatly expanded their fan-base with the pay-what-you-want model in 2009.

Not really. They increased their general awareness levels, but Radiohead is becoming less and less relevant all the time. There appears to be little on the new album that would excite a radio programmer, example, and the music doesn’t appear to fit into a category very smoothly for online services or the vertical market sat radio channels.

The $9 price is for the MP3s. $14 for wav files, and apparently they are still more compressed than what will come on the horrible shiny plastic disc they will sell starting next month.

Is it that they aren’t “giving it away” anymore that you have a problem with? I recall Mike stating the give it away and pray model is not that great of a business model. But they did that with the last album…now they are doing something else.

The question is simple: if it was such a success, why change? The $9 minimum price is in the range of what the average paying customer gave them last time.

http://www.bnet.com/blog/intercom/first-results-of-radioheads-pay-what-you-want-experiment-are-in/1214

Basically, when you look at it overall, only 12% of people who paid last time were willing to pay what their current asking price is for their lowest end offering. It would appear they are trying to shut out 88% of their potential downloaders. It would seem clear that they found little or no benefit in feeding the freeloaders.

It’s a change of direction, a swing, and a significant one.

Ryan Diederich says:

Theres nothing wrong...

Theres nothing wrong with selling digital goods in a digital age. If your business thrives from it, go for it.

But when interest declines and you find yourself without the fans you once had, instead of blaming the digital age, embrace it. TED did it, and they did a terrific job.

The point of this blog is not to downplay selling infinite goods, but to play up how doing things against the norm can yield great results.

Anonymous Coward says:

This blog makes no sense.

What’s the problem?

Economics.

That’s not true. Downloadable purchased content is booming. In sectors where piracy is less prevalent, like for example, apps and games where there is still reasonably effective DRM, the boom has been massive. Even in places where piracy is ripping creators off at a 95% rate (like music), downloadable content is raking in billions.

So the problem is not economics.

The problem is that you want people to see piracy as a normalized part of the economy. The majority of posts about copyright and content distribution on this blog are not about economics, but rather your anxiety about any effort to enforce IP law.

Your conclusion is that the best digital sales business model involves no digital sales at all. That way, no IP law needs to be enforced.

But it is not about economics. The economics of digital sales have already proven themselves to be quite strong.

That the digital economy needs law enforcement to be sustainable cannot be considered a denigration. The exact same is true of any economy.

Anonymous Coward says:

This blog makes no sense.

That’s not true. Downloadable purchased content is booming. In sectors where piracy is less prevalent, like for example, apps and games where there is still reasonably effective DRM, the boom has been massive. Even in places where piracy is ripping creators off at a 95% rate (like music), downloadable content is raking in billions.

You are not an app producer are you?
Because you would know that DRM is ineffective and games get pirated instantly no matter how hard people try to stop it and it been happening since the dawn of games.

But it is not about economics. The economics of digital sales have already proven themselves to be quite strong.

True and in spite of rampant piracy in all corners.
So it is surprising to find people who believe in the hoax of digital protections.

That the digital economy needs law enforcement to be sustainable cannot be considered a denigration. The exact same is true of any economy.

According to the history that I know you are wrong. Every single industrial country in the world first had no protections and flourish, only when big players started to come about is that protections where put in place and except for a very few instances that always, always lead to stagnation in the market.

Hugues Lamy (user link) says:

What is TED

If I remember correctly, TED stand for Technology Entertainment and Design. The conference are now covering way above the mentioned category.

I qualify these conferences as ways to improve human conditions on earth. I watched a large number of these conference and I got inspired after that. They have conference about a very wide variety of subject.
TED.com

Jose_X (profile) says:

This blog makes no sense.

>> Downloadable purchased content is booming.

As Mike said, there are other models, but, yes, there are many who allow content to exist for free yet find that when they offer the same goods at low prices from a more convenient source and with the awareness that paying for these helps the artists produce more content, many people bite.

One example I saw on a techdirt comment and verified was the music group 9 Inch Nails having lead Amazon sales in 2008 with one of their albums (currently selling at $5 for mp3) while providing access to that same music on their website using a Creative Commons license. I think they used a non-commercial and/or no-derivative CC license; however, if others create derivative works as some other CC licenses allow, this would draw to this group further attention, support, and partnership opportunities.

It might be true that some but very weak copyright might help over no copyright (let’s assume this much for now), at least for this business model of charging for digital downloads without DRM from a well-known source, but it also seems true that weak copyright helps over strong copyright (eg, as TED and many other examples suggest).

There are some who are having trouble transitioning from strong copyright models to weak/no copyright models. Some are having no trouble and can benefit from gains right away, but others have not made the mental leap perhaps believing they have too much invested. Those who keep waiting will keep losing market share to those who are moving faster.

In fact, in some cases, a loss of market share might be inevitable because we now have a lot more people empowered to reach a wide audience despite not having access to significant capital and past distribution channels.

So does Senator Leahy and others want to vote for existing wealth, monopolies, and unethical laws with draconian punishment, or do they want to vote for a more efficient ethical model that is empowering a great many more people thanks to the ability to reproduce information and disseminated it widely through the Internet and largely for free?

Jose_X (profile) says:

Nice guys

Interesting link, but could you give a better explanation of what it means?

I’ll quote from it:
> +/* Thanks to TED for sponsoring implementation of –nomux and –nodvdauthor-data options */

and note that the lines in green and red (about 350 total) are software changes made to an open source dvd authoring tool to add a feature that apparently was sponsored by TED and now is available to everyone for free.

Of course, I think over 1 billion such lines of free open source software code exist and have been “paid for” over the years by many many contributors (frequently by the very person writing the software).

I’ll also note that the website github is also a free service (supported through various means) to those who want to participate in improving such legally freely available open source software.

TED can keep sponsoring open source software features that add extra value to their specific business. Everyone benefits, and TED further gains recognition and branding.

Jose_X (profile) says:

This blog makes no sense.

>> So [do] Senator Leahy and others want to vote for existing wealth, monopolies, and unethical laws with draconian punishment, or do they want to vote for a more efficient ethical model that is empowering a great many more people thanks to the ability to reproduce information and disseminated it widely through the Internet and largely for free?

In other words, do they want to promote an ownership class or a service class?

Jose_X (profile) says:

Ethics question

>> Where does the ethics debate come into the talk of abundant vs scarce goods?

If you care about homelessness, as I and many others do, consider sharing with others the connection that ethical IP laws (and generally ownership laws) have in common with problems such as homelessness and other ills in society.

See for example this blog posting and comments by invisibul (a homeless mother with, iirc, two young girls): http://invisibull.wordpress.com/2011/02/21/a-strange-paradox/

Most people not only would prefer to support ethical laws if possible but should be glad when it seems clear that voting for ethics is voting for improvements to the economy and to each of our own well-being.

Chuck Norris' Enemy (deceased) (profile) says:

Re:

There appears to be little on the new album that would excite a radio programmer, example, and the music doesn’t appear to fit into a category very smoothly for online services or the vertical market sat radio channels.

Is relevance set on the low-low standard set by radio programming? Listen to the radio tell me how much of that is quality music. Plus, winning a Grammy for ‘In Rainbows’ isn’t relevance?

The question is simple: if it was such a success, why change? The $9 minimum price is in the range of what the average paying customer gave them last time.

Is it possible that the pay-what-you-want for ‘In Rainbows’ is part of their long range marketing scheme…which may span many, many years? ‘If you got our last album free and liked it, would you consider purchasing this time?’

Basically, when you look at it overall, only 12% of people who paid last time were willing to pay what their current asking price is for their lowest end offering. It would appear they are trying to shut out 88% of their potential downloaders.

From the link you provided paying customers paid on average $6-$8. The rest paid nothing. So they price their album for those willing to buy. ‘Freeloaders’ can go get the album from a torrent site and use someone else’s bandwidth.

It would seem clear that they found little or no benefit in feeding the freeloaders.

As with any marketing there are strategies with metrics you can track…and some you can’t track or predict. It may never be clear if ‘feeding the freeloaders’ benefited Radiohead. I am sure more people went to their shows/purchased merchandise as a result of the experiment building interest from the younger generations that may have never listened to or heard of Radiohead.

Yashraj Akashi (user link) says:

The verdict

TED’s talks are more valuable when they are shared, making everyone better off.

The videos from Ted.com usually have a sponsor’s splash screen at the start and then a rather lengthy trailer ad. It gives another revenue stream, and some of the advertising trailers are themselves very interesting.

What sells on the internet ? (Sells could means ‘Spreads’ – as revenue increase with popularity in this free market called the Internet) >>> Books do it. Porn does it. Music does it. Games do it. Apps do it. Software does it. TED sells ideas and dreams.

TED going free is also fantastic for the guests. While the speakers may be very well known in their own field, TED now exposes them to a huge new audience. People have purchased several great books after watching the author give a TED talk. Preference towards a product in influenced positively upto 92% after being associated with a TED Talk.

People love TED Talk, the response to the videos is very natural. Its amusing. People would love to go to TED, but they just need to scrape up the money to be able to go, till then they just keep watching the free videos and be inspired. The price paid by the ones who buy the passes – is purely for > 1.Experience > 2.Networking > 3.Being able to feel the idea before anyone else / exclusivity > 4.To feel a part of the community

Good ideas are more valuable the more widespread they are. They strengthen and become more powerful. The same may be said of basic human rights. The more you support them for others, the more you will ensure your own. The connect here is, that the new age urban influencer feels that he is empowered by the online clout he holds to inform them of the latest, best, exclusive info. Only to increase his credibility, clout, network, and image – online.

Downloadable purchased content is booming. In sectors where piracy is less prevalent, like for example, apps and games where there is still reasonably effective DRM, the boom has been massive. Even in places where piracy is ripping creators off at a 95% rate (like music), downloadable content is raking in billions. The future is such content.
The economics of digital sales have already proven themselves to be quite strong.

TED stand for Technology Entertainment and Design. The conference are now covering way above the mentioned category. I qualify these conferences as ways to improve human conditions on earth.

Ben Weeks (user link) says:

radiohead

As an aside to the radiohead discussion: Large acts already have an existing fanbase of a large scale, sacrificing album sales to increase their profile further gives them lots of free PR, but it wouldn’t necessarily do so for a smaller act. This would be good if radiohead toured, but they don’t really. So instead, they are clearly positioned as thought leaders and get invited to do things like the “there will be blood” soundtrack.

But to suggest that a small artist with no fanbase and relentless bills and expenses can use the same strategies and succeed is not good reasoning. In reality there has to be a revenue stream come in from somewhere. Seth Godin gave his ideavirus book away online for free, but still sells hard copies and likely charges a lot for speaking and consulting.

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