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

from the it's-called-advertising dept

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

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

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

Filed Under: business models, cory doctorow, freeloaders, micropayments, promotion

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

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

    Give them a reason to pay.....

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

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

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

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

    Already Stole It?

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

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