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

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

    Give them a reason to pay.....

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

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

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

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

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

    3. It is NOT an issue of ethics. If the business model that involves free content makes everyone BETTER off, there is no ethical or moral question at all:

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

    The reason to pay - is because the artists asks.

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

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

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

    Why is that so hard for you to grasp?

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


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

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

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

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

    Read this:

    Because otherwise you're responding to a phantom.

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

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

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