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

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

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

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

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

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

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

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

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

    //blathering about Jonathan Coulton//

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

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