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.

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  1. identicon
    Anonymous Coward, 10 Sep 2008 @ 9:52am

    Re: General response.

    For example I understand that it might be a good business model to distribute music files for free in order to gain more fans. But the question is - shouldn't the artist be able to choose if that's something they want to do? If I choose to pursue a different business model...isn't that my right (whether it's successful or not) - I think that's a debatable point.

    I don't think it is debatable at all. Yes it is your right to pursue different models. if they work for you good! if they don't, don't try and make laws that will support your failing model.

    Sometimes I think that readers of this post confuse what Mike is suggesting in terms of a musician marketing themselves by encouraging free downloads of some of their music and passing it around to their friends, with out and out cheating the artists by simply snatching up files and never giving back (or maybe they are the ones that spend the most on concert tickets...who knows)

    you can't look at the individual, look at the big picture. some people will just consume without giving back, others will spread the word, others will go out and pay. the idea is that when your fanbase is big enough even if a smaller percentage pay, it is still a larger number of people who know about your music and more money coming in. for example, before the internet it was nearly impossible to get international fame, now with a single fan telling someone in Japan about you you can potentially have a fan base in every country in the world. now if even a fourth paid you for something, that is still more money than if you get 75% of your state to buy the same things.

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