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
    hegemon13, 9 Sep 2008 @ 10:56am

    This author is my hero

    I don't know anything about Cory Doctorow, but I will have to find out. I get so sick of the entitlement mentality prevalent among so many in the creative community. Why is it not enough to earn just a decent living from something you love? Lots of people struggle to do that with a job they hate. If I finally get a novel published (I am finally working hard and consistently to get it finished), I would be thrilled to make $30,000.00 off of it over it's lifetime. That is not a huge amount of money, but I estimate that it will take me a little over a year to finish and polish. That is when I am working on it alongside a full time job, and $30K is not a bad supplemental income for a part-time job that I enjoy more than my leisure time.

    Would it be nice to have a huge bestseller and make a ton of money? Sure. But if I can make even a meager supplemental income off of an activity I do in my spare time, anyway, I would be perfectly happy with that. And even if 95% of my readers read pirated copies, I will be glad to have my work so widespread. A hundred-thousand pirated copies is not a 800,000.00 loss (based on loss of paperback sales). Rather, it is a hundred thousand people who know your name, and that leads to more contracts, speaking engagements, book signings, etc.

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