Free Does Not Mean No Business Model

from the repeat-after-me... dept

As we get ready for The Free Summit, I was thinking about some of the recent posts here on Techdirt, and realizing a really common fallacy that seems to destroy all debates around "free." It's the implicit assumption that "free" means no business model. We saw it with law professor Justin Hughes' defense of copyright in The Economist debate over copyright, where he states:
What we have now is a mixed economy for expression in which some expression is produced under a patronage model (foundation grants, universities), some expression is produced under the open source model (Linux, blogs), and some expression is produced under a profit/incentive model of copyright.
And we see it when David Simon goes to Congress and says:
It costs money to do the finest kind of journalism. And how anyone can believe that the industry can fund that kind of expense by giving its product away online to aggregators and bloggers is a source of endless fascination to me. A freshman marketing major at any community college can tell you that if you don't have a product for which you can charge people, you don't actually have a product.
Both of those statements are based on the implicit assumption that "free" means "non-profit" or "not a business." Yet, nothing is further from the truth. Free has always been a part of many business models, and when most supporters of "free" are talking about isn't that content creation and journalism go to an "all amateur/all non-profit" model. No one is saying that at all. We're saying that they need to learn to embrace other business models rather than rely on copyright as a kind of crutch.

When you've been relying on that crutch for so long, you forget that you have two legs of your own and can make do without the crutch. We're seeing it all the time, with content based business models that don't rely on copyright which have been shown to be more successful than the old copyright crutch business models. There are lots of ways to make money that involve "free" as a part of the business model.

So, from now on, whenever you see someone arguing against free, and implicitly assuming that "free" means there is no business model, correct them. Let them know that they're arguing against a total strawman. No one says the professional class of content creators or journalists is about to go away. We're saying that they'll earn their money in a different way, and it won't rely on charging directly for their content, but on other goods that their content makes much more valuable.

Filed Under: business models, free

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  1. identicon
    Doctor Strange, 9 May 2009 @ 12:07am

    I think you fundamentally missed David Simon's point. Before anyone condemns David Simon for idiocy based on the one quote above, do read his whole testimony. While you may vehemently disagree with some of his points individually, he skewers the bad behavior of the old media as well as the new.

    Simon is not arguing that the government needs to protect some antiquated business model, or that "free"-inclusive business models are not workable. What he's arguing is that if you want high-quality, socially-valuable journalism, the free market does not seem to be the best way to produce it. This is regardless of how good your business model is. In the free market, old media found that you could cut the quality of journalism substantially without losing too many ad revenues, and in fact (ad) revenues didn't seem to be that closely connected to content quality at all.

    Will the Internet change that? Will the best 'free'-based business models optimize for the best, most socially valuable journalism? I don't think so: no free market optimizes for quality, they optimize for whatever maximizes profit. Unless the Internet will suddenly increase the profitability of high-quality, socially valuable journalism, we'll get something else. Arguably, the Internet has only exposed our insatiable demand for punditry and Paris Hilton.

    The traditional solution (as with other public-good services like police, firefighting, and so on) is to nationalize the industry. Nationalizing journalism is probably even dicier than nationalizing police services, since good journalism is supposed to protect us from the state and be independent of it. Simon suggests alternatives: nonprofit models, models where news is still produced independently of the government, but where the free-market incentives are artificially modified to try to incentivize content quality, and so on.

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