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. icon
    Derek Kerton (profile), 9 May 2009 @ 11:11am


    I like the smell of Cinnabon. I smell it whenever I am in airports. Damn that smells good. I enjoy the odor every time, and occasionally am induced to buy and enjoy a bun.

    Interestingly, Cinnabon charges absolutely nothing for scenting the air in such a pleasant fashion. Given their arguments in the post by Mike, Justin Hughes and David Simon must
    think Cinnabon is a company run by socialist idiots, giving away the product (scented air) for free.

    I suppose if your vision were SO LIMITED, as to only conceive of the scenario from the perspective of the "scented air" industry, Cinnabon might appear to be a threat. You might even bitch and moan about how their model is corrupt, and how they are responsible for the death of your sector because they give away the product for free.

    Yet any freshman marketing major at any community college could tell you what is really going on. Cinnabon gives away the free scented air because of two big reasons:

    1) they just can't charge for it in any practical way.
    2) the free product is a great promotional tool for the fee product, the scarce sweet and yummy buns.

    It's amazing coherent people can unwittingly put on such blinders as not to see that free has been, and will always be, an integral part of many, many business. And usually it is for the same two reasons numbered above. Smart businesses understand this and use it to their advantage, and lame businesses cry out for government support (while ironically claiming to be capitalists, and free-marketeers).

    If Cinnabon were run by the RIAA, they would lobby the government to put in place rules that prevented anyone not buying a sticky bun from smelling the scented air.

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