*Why (or how) can the price of an item affect a customers perceived value?
*How do we relate this to the statement: "When you give it away for free it has no value. When you begin charging for it it has some value."
What do the concert tickets, expensive dresses, professional consultation, etc have in common? I'd suspect that for a good or service there is a public value associated with quality -- "you get what you pay for". People expect that for a good or service (of limited supply) you'll pay for more higher quality work/service/item. When that good or service is offered for free, it is treated as it is free, easily replaced, cheap, or perhaps even unimportant.
Hence, when a band offers a gig for free, people have an expectation of how a free ticket band will sound, and with no personal cost or involvement, may not 'care' as much about the show or the performers. If they drink too much and pass out at the bar -- who cares? Not like they paid to see the band. They are not personally invested.
Likewise with the consultant, if its a free lunch session and they don't remember/pay attention -- who cares? They didn't pay anything for the advice, so no real loss if they don't use it, no opportunity cost.
The difference (I'd propose) is that there is a public perceived cost associated with the quality of of those goods or services. The public perceived cost of a digital computer file (MP3, Movie, Whatever) is essentially $0. Therefore it doesn't matter how much you charge for it, everyone knows that it can be infinity reproducible. There is no difference between an MP3 you buy for $1, and an MP3 that you download for free (actually, the free one is typically more useful, but thats a different story).
So, the quote has some real life applications that should be taken into account, but in this case I'd argue that it has been misapplied. Pricing will only affect the perception of value if there is also a public perceived (real or imaginary) quality distribution. Where no quality differentiation exists the price will be flat.
From what I read there seems to be a misconception over the point of the original article, and the hypothetical scenario offered is simply unrealistic.
IE - I take the thought process to be:
1) Patents encourage horizontal innovation (theory)
2) The first diesel engines made were patented
3) Because of the patent other firms invested in different technologies to pursue diesel engines due to a market demand
4) That 'horizontal' innovation produced better technologies, as we do not use the original design today
...and then comes the leap of faith (or misconception)
5) Without patents, those investments would never have been realized, and we would have an inferior base engine today.
And that's where I think we have the miss. It takes a huge stretch to believe that no one would solve the overall 'problem'(efficiency, power density, etc) in a new ways if faster, less expensive vertical innovation was present than *is allowed with patents*. The market will still demand an ever improving product - and someone will make that investment to deliver.
I found it humorous that they would call out specifically facebook and twitter, repeatedly, as ways to quickly share files once uploaded. Any link between that and the government plan to log all FB and Twitter traffic? OK OK probably not...
Honestly, it was a pretty unsubstantial presentation. And what was the point? Yes, file sharing exists. Yes, its easier than ever. Instead of discussing *why* it has become easier than ever, (Duh! It's filling a market demand!) or the new opportunities to add value to their customers, they gave a somewhat pointless 'how-to use the internet' speech. Seriously? Can I have that job?
"Nowhere at all does Murdoch talk about actually giving people a reason to buy."
Exactly. The current content is being overvalued. Right now 90% of the news is simply a statement of current, mostly irrelevant facts with little to no objective analysis.
People can get 'news' or 'facts' from many other places. Very few people will 'pay' to get fed the same garbage that is being pushed out today.
The opportunity, as expressed here on Techdirt and why I'm an avid reader of the blog, is to provide honest, consistent, and reputable analysis of events/laws/news - and not just repeat random facts from around the country.