Malcolm Gladwell: Is free the future?(newyorker.com)
newyorker.com
Malcolm Gladwell: Is free the future?
http://www.newyorker.com/arts/critics/books/2009/07/06/090706crbo_books_gladwell
13 comments
The book is about things being free in the digital domain, so in the internet. Thus, a physical copy of the book is still allowed to cost some money, as the paper just does cost money. However, a good question would be: where is the free ebook?
I think you missed Mr. Gladwell's point... if we extend his reasoning, books do not cost money because they require paper (fuel). Books cost money because of the complex infrastructure required to find, edit, print, assemble and distribute them!
He should have taken a cue from Abbie Hoffman and titled it "Download This Book". :)
I agree about the hassle factor vs. cost.
In Dan Ariely's pricing experiment, if he gave a US audience the choice: 1 Candian penny for the Lindt truffles or a US dime for the Hershey Kisses, I'm sure 70+ percent would pay the dime because it's more convenient. It wouldn't prove that people want to pay more for a (seemingly) inferior product.
In Dan Ariely's pricing experiment, if he gave a US audience the choice: 1 Candian penny for the Lindt truffles or a US dime for the Hershey Kisses, I'm sure 70+ percent would pay the dime because it's more convenient. It wouldn't prove that people want to pay more for a (seemingly) inferior product.
I was wondering the same thing about the book price, it goes against what he is saying because the book is in his idea/ information type category.
I think if more of the net unified with a single payments company which was accepted just about everywhere, had low fees and as many ways to transfer money into and out of as possible.
I think if more of the net unified with a single payments company which was accepted just about everywhere, had low fees and as many ways to transfer money into and out of as possible.
do you envision a better paypal or something different?
A paypal that is even more widely accepted, on such a large scale that it can offer smaller fees and a more wide range of ways to transfer money in and out.
hmmm. so more like credit in the sense of credit cards. i wonder what the fee comparison is between paypal (3% ?) and accepting credit cards (certainly seems more of a hassle for developers).
Also, I believe that the power of FREE is not about money. It's about avoiding the hassle of paying.
I think the power of free is mostly about money. Look at Freecycle(.org) - the hassle in offering something that you give away for free, sifting through all the responses, going through the whole arrange time/place shennanigans, then somebody has to drive for miles to get to you - sure the person posting it has some non-monetary satisfaction about keeping something out of the landfill, but the person getting it? They are coming because it is free. If you offer one item on Freecycle for free and one on Craigslist for a cent, I bet you will have better uptake with Freecycle, even though 99% the hassle of the transaction is unrelated to paying.
That said... I agree that in the case of online news content in particular, the payment hassle is a factor, because it is a barrier to people (like me) who are not averse to paying. For example I would be perfectly willing to throw $100 in a yearly pot (or whatever a subscription to one newspaper would really cost), spend a year reading whatever I wanted hassle-free and upvoting (karma-style) the stuff I liked, and then at the end of the year have that $100 get distributed in the same way I distributed my karma. It could work, but the infrastructure and co-ordination is beyond what is plausible, I suppose.
I think the power of free is mostly about money. Look at Freecycle(.org) - the hassle in offering something that you give away for free, sifting through all the responses, going through the whole arrange time/place shennanigans, then somebody has to drive for miles to get to you - sure the person posting it has some non-monetary satisfaction about keeping something out of the landfill, but the person getting it? They are coming because it is free. If you offer one item on Freecycle for free and one on Craigslist for a cent, I bet you will have better uptake with Freecycle, even though 99% the hassle of the transaction is unrelated to paying.
That said... I agree that in the case of online news content in particular, the payment hassle is a factor, because it is a barrier to people (like me) who are not averse to paying. For example I would be perfectly willing to throw $100 in a yearly pot (or whatever a subscription to one newspaper would really cost), spend a year reading whatever I wanted hassle-free and upvoting (karma-style) the stuff I liked, and then at the end of the year have that $100 get distributed in the same way I distributed my karma. It could work, but the infrastructure and co-ordination is beyond what is plausible, I suppose.
I gave away a bunch of old carpet on Freecycle. It was easier than cutting it up into little pieces so the trashman would take it.
If the publisher gets the $26.99 that makes the book free from the author's point of view although I really doubt that Chris Anderson is not getting his share.
Good point about hassle. I think it's one of the reasons why smart card based payment systems have so much potential (for offline).
Here's a counter model for newspapers (and the media industry, in general) to free:
Start a club and grant access to (full online) texts to club members, only. Keep a fixed percentage of the revenue for administration. Say, 30 or 40 percent. This is where your profit comes from. Spend the rest of the money for people creating the value: reporters, journalists, photographers, or even club members.
Start with a fixed budget for a year and an initial membership price. If revenue (fee * members) exceeds the budget, send a refund to members or raise the budget for the next year. If it doesn't, stop the club or raise the membership fee for next year. You may let members vote on that issue.
Let people follow (as exemplified by Twitter) the journalists they want to read. Journalists followed by many are obviously popular, and thus valuable. In other words: Make them celebrities, to some degree. Inform club members about new pieces of the journalists they follow by mail or SMS. Provide an interface for members that resembles a feed reader: A member only gets to see information from journalists he or she follows. Let members vote on articles.
Create an incentive to journalists to advertise their commitment to a certain club. For example, make a part of their payment depend on the numbers of followers they have. You may also allow them to employ other journalists (or ghost-writers). Then, they may utilize their blogs and appearances in other media to point to 'their' club. They could engage with their reader community (by answering comment discussions, for example).
In other words: Your sales pitch is not about the news you provide, anymore, but the access you provide to (popular) journalists.
You may also let members follow other members and show only comments made by them (or notify about new comments). Invite members with lots of followers to write articles. This creates an incentive to members to write good comments. You may also increase to incentive to be a club member by letting people become members by invitation, only. Being a "Wall Street Journal Club Member", for example, could mean something. If you provide a page for each member, they may use it on their usual web presence (LinkedIn, etc.)
Offer some free content on the site; for example, general news, introductions to popular articles, outdated articles, or comments (or discussions by your journalists. Make is SEO-friendly so people can link to it and Google can pick it up. You could use advertising to finance the free part.
This has the following effect: Firstly, they have an incentive to advertise the club: the more people participate, the more value they get (or the less they will have to spend). Secondly, there's an incentive for readers to withhold more valuable information to others (instead of spreading them and making money with Google Adwords). They are also less likely to spread their account information to others.
In other words: Create a mix of Digg, Twitter and Feed Readers and add a stronger incentive to keep information private.
Or course, that's just a quick summery. Comments welcome.
Start a club and grant access to (full online) texts to club members, only. Keep a fixed percentage of the revenue for administration. Say, 30 or 40 percent. This is where your profit comes from. Spend the rest of the money for people creating the value: reporters, journalists, photographers, or even club members.
Start with a fixed budget for a year and an initial membership price. If revenue (fee * members) exceeds the budget, send a refund to members or raise the budget for the next year. If it doesn't, stop the club or raise the membership fee for next year. You may let members vote on that issue.
Let people follow (as exemplified by Twitter) the journalists they want to read. Journalists followed by many are obviously popular, and thus valuable. In other words: Make them celebrities, to some degree. Inform club members about new pieces of the journalists they follow by mail or SMS. Provide an interface for members that resembles a feed reader: A member only gets to see information from journalists he or she follows. Let members vote on articles.
Create an incentive to journalists to advertise their commitment to a certain club. For example, make a part of their payment depend on the numbers of followers they have. You may also allow them to employ other journalists (or ghost-writers). Then, they may utilize their blogs and appearances in other media to point to 'their' club. They could engage with their reader community (by answering comment discussions, for example).
In other words: Your sales pitch is not about the news you provide, anymore, but the access you provide to (popular) journalists.
You may also let members follow other members and show only comments made by them (or notify about new comments). Invite members with lots of followers to write articles. This creates an incentive to members to write good comments. You may also increase to incentive to be a club member by letting people become members by invitation, only. Being a "Wall Street Journal Club Member", for example, could mean something. If you provide a page for each member, they may use it on their usual web presence (LinkedIn, etc.)
Offer some free content on the site; for example, general news, introductions to popular articles, outdated articles, or comments (or discussions by your journalists. Make is SEO-friendly so people can link to it and Google can pick it up. You could use advertising to finance the free part.
This has the following effect: Firstly, they have an incentive to advertise the club: the more people participate, the more value they get (or the less they will have to spend). Secondly, there's an incentive for readers to withhold more valuable information to others (instead of spreading them and making money with Google Adwords). They are also less likely to spread their account information to others.
In other words: Create a mix of Digg, Twitter and Feed Readers and add a stronger incentive to keep information private.
Or course, that's just a quick summery. Comments welcome.
"there's an incentive for readers to withhold more valuable information to others (instead of spreading them and making money with Google Adwords)"
There are two problems. The first one is that you make an assumption here, that individuals choose what's in the best interest of the group (if it's only about the individual, the Adwords money might outweigh the information value...). Secondly, even if the assumption holds and people will behave according to this rationale, then still it takes only two or three odd, less-rational individuals to redistribute the information, thereby devaluating it back to free.
That doesn't mean your model won't work. It seems it will (and does already) work very well for something like The Economist - perhaps it simply requires a certain type of readership...
There are two problems. The first one is that you make an assumption here, that individuals choose what's in the best interest of the group (if it's only about the individual, the Adwords money might outweigh the information value...). Secondly, even if the assumption holds and people will behave according to this rationale, then still it takes only two or three odd, less-rational individuals to redistribute the information, thereby devaluating it back to free.
That doesn't mean your model won't work. It seems it will (and does already) work very well for something like The Economist - perhaps it simply requires a certain type of readership...
Thanks for the critic. I'd like to explain:
First, I assume self-interest, not group-interest. That's what the club is for: The more people become members, the more content anyone gets, including you as a member. This is guaranteed by the club structure. For additional effect, the club may also own the copyright of the content.
Second, redistributing information is work. You can't simply copy'n'paste articles due of copyright. Even if this still pays for some individuals, finding good information is also work. It's easier to become a club member, especially when you have additional benefits such as being the first to know by automatic notifications, being able to set manual filters by following, being able to get to know other members by following, etc.
The Economist offers nothing like that.
First, I assume self-interest, not group-interest. That's what the club is for: The more people become members, the more content anyone gets, including you as a member. This is guaranteed by the club structure. For additional effect, the club may also own the copyright of the content.
Second, redistributing information is work. You can't simply copy'n'paste articles due of copyright. Even if this still pays for some individuals, finding good information is also work. It's easier to become a club member, especially when you have additional benefits such as being the first to know by automatic notifications, being able to set manual filters by following, being able to get to know other members by following, etc.
The Economist offers nothing like that.
Nice. I'd definitely pay for the patronage and access to my favourite journalists. They act as the best information filters on certain issues.
I don't get it.
stuff isn't free. Take news. You make the content free to consumers then sell something of value to businesses. You mask a B2B operation with a B2C front.
Whats of value? Aggregate reading data for news aggregators, personalised advertising slots, some new crazy business model companies will pay for data.
stuff isn't free. Take news. You make the content free to consumers then sell something of value to businesses. You mask a B2B operation with a B2C front.
Whats of value? Aggregate reading data for news aggregators, personalised advertising slots, some new crazy business model companies will pay for data.
One could spend a lot of time writing about how worthless Chris Anderson books are. The number of startups based on his Long Tail theory, which is proving almost totally fallacious, and in fact comes from a very inaccurate data set, is staggering. At least with this book, people have already been building startups around the theory for 10 years.
The Chicago Tribune has an estimated 541,000 daily
readers. 898,000 on Sunday. Let's use the daily
number to stay on the conservative side.
Daily newsstand price is $1.00.
$1.00 x 541,000 x 365 = $197,465,000
What percent of that number does it take to bring all those ideas (including stories, columns, ads and obits) to market?
Let's say 85%. That's $167,845,250.
$197,465,000 - $167,845,250 = $29,619,750
Now make everything digital. Sell the trucks and presses, layoff all production and delivery personnel. Hire only digital content creators and use the Amazon Kindle.
Annual subscription per reader: $54.75
At 70/30, the Amazon Kindle subscription would have to be $182.50 not the $120.00 cited in the article.
I'm not including revenue from advertising (which may not translate well on the Kindle) but if you owned the Chicago Tribune or The Dallas Morning News would you agree to the terms?
Daily newsstand price is $1.00.
$1.00 x 541,000 x 365 = $197,465,000
What percent of that number does it take to bring all those ideas (including stories, columns, ads and obits) to market?
Let's say 85%. That's $167,845,250.
$197,465,000 - $167,845,250 = $29,619,750
Now make everything digital. Sell the trucks and presses, layoff all production and delivery personnel. Hire only digital content creators and use the Amazon Kindle.
Annual subscription per reader: $54.75
At 70/30, the Amazon Kindle subscription would have to be $182.50 not the $120.00 cited in the article.
I'm not including revenue from advertising (which may not translate well on the Kindle) but if you owned the Chicago Tribune or The Dallas Morning News would you agree to the terms?
Subscribers pay much less than the newsstand price, and you can haggle down from the advertised subscription price as well, so I think your estimates are way off.
The factoid I remember, although I can't cite a source offhand, is that the cost of printing and delivering a daily newspaper is just about equal to the cost that the consumer pays, and the rest of the newspaper's income is coming from advertising.
If ebook readers were more widely used then it might be practical to run a newspaper by selling an online-only edition (perhaps making everything free on the Web after a 48-hour delay), but I'm not sure we're there yet. Also, I suspect that the first publisher to offer news in this way will be some upstart who is not encumbered by the sunk costs and contractual obligations surrounding a paper-and-ink newspaper.
The factoid I remember, although I can't cite a source offhand, is that the cost of printing and delivering a daily newspaper is just about equal to the cost that the consumer pays, and the rest of the newspaper's income is coming from advertising.
If ebook readers were more widely used then it might be practical to run a newspaper by selling an online-only edition (perhaps making everything free on the Web after a 48-hour delay), but I'm not sure we're there yet. Also, I suspect that the first publisher to offer news in this way will be some upstart who is not encumbered by the sunk costs and contractual obligations surrounding a paper-and-ink newspaper.
When I read about the proposed 70/30 split, I thought that it was quite generous of Amazon! Let's presume that the cost of printing and delivery is equal to current subscription revenue. Amazon just gave the newspapers a huge increase in profitability (presuming everyone switched to a Kindle tomorrow).
My sister-in-law is the business manager for a magazine with 250K subscribers. Their printing/distro costs exceed the average subscription price, so they'd be overjoyed if they could strike such a deal with Amazon and get their subscribers to convert over (unlikely).
My sister-in-law is the business manager for a magazine with 250K subscribers. Their printing/distro costs exceed the average subscription price, so they'd be overjoyed if they could strike such a deal with Amazon and get their subscribers to convert over (unlikely).
But you're not taking into account advertising revenue. I'm not sure a Kindle-based newspaper could attract as much ad revenue as a print newspaper, because the medium just isn't as attractive to advertisers; ads on ebooks or the Web feel much more intrusive to readers than ads in newspapers or magazines.
I'm not sure either. Does Kindle allow for customized advertising? One problem this magazine has is that 40% of their subscriptions are outside of North America. It's a good thing overall, but they could increase ad revenue by printing two books -- one for NA and the other for "world" (mostly Western Europe in practice) and selling space in just one or the other.
The newsstand price of a paper has very little to do with revenue and/or profit for a newspaper. The bulk of the revenue is in the advertising : that's why there has always been free papers around : especially in community papers.
The largest dent in newspaper revenue is the gradual loss of revenue from classified ads, and the falling revenues from print-based advertising, caused by pricing competition from online sites.
The largest dent in newspaper revenue is the gradual loss of revenue from classified ads, and the falling revenues from print-based advertising, caused by pricing competition from online sites.
I remember reading that the YouTube bandwidth costs cited in this article were way out of wack and beard no semblance to reality. Has anyone seen any updates on those figures? Are they, in fact, correct?
My figures:
100.5 million unique viewers in Oct 2008. Average of 53.5 views per user that month. (source: http://www.businessinsider.com/2008/12/youtube-hits-100-mill...) Average video size, 10mb.
100.5m * 53.5 * 10 / 1024 = 52m GB served.
At a generous price of 5 cents a gigabyte, that works out to about $2.5 million a month, or $31.5 million in 2008.
100.5 million unique viewers in Oct 2008. Average of 53.5 views per user that month. (source: http://www.businessinsider.com/2008/12/youtube-hits-100-mill...) Average video size, 10mb.
100.5m * 53.5 * 10 / 1024 = 52m GB served.
At a generous price of 5 cents a gigabyte, that works out to about $2.5 million a month, or $31.5 million in 2008.
That doesn't factor in peering, Google is in a ton of data centers and almost every major ISP peers with them (they'd be stupid not to with all the outgoing traffic going to them).
Either way the Credit Suisse estimate was way off.
Either way the Credit Suisse estimate was way off.
IMHO Youtube is doing nothing more than buring money.
Eventually the money will run out and the flame will die.
Eventually the money will run out and the flame will die.
I'm disappointed by Gladwell misinterpreting Lewis Strauss' remarks. When Strauss claimed that electrical energy [will be] too cheap to meter, he was talking about subsidizing plutonium production. Originally, the feds needed plutonium for nuclear weapon production, and they were paying about $1,000,000 per kilo of privately produced plutonium. At those prices, the sales of plutonium would cover the price of building and operating a plant, and the electricity would be a free by-product.
When the feds quit purchasing plutonium in the early 1970s, it destroyed the economic model for building and operating nuclear power plants. Not the meltdown at three mile island, nor tree hugging lawyers.
Please read The Curve of Binding Energy for more details. http://www.amazon.com/Curve-Binding-Energy-Alarming-Theodore...
When the feds quit purchasing plutonium in the early 1970s, it destroyed the economic model for building and operating nuclear power plants. Not the meltdown at three mile island, nor tree hugging lawyers.
Please read The Curve of Binding Energy for more details. http://www.amazon.com/Curve-Binding-Energy-Alarming-Theodore...
The point isn't really that everything will be free. The point is that lots of informational products will have a free option --- and that there will be pay versions too.
The future is differential pricing.
The future is differential pricing.
I think Gladwell and Anderson are both right. Anderson is right that many products that once cost money will now be free. Gladwell is right that many more products will never be free for many reasons, and one good reason is there are hidden costs that make it impossible for someone to provide the product for free.
The slashdot story points out that "information wants to be free" is a misrepresentative subquote. An alternative misrepresentation is "information wants to be expensive".
http://en.wikipedia.org/wiki/Information_wants_to_be_free#Hi...
http://en.wikipedia.org/wiki/Information_wants_to_be_free#Hi...
I doubt the model of online advertisement as the model of the future. Also, I have not clicked on any facebook ads, linkedin ads, or ads on google mail as long as i can remember. The only time i click the ads is when I'm actively searching for a product on Google.
Do you click on ads just for the sake of it?
I've watched over a thousand truck ads on tv and never considering buying one. That doesn't mean the ads don't work.
Be wary of generalizing from a sample size of 1, or from peculiar audiences, such as those on hacker / startup-oriented social news sites.
I, for one, have observed surprisingly compulsive reactions to advertising in some of the people around me, things I'd never do just on principle of being bidden by an ad. You'd be surprised.
I, for one, have observed surprisingly compulsive reactions to advertising in some of the people around me, things I'd never do just on principle of being bidden by an ad. You'd be surprised.
Did Malcolm just invoke Moore's law to explain how newspapers should be priced?!? That's as relevant a Goodwin's.
Also, I believe that the power of FREE is not about money. It's about avoiding the hassle of paying. It doesn't matter whether you're paying 10 dollars or 1 cent - the hassle factor is about the same in both cases. This makes a free product more than 1 cent cheaper than a 1 cent product.