Friday, May 7, 2010

To free or not to free

Personally, I blame Napster.

They may have started all this by planting the idea of free stuff over the internet firmly in consumers’ minds. Big Music made a huge and short sighted mistake in not doing a deal and legitimising Napster early on before the expectation of free music really took hold but Napster made themselves difficult to deal with by not understanding their own business objectives. On one hand they were talking about pay-for-play deals with labels and on the other, they were fighting the very notion of copyright in the courts. They either thought the music should be free or not and if so, they needed to find another way to support themselves. (There is a wonderfully detailed account of all this dithering in Steve Knopper’s excellent book Appetite for Self-Destruction: The Spectacular Crash of the Record Industry in the Digital Age')

Was there a turning point in the early days of the internet in which businesses could have rallied around pay-for-play models and turned the tide of consumer expectation for free before it really took hold? I doubt it, the early days of the internet were far too heady and chaotic for anyone to strategise in this way.

Most businesses, understandably, went for the ‘get enough eyeballs and the money will come’ approach because it was easier and quicker to achieve than trying to work out which business models would win in the long term.

It was a land grab and even now, with benefit of more than 10 years hindsight, it’s hard to see any pattern in who the winners and losers have been.

Today, it has become obvious that ‘eyeballs’ alone do not equal value and there is a lot of foot-stamping and hand-wringing over who’s gonna pay for all this.

As online audiences are becoming more discerning and there probably are many who would be willing to pay if it got them exactly what they want, there is a feeling that it’s too late because online consumers have learnt to expect stuff to be free.

For the purpose of this article, I’m putting aside businesses that sell ‘stuff’, (as in things you used to buy in shops but now have the option to buy online) and am thinking about the future of businesses that provide services, entertainment and information (i.e. content) of the kind that is currently available all over the internet for free.

I love wikipedia. Almost every day I’m delighted and grateful that it exists and I don’t believe it could exist in any other way than it does currently. But this model won’t and can’t work for everything online.

In a recent post on Wired Pen, Kathy E. McGill convincingly argues that the content carried in newspapers and magazines has always been free. The cover price pays for the delivery method (i.e., printing and paper) not the journalism. By this argument, the online analogy would be that we pay a small access fee to cover the ‘delivery’ (i.e. administering of the website, coding etc) and that online publications still carry advertising to cover the cost of the journalism. This model doesn’t help the consumer (preferably we want stuff either free or ad-free, not neither) and it also doesn’t help the advertisers who will continue to find the efficacy of their easily-ignored banner ads dwindle at an alarming rate.

So do we put everything behind a subscription wall and make the entry fee high enough to cover the cost of the delivery and the content? My guess is this will work for some publications and not for others. And this is a good thing. Let the consumer weed out what they feel is worth paying for and what not. (Rolling Stone magazine’s recent launch of their entire back issue archive online for a fee is a wonderful foray into this idea.)

But this won’t work for everything either. There is too much competition from people (such as bloggers) who are more than willing to give their content away for free because it serves some other purpose for them.

I don’t particularly care about whether or not the traditional big media survive the transition to online. There will be plenty of exciting new businesses to take their place if they don’t. But I do care about the clever and talented professional people (journalists, authors, film directors, photographers, musicians etc) who create the content.

If these content creators want to continue to earn a decent living in the online era it is looking increasingly like they will need to become entrepreneurial in managing their careers in order to survive.

Jancis Robson, one of the world’s foremost wine experts splits her writing time largely between being wine critic for the FT (a very prestigious and ‘career’ job for a journalist) and creating content for her own (part free, part subscription) website. I was fascinated to learn recently that subscriptions for her website currently earn her around double what writing for the FT does. This is just one of many examples I’ve come across of professional content-creators turning entrepreneur to boost their earnings.

The internet is a delightfully complex beast. It can accommodate, and increasingly will require, many different business models.

There’ll be more pay-for-access, more ‘freemium’, more opportunities for micro-payments through things like Amazon’s Affiliates, more ad-funded sites (but increasingly using consumer-driven platforms involving interaction and choice) and many new ideas and models that no-one has thought of yet. And of course, loads more great free stuff.

Everyone with a large stake in content-ownership is trying to work out which horse to back but I don’t think there will be any clear winners. Probably the best bet for content-owners and creators is to – like any good investor –diversify. A bit of income from this, a bit of income from that.

No doubt it will be a bumpy ride. Businesses, advertisers, content-makers and consumers alike will be muddling through these issues for quite some time yet. As Clay Shirky explains in his brilliant article ‘Newspapers - Thinking the Unthinkable,' the fall out from revolutions can last for many years.

This, of course is not good news for large businesses who are burdened with costly infrastructure and need a solution soon to survive. But it’s great news for clever and brave people who are willing and ready to have a lot of fun trying out all the new possibilities.

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